This publication addresses a problem which has emerged in recent years in many, if not most, countries which have liberalized their agricultural marketing systems. Such changes are being witnessed in Eastern Europe and states of the former Soviet Union as well as in many developing countries. Government marketing boards and parastatals usually had ready access to finance to enable them to purchase and to store food and industrial crops. Following liberalization, such finance has not been easily available to private traders who are expected to take over the marketing functions previously carried out by the state. Particularly in the case of food crops, this lack of finance places the burden of storage on farmers who are not always well equipped to store efficiently. The consequence of this is high levels of inter-seasonal price instability, to the detriment of producers and consumors alike. Inventory credit is one way of overcoming financing constraints. This is not a new concept; archaeological evidence shows that it was practiced in Ancient Rome. Obtaining finance against stocks of a wide range of products held in bonded warehouses is common in much of the world. Inventory credit for agricultural produce is widely used in Latin American countries and in some Asian countries (see Case Studies 1 and 2). In many countries, however, it is seldom practiced and real estate remains the main form of collateral acceptable to banks. Various different approaches to inventory credit are presented. For countries discarding interventionist systems or with little experience of commercial storokeeping, an approach is suggested involving a three cornered arrangement between a bank, a borrower and a warehouse operator. The borrower can be a trader, a miller, a large farmer or a group of farmers. The warehouse operator is generally an organization which is specialized in this field and which does not trade in the produce stored. Inventory credit is of use in financing the procurement and storage of durable agricultural produce, including: (a) cash crops destined for export markets, (b) imported produce, usually held in bond, for which the importer needs finance during disposal, and (c) domestic food and feed crops, particularly grains, subject to seasonal gluts. This publication is mainly concerned with the last use.