Tawanda Musarurwa
WHILE Zimbabwe introduced its commodity exchange – the Zimbabwe Mercantile Exchange (ZMX) in 2021 – recent developments are enhancing its capacities as a platform that can drag more of the country’s agriculture into the formal, finance-friendly fold.
At the just-ended African Continental Free Trade Area Association of Commodity Exchanges (A-ACX) conference in Victoria Falls, ZMX inked a memorandum of understanding (MoU) for collaboration with Malawi’s Agricultural Commodity Exchange for Africa (ACE), the Zambian Agricultural Commodity Exchange (ZAMACE) and the Tanzania Mercantile Exchange (TMX).
The cross-border MoU opens doors to regional capital and markets, making local commodities more bankable, resulting in a tighter link between crops and credit.
ZMX has also set its sights on launching futures trading, a mechanism that lets farmers and buyers agree today on the price they will pay (or receive) for commodities in the near future.
By introducing futures trading and teaming up with regional exchanges, the country’s commodity exchange can become a bustling financial engine.
“If you produce a commodity of a certain quality, and you can anticipate that the future price will be this, that is very helpful to both the farmer and the off-taker,” said ZMX CEO Mr Collen Tapfumaneyi.
When introduced, futures trading can give farmers and financiers something they have long lacked: price certainty.
The ZMX CEO said the local commodities exchange is working to ensure that “the Zimbabwe agricultural sector is anchored on efficient, effective and convenient access to markets and finance by our hardworking farmers.”
ZMX can be a big game-changer for agriculture in the country, which is currently underfinanced.
An underfunded sector
Despite agriculture contributing over 12 percent of gross domestic product (GDP), farmers receive just 3 percent of the country’s total formal credit, according to the Food and Agriculture Organisation (FAO)’s 2024 report on Southern African food systems.
Less than 10 percent of smallholders in the country have access to structured credit.
According to the Reserve Bank of Zimbabwe’s 2025 Monetary Policy Statement, aggregate banking sector loans and advances totaled ZiG55,93 billion as at the end of 2024.
Of that total, lending to agriculture accounted for just 14,7 percent.
Most rely on informal lenders, advance payments from middlemen or high-interest microloans.
Climate change has increased the financing requirements for the country.
According to the African Development Bank (AfDB), Zimbabwe has a climate financing gap estimated at US$61,7 million – or 0,24 percent of GDP – for the period 2020 to 2030.
With futures contracts, banks can lend with greater confidence, knowing what crops will be worth months in advance.
It would give farmers and financiers the one thing they lack: certainty.
A banker, told that a maize farmer will earn US$280 per tonne three months from now, is far more likely to sign a cheque.
A farmer, assured he will not have to sell at a panic-induced discount, might finally invest in quality seed or irrigation.
But, the real muscle behind this movement is not just in contracts; it is in the infrastructure.
A warehouse full of promise
ZMX has built a network of 33 warehouses across seven provinces, offering 642 000 metric tonnes of storage.
As at the end of this first quarter, 437 000 tonnes of commodities – from maize to rice bran – sit in storage, backed by warehouse receipts that can become an important currency for farmers.
These slips of paper or digital records are collateral, usable for loans and trade.
As a commodity exchange, ZMX facilitates “structured agricultural trade.”
What that means in practice is a farmer can take their maize to a certified warehouse, receive a warehouse receipt (essentially a claim cheque for the grain) and use that piece of paper as collateral for a loan.
While warehouse receipt financing works and is simple, it is currently underutilised.
FAO has long championed warehouse receipt systems (WRS) as one of the most effective tools for improving liquidity in agriculture.
The specialised agency has, however, said warehouse receipt systems initially require the buy-in of big agribusiness players.
“The ability of a warehouse receipt system to overcome the credit access problems faced by small and poor farmers is limited (larger farmers tend to have larger surpluses available as collateral).
“Experiences with well-functioning warehouse receipt systems around the globe show that warehouse receipts are initially used by larger and more financially viable entities,” said FAO in a 2009 working paper titled ‘The use of warehouse receipt finance in agriculture in transition countries.’
“As the system expands, the effects gradually spread over to smaller producers and operators.
“The major driving forces behind a sustainable warehouse receipt system are traders, large producers and processors.”
ZMX’s new collaboration with other regional commodity exchanges enhances its offerings to local farmers.
How warehouse receipts boost agriculture financing
The concept is simple: a farmer deposits grain in a certified warehouse and gets a receipt.
That receipt, which verifies quality and quantity, can be traded or used as loan collateral.
The State as referee
Government has long-valued the agriculture sector and is no stranger to interventions, such as price controls, farm subsidies and land redistribution.
But when it comes to ZMX, the State needs to embrace a more nuanced role.
First, as highlighted at the 2025 A-ACX Conference, the Government must act as both a facilitator and an enabler.
For example, the State could mandate parastatal banks like AFC Commercial Bank to accept warehouse receipts as collateral.
It could also subsidise insurance premiums, making agricultural loans less risky for private banks.
Education is just as important, because as it stands, for many smallholder farmers, ZMX might as well be a telecoms acronym.
Extension officers must be trained to explain how to grade produce, store it properly and access financing through the platform.
Private sector
Banks, financial technology firms, insurance companies and logistics providers all stand to benefit – if they build bridges to the exchange.
Some local banks have been cautious about agriculture lending due to perceived high risks.
But, verified warehouse receipts change the game.
Receipts prove that the commodity exists, has value and can be liquidated.
Banks should now roll out tailored products – seasonal loans with flexible repayment or pre-harvest financing backed by forward contracts.
The country’s mobile money firms and technology start-ups, too, can get in on the act.
ZMX already supports digital trading, but to reach Zimbabwe’s 1,8 million smallholder households, it needs WhatsApp bots, mobile-first applications and integrations with EcoCash and OneMoney.
Imagine a farmer receiving a price alert in their local language, securing a loan and selling a futures contract – without ever stepping foot in a city.
Market rationality
Futures markets do not just help farmers and banks.
They can bring sanity to food markets that are sometimes chaotic.
“Commodity exchanges provide market transparency,” said commodities and derivatives markets expert Dr Bharat Kulkarni at the Victoria Falls summit.
“They provide price discovery, giving information to policy makers, farmers and buyers on where supply and demand fundamentals are heading.”
Price discovery, simply put, is knowing what something is actually worth.
When both a buyer in Durban and a grower in Mutoko are staring at the same ZMX futures screen, the chances of exploitation shrink.
It is harder to gouge farmers when they can see global prices.
And it is easier for Government to make policy when it knows where markets are heading.
In countries like Kenya and Uganda, warehouse receipt financing already accounts for between 15 to 30 percent of rural credit in some regions.
With the right mix of state policy, private sector enthusiasm and technical innovation, Zimbabwe can catch up – and perhaps even leap ahead.
ZMX has the potential to become a financial nervous system for rural Zimbabwe.
ORIGINALLY PUBLISHED IN THE SUNDAY MAIL – https://www.heraldonline.co.zw/sundaymail/warehouse-receipts-can-boost-zimbabwes-agricultural-financing