Commodity Exchange-Linked Financing

A receipt the depository blocks until the bank releases it.

On this route the commodity sits in an accredited warehouse on the USE Commodities Exchange (USE COMMEX). The exchange issues an electronic warehouse receipt, a commodity security held in the depositor’s account at the depository. The bank takes its security by pledge, and no sale or transfer is possible until the bank releases it.

Our Role

No receipt exists until the exchange-designated collateral manager approves the request that creates it. VSM holds that role as a strategic partner of USE COMMEX, working alongside the Uganda National Bureau of Standards on quality. The instrument a bank pledges has already passed an independent check.

What we do

• Commodity stock verification
• Warehouse monitoring
• Trade process coordination
• Inventory reconciliation
• Commodity movement monitoring
• Documentation and reporting

The Market

• USE Commodities Exchange Limited was incorporated in October 2020. The Uganda Securities Exchange received Capital Markets Authority approval to operate a commodities exchange in December 2021.
• Warehouse receipts are governed by the Warehouse Receipt System Act 2006, administered by the Ministry of Trade, Industry and Cooperatives.
• Accredited warehouses include Mityana, Kiryandongo and Kawempe. Accredited laboratories grade each lot to the exchange standard.

How a Lot Reaches the Market

1. The depositor delivers the commodity to an accredited warehouse, where it is weighed and graded. A lot that fails is re-cleaned, re-graded or withdrawn.
2. The warehouse keeper requests a receipt.
3. VSM verifies the request and approves issuance.
4. The exchange creates the electronic receipt and records it in the depositor’s account.
5. The receipt is listed on the spot market and traded through a broker at a discovered price.
6. After settlement, the receipt passes to the buyer and the warehouse releases the goods against a written order.

Lending on a Pledged Receipt

• The bank verifies the holding through the depository: quantity, grade, warehouse and validity.
• The bank pledges at least one full lot. Partial pledging is not permitted.
• The depository marks the receipt pledged and encumbered, and the bank disburses only after this is confirmed.
• Only the bank can start the release. If the lot is sold on the exchange instead, cash settles on the third day and repays the loan.

Rules That Protect the Bank

• A receipt nearing half its storage life is re-weighed and reissued.
• When only part of a lot sells, a new receipt is issued for the balance, so the remaining security stays intact.

The same chain carries export traceability for coffee bound for Europe. See ESG and Sustainability Advisory.

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