INTEREST TOWARDS BANK CREDITS AGAINST GRAIN IN STORE PICKS UP
With the start of the harvest farmers' interest in getting loans against warehouse receipts runs high. Under the Grain Storage and Trade Act, only licensed public storehouses are entitled to issue warehouse receipts. Currently, there are 26 such grain stores round the country with an aggregate capacity of 270,000 tons. The warehouse receipts are guaranteed by compensation funds. Each public storehouse should be a member of at least one such fund and make annual contributions into it. In 2000 the most active financial institutions that released credits against warehouse receipts were SG EXPRESSBANK, which extended such loans worth about BGL7MN, and UNIONBANK, with credits amounting to BGL1.9MN. The money resource went to depositors of grain in licensed public storehouses.
The ceiling of the loans allocated by SG EXPRESSBANK is set at 70% of the estimated worth of the stored product, while UNIONBANK has raised that ceiling to 75 per cent. The interest rate charged on credits extended by SG EXPRESSBANK is negotiated between the financial institution and the client, and can be in Bulgarian levs, US dollars, or in euro. UNIONBANK's rate on the loan is equal to the base interest rate (BIR) plus 8% when paid in local currency, and BIR plus 11% if paid in Deutsche marks. The redemption term is set individually for each borrower. UNIONBANK, however, has fixed April 15, 2002 as the deadline for paying off loans. A mandatory provision requires insurance of the deposited grain in favour of the bank. On receiving the credit the borrower has to endorse the warehouse receipt in favour of the bank. The amount of the loan, the interest rate, and the redemption date, as well as the name and address of the crediting institution, are entered in the endorsement.
The transferrence of rights on the warehouse receipt are mandatorily entered in the register, which is kept at the public warehouse. There are no legal stipulations, banning the secondary sale of warehouse receipts. However, neither SG EXPRESSBANK nor UNIONBANK have so far taken that opportunity. The principle of the secondary sale of receivables, pledged by warehouse receipts, is absolutely the same with the above-described transferrence in favour of the creditor. In their practice of crediting against warehouse receipts the two banks have not encountered serious problems so far, either concerning their clients, or the public storehouses they work with.
The interest of agricultural producers towards storage of grain in licensed warehouses with a view to getting bank credits, pledged by grain, has picked up. While last year we had to persuade our clients that through the issuance of warehouse receipts they could profit more by selling their product later, and having meanwhile the necessary money for current expenses, both farmers and traders are currently much more interested in this kind of securities, Stefan Ivanov, Executive Director of Zurneni Hrani (Cereals) - Silistra, commented to the BANKER weekly. SG EXPRESSBANK and UNIONBANK shall not change the terms for releasing this kind of credits in 2001. The United Bulgarian Bank and BULBANK have already shown interst towards such operations.