Lithuania: Financing of Warehouse Receipts - Legal Review
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Warehouse receipts are used to facilitate the financing of primary agriculture, agricultural trade and food processing. By storing grain or other agricultural commodities in licensed warehouses, farmers, traders and agri-processors have the possibility to obtain receipts that can be used as collateral with local credit institutions. This system has proved particularly useful in Central and Eastern European countries where agricultural enterprises do not have strong credit histories and have few assets to pledge as collateral. In these circumstances, local banks often prove reluctant to lend to the agricultural sector. For warehouse receipts to become a convincing instrument to secure loans to agricultural enterprises, a coherent institutional and regulatory framework is required. Banks need to be able to trust warehouses, which should be licensed and supervised properly, and banks must be certain that the receipts can be used as effective deeds to exercise their rights in case of loan default.