STRENGTHENING THE VIABILITY OF COMMON INTEREST … · STRENGTHENING THE VIABILITY OF COMMON INTEREST GROUPS (CIGs) FOR AGRIBUSINESS DEVELOPMENT National Agriculture & Livestock Extension

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Strengthening the Viability of CIGs for Agribusiness Development

REPUBLIC OF KENYA

Ministry of AgricultureMinistry of Livestock Development

STRENGTHENING THE VIABILITY OF COMMON INTEREST GROUPS (CIGs) FOR AGRIBUSINESS DEVELOPMENT

National Agriculture & Livestock Extension Programme (NALEP)

By

I. Stubbs, B. Mwangangi, P. Muiruri, S. Mwangangi

June 2010

Reviewed by Implementing Ministry’s Technical Staff at a Workshop in ATC, Kitui,

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CONTENTS

ACKNOWLEDGEMENTS.............................................................................................................................................................3ABBREVIATIONS AND ACRONYMS........................................................................................................................................................... 4EXECUTIVE SUMMARY............................................................................................................................................................................. 5IntroductIon ....................................................................................................................................... 5PolIcy Framework......................................................................................................................................................... 5methodology ..................................................................................................................................... 6maIn Study FIndIngS....................................................................................................................................................... 6IncreaSed extenSIon ServIceS to cIgS........................................................................................................................... 10Summary oF obServatIonS and recommendatIonS............................................................................................................ 10concluSIon............................................................................................................................................................... 12

PART I: STRENGTHENING THE VIABILITY OF CIGS................................................................................................................................. 13

1.1 IntroductIon..................................................................................................................................................... 131.2 background and ratIonale ...........................................................................................................161.3 objectIveS & PurPoSe .................................................................................................................161.4 methodology ..........................................................................................................................161.5 lImItatIonS oF the Study ................................................................................................................181.6 deFInItIon oF agrIbuSIneSS ............................................................................................................18

PART II: STRENGTHENING LINKAGES TO THE MARKET .........................................................................................................................19

2.1 IntroductIon ............................................................................................................................192.2 Summary oF cIg market lInkageS ...................................................................................................272.3 cIg oPPortunItIeS to acceSS marketS .............................................................................................282.4 concluSIon ..............................................................................................................................342.5 PublIc PrIvate PartnerShIPS (PPP) oPPortunItIeS .................................................................................342.6 Summary oF cIg oPPortunItIeS to acceSS marketS ..............................................................................372.7 commercIal vIabIlIty oF the cIgS ....................................................................................................382.8 ImProvIng cIg comPetIveneSS through lInkageS to larger entItIeS ...........................................................47

PART III –POLICY ....................................................................................................................................................................................54

3.1 IntroductIon ............................................................................................................................543.2 key FactorS to be addreSSed In commercIalIzatIon oF cIgS ...................................................................553.3 Summary oF SPecIFIc ISSueS to addreSS In commercIalISatIon oF cIgS .....................................................57

PART IV: TRAINING TOOLS FOR IMPROVED CIG BUSINESS SKILLS .......................................................................................................60

4.1 IntroductIon ............................................................................................................................604.2 extenSIon ServIce ProvIderS .........................................................................................................604.3 general FIndIngS on extenSIon ServIceS ............................................................................................604.4 PerceIved conStraIntS to extenSIon delIvery .......................................................................................614.5 recommendatIonS For ImProved extenSIon In agrIbuSIneSS .......................................................................624.6 traInIng toolS to SuPPort agrIbuSIneSS In extenSIon ............................................................................63

SUMMARY OF AGRIBUSINESS CONSULTANCY MARCH 2010 ................................................................................................................66

ANNEX 1: MARKETING SKILLS EVALUATION (STAGE OF DEVELOPMENT) & TRAINING

MATRIX FOR COMMON INTEREST GROUPS (CIGS) ..........................................................................................................84

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ANNEX 2: SIMPLE BUSINESS PLAN MODEL FOR CIGS AND MEMBERS ................................................................................................91

ANNEX 3: SUPPORTING BUSINESS TRAINING TOOL ...........................................................................................................................102

ANNEX 4: INSTITUTIONS AND PRIVATE BUSINESSES INTERVIEWED ..................................................................................................131

ANNEX 5: REFERENCES ........................................................................................................................................................................132

ANNEX 6: TERMS OF REFERENCE ........................................................................................................................................................133

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ACKNOWLEDGEMENTS

This study was undertaken by Ivan Stubbs, the International consultant, and a team of NALEP

Technical staff comprising of Mr B. Mwangangi, P. Muiruri and S. Mwangangi. We wish to thank all

of those who have contributed time and shared information with us during their busy schedules. In

particular the NALEP PCU staff headed by Mr. Tom Bonyo, representatives of government institutions,

NGOs, donor representatives and private sector players we say a “Big Thank You”. To the committed

field extension staff for their contributions and readiness to share information, we say keep up the

good work and thank you. To the CIGs we appreciated your time taken from your busy farming

schedules to share information with us. We wish you all the success in achieving your visions in the

future.

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ABBREVIATIONS AND ACRONYMSABD Agricultural Business Development ACTESA Agricultural Commodity Trade for Eastern and Southern Africa ASCU Agricultural Sector Coordination UnitASDS- Agricultural Sector Development StrategyASPS Agricultural Sector Programme SupportCOMESA Common Market for Eastern and Southern AfricaDASS Decentralized Agriculture Support StructuresEAC East African Community EAGC East African Grain Council

EDM Enterprise Development Model

ERS Economic Recovery Strategy GDP Gross Domestic Product HCDA Horticultural Crops Development Authority ICTs Information Communication Technologies KACE Kenya Agricultural Commodity Exchange KENFAP Kenya National Federation Of Agricultural ProducersKMDP Kenya Maize Development Programme KWFT Kenya Women Finance Trust LTS LitresMCSSS Ministry Of Culture, Sports And Social Services MoA Ministry Of AgricultureMoLD Ministry Of Livestock And development MSEM Market Skills Evaluation Matrix NALEP National Agriculture And Livestock Extension ProgrammeNASEP National Agriculture Sector Extension Policy PBG Producer Business Group PCU Programme Coordination Unit PPP Public Private PartnershipPSDA Private Sector Development In Agriculture RATES Regional Agricultural Trade Expansion Support SHoMaP Smallholder Horticulture Marketing ProgrammeSMEs Small And Medium Enterprise SNV Netherlands Development Organization SRA Strategy For Revitalization Of AgricultureSSF Small Scale Farmers TNA- Training Need Assessment ToR Terms of References TWGs Thematic Working Groups UHT Ultra High Treated MilkUSD United State Dollars WFP World Food ProgrammeWRS Warehouse Receipt System

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EXECUTIVE SUMMARY

IntroductionThe study was conducted to assist NALEP identify and implement suitable interventions for improvement of CIGs access to markets and enterprise profitability. The overall objective of the consultancy was to provide a methodology and framework for improved profitability of the CIGs through strengthened links with markets and through preparation,implementation and follow up of business plans for the selected enterprises.The study focused on market linkages, value addition, organizational competiveness, policy, improved business skills and highlighted the “HOW” in implementation.

The report is organized in five parts; the first part covers background information, an overview of the national policy, objectives and methodology of study. Part II covers the framework for strengthening the viability and competitiveness of CIG. Part III examines measures of strengthening CIGs linkages to markets and part IV proposes a set of Training Tools for developing and improving CIGs capacity and business skills. The Action plan of implementation is provided in Part V.

Policy FrameworkThe policy environment is crucial for the success of CIGs and their commercial viability in the country. The role of the government is to provide an enabling environment that allows the private sector to operate with minimal hindrances. The Government policy on agriculture and poverty reduction are well articulated in various policy documents ,including among them,Poverty Reduction Strategy Paper 2001-2004(PRSP), Economic Recovery Strategy for Wealth and Employment Creation 2003-2007( ERS), National Poverty Eradication Plan 2000-2015 (NPEP), and more recently the Kenya Vision 2030.

The main thrust of Vision 2030 is to transform Kenya into a middle income country by the year 2030 and rapid transformation of the agriculture sector. Kenya Vision 2030 is to be implemented in successive five-year Medium Term Plans (MTP) starting with 2008 to 2012 as the first MTP. In order for Kenya to achieve medium income status by 2030 a Gross Domestic Product (GDP) growth rate of 10% per annum is targeted for the next 25 years. There are three pillars (economic, social and political) in Vision 2030. This study predominantly addresses the economic pillar.

Reforms in the agricultural sector, starting with the Strategy for Revitalization of Agriculture (SRA), have focused on commercialization of agriculture-“farming as a business”.This is emphasized in the new Agriculture Sector Development Strategy (ASDS).One of the key interventions that is being fast tracked in the ASDS is: ‘addressing marketing challenges with a view of increasing competitiveness of agricultural produce in both domestic and external markets’.

The development of agribusiness is critical to the commercialization of agriculture and realization of Vision 2030, and the ASDS, due to their enormous contribution to employment creation and improvement of the economic status of players along the agricultural value chains. The Producer Business Groups (PBGs) and the wholesale hubs which are highlighted in vision 2030 and principally found in the rural areas can be recognized as “Business Hubs” and are similar to CIGs (Common Interest Groups) in this report.

