Collateral problem in short term agricultural credits: Availability of private cold atmosphere warehouse receipts as collateral

In this study, issue of collateral for short term financing of agricultaral sector is studied and potential usage of warehouse receipts, issued by cold atmosphere warehouses in exchange for the products stored, as collateral against agricultural credits on harvesting period is evaluated. Agricultural financement had been provided by public sector until the recent time. But in recent years private banks, by establishing agricultural banking units, has started to increase their shares in agricultural credits with needs oriented agricultural banking services such as innovative credits products, special debit and credit cards with maturity period in harvesting season. However, the existing credits provided to agricultural sector by public or private banks are generally limited for pre-harvest period. Only the period for preparation to production and production period is credited with appropriate collaterals and those credits are getting closed in a short period after the harvest. However, there is some constrains on the issue of collaterals of small farmers accepted by the banks. The general aproach of banks on not accepting the unregistered or lower value expertised assets in rural areas decreasses the amount of credits given to small farmers. But agricultural products could generally be traded away in low prices compared to labour force, income costs and long time during the growing up period, due to the vast amount of supply in the market during harvest season. Classified and stored products transfered to the new buyers and consumers with higher prices in the next several months. The price gap not only meets the expenditures for cleaning, classifying and storage; but also make profit to intermediaries. In this study, by searching for the possibility to use apple itself as collateral and bringing the results to the attention of traditional banking and participating banking sector, whether the increase in prices following the harvest season could contribute to the welfare of the producers by meeting the short-term financial needs of them by credits. It is proposed that, the credit opportunities for cereals, oilseeds, cotton, dried apricots, olives, and olive oils at present brought by Warehouse Receipt Act No 2699 and Agricultural Products Licensed Warehouse Act No 5300, to be given without any new legislation to the fruits those harvesting period is limited to one or two months but their consumption spread over the whole year. Aplication by primarily starting from apple growing regions, could increase in the credit opportunities of the producers of fruits to be stored in cold warehouses and increase in the amount of short term placements of traditional banks and participating banks.