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Commercial bank floats system to pay paddy farmers promptly

Last Updated on Monday, 27 July 2015, 22:06 by GxMedia

Chief Executive Officer of the Guyana Bank for Trade and Industry, John Tracey delivering a presentation at the National Rice Industry Conference held at the Arthur Chung International Conference Centre.

One of Guyana’s major lenders to the rice industry on Monday proposed a new system to pay paddy farmers on time rather than enforce the law that could see millers licenses being revoked if they do not settle their debts within a given time frame.

Chief Executive Officer (CEO) of the Guyana Bank for Trade and Industry (GBTI), John Tracey said enforcing the Rice Factories Act would be counterproductive because it would create a cycle made up of fewer millers who would be available to buy paddy. “If you de-license some of the millers, the next crop you have less millers to buy paddy and so you will overburden them, they will have a bigger funding gap and it just wouldn’t work so we have to find a different way of having this industry perform than to have a Rice Factories Act which you can’t enforce,” he told the National Rice Conference.

Instead, Tracey recommended that banks and farmers could examine the introduction of a payment guarantee or IOU for rice producers. “We can design this instrument later, it’s an IOU, it will carry an interest rate and the rice producer can take it to the bank and discount it, he can hold it if he wants to self-finance,” he said.

The GBTI boss explained that when the financial instrument is discounted by the bank,  the rice producer gets the principal but not all the interest because the bank “takes out some.” In the end, he said the millers would have to agree to such a system because he or she would have to honour that eventually. While Tracey supports the establishment of agriculture bank, he said commercial banks appeared willing to take the risk.

Chairman of the Essequibo Paddy Farmers Association, Naitram (one name) appealed to authorities at the National Rice Conference to enforce the law that compels millers to pay for paddy within the prescribed period. “Right now the rice crop in Essequibo has started bearing. Farmers have not received money,” he said.

Naitram said a number of millers have paid farmers only 30 percent of monies owed for paddy, forcing a number of them to rack up bank debts or unable to spray their rice fields. The Association’s Chairman recommended that the Rice Factories Act be amended to make it compulsory for millers to pay interest rates if they do not make final payments after 42 days. The law currently requires millers to pay 50 percent of their debts to famers in two weeks. “We have to change that Factory Act,” he said. “What we find is that the millers owe farmers and they keep expanding all the time. We are the farmers, we are the ones who are suffering,” he said.

Naitram called on government to cushion the impact of lower paddy prices and market loss with a waiver of the taxes on fuel and fertilizer “so that we can be competitive in the industry based on the current prices at this juncture.”

He also accused the Guyana National Bureau of Standards (GNBS) of poor monitoring of millers’ scales that are being used to weigh paddy.  Issues having to do with moisture content, quality and content were also among other major concerns raised by the Chairman of the Essequibo Paddy  Farmers  Association.