IFMR Trust - Announcements - Agreement with National Spot Exchange for financing model

Agreement with National Spot Exchange for financing model

IFMR Trust signed a partnership agreement with National Spot Exchange Limited (NSEL) on September 30, 2008, to create a seamless process for providing finance to farmers and traders against commodity warehouse receipts.

The pilot for this financing model will be launched shortly at Unjha, Gujarat.

Present during the signing of the agreement were Anjani Sinha, MD and CEO, NSEL, Bindu Ananth, President, IFMR Trust, Sucharita Mukherjee, Senior VP, IFMR Trust and Kshama Fernandes VP, IFMR Trust.

Under the partnership, IFMR Trust will provide loans to farmers against agricultural commodities deposited in NSEL-approved warehouses, by way of warehouse receipts issued for these deposits.

Such post-harvest financing will give farmers the option to hold on to their produce during the period immediately after harvest, when low prices are usually offered and sell at a later time, when prices tend to rise.

It will also allow farmers to take advantage of changing market prices rather than being burdened by them.

The loans backed by warehouse receipts will be pooled and repackaged into securities. IFMR Trust will structure, arrange and sell these commodity loan-backed securities in the capital market.

Speaking at the occasion of the signing of the agreement, Anjani Sinha, MD & CEO, NSEL said, "This partnership empowers the farmer by providing a liquid market for agricultural commodities accompanied by access to finance."

NSEL, he said, was poised to transform the rural economy by improving marketing efficiency for agricultural produce and would provide maximum support for the project with IFMR Trust.

Sucharita Mukherjee, Senior VP, IFMR Trust said, "We will unlock tremendous value for both farmers and investors through this partnership with NSEL. We expect this model to be replicated throughout the country in the coming years."

IFMR Trust will act as Professional Clearing Member (PCM) of the exchange. The disbursement and repayment of loans made by IFMR Trust will be made through NSEL's PCM system.

NSEL is a national, institutionalised, electronic spot exchange, promoted by Financial Technologies (I) Ltd. (FTIL) and National Agricultural Co-operative Marketing Federation of India Limited (NAFED). It provides a state-of the-art market place with facilities for risk-free and hassle-free procurement and disposal of farm produce. It provides customised solutions to various problems related to agricultural marketing, storage and warehouse receipt financing.

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Agreement with National Spot Exchange for financing model