MethodologyBoth qualitative and quantitative data were collected from both secondary and primary sources using Focus Group discussions and interviews with a cross section of CIGs members in 8 sampled districts across varied economic sub- sectors ranging from soap making, production of milk, fresh vegetables, sweet potatoes, local chicken, honey, avocado, mango and value adding activities. Discussions were also held with staff and stakeholders in the sampled districts of Kajiado, Muranga,

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Rachuonyo, Naivasha, Nakuru, Mombasa, Kilifi and Kitui. Meetings were held with representatives from government institutions, donor agencies, and private sector organizations in agriculture, financial institutions, and agriculture commodity exporters.

Main Study Findings

Market LinkagesMarket linkages are of key importance; without which CIGs will not be able to commercialize their enterprises into a business. The study found that CIGs with large membership and/or high sales volumes were able to access markets much easier than CIGs with small membership numbers and small sales volumes. The common complaints raised by all CIGs were; lack of market access, low productivity, low prices and high marketing and transportation costs .The price became an important factor when production volumes were low as well as when transportation became the dominant cost and was over 50% of the sales value; the farmers tried to compensate low production by increasing the price.

Contact Information about BuyersThe lack of contact information for the bigger buyer agents and wholesale agents was identified as a barrier. A number of CIG members interviewed complained that the local buyers paid below market prices, formed local buying cartels and harassed farmers to sell at their offer prices. One of the suggested solutions to address this barrier is improved market information, a directory of buyers and adoption of ICT technology which can enhance CIGs access to information about buyers. CIGs have invested in cell phones as a useful tool that can help them access bigger buyers and get price information which can then be used to decide on a suitable farm gate price for the produce they intend to sell. This information can be compiled into a market supply chain format for analysis where additional opportunities can be identified. This can help CIGs identify where it pays to bulk and supply at higher price than farm gate price.

Inadequate Access to Market InformationThe study found out that market information is inadequate and not easily and quickly accessible to many CIGs and often is available late. CIGs will benefit if price and buyer information can be accessed at a national level in time and at a low cost. This will help match supply and demand better between districts and on a national level, thus helping stabilize prices for farm produce. The challenge, however, is who is going to source, process and share this information at the national level? To this end, the government should explore the possibility of developing a Central Information Hub that is linked to all suppliers of market and business information, where the information is processed into a user friendly format that is easily accessible to rural based clients. This has to be a neutral body serving without “Bias”.

Inadequate Marketing SkillsCIG member marketing skills were identified as varied. It was noted that successful CIG members had higher marketing skills levels. However, in-spite of this, a number of the bigger CIGs are still having problems marketing certain produce or increasing their market share. One of the solutions to this problem is to build the capacity of farmers in-order to improve their marketing skills and build stronger linkages to marketing specialist service providers.

Physical Markets infrastructure and facilitiesA large volume of CIG produce is supplied through public markets at county, district, municipal and city levels. It was noted that a number of these markets offer low level of marketing services and are in poor physical conditions, often lacking in basic infrastructures such as water and sanitation, market shed/stalls and cooling facilities and yet these markets are important avenues of farmer produce linking to buyers. Additionally, Local Government Authorities collect levies on a daily basis,

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yet very little is invested for improvement of market infrastructures and service provision. If marketing services are to be treated as a business then some of these levies should be invested into this service structures.

High marketing costs were identified where produce was delivered over distances as the main transport item. Bulking was identified by the CIG farmers as a solution to this problem. A second factor was the size of the load; a transport cost analysis tool which identifies the cost per kg/per kilometer over the entire transportation distance comparing vehicle capacities ranging from 1, 1.5,3,5,7,10, to 30 tons has been developed as part of the solution process. The challenge is for the CIGs to plan their production so as to be able to harvest sufficient quantities to take advantage of transport cost savings measures. The market also has to be large enough to buy these quantities without crashing the price paid to the farmers for the delivered produce.

CIG Opportunities to Access MarketsThe market should drive the process of access to market opportunities by rewarding those who supply a wide choice of products at an affordable price. Some methods of responding to this opportunity are value adding, bulking and improved marketing services. Some marketing services, which if supplied, can help lower transaction costs are; transporter charge rates (according to load size), current price information and big buyer contact details. Value addition is used to increase the market access through the offer of a wide product range, increased shelf life and packaging bulky units into smaller ones. Bulking and improved marketing services help lower the cost of supplying products, thus making them more affordable to the final consumer. There is opportunity for CIGs to increase the number of value adding cottage industry processing units invested in and can invest in. However, suitable model designs were missing to help CIGs identify potential business opportunities. The program should identify and analyze successful commercial CIG models that can be used for further CIGs exposure.

Cottage Industry ProcessingIt was observed that cottage industry level is still very low. Processing at the Cottage Industry level is a powerful tool in lowering business costs and making products more competitively priced for certain products. Cottage industry is advantaged to central processing in that the rewards to the farmer are higher than a highly mechanized high capital investment unit.Again, cottage industry processing is competitive when raw materials for processing are found in relatively small quantities and are only available on a seasonable basis. This is also the case when transport cost of supplying raw materials is high as a percentage of total costs. Under such circumstances it pays to invest in cottage industry processing close to the source of raw material production.

CIG Commercial ViabilityThe study found that the size of business activities of CIGs had a marked influence on market penetration. This was influenced by the CIGs ability to access larger market supply agreements through group organization and having a large membership base in order to be able to bulk sufficient quantities together to be able to supply the order. It was observed that the bigger CIGs also have the capacity to generate sufficient income to hire professional staff to manage their enterprises, while smaller CIGs relied on voluntary labor contributions from members to run the enterprises. Smaller CIGs, often with a limited skills base, are challenged on how to keep the enterprise management costs down, while at the same time trying to help members mobilize resources to increase production to respond to a market opportunity.

DiversificationDuring the study CIGs also mentioned low product development as another constraint. Some CIGs (both small and large) have started new enterprises as well as service diversification by increasing the number of services offered (marketing and input supply) to members as part of their commercialization

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process. This has helped to increase the CIGs sustainability. The type of enterprise has a bearing on the ability of the CIGs to move forward with the business line. Those CIGs who are unable to move forward need to go back to the opportunity identification stage to reflect and review if there are better enterprises that can be added into the existing business base. This suggests need to review enterprises flagging and choice by CIGs to make it demand driven.

Access to CreditThe CIGs mentioned in adequate access to credit as a limiting factor to their growth and increased productivity. CIGs need to be assisted to legalize their businesses so as to be able to qualify for possible funding support through grant opportunities and to improve linkages with agribusiness service providers such as banks. Financial service providers are important because through opening of a group bank account the CIG is in a better position to control their money. It was noted there was need to strengthen CIGs linkage to this type of service providers as a number of these institutions, besides providing credit, also offer financial advice at no extra cost to their customers.

Farmers Groups/AssociationsTo improve CIGS competitiveness and market access to bigger supply contracts both locally, regionally and internationally, it is important that CIGs are aware of the need to be organized into bigger organizational structures, producer groups/associations and /or supply groups. The benefits of organizing CIGs into bigger groups are that; by bulking produce transport costs can be reduced, the produce can now be supplied at a cheaper cost making it more competitive. Large supply contracts that require minimum quantities can now be bid for by organized CIGs. It is also important that CIG market linkages to bigger buyers should be strengthened using institutions and private service providers already in place offering professional linkage services such as EAGC, KACE and HCDA. The successful development of large organizational will also create a lobby voice for favorable policies.

KENYA’s Competitive AdvantageThe reason for valuing competitiveness is that if a business is competitive in supplying the market, the market share can be maintained and or increased over time. This helps to increase the businesses sustainability and profitability capacity.

Kenya has a competitive geographical advantage ; a wide and diverse climatic conditions which permit the CIGs to produce a wide selection of produce over an extended period, thus many crops and products can be grown and produced more competitively by the Kenyan farmer who can be linked to the local and the international markets. Further, Kenya’s preferential market access to the regional and EU markets offers an opportunity for CIGs to access export markets..

Policy ISSUES ON CIGS GrowthThe study highlighted policy issues raised by different stakeholders, partners, CIGs and agribusiness service providers during the study that need attention, broadly as:

• Role of Government and the private sector;• Review of the Local Authority Act to allow for an agreed percentage (+ %) of all levies

collected from public markets to be re-invested into improvements of market infrastructure and services;

• Review of the legal status of CIGs under the Ministry of Culture, Sports and Social Services in conducting business;

• Reviewonthetaxationlevelsonexportproduce(freshfruit)inordertoimprovethecountry’scompetitiveness ;the Government should adopt a policy of promoting import substitution targeting to increase market access for farm produce e.g. juice concentrate (local vs. imported)

• Need for specific policies on cottage industry promotion at the Small and Medium Enterprise

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(SME) level; and• Setting up a Central Information Hub that is linked to all suppliers of market and business

information, where the information is processed into a user friendly format that is easily accessible to rural based clients.

• Improved Business skills through Capacity Building

Business skills developmentIt was found out that the CIGs marketing skills are low with the poor sourcing of produce price information and the use of informal marketing supply arrangements resulting in low producer prices to CIG members. The use of business plans has not been well understood by CIGs and is not helping deliver sustainable CIG enterprises. Unless the above skills base is improved, low levels enterprise sustainability will continue.In support of the existing extension training materials and addressing the identified business skills needs the consultancy has proposed two simple tools to assist NALEP in upgrading the CIGs business skills, thus;

• AsimplifiedmarketingmatrixwhichcanbeusedforgradingtheCIGsonmarketingskillsand as training needs assessment (TNA) tool ;

• Asimplifiedbusinessplanwhichmakesthebusinessplaneasytoprepareandcomplete,andalso doubles as a TNA tool.

