Regional banks support commodity financing through a repo system in Ghana
Commodity Clearing House Ghana reports up to USD12 million made available to finance grain and shea nuts through repo contracts by early 2013. The repurchase Agreement, developed in the course of 2012 with financial assistance of the Common Fund for Commodities (CFC), will operate through warehouses licensed and supervised by the Ghana Grains Council (GGC). In the first year of operations, warehouse receipts will be issued under a Warehouse Receipts System operated by the GGC which will use cost effective Wide Area Network technologies to make the system accessible to all participants to make real-time information available to all. In the first year the system will operate using local IT solutions, with an intention to switch to an appropriate Electronic Warehouse Receipts platform in the near future as traded volumes make a larger investment possible.
Repurchase agreements secure commodity financing as a pair of contracts signed back-to-back to purchase and sell the same commodity stock within a given time period. It makes funds available to the original seller, re-paid through “re-purchase”. To further enhance risk mitigation for the lenders, CCH Ghana Repo Agreement includes a put option as guarantee of borrower’s performance. The development of a Repo Agreement and the setup of the Repo system was the initiative of CCH Ghana, made possible through a grant of USD 0.12 million provided by the CFC.