Adoption dynamics of warehouse receipt finance: Evidence from red chilli farmers in the Guntur region of Andhra Pradesh

Abstract

This study examines the socio-economic and institutional factors influencing the adoption of Warehouse Receipt Finance among Red Chilli growers in the erstwhile Guntur district of Andhra Pradesh, India. Warehouse Receipt Finance is a post-harvest credit mechanism that enables farmers to use stored produce as collateral, allowing them to avoid distress sales and improve price realization. Data is obtained from 144 farmers using purposive-cum-random sampling across 12 villages from four major chilli-growing mandals using a pre-tested interview schedule. Multinomial Logistic Regression identified significant determinants influencing farmers’ choice of market channels as farm size, distance to market, condition of storage facility and preferred sources of finance (input dealers and traders) distinguishing Warehouse Receipt Finance users from immediate sellers. Factor Analysis extracted five components viz., Storage Facility and Service, Financial Support, Peer and Social Influence, Operational Facilitation and Perceived Convenience which explained a substantial portion of variance. Multiple Linear Regression showed that distance to market, farm experience, membership in cooperatives, etc. and perceived convenience as significant factors impacting farmers’ willingness to use Warehouse Receipt Finance. These findings highlight a perceptual-behavioural gap, suggesting that, while socio-economic characteristics shape actual adoption but farmers’ willingness is primarily driven by perceived ease and convenience. Policy interventions should aim to integrate storage and financial services, streamline procedures and promote cooperative-linked mechanisms to enhance Warehouse Receipt Finance adoption rates among smallholders.