Increased Extension Services to CIGsIt was identified during the study that the demand for extension services by CIGs is much greater than the ability to supply within the allocated programme time span. The challenge faced here is; how can the supply of extension services be increased to CIGs based on the existing allocated budgetary support? For CIGs to reach sustainable commercial levels normally takes a period longer than one year. Due to staff and other constraints NALEP is only able to provide intensive extension support to a CIG for one year. In order to address weaknesses in extension services, it could be necessary to;

• Enhancecapacityoftheextensionstaffinagribusinessbusinessandmarketingdevelopmentskills.

• Develop a strongerPublic PrivatePartnership (PPP) between:Government/NGOs/Donors;Farmer to farmer and; Private extension service providers. These partnerships would provide platforms through which CIGs could be developed and assisted, achieve complementarities and synergies through a pluralistic extension service.

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SUMMARY OF OBSERVATIONS AND RECOMMENDATIONS

Observations Recommendations

1. Market Linkages1. Low level of marketing skills in poor

performing CIGs2. Cottage industry value addition is still

at a low level

3. Lack of accessible market information especially buyer contact details

4. Inadequate collective marketing among CIGs

5. Levies collected in local markets

6. Long value chains (many actors)

7. High marketing costs (e.g. transport of bulky produce)

1. Training of CIGs in marketing using tried and tested training tools

2. Develop cottage industry value adding business plan models with appropriate linkages; share these with CIGs and potential financiers of the projects

3. Develop buyer information directory at the CIG and district levels

4. Promotion of bulking and group marketing linking to industry service provider

5. CIGs sensitized on lobbying for favorable regulation review for Cess and Levy collection

6. Train CIGs on the use of the market supply chain and transport cost analyses

7. Use training tools to identify opportunities in reducing marketing costs to CIGs

2. Business Environment1. Cooperatives – Inadequate awareness

on the revised Cooperative Act

2. Some progressive groups register as companies

3. Low/seasonal income flows to CIGs are a main cause for distress and side selling

4. Diversification of enterprises has helped increase income levels

5. ABSP (Ag Business Service Providers) are oriented towards large clients

6. Costs for CIGs operations may be high

7. Personal income requirements not included in CIG member annual financial planning

8. Some Stakeholder Fora are challenged in terms of identifying investment priorities and sourcing the funding for implementation

1. CIGs to be sensitized that there is a Cooperative Act in place and given training on how to prosecute erring members

2. Support CIGs in following correct registration and management of companies

3. Continue supporting income generation diversification by CIGs

4. Continue to support both production and income diversification practices for CIGs

5. Develop localized strategies on linking CIGs to the bigger ABSPs

6. Train CIGs to identify operational costs and to target suitable organizational structures and membership numbers

7. Train CIGs on business plan skills and annual income allocation including personal costs

8. Community ownership of the Stakeholder Fora to be re-enforced through clarification of roles, responsibilities and targeted outputs

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3. Access to finance1. Farmers are reluctant to borrow money

from commercial sources 2. Some institutions provide loans based

on group security and offer technical support to CIGs as part of the loan package

3. Low CIG profit margins on certain enterprises have led to low capacities to service debt

4. High potential areas have had a higher success rate of accessing finance

1. Train CIGs on when and how to borrow money

2. Inform and link CIGs to Finance Institutions in Districts offering favorable financial services

3. Use budgeting and analyses tools to improve enterprise selection and profitability

4. Inform Potential Financing Partners about CIGs business activities, their need and area of location

4. Policy1. Stakeholders using strategies in

promoting farm business

2. Public market infrastructure inadequate at county, district, municipal and city markets

3. There is little investment by Local authorities from the collected market levies into improved market infrastructure and services

4. Weak legal framework for CIG s to transact businesses under Min. of Culture, Sports and Social Services (Cannot sue or be sued, increased risk)

5. Multiple levies and taxes are negatively affecting exports

6. Poor rural infrastructure acting as barriers to accessing markets

7. Market information is not distributed quickly and efficiently

1. Harmonization of development is key to increasing beneficial impact to Kenya, all parties encouraged to support this initiative at all levels

2. Physical Market Infrastructure improved through an amendment to the Local Authority Act

3. An agreed percentage (+%) of all levies collected

from a market be re-invested back into the same market for improved market infrastructure and services

4. The Legal status of CIGs to be reviewed

5. Review tax profile on non-competitive export products and amend to improve competitiveness. High taxes; apex associations need to lobby government for tax relief (here impact assessment studies on the area of interest are a useful tool)

6. Rural infrastructure development prioritized where selection is market access based

7. Develop a Central Information Hub that is linked to all suppliers of market and business information, where the information is processed into a user friendly format that is easily accessible to rural based clients. This has to be a neutral body serving without “Bias”

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5. Extension1. Tools require additional review after

presentation at the KARI workshop 18th February

2. Mock training conducted at Kitui on proposed training tools

3. Extension training manuals not inclusive of simple marketing and business plan tools

4. Extension staff skills base limited to area of expertise

5. Sustainability levels of CIGs post programme support identified as being low

1. Complete marketing training tools assessment, development and testing with stakeholder partners

2. A follow-up made to Kitui extension officers attending mock training on effectiveness of tools and recommended changes

3. Extension manuals to be updated with new business tools

4. Expand extension staffs skills base to include the new marketing & business tools once development is completed

5. Train CIGs in marketing & business skills using new tools. Exposure visits facilitated between strong and weak CIGs as a form of cross-pollination of ideas and capacity building

ConclusionIn conclusion it should be noted although the report has been divided into sub-components; all components are dependent on one another in order to achieve successful commercialization and sustainable CIG enterprise development. If one of these components is not functional and delivering, then the other components will not perform well e.g. without good policies in place, CIGs will have difficulty in remaining competitive. High taxes (20% of costs are taxes) on fresh fruit exports have placed Kenyan market delivered fruit prices at a higher price in North African markets than competitors which are supplying fruit from India and Pakistan farmers, Kenyan suppliers are losing their market share.

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PART I: STRENGTHENING THE VIABILITY OF CIGs

1.1 IntroductionKenya has a relatively advanced and diversified agricultural sector with the main agricultural production concentrated in the medium-high potential areas. About 80% of Kenya’s population, the majority poor rural farmers depends on the sector either directly or indirectly. Small holder production dominates the agricultural sector in terms of food crops and livestock production for the domestic and export markets.

Kenya’s economic reforms, which started in the 1980s, have radically transformed the agricultural sector by removing inherent barriers and promoting market- oriented production. As a result a number of smallholder farmers have benefited through increased access to markets and diversification into high value enterprises and agricultural products. There is considerable scope, domestically and internally, of increasing the benefits that smallholder farmers can derive from market oriented production.Kenya’s strategic planning for the agricultural sector aims at intensification of production, development of efficient marketing systems for crops, livestock and fish through improved market information, better marketing infrastructure, commodity exchange systems and enabling environment for smallholder producers and private sector investors.

A number of recent documents and papers articulate the government policy and strategies for economic growth and poverty alleviation. These include, principally, among them, Poverty Reduction Strategy Paper (PRSP) 2003, the Economic Recovery Strategy for Wealth and Employment Creation ERS) 2003-2007, National Poverty Eradication Plan (NEP) 2000-2015, Revitalization of the Agricultural sector-2015 and most recently the Kenya Vision 2030. Within the context of a long-term policy framework for poverty reduction, these policies emphasize sustainable use of natural resources, increased agricultural production, and enhanced access to markets and market opportunities and improvedmarket infrastructures.

In the context of agricultural sector development, the Kenya Vision 2030 aims at increasing Kenya’s global competitiveness through;

• “Increasingvalueinagriculture”usingprocessingandbetteryieldsincrops,andincreasedsmallholder specialization

• Cottageindustrytoprovideabasefromwheremorespecializedinvestmentssuchasbrandingof Kenyan products can grow from

• Diseasefreezonesandlivestockprocessingfacilitiesofinternationalstandards• Increasingtheproductrangeavailableforthenewretailers(target3supermarketchains)• Supportproducergroupswhichinturnwillfeedintolargewholesalehubsprincipallyinrural

areas where producer groups can grow from.• Have a vibrant and globally competitive financial sector and decrease the share of the

population without access to finance from 85% at present to below 70%.• Savingsratestorisefrom17%to30%ofGDPby2030

The New strategy for the Agricultural Sector (draft) underscores the need for the agricultural sector to be market oriented in order to become competitive. The recommendations of the study have taken into consideration the above strategies so as to guide NALEP on how the programme can contribute towards achieving these goals.

At the regional level new market opportunities have emerged within the EAC and COMESA countries. In 2007, it was estimated that about USD19 billion was spent by COMESA on food imports while about USD 30 million was sourced from among member states which offers great opportunities for trade. Increased trade is anticipated in the future with the establishment of the COMESA FTA and the launch of the EAC common market. Figure 1 shows the intraregional trade on staple food imports

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Figure 1:Intra Regional Staple Foods Trade, 2007.

In the same period there was a deficit in food supply as overall production of staple foods within the EAC countries remained below consumption demand (Figure 2) suggesting need to boots agricultural production to meet the consumption requirement.

