In 2023, the Commission commenced a study to review the Warehouse Receipt System Act, No. 14 of 2006 (the Act). The Warehouse Receipt System is designed to allow farmers and traders of agricultural produce access financing. The review is intended to: explore the gaps in the regulatory framework and structure; examine the performance of the Uganda’s warehouse receipt system; devise feasible mechanisms to increase the efficiency and effectiveness of warehouse receipting; and support market competitiveness and agricultural price stabilization and access to credit.
Warehouse Receipt Systems (WRS) are mechanisms that allow farmers to access markets and financial services using their commodity as collateral. The warehouse receipt system is regulated under the Warehouse Receipt System Act No.14 of 2006 and regulations made thereunder in 2006 and 2007.The Act was enacted to provide for the licensing of warehouses and warehouse keepers, provide for a national system of warehouse bonding for the protection of depositors, the issuance of warehouse receipts and to provide for other related matters.
Despite the enactment of the Warehouse Receipt System Act, the system is facing challenges that need to be addressed. The Act has gaps such as lack of provisions for use of electronic receipts, clear operating procedures and punitive penalties for breach of the law. The Act also lacks clarity and certainty for priority to a holder of a negotiable warehouse receipt among many creditors in the queue of recovery. Further, there are international best practices that have evolved which affect the implementation of warehouse receipting.
The overall objective of the review is to address the gaps, provide clarity and certainty of the law. The specific objectives of the review are to:
- identify gaps hindering optimal implementation of the Act;
- undertake comparative study of other jurisdictions to borrow best practices;
- identify new and emerging issues affecting warehouse receipting system; and
- propose recommendations for reform.
The review therefore, seeks to enhance the warehouse receipting system; increase productivity; enhance access to credit for famers and improve the quality of products; enhance efficiency and effectiveness of administration; encourage handling and marketing through organised farmers/producers; provide an enabling environment for strengthening WRS for grading, standardization and quality control of grains; facilitate negotiation and transfer; reduce the costs of transfer and enhance marketability and trade of receipts and increase efficiency in collateral management for financial institutions.
The Commission has published an issues paper containing issues and proposals for reform. The issues paper has been subjected to consultations with key stakeholders. The issues and proposals for reform include the need to amend the law to:
- streamline the functions of the Authority and the Board in dealing with the warehouse receipting system;
- provide for punitive offences and penalties;
- introduce electronic warehouse receipting;
- apply the warehouse receipting system to non-agricultural commodities;
- apply the warehouse receipting system to other agricultural produce other than grain;
- provide for the order of priority of holders in process of recovery where there’s default by the debtor;
- use warehouse receipts as collateral to access credit;
- provide for the procedure of recovery of credit in case of default; and
- dissemination of information for users of the law.
REVIEW OF THE WAREHOUSE RECEIPT SYSTEM ACT -ISSUES PAPER
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