An examination of the legal framework Governing structured commodity financing in Tanzania: the case of warehouse receipt

The socio-economic well being of Tanzanians is dependent upon agriculture which employs about 50% of the active workplace; accounts for about 50% of the GDP; provides about 50% of the merchandise export and is the main source of food supply and industrial raw materials. Despite this potential, banks did not extend credit to the sector as agricultural commodities were not acceptable as collateral and thus remained dead capital. This study has established that banks have started extending finance to the sector under structured finance arrangement known as warehouse receipt system. The work has established that banks secured their advances through contractual arrangements grounded in scattered pieces of legislation. These arrangements are, however, inadequate as no legislation govern some key aspects of the transaction such as licensing and regulation of warehouses and warehouse Operators; regulation of warehouse receipts; and addressing all other relevant issues. The warehouse Receipt Act, 2005 addresses these inadequate, streamlines and consolidates the law on use of agricultural commodities are security for advances. The effective utilization of their produce as there will be no need of selling crops at the time of harvest as they may, through warehouse receipt, secure finances to meet their immediate financial needs while awaiting good prices.