Figure 2:Staple foods: Trade Prospects

Beans - Production vs Consumption (2007) in EAC (Figues in MT)

-200000

-100000

0

100000

200000

300000

400000

500000

600000

Kenya Tanzania Uganda Rwanda Burundi

Production (MT)

Consumption in MT

Deficit/Surplus

In 2009, Agriculture contributed 26% of GDP; the Livestock sector contributed 47% of the Agricultural Gross Domestic Product (AGDP) as shown in Table 1 below

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Table 1: Contribution of the agricultural sector

Country Agriculture GDP (% of total GDP) Livestock % of Agricultural GDP

Djibouti 82

Eritrea 10 63

Ethiopia 52 19

Kenya 26 47

Madagascar 25 34

Malawi 25 34

Mauritius 33 10

Sudan 7 26

Swaziland 13 27

Uganda 39 14

Zambia 13 42ACTESA Workshop Nov 2009 Addis, Ethiopia

1.2 Background and RationaleThe Sida supported National Agriculture and Livestock Extension Programme (NALEP) is a nation-wide programme, jointly implemented by the Ministries of Agriculture (MoA) and Livestock Development (MoLD). At least 4,000 extension staff from the two ministries are directly engaged in the Programme. During the first five years (2000 – 2005), NALEP reached about 800,000 clients (farmers, pastoralists and other land users). In the last two years (July 2007- June 2009), this has increased to at least 1.8 million clients. This increase is due to expansion of the Programme to all districts and to the increase of the size of the local focal area. NALEP is expected to have reached 4 million clients by December 2011.

At national level the programme is co-ordinated by the Programme Coordinating Unit (PCU), consisting of 8 full time technical staff (Project Coordinator, and 7 Officers each charged with responsibilities for different project components). Additionally, there is a Programme Adviser and a Bilateral Associate expert. The program is also assisted by short term Technical Consultants in the various components as their need arises.

CIGs (Common Interest Groups) are one of the grassroots structures promoted by NALEP and other organizations to promote commercialization of agriculture. The concept of promotion of opportunities and formation of CIGs aims at enabling the farming communities in the focal areas to take up agri-business opportunities. Emphasis is on enterprise-based opportunities that are market oriented and income driven. CIGs are viewed as business entities and not just extension groups. The NALEP programme facilitates the formation of about 7,500 CIGS annually, each with about 15 to 25 members.

From the reviews and discussions with farmers there are indications that over 70% of CIGs have difficulties in reaching the intended level of financial viability and significantly contribute to increased income and improved livelihood of the members. The growth and scale of operation for those groups is another concern.

1.3 Objectives & PurposeThe objective of the consultancy was to provide a methodology and framework for improved profitability of the CIGs through strengthened links with markets and through preparation, implementation and follow up of business plans for the selected enterprises.

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1.4 MethodologyA study team comprising of 4 NALEP staff and the consultant was formed to take part in the field visits, interviews and presentation of workshop findings.The study was carried over a period of 5 weeks.

As a first step the team carried out a one week orientation, comprehensive review of relevant documents and preparation of the Inception Report on the way forward. This was followed by a one week of extensive consultations with key stakeholders. In the next two weeks the team undertook field work including mock training. During the field work the team undertook commodity value chain analyses and also explored how CIGS develop over time for selected CIG enterprises in a sample of 8 districtswhich included Kajiado, Muranga, Rachuonyo, Naivasha, Nakuru, Mombasa, Kilifi and Kitui.

The study involved a detailed analysis of the economic status, general viability and existing and potential market links of a number of CIGs in all the districts, interviews and focus group discussions. The final week was devoted to report preparation and a one day workshop with PCU and NALEP extension staff.

In order to validate the study findings, NALEP organized a one week Retreat Workshop to review and synthesis the draft consultancy report and come out with edited report and an action plan for implementation.

1.4.1 Primary Information SourcesPrimary information was obtained through focus group discussions and field interviews. Focus Group discussions were held with a cross section of CIGs members in order to obtain primary information. The group size was in the range from 4 members up to more than 30 members in a group. The CIG enterprises visited varied from soap making, production of milk, fresh vegetables, sweet potatoes, local chicken, honey, avocado, mango and value adding activities.

Discussions were held with NALEP extension staff and stakeholders in the sampled districts. Meetings were also held with representatives from Government agencies, donor institutions, and private sector organizations in agriculture; financial institutions, and agriculture commodity exporters. The profile of meetings, arranged with representatives from different institutions and the private sector, was of good focus and high standard, thus helping in sourcing valuable information to contribute to a quality report. The list of these respondents is provided in Annex 2.

During field visits to CIGs, interviews were carried out and a range of records were reviewed from basic budgets to farm business plans. A draft training marketing matrix was developed and revised in the first week (Annex 1). The tool was subsequently pre-tested in the field through interviews. The draft simple business plan questionnaire was developed by the end of the second week and field tests commenced during field visits to the CIGs (Annex 1). The training tools were pre-tested through a mock training in which 23 field extension staff participated.

In addition, the business plan was presented and reviewed by the participants during a one day stakeholder workshop at the beginning of the fifth week.

1.4.2 Secondary Information SourcesA comprehensive literature review was undertaken, sourcing information from previous programme consultancies, report reviews, sector studies from Government ministries, and the web and agribusiness collaborators. The list of reference material is provided in Annex 3

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1.4.3 SamplingThe CIGs visited and the 8 districts were purposively selected. The Sample size, however, was relatively small in relation to the total number of CIGS. The CIGs enterprises visited covered Crops, Livestock and non-farm activities, thus giving a representative sample of CIG enterprise activities. Generally, the quality of the groups visited was high with a good cross section of enterprise activity sampled.

1.5 Limitations of the studyTime was effectively used through travelling by airplanes and travelling on weekends. Despite this, time became a major limitation in the context of carrying out in-depth interviews and the number of CIGs visited in a day.

Record keeping presented a big challenge to the CIGs. It was evident that emerging CIG businesses were less consistent with their record keeping while the more developed CIGs kept proper records. Due to the inconsistency in record keeping, certain market information and consumption patterns of selected food stuffs (sweet potato, fresh juice, sour milk) were difficult to access.

1.6 Definition of AgribusinessFor a common understanding of the word Agribusiness, the following definition was adopted; “Agribusiness is a legal business that supplies a product or service of value to the agriculture industry”

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PART II: STRENGTHENING LINKAGES TO THE MARKET

2.1 IntroductionTo get background information for recommendations in strengthening the development of market linkages, a sample of CIGs were visited in 8 districts for analysis and assessment of commercial viability in the context of sustainability. Some of the important findings are presented and discussed below:

2.1.1 CIG Access to the MarketAccessing the market is a major constraint faced by CIGs when starting their business. This was evident during field visits, especially for the smaller CIGs, who lacked resources and skills to source markets for their produce. The CIGs visited basically fell into two groups: large and small. Large CIGs have 200 to 400 or more members, with individual regular earnings ranging from KES. 6,000 to KES 30,000 per month. Members belonging to large CIGs tended to have multiple income sources and did not rely on one enterprise only. Sources of income outside the CIG enterprise ranged from cash crop production such as tea and coffee; and off-farm activities such as small shops. For these CIGs to mobilize resources to invest in new enterprises in the short term is not difficult. In general the business skills base of individual members in the larger groups was of a much higher level than those of the smaller groups.

The smaller CIGs visited had a membership ranging from 15 to 40 members. Here the income earnings are much lower, often irregular and often dependent on a crop production cycle (3 to 6 months). Earnings per individual range from KES 225 to KES 5,000 per month but there are some months with no income. In smaller groups where resources to invest in the enterprise were limited, the group owned a production unit together, examples of these are; Saint Julita CIG in Rachuonyo District, Mwavitendo Self Help Dairy CIG in Kilifi District and Matungulu Vegetable Grower CIG in Kitui. The main functions of production projects in groups are to train members in production skills and using the group production unit for resource generation, especially capital development, based on a merry go round principle.

The smaller CIG members’ income (profits) generated from their individual fields are generally used to meet needs for personal-family expenditures. Income generated from the group enterprise (field /dairy unit/chicken unit) is commonly used for activities like buying every member a dairy cow, a sheep or an irrigation pump over time for capital growth.

Most produce from CIGs is likely to be sold at the local markets or to the bigger buyers. For some CIGs visited (Kitui Vegetable CIG) the issue was the price paid per unit to the group member not the absence of a market. The selling price should be determined based on the cost of production by a group but this is normally not the case. Instead, in most cases, the price is determined by the following assumptions:

All costs in the value added and market supply chains including profits are discounted from the final selling price to the consumer to determine the farm gate price. This rule does not change in the medium and long term.

The market will buy first from whoever can deliver the produce at the best price on the day (the best competitive price which determines the wholesale price). The retail price is determined where demand and supply for the produce are matched on that particular day; the marketing players (farmers and middlemen)’ vs. the buyers-(hotels and housewives). This profile is common for fresh produce with a short shelf life sold in the open air markets.

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2.1.2 Constraints for CIGs in Accessing MarketSeveral constraints were noted in CIG access to the market. These are discussed below:

2.1.2.1 Lack of Accessible Market InformationIt was especially noted that there was very little information on how to contact buyers. In a number of interviews with field staff and CIG members it was disclosed that accessing bulk buyers (agents of processors/manufacturers) and finding out the prices they offered for farm produce was difficult. The small agents employ various ingenious tactics in reducing the price to be paid to the farmer ranging from; forming buying cartels at local and national markets with price fixing, misinforming farmers and verbal harassment. On the other hand, this is made possible because farmers bring the produce to the market without first carrying out a market survey and coming to some form of an agreement with an identified buyer. The agent knows that when a farmer comes to the market with their produce they are not going to take it home, the farmer has to sell it thus putting the farmer in a disadvantaged position, being a mere price taker.

