In order to facilitate smoothness of production and distribution of goods, it is necessary to have warehouse receipt system as one of financing instrument. Considering these, Law No. 9/2006 regarding Warehouse Receipt System (or WR Law) was promulgated on 14 July 2006 and followed with promulgation of Government Regulation No. 36/2007 as the implementing regulation.
A warehouse receipt is a document of title issued by a warehouse manager covering commodities that are stored in a warehouse. The warehouse manager has a right to issue warehouse receipt and operates warehouse owned by them or other party, as well as performs storing and maintenance and supervision of commodities that are stored in such warehouses. In Indonesia, the warehouse manager must at least obtain license from Badan Pengawas Perdagangan Berjangka Komoditi (or Bappebti).
Warehouse receipt can be issued as script warehouse receipt or scriptless warehouse receipt. Scriptless warehouse receipt shall be recorded electronically and the holder shall receive proof of title registration from Lembaga Kliring Berjangka as the Registration Centre under WR Law.
Script warehouse receipt can be issued in 2 forms i.e. (i) Negotiable Warehouse Receipt (Resi Gudang Atas Perintah) which contains order/instruction of a party that has a right to receive delivery of the commodities; and (ii) Non-negotiable Warehouse Receipt (Resi Gudang Atas Nama) which states the name of a party that has a right to receive delivery of the commodities. Warehouse receipt may be transferred, used as delivery of commodities document, used to settle expiring future contract and eligible as collateral without requiring any other collateral.
After enactment of WR Law and its implementing regulation, many small size and mid size agribusiness owner have been getting financing from local and or foreign banks with warehouse receipt financing scheme. The scheme can be summarized as follows:
- Agribusiness owner and the bank sign Financing Facility Agreement;
- Agribusiness owner, the bank and the warehouse manager sign Collateral Management Agreement;
- Commodities received in the warehouse by the warehouse manager under the terms of Collateral Management Agreement;
- Upon receipt of commodities, checking of quality and quantity of commodities, the warehouse manager shall issue warehouse receipt to the bank;
- Upon receipt of the warehouse receipt, the bank shall disburse the fund to pay the purchase of commodities from supplier;
- Agribusiness owner must repay all fund disbursed by the bank plus interest, penalties (if any), fees, expenses to the bank under the terms of Financing Facility Agreement;
- During the period of such financing, any release of commodities to buyer shall be performed under instruction of the bank;
- The warehouse manager shall release the commodities for delivery to buyer and upon receipt thereof, the buyer shall pay the commodities to the bank. If the agribusiness owner (debtor) breached the agreements and/or an event of default occurred, the bank shall have a right to sell the commodities in its own authority through public auction or direct sale.