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Credito Emiliano Bank of Italy Takes Cheese as Collateral for Loans

Credito Emiliano Bank of Italy Takes Cheese as Collateral for Loans


ITALY
Thursday, July 9th, 2015

One bank stands among the sea of investors taking houses and cars as acceptable collateral with one more possession that can offer security: cheese.

Not just any cheese though, “The King of Cheeses.”

According to a Harvard Business School Case Study, producers of Parmigiano Reggiano cheese can offer wheels as collateral to Credito Emiliano, an Italian-based bank in the Emilia Romagna region.

Credito Emiliano (Photo Credit: Investireoggi)

As stunned as you might be, this is evidently a system that works because this is something Credito Emiliano has been doing for over 60 years.

Nikolaos Trichakis, Assistant Professor of Business Administration, Harvard Business“In my research I look at how operations affect financing and vice versa, and this was a prime example of how to tailor a financing infrastructure to the operating characteristics of a supply chain,” Nikolaos Trichakis, Case Author and Assistant Professor in the Technology and Operations Management unit at Harvard Business School, said in the report, according to Forbes.

The study also notes that the bank stores the cheese for producers as it ages, allowing them to cut down on storage costs while still ensuring the cheese ages enough to reach maximum value.

Inside the cheese vault of Credito Emiliano (Photo Credit: Limmattaller Zeitung/Keystone)

On the flip side, they can see firsthand if the collateral is flawed.

“From the bank’s perspective, it becomes almost risk free,” Trichakis notes, according to Forbes. “They have the collateral in their possession the whole time it is aging. So the moment they see some issues—like bubbles, for instance—they can say, ‘Oh, that collateral isn’t worth as much as we thought.’ And they can immediately call up the producers and say, ‘Listen, you’re under water here.’”

Trichakis calls it a finance infrastructure that is tailored to the kind of environment. With the danger of bubbles forming, sweating, or cracking endangering the cheese’s value, or even rendering it useless, it seems a sensible way that benefits both parties if you’re going to take cheese as an insurance policy.

To purchase the full study, click here, and to keep in touch with the latest in the deli industry, keep checking in with DeliMarket News.