ConsequenceWithout quality market information, CIGs will not be able to negotiate for the best possible price. In addition, the CIGs will not be in a position to scale up their production levels, nor will they be in a position to diversify their enterprises.Recommendations

• Useofthecellphonetechnologyasaninformationlink.Thisisanaffordablesolutionandboththe short message service (SMS) and call functions can be used.

• Useofmedia(print&electronic)asasourceofmarketinformationfortheCIGS• Abuyer’sagency/tradersdirectorycanbedevelopedlisting:• Thecontactnameofthebuyer• Phonenumberofthebuyer• TheproductrangethatthebuyerwishestopurchasefromeachCIG.

A buyer’s agency/traders directory could form part of the information required by CIGs while undertaking a market survey. This information can further be consolidated at district and division level by extension staff and be made available to all CIGs. At National Level an electronic directory can be maintained where any buyer wishing to purchase a product can be registered. These buyers are contacted on a weekly basis for their price offer of the week. The buyers are then listed by code into categories of produce. Each category column is listed in priority of best price offer. Farmers can SMS in for this information where they are given the list of best offer together with the contact details. Box 1: Provides an example of information profile of buyer/agent directory and web page format

Box 1: Example of Buyer/Agent Information Profile and Web Page Format

Product Sorghum

Price / Kg District Quantity required Standard SMS Trader / Agent Phone

Ksh 30 Nairobi 5 tons 13% moisture content 0722-646935 Big-Brew 2718872

Ksh 27 Nairobi 15 tons 13% moisture content 0726-699999 K-Breweries 2711800

Ksh 17 Kitui 10 tons 13% moisture content 0725-494949 M-Traders 4822154

Ksh 17 Naivasha 400Kg 13% moisture content 0724-212121 Small-Brew 6513675

SMS Phone Price Information Format for Sorghum example:18 buyers listed in Kenya, Price (KSH.) per Kg: Big Brew 30 –SMS 0722646935, K-Breweries 27-SMS0726699999, M-Traders 17-SMS0725494949, Small-Brew17-SMS0724212121, etc.

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2.1.3 Inadequate collective marketing by CIGsAmong the groups visited, collective marketing has been successful with the bigger groups than with the smaller groups. The volumes of production for many small CIGs in many cases are too insignificant to justify the concept of bulking. This was noted for fresh vegetable production, soap making, rabbit production and honey. To justify bulking they must increase the quantities produced.There is an opportunity for grain producing CIGS to come together to take advantage of bulking of their produce and storing it in a shed under the warehouse receipts system (WRS). However, CIGs and extension staff awareness on the use of the Warehouse Receipts system was limited.

ConsequenceWithout bulking, individuals and groups will be less competitive, have higher supply costs and can expect lower farm gate prices.

Recommendations• TheCIGsandextensionstafftobesensitizedandtrainedonWRS• Linkgrainproducing(cerealsandpulses)CIGstotheWRS(Box4)• ContinuesupportingdairyCIGstoformmilkcollectioncenters(bulking)• Adoptthemodelformilkcollectioncentersinthedesignofsupplytothefruitandvegetables

market where production volumes are sufficient (minimum of 200 tons of fruit for processing. Cash flows are the best tool to identify minimum quantities here to cover operational costs and capital investment payments)

• For livestockCIGs, linkagesto localauthoritiesandabattoirsshouldbeestablishedwhereprice information can be sourced and potential buyers identified

• Network;CIGstoenablethembenefitfromthebulkingconcept

2.1.4 Level of marketing skills among CIGsThere were variations in marketing skills among the CIGs. For large CIGs; marketing skills were generally at a higher level compared to the small groups. The larger groups were able to negotiate better and maintain supply contracts, keep records and had carried out some form of market survey. The majority of small CIGs did not keep any records, had not conducted any market survey beyond the local market and supplied the market with small amounts of produce for cash in an informal arrangement.

ConsequenceThis supply arrangement leaves the small CIGs at the mercy of the middlemen and market buyers.CIGs with low levels of marketing skills are more likely to get less for their produce. They are not able to realize the full market potential. . This translates into lower incomes for all CIG members.

Recommendations• TheCIGsshouldbetrainedinagriculturalmarketingusingthetoolsdeveloped.(Annex1)• All CIGsmust keep some form of records to helpmake better business decisions. The

minimum records should include:• Marketingbudgetsfortheproducelistingallcosts,seeexampleAnnex1• Transportcostprofile,thesupplychainprofileidentifyingthefarmgateprice.Annex1• CashbookrecordingallexpenditureandincomeAnnex1

The use of these tools can empower the groups with knowledge on the highest price that they could negotiate for without losing the sale (Annex 1).From the market skills training, CIGs should be able to make better business decisions based on empirical facts. A final decision to sell or not should be done just before the day of sale. The CIG shouldn’t bring the produce to the market before that final ‘check’ has been done. This is because when the produce is already brought to the market without being sure of the sale it is difficult to bring it back if the sale doesn’t go through. In the absence of a contract, the CIG might be forced to sell at a throwaway price.

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As part of the training support to CIGs, those CIGs at their formative stage should be linked to more successful CIGs through exchange visit. This will promote sharing of experiences and good practices. It is important to sensitize the farmers that the same product might fetch a different price depending on various factors such as the type of market the buyer of the produce represents. The best prices are normally fetched from those targeting the fresh produce market and especially the up-market ones like hotels and supermarkets, while prices are lower for these markets supplying the low income earners. Processors and manufacturers normally pay a lower price, but on the other hand they buy bigger quantities.

2.1.5 Poor Market Infrastructure and Service Levels at Public Markets

Levies Collected in Local Markets The county councils are in charge of markets and they collect market levies on a daily basis. Councils are supposed to provide services such as security, sanitation, amenities etc. to the public markets although this is not case on the ground. It was noted that little of the collected money is used to invest in improved market infrastructure and services. The bulk of the money collected is used in a consumptive nature to cover the monthly administrative costs.

ConsequenceThe consequence of having poor marketing infrastructure and a poor level of market services at county markets is market inefficiency resulting in poor food distribution and wastage.

RecommendationsThe CIGs should be linked to or be members of a Cooperative society and/or form limited companies.These bodies should seek representation and are part of the market committees in the planned public private partnership (PPP) arrangement. (See 5.2.2).These bodies will lobby representative councils (County, Town & Municipal) through the elected representation for improved marketing services for farm produce. This process can be started at the grassroots level through the sharing of the daily levies collected where part are kept for direct investment into improved market infrastructure and services for all public markets.

2.1.6 Long Value Chains (Many Actors)The long value chains are often seen in the context of supply rather than value adding. It was noted that in certain supply chains there are a minimum of 3 players;

• Thefarmgatebuyer(player1)• whosuppliesabuyeratthecountymarket(player2):• whothensuppliesanagenttakingtheproducetoanationalmarket(player3),

In certain cases an additional agent is involved between the county and district market before continuing to the national market. When there is stiff competition between buyers the margins realized are normally fair.Where competition is low or cartel behavior practiced, the margins for the traders are generally high.

ConsequenceThe long supply chains reduce the price paid to the farmer or increases the price the consumer pays, or both. The long chains normally originate when produce quantities offered for sale are small and the supply chain starts performing the role of a bulking agent. There is an opportunity to increase the farm gate price by CIGs doing their own bulking instead of leaving this to middlemen.

Fig. 3 Sweet Potato Bulking in Rachuonyo District

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RecommendationsMarketing of produce costs money, this is why it is important that CIGs are able to prepare accurate marketing budgets so as to be able to negotiate the best farm gate price or decide where and when it pays to bulk produce (See figure 3) and supply the market at the top part of the supply chain. CIGs should compile accurate marketing and transport budgets at the planning stage to help identify minimum bulking quantities required to justify bulking through the lowering of costs .CIGs should be linked together to share bulking services for identified enterprises.

2.1.7 High Marketing CostsCIGs face high transport costs such as when transporting small volumes of produce over long distances. As an example, from Kitui a CIG hired a 1.5 ton vehicle at a cost of KES10,000 per load to deliver their water melons to Nairobi. In a later delivery a transporter was hired with a 7 ton truck capacity who charged KES. 15,000 per load delivered to Nairobi. This case offers a transport saving of 68% for 7 tons loadof watermelonsto the market. For transporting mangoes one CIG was charged KES.2 per kg, half of the produce will be thrown away after processing as waste (peel & seed), if juice pulp was transported instead of fresh mango.The transport cost could dropby as much as 50% without taking damages and rejects into consideration.

ConsequenceWithout bulking and producing sufficient minimum quantities CIGs will not be able to access certain markets resulting in wastage of produce and loss of income. If bulking is not practiced the competitiveness cannot be improved by reducing the costs of supply.

RecommendationsMarketing costs need to be to be factored when preparing a business plan. In order to reach the required minimum critical mass of produce, planting dates and quantities need to be coordinated within and between CIGs at the production stage. During the development of business contracts, between CIGs and the buyers extension officers should provide the necessary advisory services.

2.2 Summary of CIG Market LinkagesWithout reliable access to the market, CIGs cannot commercialize their businesses. The expected outcomes from implementing the above recommendations are:

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Table 2: Summary of Improved Cig Market Linkages

Increased Cig Capacity To:

Expected Outcomes

1. • Accessthemarket• Increasethequantities

of produce supplied• Promotepricestability• Lower the business

transaction costs• PlaceCIGsinastronger

position to negotiate for better prices.

• Increasedknowledgeonhowtomarketthroughtraining• Useofimprovedmarketingtrainingtoolstoincludemarketing

budgeting, comparative transport costing, bulking methods, supply chain analysis, simple record keeping formats and how and when to do a market survey. (These are further developed in part III of this report).

