AGRICULTURAL VALUe ChAIn FInAnCInG In KenYA

16 • AGRICULTURAL VALUE CHAIN FINANCING IN KENYA: ASSESSMENT OF POTENTIAL OPPORTUNITIES FOR GROWTH
and veterinary drugs dealers offering inventory credit to some of their agents
and stockists; limited producer credit from feed and vet drugs stockists; and
cooperatives extending inputs credit to their farmer members that is recovered
from milk deliveries. Thus, with this extensive evidence, Dairy received the full
four percent available for this rater.
4.6 NaTIONaL aGENDa
The dairy value chain is clearly a Government of Kenya priority. Dairy is placed
very high in the broader national goals of poverty reduction, employment
creation and food security. Further, dairy is the largest agricultural sub-sector in
Kenya and according to the literature reviewed, commercial smallholder dairy
production is considered by government as providing one of the best conduits
for meeting poverty reduction and economic growth goals as it underpins
sustainable employment generation. The government has been influential
in extending the reach of Artificial Insemination services and improved breed
stock. Finally, the dairy sector is duty exempt and fully liberalised. Thus the
dairy value chain received the four percent available for this rater.
Government of Kenya Intervention was historically an issue for the dairy value
chain but the sector is fully de-regulated and highly liberalised. Government
puts emphasis on private sector mechanisms for the dairy sector and has done
enough to counter the pressure of big players to keep off the informal dealers
from the market. The Kenya Dairy Board, established by national legislation,
is mandated to efficiently and sustainably develop, promote and regulate
the dairy industry. The Kibaki Commission actually abolished contracted
milk quotas and opened up KCC to all farmers. Any perceived interference
by GoK in the dairy sector (research, disease prevention and control, etc) is
pro-development of the sector rather than impeding its growth, and has thus
not had distorting impact on the dairy market. Thus this value chain was
not penalised given the absence of any evidence pertinent to government
intervention and received the six percent available for this rater.
4.7 COMPLEMENTaRY TECHNICaL aSSISTaNCE aND
BUSINESS DEVELOPMENT SERVICES
There was strong evidence of access to services for the dairy value chain from
the literature reviewed. The Kenya Diary Competitiveness Project, the Gates
Foundation, public extension services, Kenya Dairy Board and others are
providing services to the sector. Technical assistance services provided include
improved flow of feeds, addressing the impact of post election violence, better
animal husbandry practices, better breed selection, and quality maintenance
within the value chain. Further, USAID has contracted Land O’ Lakes to provide
business development services in 13 milk sheds. Given the strong presence of
complementary service provision, the authors awarded the dairy value chain
the full two percent available for this rater.
Regarding value chain service provision,, for the dairy value chain, there
was also strong evidence of support between buyers and sellers according
to the literature reviewed. Dairy transporters and bulkers provide technical
assistance to their suppliers. Also processors, in partnership with Kenya Dairy
Board, provide technical assistance to smallholders. Dairy received the full
four percent available for this rater.
4.8 GEOGRaPHICaL SPREaD
With respect to concentration of clients, the dairy value chain is strongly
concentrated in six geographical areas. The largest is the Rift Valley with 53%
of production followed by Central 25%, Eastern 6%, Western 6%, Nyanza 5%
and Coast 3%. While these six are indisputably the largest concentrations,
technical assistance providers contend that there are additional seven milk
sheds with significant volumes of milk and processing capacity. The dairy
value chain received the full ten percent available for this rater.
According to the documents reviewed, access to minimum infrastructure for
supporting financial services to the dairy value chain is basically assured.
Clearly the majority of production and processing centres around urban and
peri-urban areas in the Central region and Rift Valley. Hub and spoke banking
arrangements can easily reach the large potential clientele in these areas. Other
than for these provinces, smallholder dairy production is in the rural areas. The
condition of the infrastructure in such areas was not in the least captured by
the documents available for review, nor beyond. Thus based on the literature
reviewed, the authors have given a score of the full possible ten percent for
this rater with the caveat that the literature may be misrepresentative or
inadequate to fully answer this question.