Karandaaz Partnership with NRSP Agricultural Processing Company Reaping Rewards

Karandaaz Partnership with NRSP Agricultural Processing Company Reaping Rewards

Karandaaz Pakistan, following its mandate of promoting access to finance for micro, small and medium-sized businesses through a double bottom line investment platform, announced an equity investment of PKR 600 million in National Rural Support Programme (NRSP)’s subsidiary Agriculture Processing Company Limited (APCL). This investment will help APCL scale up warehousing, financial inclusion, and the incidence of rural industrialization, particularly for small-holding farmers. The investment made in October 2020 helped NRSP APCL install rice processing capacity of 40,000 tons of paddy per annum and expand the warehousing capacity of 5,250 tons to 20,000 tons. In 2021, NRSP APCL became the first accredited warehouse of the country to issue electronic warehouse receipts. During the current season the facility issued electronic warehouse receipts for 3,000 tons of paddy. As a result of Karandaaz investment in NRSP APCL, farmer income has increased as market imperfections caused by Aarti commission and inefficient weight measurement practices are eliminated, cost of capital via access to warehouse receipt finance are reduced, and seasonal arbitrage ensure better, competitive prices for farmers at the time of harvest. NRSP APCL’s exports are worth USD 1,076,250 as of March 2022.

Speaking about the vision behind setting up the facility, Dr. Rashid Bajwa, Chairman NRSP APCL explained, “Pakistan employs 45% of its labor force in agriculture but agriculture’s share in GDP remains a mere 21%. This is because major crops are mostly produced by subsistence farmers with low yield. Low yields are associated with a vicious sort of generational bondage relationship between small farmers and Aartis (whole sellers) who often charge hidden / high interest rates on in kind financing of unbranded and low-quality input supplies, compelling farmers to make distress sales at low prices. NRSP established NRSP APCL as a for-profit subsidiary to demonstrate the significance of investing in back-to-back value chain wherein the small and landless farmers are provided farm inputs such as credit, seed, fertilizer, advisory, and postharvest opportunities to decide whether to store or sell their crop at competitive rates to their advantage. The ecosystem approach not only helps the farmers in increasing per acre yield but also enables them to increase their incomes. The entire value chain model ensures genetic and geographical traceability.”


Speaking about the significance of Karandaaz investment in APCL, Mr. Navid Goraya, Chief Investment Officer, Karandaaz said, “Issue of timely, easy, and favorable access to finance is a big constraint for small farmers.

Warehouse receipt financing is a novel instrument in Pakistan’s context that has the potential to thread small farmers, processors, and the financial sector; enabling them to earn financial and social returns that have been previously nonexistent in agricultural value chains. Karandaaz’s partnership with NRSP APCL, which in turn has introduced a warehouse receipt financing programme with Naymat Collateral, is helping eliminate price anomalies and traditional practices prevalent in the mandi system, mostly contrary to the interests of growers. With electronic warehouse receipt regime, farmers have an alternate avenue to access formal financing and evade the hassle of conventional pass book lending. Mr. Navid also indicated a possibility to enhance the existing storage and processing capacity of the plant in near future.

Karandaaz is the implementation partner of the Enterprise and Asset Growth Programme (EAGR) of the UK’s Foreign, Commonwealth & Development Office (FCDO) with a mandate to improve access to appropriate financial services for micro, small and medium enterprises and translating this into higher economic benefits for state, poor, and marginalised groups, in Pakistan. Explaining the reasons for Karandaaz to partner with NRSP APCL, Mr. Waqas ul Hasan, CEO Karandaaz said, “Eighty (80%)[1] of the world’s poor live in rural areas and work mainly in farming. This important agricultural infrastructure set up by NRSP to provide storage, process, and warehouse receipt finance facility is playing the role of a game changer for rice growers of the region and helping transition them to be formalized agri-businesses and we are happy to be their partners in this. In Pakistan, it is estimated that post-harvest losses for grains are 15-18 percent; while around 25-40 percent of the produce is lost in case of fruits and vegetables [2]. Besides the lost economic potential of the wasted produce, this is an important issue for the country to address from the food security point of view. The State Bank of Pakistan’s decision to make electronic warehouse receipts an acceptable collateral and Securities and Exchange Commission of Pakistan’s amended to Collateral Management Companies Regulations 2019 to declare collateral management companies with an equity of PKR 200 million or higher eligible to issue warehouse receipts for agricultural commodity financing are steps in the right direction. EWR regime, once fully in place, will help state to exit from commodity finance, make farm production market based and not only lower the public debt burden but also arrest circular debt which has started creeping up under this head.”


Currently, major crops in Pakistan, including cotton, sugarcane, rice, maize and wheat have an annual yield of greater than a million tonnes. However, Pakistan lacks sufficient infrastructure for post-harvest treatments, preservation of quality, storage, and access to financing for small holders; all required to ensure that the agricultural sector is cleaned of lingering inefficiencies particularly affecting small farmers. The model that Karandaaz and NRSP APCL has set up can be adapted in any agricultural value chain including livestock so that smaller farmers can reap greater rewards.