• Promotetheconceptofbulkingthroughimprovedknowledgeabout identified minimum quantities; this will be influenced by the cost of transport related to quantity

• CIGstobesensitizedandlinkedtodifferentbusinessserviceprogrammes, national institutions and private businesses offering support and technical assistance to farmer groups such as the warehouse receipts system, HCDA, ABD, KACE & commercial banks

• Improved market information, listing buyers with theircontact details and type of produce required and using low cost communication technologies such as the cell phone and the digital village initiative supported by government

• Exposurevisits facilitatedbetweenstrongandweakCIGsas a form of crosspollination of ideas and capacity building

• CIGssensitizedontheimportanceofjoininglobbygroupswith apex representation at the national level so as to have a voice from where to lobby for favorable policy changes e.g. improved market infrastructure and services offered by public markets.

• CIGssensitizedonthebenefitsof theproposedPPPandlevy sharing with local county authorities 1

• Facilitatethedevelopmentofabasketofbusinesstrainingtools to be supported by all stakeholders

• Gender&Youth;for improvedimpactandbenefittheCIGhousehold be treated as a business unit where the CIG members receiving business training, share this knowledge with all household members. This will promote a family business rather than a single entrepreneur.

2.3 CIG Opportunities to Access MarketsIn supporting CIG development and capacity to achieve increased profit levels, several options were identified and can be classified into two major categories:

• Valueaddition;and• Bulking

2.3.1 Value AdditionValue addition is to economically improve the value of a product to form characteristics more preferred in the market place.

Why value addition? Value addition is used to increase the market access through an increased product range, increased shelf life and by packaging bulky units into smaller units, thus making them more accessible to the final customer.

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Increased Product RangeWheat is a good example of increasing the product range; it is turned into flour products which in turn are turned into bread, pasta, chapattis, cakes and sauces to mention but a few. Milk is processed into a wide range of products including pasteurized milk, sour milk, yoghurt, UHT milk, butter & soft cheeses as some of its product range.

Increased Shelf LifeValue adding assists in increasing the storage life of certain produce so what is harvested during times of surplus is processed and then stored for times of shortfall (deficit). Due to the extended shelf-life, new markets that were not accessible to supply the fresh product can be accessed. This type of value adding does not normally bring increased prices to farmers when compared to fresh produce but allows greater quantities of produce to be supplied and purchased at a lower price. Some examples of value addition are provided in box 2 and figure 4.

Figure 4: Cottage Industry Yoghurt making - Kilifi

Packaging into Smaller UnitsFor the CIGs, it is an advantage to supply in bulk to the market in order to lower costs. On the other hand, the large volumes are normally not of interest to the final consumer who wishes to purchase the product in Kgs and even grams. An example of this is horticulture produce; CIGs supply in tons to the wholesale market products such as strawberry and mushrooms which are then pre-packed into 200 gram punnets and retailed to the final consumer. A carcass of a cow is weighing 200kgs at a wholesale price then retailed in 500 grams packs of meat.

BOX 2: Increasing the shelf-life of a product

Fruit concentrate has a shelf life of up to 15 months, where fresh fruits’ normal shelf life is 2 to 3weeks.

GradingFarm gate price for graded fresh mangoes for export market is KES. 12 to 14 per Kilogram(kg) while that for local market is KES 4 per kg

ProcessingFresh milk has a shelf life of one day, sour milk 3 to 5 days, UHT / powder milk 6 months to more than a year and hard cheeses up to several years. It is estimated that less than one quarter of the East African population has access to refrigeration, this offers a large market potential for UHT / powder milk if it can be produced and sold at an affordable price.

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2.3.2 Adding value to Agriculture produceCIGs could considerably increase their share of the market and profit if they did more value adding targeting increased product range, increased shelf life and packaging into smaller units through “Cottage Industry Processing”. The value adding equipment used at cottage industry level is affordable, has low costs of operation and can be handled within the skills which can be imparted to the CIGs by the programme. Some examples of types of cottage industry processing appropriate for the CIGs to invest in are:

2.3.2.1 Roast meat (Nyama Choma) butcheries: To be owned by CIGs (Small stock to be supplied by members),members sell goats to a Nyama Choma butcher (owned by the CIG), who slaughters the animal and sells the meat in small units (1 kg) to the consumer. Nyama Chomais a valuable market linkage for small livestock farmers. Farmers can invest in ownership of Nyama Choma butcheries as a group, thereby increasing their share of the value addition in the chain. They can hire workers (or their adult family members) to manage and run the business and continue with farming.

2.3.2.2 Cottage meat processing This can be added to the Nyama Choma model. Here, CIGs are increasing the product range (sausages, smoked meats, pickled meats etc.) This model allows for beef to be added to the small livestock product range. Cattle are often not purchased by Nyama Choma butcheries because all the meat from a carcass cannot be sold in a day. For CIGs to process beef they will have to include refrigeration equipment in the processing equipment. This will help CIGs increase the shelf life of the meat.

2.3.2.3 Cottage Motorized Oil Expellers. CIGs can invest in a motorized oil expeller that can process between 200 to 800 tons / year of oilseeds and the CIGs can sell the oil and the cake by- product as two product types. Crops suitable for oilseed processing are sunflower, groundnuts, soybeans, castor, jatrophila, sesame, avocado, and moringaoliefera. CIGs can sell the cooking oil direct to the households or they can make a contract with schools, hospitals and the cake to the livestock farmer etc. Livestock development as a business often starts in areas where oil expellers are found processing sunflower as the sunflower cake is a valuable form of protein stock feed.

2.3.2.4 Cottage Stock Feed Manufacturing.This enterprise fits in well with the cottage oil expelling and maize hammer milling. The biggest customers of this service are farmers themselves especially dairy, pig and poultry farmers. 2.3.2.5 Processing Fruits and Vegetables to Juice Locally available juice processing equipment can process mangoes, pineapples, passion fruit, avocado and vegetables such as carrot and beetroot. CIGs can sell the juice directly to the consumers by packaging it into smaller units or to a large buyer (bulking) of juice concentrate. The juice concentrate has a shelf life of up to 15 months where the fresh fruit has a shelf life of 2 to 3 weeks.

2.3.2.6 Milk Processing Milk is processed into pasteurized milk, sour milk, yoghurt, butter & soft cheeses is another profitable option. Milk processing starts with the bulking of milk at collection centers. Small cottage industry pasteurizers can be purchased to sterilize the milk. This will normally extend the shelf life up to a week if combined with refrigeration. Sour milk cultures can be added to the pasteurized milk and consistent quality sour milk produced and sold to the consumer. Yoghurt can be made in a similar manner as well as soft cheeses such as cream, feta and mozzarella for the tourists and local consumers. Where milk centers are not able to collect the afternoon milk, instead of throwing surplus milk away, it should be processed.

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2.3.2.7 Fish Cold Chain Management The bulking of fish and pre-packing into smaller units ready for sale is another value adding opportunity. This involves harvesting the fish, bulking, and then placing the fish into blast freezers or on ice, transporting this to the market while maintaining the cold chain quality. Then the bulk fish is broken down into small pre-pack units and either sold directly to the consumer or supplied to various retail outlets.

ConsequenceIf CIGs do not invest in cottage industry, their full potential will not be realized in terms of income generating opportunities and improved market access.Recommendations

• TrainingofCIGsinmarketingusingtriedandtestedtrainingtools• Promotionofbulkingandgroupmarketing• DevelopcottageindustryvalueaddingtrainingmodelsandsharethesewithCIGsandpotential

financiers of the projects• Increaseavailabilityof informationcoveringcottage industryvalueaddingmodelstogether

with appropriate market linkagesIn conclusion there are many opportunities to use value adding models to help the CIGs improve their market access as a business activity.

2.3.3 Bulking

2.3.3.1 Bulking of grainsCurrently the East African Grain Council (EAGC) is promoting and supporting the Warehouse Receipts system to help grain farmers to get better market access. As a result, with improved market access farmers will get a better farm gate price.

Model DescriptionWhere CIGs are based in major grain producing areas the warehouse receipts system has the potential to work well. The concept is for farmers to bulk their produce and store it in a certified storage facility where one is issued with a receipt. This receipt can then be taken to a bank using it as collateral to apply for a short term loan from the bank. One commercial bank visited mentioned that they were issuing loan amounts of up to 80% of the produce value on the day of receipt issue.

BOX 3: Quote:

“The Eastern African Grain Council (EAGC), in conjunction with Kenya Maize Development Program (KMDP) and Regional Agricultural Trade Expansion Support (RATES), officially launched the much-awaited pilot warehouse receipts system (WRS) on April 21st, 2008 at the Nakuru Wheat Silos in Nakuru.”

The marketing mechanism here is linking to the Kenya Agricultural Commodity Exchange (KACE) whose mission statement is as follows:

Kenya Agricultural Commodity Exchange (KACE) is a private sector firm launched in 1997 to facilitate linkage between sellers and buyers of agricultural commodities, provide relevant and timely marketing information and intelligence, provide a transparent and competitive market price discovery mechanism, harness and apply information and communication technologies (ICTs) for rural value addition and empowerment.

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There are two main factors that can help the CIGs when using warehouse receipts; The CIG can get cash for their produce without having to sell the crop, so the CIG can wait for a few months for prices to rise, and then the CIG can sell the crop, pay back the loan to the bank plus storage charges and put the profit (the difference) back into their pocket.

