Page 72 - MEX-Yearbook-2017

Research Paper & Articles

Structured Finance in Context of

Nepalese Agriculture Sector

Nepal’s economy is predominated by the lists of to do things for the concerned authority. Here, a creation of agro securities would bridge
agriculture sector which is contributing one third With the introduction of recent commodity bill, it 100 of billion worth of agriculture produced to
to the national economy and almost two-thirds of has addressed lots of concerned requirement for the financial market and commodity exchange
employment. These figures are massive and this the sector and commodity exchange can perform would provide national scale online market
also leads to the point where we need a lot of its role in coordination with a various sector. where a producer can be benefited with the fair
innovation in terms of more dynamic agriculture Securitization of agricultural produced refers price discovery process through an exchange.
ecosystem benefitting various stakeholder. to the process of creating a receipt where Moreover, the price discovery in the commodity
One of the key areas that we can focus is on produced good with certain quality and grade are exchange also complement the spot market all
the securitization (structured finance) in the verified, certified and stored in the agriculture over the country and any differences in the price
agriculture sector. warehouse with required standard and issuing a of spot and futures market are balanced out by the
Traditional practice is prevalent in the agro sector receipt against such storage. This receipt can be arbitragers who are specialized in taking benefit
but at the same time modernization also taking its negotiable/non-negotiable which would help the of price differences of the same product in two
own pace. However, some of the biggest hurdles producer to obtain cheap financing facilities and different markets. Likewise, producer/consumer
can be contributed due to lack of infrastructure in can list their receipt in the commodity exchange can hedge their exposure in the spot market with
the storage and grading along with access road, where they can quote the appropriate price for the help of position in a futures market. All these
reach to market, cheap financing making up the their produce in the national online market. roles played by the commodity exchange would

There is also the provision of
clearing and settlement entity
in the commodity market bill
which will ensure the financial
performance of any contract

traded in an exchange.

71 | MEX NEPAL YEAR BOOK 2017