AGRICULTURAL VALUe ChAIn FInAnCInG In KenYA

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iv • AGRICULTURAL VALUE CHAIN FINANCING IN KENYA: ASSESSMENT OF POTENTIAL OPPORTUNITIES FOR GROWTH Abbreviations aDB African Development Bank aGRa Alliance for a Green Revolution in Africa aSaL Arid and Semi-arid Land areas aSDS Agricultural Sector Development Strategy aTM Automated Teller Machine BDS Business Development Services EPZ Export Processing Zone EU European Union FSD Financial Sector Deepening GDP Gross Domestic Product GoK Government of Kenya ILRI International Livestock Research Institute JKUaT Jomo Kenyatta University of Agriculture and Technology KaRF Kenya Access to Rural Finance KCB Kenya Commercial Bank KCC Kenya Co-operative Creameries KSh Kenya Shillings KSPFS Kenya’s Special Programme for Food Security KWFT Kenya Women Finance Trust NCPB National Cereals and Produce Board NFNSP National Food and Nutrition Security Policy NGOs Non Govenrmental Organisation NIB National Irrigation Board NRDS National Rice Development Strategy MT Million Tonnes Ta Technical Assistance UHT Ultra Heated Homogenized Treated Milk USaID United State's Aid agency USD United State's Dollar WTO World Trade Organisation
Chapter 1 INTRODUCTION AGRICULTURAL VALUE CHAIN FINANCING IN KENYA: ASSESSMENT OF POTENTIAL OPPORTUNITIES FOR GROWTH • 1 The systematic and prudent financing of smallholder agriculture has been and continues to be a difficult goal in Kenya in spite of remarkable progress in the microfinance over the past twenty years. Agriculture, with its non-uniform cash flows, rural bias, poorly capitalised and widely dispersed producers, seasonal cash flows, price and market risks differs substantially from businesses conventionally supported by traditional finance and microfinance. Nonetheless, the majority of Kenyans are smallholder agricultural producers and fisher-folk and the well being of themselves, the food security of the nation and the development of Kenya’s national income depend on their continued and improved performance. What is required is a rigorous, analysis based approach to identify and service financing opportunities on the basis of minimum risk and maximum return. One methodology for the design and rollout of agricultural financing strategies is based on a value chain approach. That is, doing a relatively complete analysis of who buys what from whom from input suppliers to terminal markets to establish: 1. 2. 3. that all necessary actors along the chain are present and therefore the chain is well functioning and capable of growth; that all actors are profitable and thus encouraged to stay in the market and increase their market share; the relative magnitude of each actors’ business and value chain segment to thus better understand the market and its supply and demand dynamics; and, after verifying on the basis of 1 to 3 that the value chain is well functioning; 4. which of the actors have the highest value, shortest tenure and lowest risk businesses and are thus most ideal for supporting financing. INSPIRED International has a quantitative analysis tool for evaluating value chains and recommending financing strategies and financial products. INSPIRED was engaged by USAID’s Kenya Access to Rural Finance (KARF) project to use this tool to analyse Kenya’s dairy value chain in four principal dairy producing geographies of Kabete, Nyeri, Nakuru and Eldoret. The outcome of this research was a strong interest on the part of several of Kenya’s financial institutions to finance opportunities identified using this numbers based approach. Both KARF and Financial Sector Deepening Kenya (FSD) felt encouraged to extend this analysis to other commodities based on the strong interest shown by the financiers in this approach. Against this interest to expand this approach to other commodities was the implicit fact that substantial research into Kenya’s agricultural value chains had already been undertaken. Unfortunately, in spite of the existence of this data, a quality synthesis had never been undertaken with respect to financing opportunities. Thus, before undertaking research into value chains beyond dairy, KARF and FSD opted to sponsor a desk review of all materials deemed valuable for twelve commodities including: beef, dairy, eggs, feeds, fish, fruits, maize, poultry, rice, vegetables, water and wheat. Based on the previous work on dairy, INSPIRED was engaged to undertake this desk review.
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Page 9 and 10: Categories and raters Discussion Ca
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Page 29 and 30: DOCUMENTS REVIEWED “Leg Up for th
Page 33 and 34: Chapter 7 FISH VALUE CHAIN 7.1 BaCK
Page 35 and 36: VI Complementary Ta and BDS AGRICUL
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Page 41 and 42: V National agenda 10% a GoK priorit
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Page 53 and 54: Value chain service provision 4% AG
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c Value per producer 1% d Price tre
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AGRICULTURAL VALUE CHAIN FINANCING
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DOCUMENTS REVIEWED AGRICULTURAL VAL
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Contribution to GDP 5% c Value per
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BIBLIOGRAPHY MaIZE AGRICULTURAL VAL
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Irungu, J. Kenya National Rice Deve
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NOTES AGRICULTURAL VALUE CHAIN FINA
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AGRICULTURAL VALUe ChAIn FInAnCInG In KenYA

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