At harvest time there is always surplus produce available which normally depress crop prices considerably. If this surplus is removed at harvest time CIGs will be able to stabilize the prices of produce, avoiding low prices resulting into increased profits for farmers. CIGs at a later stage can release the stored stocks back onto the market to keep supply and demand in balance. CIGs could use KACE as their marketing platform/ service provider to sell their grain on behalf of the CIG members. The CIGs can also use KACE to help link them to big buyers such as World Food Programme and other relief organizations.

2.3.3.2 Bulking Horticulture produceThe Horticultural Crop Development Authority (HCDA) is offering technical advice and creating platforms through which farmers can learn how to add value to horticultural produce as well as securing markets to ensure they reap maximum benefits from production.

ConsequenceThe CIGs will continue experiencing marketing challenges if they do not embrace business support services provided by institutions such as KACE, EAGC, and HCDA etc. which have the capacity to form strong and sustainable PPPs.

RecommendationInstitutions and agribusiness service providers such as HCDA, EAGC, and KACE offer important services which CIGs should be made aware of and linked to. It is important that these institutions are part of and are included in the promotion of PPP. This can be done when stakeholders arrange to meet with agribusiness service providers on a quarterly or biannual basis to get partner feedback on CIG development at the grass root level.

2.4 ConclusionThere are a number of service and support bodies established and active to help the CIGs achieve better market access. The CIGs should take advantage of this

2.5 Public Private Partnerships (PPP) OpportunitiesThe WFP is promoting a programme called Purchase for Progress (P4P). The main objective of this programme is connecting farmers (especially small scale) to markets. WFP annually purchases large quantities (variable according to funding support and need) of food for “Food Aid Relief”. When this food is purchased from out of country and supplied into a country for relief this takes a potential market away from the local farmers growing these food crops. The objective here is to first purchase local food surpluses from farmers in the country requiring food aid support, before looking for alternative sources. The challenge here is how to coordinate and bulk the produce to supply to WFP from small scale farmers on sustainable commercial basis. An example of P4P through PPP is illustrated in figure 5.

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Box 4 explains the fundamental components of P4P

Box 4: There are three fundamental components to a P4P programme:

Innovative procurement modalities to intervene in markets; will ensure farmers find an adequate and fair market for their produce. WFP is focused on markets and can offer the demands that will allow farmers to increase their sales and income.

Strong supply-side partnerships; aimed at strengthening both the productivity levels of small and low-income farmers and their participation in markets. Working with supply-side partners who specialize in enhancing agricultural productivity, P4P will improve farmers’ access to technologies and practices that can enhance the quantity and quality of their crop production.

Learning and Sharing; Rigorous monitoring and evaluation system designed to effectively assess the impact of P4P on livelihoods and markets. This also involved engaging in active dialogue and exchange of ideas on approaches - what works and what does not work, with a range of interlocutors.

Local procurement principles underpin P4P purchases

Best practices will be mainstreamed into WFP local procurement procedures by the end of the pilot

Supply-side PartnersProviding technical expertise in

Agriculture & market development

Three Fundamental Components

Connecting Smallholder Farmers to Markets through Market and Agricultural Development

Learning and Sharing

Innovative Procurement ModalitiesPro-smallholder competitive tendering

WFP Local Procurement – the Foundation of P4P

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Figure 6: Targeted P4P Market Entry Points

As said earlier, there is little investment by Local Authorities of the market levies collected into improved market infrastructure and services. “County market infrastructure is at a low level with little investment undertaken by local authorities”. The few market services that are offered are basic in nature such as one central water supply point, unpaved roads, and a simple security service. Investment into infrastructure in the form of retail outlets, storage facilities for both bulk and the cold chain together with paved walk ways, paved entry roads, good drainage and running water was missing in a number of markets visited.

Consequence Lack of investment into marketing infrastructure and services will continue to act as a barrier to development and limit national growth.

Recommendations• DevelopPublicPrivatePartnership(PPP)attheCounty,District,MunicipalandCitylevels• Whenpromotingimprovedpublicmarketservicelevelsasabusiness,someoftheearnings

(levies collected) should be re-invested for improved infrastructure and service supply and be managed by the private sector on behalf of the council

• CIGmembers through apex representation of either cooperatives or farmer associationsshould take positions as part of the Market Management Committee at the County, District, and Municipal & City Markets under the PPP.

• Secondarymarketservicessuchasinformation,security,livestockholdingpens,valueaddingsupport, infrastructure and access roads should be considered after the primary services have been improved.

Regulations for Cess and Levy collection should be reviewed. Agriculture Sector Coordination Unit (ASCU) can take the lead in this area

2.6 Summary of CIG Opportunities to Access MarketsBy supporting market led CIG development, it can be concluded that there are some powerful tools available for the process of commercializing agriculture. However, in the Kenyan situation they are

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underutilized. These avenues range from cottage industry, value addition and processing, breaking bulk units into smaller pre-packs, increasing product range and shelf life. This will increase the number of customers CIGs can access in a day as well as allowing CIGs to hold produce for longer periods; thus be able to reach customers that are distant from the site of production. The Warehouse Receipts system supports price stability and allows farmers with little capital to come together to participate in an effective marketing tool. This is a very effective tool in stabilizing prices to the farmers when there is bumper harvest with big surpluses. PPP is the way forward both in the programme implementation and in the provision of improved market infrastructure and services by public markets.

The following are the recommended Market led CIG development activities identified for support:• TrainingofCIGsinmarketingusingtriedandtestedtrainingtools• Promotionandsupporttobulkingandgroupmarketing• DevelopcottageindustryvalueaddingtrainingmodelsandsharethesewithCIGsandpotential

financiers of the projects• Increaseavailabilityof informationcoveringcottage industryvalueaddingmodelstogether

with appropriate market linkages• Strengthenlinkagestoagribusinessserviceproviders.• Facilitate the Development of a Public Private Partnership (PPP) at the County, District,

Municipal and City levels • FacilitateCIGmemberdevelopmentthroughapexrepresentationofeithercooperativesor

farmer associations and to take positions at the County, District, Municipal & City Markets under the PPP as part of the Market Management Committee

• ReviewregulationsforCessandLevycollection.

2.7 Commercial Viability of the CIGs

2.7.1 Factors which have influence on the commercial Viability of CIGsIt was identified that the commercial viability of the CIGs was dependent on five main factors:

• Thesizeofmembership• Thetotalsalesvolumeofthebusiness• Abilitytomobilizeresources• Diversificationofenterprises• Embeddedservices

2.7.2 The Size of MembershipCIGs can have a large number of members producing small quantities individually or fewer members, each producing larger quantities of produce. Where there are small membership numbers with low quantity levels of produce offered for sale, the commercial viability potential is low.

2.7.3 Diversification of EnterprisesA number of these groups have started diversifying and investing in additional business enterprises as a method of improving their sustainable commercial viability e.g. snow pea production, input supply to members, yogurt making and mixed vegetable production to name some. Some CIGs have diversified into additional enterprises that are complimentary as a strategy to increase income whereby they are using the original enterprise as the business foundation and the CIG as a marketing service platform. Ngurumo Horticulture CIG in Muranga East has 340 farmers in the group who each grow an average of ¼ acre of snow peas as well as tea (the original enterprise). The CIG members earn on average KES 14,000 per month from snow peas, after production and marketing costs have been deducted. These CIG members (340) also each produce 3 lts/day on average of milk where the milk is sold locally. The milk is sold individually by members; there is an opportunity here to bulk the milk (340*3lts) and sell it as a group. Some of the income earned from snow peas has been invested into dairy cows. They have further diversified into avocado production. This group provides a good example of successful enterprise diversification resulting in improved income flows, though

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still facing some challenges. As milk production increases so the CIG will have to consider forming a milk collection center as a second major business enterprise after the snow pea.2.7.3.1. Diversification of Services within CIGsIt was found that single service business units have sustainability problems and there is a need to apply a strategy of packaging services together for increased levels of sustainability through enterprise diversification and widening the range of service offered. CIGS cannot only provide marketing services but have to look at conducting other services such as input-supply, some form of credit and others as identified by the members. When income levels for individuals are low the CIG members only have a small capacity to pay for services. It is at this level of business that CIGs should start looking for opportunities to invest into other enterprises. Certain CIGs have diversified their service base where they are supplying inputs on a cash and credit basis for that enterprise to their members. This has had the effect of increasing production volumes quickly in the short term. A dairy CIG known as Mununga Kianda Farmers in Naivasha was visited where members supply 2,000 lts of milk per day to the milk collection center. This center charges KES. 2/lt as a service charge for members from KES 26/lt selling price. Income generated from this fee has been used to cover operational costs and the surplus money invested in inputs to help the farmers increase yields and lower costs. The range of products includes inputs like dairy meal, veterinary drugs, seed, chemicals and fertilizer.

2.7.3.2 Ability to mobilise resources by CIGsWhere CIGs have limited resources for start-up capital, they make contributions in labor and land together with small cash contributions aimed at purchasing inputs as a method of resource mobilization. A vegetable CIG in Kitui with a farm owned as a group had adopted this model; income generated from vegetable sales from the field was used to purchase each member a small motorized irrigation pump in the form of a merry go round. The members had started irrigating their fields using hand buckets to carry the water. Another group used soap making to raise income to purchase a breeding goat for each member.

