In a concerted effort to extend financial support during the soybean harvesting season, authorities have initiated a credit scheme for edible oil manufacturers through the Ethiopian Commodity Exchange (ECX) warehouse receipt system.

The Ministry of Industry(MoI) was receiving continuous appeals from soya bean processors over financial constraints restricting their operational capacity. This prompted a meeting of stakeholders from the Ministry of Regional Trade & Integration and the Ministry of Agriculture two months ago.

The warehouse receipt system, which has been available for maize, wheat, and malt barley until now, allows for the acquisition of loans from seven commercial banks registered by the ECX with the commodity held as collateral.

Domestic edible oil processors began registering for the system last week at the Capital Hotel on Haile Gebre Silase St during a stakeholder meeting over contract farming.

Muna Jemal,  Head of expansion and incentive facilitation at MoI, conveyed that the move to secure finance was spurred by the industries' plea for assistance in acquiring soybeans due to insufficient financial resources.

"Supporting manufacturers is our mandate," Muna told Fortune.

Launched in 2011, the warehouse financing system has enabled farmers, unions, and processors to access loans from banks as part of an effort to minimize difficulties in accessing working capital.

Merchandise stored at ECX warehouses will be checked for quality by resident experts, who will issue a receipt of approval, which can be used to ask for a loan from the affiliate banks.

Birahanu Tiruneh, warehouse receipt manager at the Exchange, explains that banks will ask for final approval after receiving the receipts to issue loans worth up to 70pc of the warehouse stock.

"Soybeans were added to help processors take advantage of price variations," he told Fortune.

Derese Kasu, the general manager of Kunifira Agro Processing PLC, has been struggling to secure a bank loan for plant inputs, despite the facility's capacity to produce up to seven million litres of oil daily.

"We are operating at less than half capacity," he told Fortune.

Kunifra, which was established with two million birr paid-up capital nine years ago, requires around 420 quintals of soybean daily to operate at optimal levels.

"The loan cap has made things worse," Derese claims.

He explained that even with the decline in the price of soybeans, most edible oil processors are not capable of mustering enough working capital to secure the necessary inputs.

Addis Gerkabo, the manager of the Ethiopian Edible Oil Manufacturing Industries Association (EDEOMIA), indicates that factory liquidity has been rapidly deteriorating for four years, with complaints from 126 members becoming more common.

"Soybean is the primary input for edible oil industries," he told Fortune.

Oromia Bank, which had 1.58 billion Br profits during the previous financial year, is one of the seven commercial banks that have an existing arrangement with the ECX to provide loans for the three other commodities.