Federal officials are moving forward with a belated initiative to form a regulatory body tasked with supervising a national credit scheme that facilitates loans for farmers, unions, and agro-processors using receipts for commodities they keep at warehouses.

It has been 17 years since laws were introduced to regulate a warehouse receipt system and nearly two years since a bill that governs the scheme's implementation was legislated. Nonetheless, the initiative has remained on the back burner.

Two months ago, a team from the Ministry of Trade & Regional Integration (MTRI) launched a pilot programme to supervise the warehouse scheme. It will continue until a federal regulatory body is established in August, according to Tarekegn Shibeshi, who heads the team at the Ministry. A committee comprising seven officials of the Ministry has been formed to hire staff for the proposed agency, including a director.

The regulator will have an advisory board composed of representatives from the ministries of Trade, Industry, and Agriculture; the central bank; the Ethiopian Standards Agency; the Ethiopian Bankers' Association, an industry lobby group chaired by Abie Sano, president of the Commercial Bank of Ethiopia. The process to establish the agency is expected to wrap up in three months, at which time officials hope to scale up the warehouse scheme, Tarekegn told Fortune. It would allow smallholder farmers, unions, and agro-processors to access loans up to 70pc of the value of the commodities they store at warehouses.

Only four crops, including teff, are eligible for use as collateral.

Last year, eight commercial banks inked agreements with the Trade Ministry to facilitate the credit scheme. However, only three – the state-owned Commercial Bank of Ethiopia (CBE), Awash Bank, and the Cooperative Bank of Oromia – are actively engaged. The Ministry plans to disburse 325 million Br in loans during the pilot period, according to Tarekegn.

Two unions and four agro-processors have thus far received 75 million Br in short-term loans against collateral of 41,000qtl of grain.

Incorporated nine years ago, Abas & Mahari Flour Factory was the first to receive credit under the warehouse scheme. The factory, which has an annual turnover of 100 million Br, operates with a workforce of 84 in Debre Markos town, the Amhara Regional State. It received 12 million Br in loans against collateral of 14,000qtl of wheat.