Sarura Secures First-in-Class Inventory Credit Financing from Leading Commercial Bank
April 28, 2014
Sarura Commodities Limited (“Sarura”), the innovative Rwandan crop storage and trading enterprise, has secured $450,000 (RWF 300 million) in inventory credit financing from Kenya Commercial Bank (“KCB”), one of the leading banks in East Africa. This is the first time any commercial bank has provided such financing in the Rwandan staple crops sector. Securing the financing will allow Sarura to significantly scale its operations while also helping to catalyse the growth in access to such financing for other private companies which is essential for the development of the agricultural sector, and so broader economy, in Rwanda.
Inventory-credit financing, whereby those commodities purchased using a loan are used as the collateral to secure the loan, underpins the multi-trillion dollar global trade in agricultural commodities. However, in many poor countries including Rwanda access to inventory-credit financing is often restricted to those companies working in high-value export crops and completely unavailable to those dealing in staple crops such as maize and beans which are predominantly grown by small-holder farmers. Restricted access to such finance is a major constraint to the development of agricultural markets, and so the economic development of these poor countries and individual smallholders.
On entering the market in 2012, Sarura became the first private sector company in Rwanda ever to use staple crop inventory credit financing, provided by the micro-finance lender Duterimbere IMF Ltd (“Duterimbere”) to work with cooperatives of small-holder famers. Under Sarura’s innovative warrantage model, farmers receive an initial payment when crops are deposited in the Sarura warehouse equivalent to 60% of the harvest value (paid from the inventory-credit financing), and a second payment equivalent to 40% of the post-harvest sale value when the stored crops are sold to purchasers at a premium to the harvest price. Sarura values the partnership established with Duterimbere and will continue to work with them for the benefit of small-holder farmers.
However, for Sarura to achieve its ambitious growth targets of tens of thousands of tonnes of high quality maize and beans under storage, financing from larger commercial banks is required. The agreement reached with KCB, one of the largest and most innovative agricultural lenders in the east African regions, represents an important step in reaching its growth targets and delivering impact to small-holder producers at scale. The inventory-credit facility of $450,000 for harvest A 2014 will allow Sarura to secure upwards of 1,500 tonnes of maize and service major purchasers off-takers such as the World Food Programme, that demand the highest quality commodities while also looking to benefit small-holder producers through their purchase power.
Securing the inventory credit facility also represents an important first for the development of the Rwandan agricultural sector. The example that Sarura is setting has the potential to catalyse inventory-credit lending by the commercial banks to other private companies. This is essential for the development of the staple crops markets and so the improved livelihoods of smallholder farmers.
On securing the facility with KCB, Augustin Mutijima, the Sarura CEO, commented:
“Being the first private company to enter into such an agreement with a commercial bank is a major achievement, not only for Sarura but for the Rwandan agricultural sector more broadly. I am delighted to be working with KCB, which is one of the leading commercial banks not only in Rwanda but across the region. KCB is an ideal partner as it has the experience, expertise and capital resources to help Sarura grow its business and achieve its impact targets.”