Kenya Crops & Dairy Market Systems By Joseph Mutua Activity Snapshot About the KCDMS activity • The Kenya Crops and Dairy Market Systems Activity (KCDMS) is a five-year (Oct 2017– Sept 2022) program of the United States Agency for International Development (USAID). • It is funded as part of Feed the Future, the U.S. Government’s global hunger, and food security initiative that helps to increase agricultural production and reduce poverty and malnutrition in Kenya. • KCDMS activity operates in12 counties and is designed to spur competitive, resilient market systems in Kenya’s horticulture and dairy sectors. Project Partners • The Kenya Crops and Dairy Market Systems Activity (KCDMS) is implemented by Research Triangle Institute (RTI) • Other partners supporting the implementation process include: 1. Busara Center for Behavioral Economics 2. East Africa Market Development Associates (EAMDA) 3. Farm Input Promotions (FIPS) 4. International Livestock Research Institute (ILRI) 5. Making Cents International 6. Open Capital Advisors (OCA) Value chain crops of focus Dairy 1. Dairy Production 2. Fodder and Feed Horticulture 1. Mango 2. Passion fruit 3. Banana 4. Avocado 5 Pineapple 6. Sweet Potato 7. ALV KCDMS works to support five priority areas: KCDMS’s approach combines simultaneous pull market interventions to reduce business risk and push productivity interventions to reduce production risk. Interventions have been categorized into five priority areas including; Collaborative A competitive, Diverse An improved Integration of action and inclusive, and agricultural policy women and learning for resilient production and environment for youth into market systems agricultural improved market systems agricultural change and market system productivity development market systems technology adoption Counties of operation-where we work SA2– Eastern Region 1. Kitui 2. Makueni 3. Taita Taveta HR1– Nyanza Region 4. Homa Bay 5. Migori 6. Kisii 7. Kisumu 8. Siaya HR1–Western Region 9. Kakamega 10. Bungoma 11. Busia 12. Vihiga KCDMS integration of cross cutting activities Access to finance is a key constraint to To implement a nutrition-sensitive approach, To build Kenyans’ capacity to survive and thrive underpinned by three pathways linking farmers adopting new technology and to after climactic, financial, or other shocks. agriculture to nutrition: production, income, Promotion of climate-smart practices and other market actors improving efficiencies in and women’s empowerment. To increase diversification of production to spread risk, paired the value chain. KCDMS will develop a farmer productivity and production of with savings and insurance products to protect Financial Services Strengthening Plan nutritious foods. producers from crop or revenue loss. Natural Social Inclusion Nutrition Resilience Financial Resource (Women and Youth) CLA Empowerment Access Systems Intensification of farming systems to include fodder Implement strategies to overcome women’s barriers to production, for example, offers opportunities for participation, ensuring equitable access to and benefit productive fallowing and crop rotation that reduce from all KCDMS activities. Employ efforts to converge CLA approach builds in environmental pressure on shared pastures and around support to women’s leadership networks to flexibility for localized protected areas. Importantly, these climate-smart provide business mentoring, improve access to adaptations through after- practices result in improved yields and income. information, and strengthen their roles in dialogue action reviews, seasonal debriefs, quarterly reviews, stakeholder surveys, and strategic assessments Position young Kenyans to the forefront of agricultural innovation and investment. Our interventions will harness the demographic advantages (education, digital literacy, etc.) of young people to leverage their energy as dynamic entrepreneurs, constructive employees, and cultural trailblazers All Actors are candidates to the change process Exporters KCDMS Co-investment plan is through a Partnership Innovation Fund KCDMS provides the Partnership for Innovation competitive grant fund as a key mechanism for facilitating partnerships and co-sponsoring value chain activities. Through annual program statements (APS) and requests for applications (RFA), With USAID Proposals for approval • 428 • 53 • 87 • 4 • 12 in pipeline Concepts Negotiation KCDMS proposed Sweet Potato Interventions • Facilitate increased access to quality inputs • Facilitate improved market structures • Facilitate increased access to market information for producers. • Support the development and promotion of post-harvest handling technologies • Facilitate increase in demand for SP and SP-based products • Facilitate improved access to finance • Facilitate supportive and inclusive policy formulation KCDMS proposed Sweet potato ToC Increased HH income from sales of Sweet potatoes and Banana products Farmers have access to Farmers have access to Farmers have Farmers have affordable and clean extension information access to access to planting materials and services affordable financial sustainable and services better paying mkts Increased use of More Financial PSPs Increased Increased availability of Modern production with tailored structured affordable clean planting practices as part of products for SP markets materials normal business farmers Facilitate linkages with R&D Link private Facilitate FSPs to Link aggregation for information and services extension service develop tailored centers to off takers to POS services Identify private sector actors Facilitate formation of Promote private willing to invest in SP planting Identify FSPs farmer led aggregation sector led materials willing to enter centres extension models into ag financing INTERVENTIONS MARKET TARGET IMPACT SYSTEM GROUP CHANGE CHANGE Lenders struggle to adapt their products to the unique risk profile of ag. players Agricultural borrowers often… … which means FSPs must have Operate in remote regions More bank branches or agent networks Have limited documented track record An ag-focused credit scoring process, high collateral requirements or high interest Have seasonal cash flows & price Flexible (or cyclical) servicing and repayment fluctuations High risks due to weather, pests, etc.. Short loan tenors or work with ag insurances Lack formal ownership of land Alternative collateral Work in unstructured supply chains A focus on structured supply chains Various interventions available to support increased lending to players in the agricultural sector Studies Intervention Key success factors Challenges to success Bank guarantees • Reduced exposure to excessive risk • Increased defaults if borrowers are • Effective only if it leads to changes aware of guarantee in the credit approval process • Guarantee doesn’t lower a bank’s credit requirements e.g. collateral Results-based • FSPs can expand consumer lending • Clear outputs and outcomes that are financing (RBF) measurable • Mechanisms need incremental progress targets, and gradual • phase-out Subsidized • Ideal where SHF activities have low • Can hinder rationalization of production interest rates profitability towards more efficient value chains by • Support SHF to achieve sustaining unprofitable farming activities profitability enabling them to borrow at commercial term Work in progress in Sweet Potato Value Chain 1. Super Loaf: Studies Engagements on using sweet potatoes in their pastries/cookies. Confirmed willingness to procures 1000 bags of flour per month from processors Challenge: The ability of processors to manage these volumes 2. Khwisero and Siwongo agro-processors Engagements through B2B Meetings for linkages with aggregators 3. Creadis Ltd: Currently processing sweet potato flour and baking bread and cakes 4.Safe produce Ltd Contract farming with farmers in Migori for fresh roots and processing www.feedthefuture.gov