2.7.3.3 Grant Assisted Resource Mobilisation by CIGsMany resources poor CIGs have prepared group proposals for grant funding support where they have not been able to save adequately from existing income earnings. Some of those have successfully accessed funding support while others have not. From this funding support group production projects have been implemented where funds have been used to provide training to members (in job training) and to raise start-up capital for each member so that they can start their own enterprise, e.g. each member gets one dairy cow, some chickens and a cockerel etc.What sustainable business service model do CIGs wish to develop? It is important that at the opportunity identification stage the full business costs of managing and operating this specific CIG business enterprise are identified and targets set where income generated reaches a level that is greater than these costs in a defined timeframe. This level of planning was not seen in the weaker CIGs visited.

Recommendations• Single enterprise selection for CIG business development should be used as a startup

mechanism but in the longer run the CIG should not be limited to only one enterprise. • Diversificationofbothenterprisesinvestedinandservicesofferedwithineachenterpriseare

key to the sustainability and commercialization of supported CIGs. The CIG should expand into a business service center for members.

• AninventoryisconductedwherebysuccessfulCIGmodelsareidentifiedanddocumentedforuse by other farmers for exchange visits.

• FarmersinaCIGmayproduceasindividualsbutsourceforbusinessservicesandmarketcollectively.

• CIGs’havethepotentialtogrowtoSmall&MediumEnterprise(SME)developmentandsothey should be mentored for growth. Saving mechanisms should be identified and/ developed

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in order to help CIGs mobilize resources in the implementation of enterprises as businesses

2.7.4 Choice of Enterprise for CIGsIn commercializing the CIGs the aim of the members is to make them service centers. In the current enterprise selection process (flagging of opportunities) good opportunities are often getting lost. One of the reason for this is that promotions is often done to meet targets by extension officers and is most likely aligned within his/her field of specialization. Flagging of inappropriate opportunities leads some CIG enterprises having poor commercialization chances through low income generating capacities. It is important to build on the existing CIGs business activities by encouraging diversification into enterprises that offer good opportunities thus increasing their members’ income levels and their capacity to pay for services. It is necessary to use budgeting with cash flows as part of the opportunity identification process to help identify potential profit levels.

Risk mitigation is another factor to consider. For example, in marginal areas with a high drought incidence small stock should be promoted instead of large livestock. This is based on the following information: In Kajiado District, during the 2008/9 drought, livestock population reduced by 60% for dairy animals, 40% for beef animals through drought related mortalities but only 10% for small stock and this number of small livestock reduction was not due to death but because of increased sales to compensate for revenue losses from the large stock.. The normal livestock off- take is 10% of the population number which is acceptable under extensive grazing systems.

ConsequencesThe net position for commercial viability is that the monthly operational costs for the CIG have to be covered in full by the service fee charged to individual CIG members for selling their produce through the group. If this amount is negative at the end of the programme support, the CIG will most likely collapse after this period.

Poor enterprise selection can jeopardize the sustainability of CIGs. Factors beyond the farmers control (the climate) can make an enterprise with high returns into one with low income levels. CIGs must have the capacity to adjust or change (flexibility) their existing enterprise models over time to respond to challenges due to both external and internal factors in order to increase their resilience. If returns from the business is not enough to cover domestic expenses and leave some savings for re-investment, then most likely it will eventually collapse.

Recommendations• Opportunity identification in improvingourbusinessperformance is acontinuousprocess

which guides our enterprise growth. “Action-Reflection- Action”.• Riskmitigationusingcontingencyplanningisausefulconceptandshouldbeincludedinthe

planning process when there is reliable information available.• ThetargetfortheCIGformationbyofficersshouldbereviewedtobedemanddrivenafter

sensitizing on the benefits.

2.7.5 Legal Status of CIGsIt was noted that most CIGs register with the Ministry of Culture, Sports and Social Services (MCSS) as a way of lowering business costs and increasing access to financial support. However, the legal framework to transact businesses is weak for CIGs registered under Ministry of Culture, Sports and Social Services (MCSSS) as they cannot sue or be sued. The key constraint under this arrangement is that poor governance by members is difficult to prosecute and discipline. Prosecution under the MCSSS is through the civil system and the costs of prosecution are borne by the claimants (Hiring a lawyer). When a business is registered as a cooperative or company and when fraud is committed and the matter is reported to the police, the investigation is conducted under criminal prosecution. State lawyers and investigators will be instructed to follow up this matter and the cost for this to be

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borne by the state. This is especially important when the members that have been defrauded have little capacity to hire a lawyer.

CIG members’ confidence in the cooperative system was found to be low mainly due to the past history of poor governance. They were unaware of the Revised Edition 2005 of the Co-operative

Societies Act. This act has corrected the weaknesses in addressing previous problems of poor governance and financial misconduct.

ConsequenceLack of legal status of the CIG leads to lack of access to commercial legal services available under criminal prosecution for fraud and non-business grants. Membership asset ownership (cash or fixed assets) is better protected under the cooperative / company structures. Non registration of the CIG puts the business operation at higher risk of failure through mismanagement.

Recommendation• ContinuelegalizationofCIGoperationbyregisteringwiththeMinistryofCulture,Sportsand

Social Services. As they grow the CIG business phase upgrade the legal structure to a co-operative or company

• SensitizeCIGmembers on the revisedCooperative Act, Edition 2005 of the cooperativesocieties Act and company’s Act.

2.7.6 Access to finance for CIGs

2.7.6.1 Rural financeMobilization of savings is normally the first step of a process in linking CIG members to suppliers of rural finance. When CIGs are able to show some form of financial discipline through savings they become more attractive to these financial service suppliers. Therefore saving is an important practice for CIGs and hence they should be sensitized in order for them to open bank accounts. Some small CIGs (Kilifi dairy, Kitui vegetable) had not yet opened a bank account and were keeping the money with the group treasurer. The CIGs capacity for mobilization and diversification of savings into non farming investments (savings accounts) were identified as low especially in areas with marginal potential.The Kenya Vision 2030 underscores the importance of raising the national savings from the current 17% to 30% by 2012. The 7,500 CIGs achieved by the programme per year can substantially contribute towards achieving this objective. Savings is a useful practice in helping CIGs overcome and mobilize resources for enterprise implementation but later on they will require credit for enterprise growth. Since the costs of borrowing are high, the business has to generate returns that can be able to meet loan expenses. Currently there are a number of financial institutions providing credit and loan services

Box 5: Revised Cooperatives Act, 2005

There are over 12,000 registered Cooperatives in Kenya. It is mandatory that a cooperative holds a minimum of 3 meetings per year, 2 meetings for education and training and a 3rd as the Annual General Meeting. Currently an elected member has to sign an indemnity form. The Commissioner of Cooperatives has the right to inspect the cooperatives books at any time; books must be audited quarterly and disputes are handled through a tribunal.

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to the agricultural sector in Kenya. An example some facts about credit are provided in box 6.

It is in the interest of each and every CIGs to develop a bankable business plan. At some stage a business entity may wish to borrow money, so it is better to adhere to good financial practices. For better risk management owner’s equity should constitute 30% of the total startup capital though 50% would be safer.

A number of the financial service providers offer financial advice at a charge which is included in

Box 7: E-Banking Services

1. M-Pesa Services and ZapM-Pesa and Zap are money transfer system owned mobile phone companies. The services are helpful for farmers in remote areas. The transaction cost of exchanging money is low and large service providers do not have to carry large volumes of cash with which to pay farmers for produce. Farmers are also able to make a payment into a central account at a low cost when mobilizing resources for purchase of inputs.

2. M-Kesho ServicesM-Kesho is a form of banking that can be very helpful to farmers in remote areas far from banking services. For example a dairy farmer is able to bank daily milk sales from M-Pesa accounts to their equity M-Kesho accounts. This way the farmer is able to save on time and on transportation costs that they would have incurred while travelling to go and bank the milk sales money.

Box 6: Some facts about credit from financial service providers.

The following financial service providers gave the information below:

Juhudi Kilimo has a KES 80 million loan portfolio and is working with 6,000 farmers.

Equity Bank: the bank’s total loan book is over KES 60 billion of which approximately 30% goes to agriculture.

KWFT (Kenya Women Finance Trust) has a KES 21 billion loan portfolio with a customer base of just over 325,000 of which 90% are rural based

Techno serve: is working with 50,000 farmers and facilitates financial linkages for its clients. It is estimated that each farmer requires KES 15,000 (US$200) to KES 18,000 ($250) to jump-start their business to be able to see impact.

Financial services in Kenya serve less than 10% (350,000) of small scale farmers.

Interview with a banker revealed that a number of clients seeking financial services do not require funds but advice on how to mobilize and manage the existing resources.

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the interest rate or routine account charges. An example of M-banking that can be used by CIGs is shown in Box 7.ConsequencesFinancial management and control is a challenge without a bank account.Business growth cannot berealized without access to formal financial services.

Recommendations• CIGsshouldbesensitizedtoopenasavingsbankaccountuponcompletionoftheregistration

process• CIGsshouldbesensitizedtoopenbankaccountswithfinancialserviceproviderswhooffer

advisory services.• CIGsshouldbeadvisedonhow,whenandhowmuchtoborrow.• CIGshoulddevelopabankablebusinessplanwiththehelpoftheserviceprovider.• CIGsshouldbesensitizedonthebenefitsofusingM-Pesaformakingpaymentstomembers

and suppliers rather than using cash; this reduces the business risk considerably from cash misuse and robbery.

• CIGs should be sensitized on benefits of e-banking1 for use in business financialtransactions.

2.7.7 CIG Linkages to Agribusiness ServicesIt is important that CIGs are sensitized on how to establish linkages with agribusiness service providers. These include, but are not limited to buyers, suppliers of agribusiness development services, transporters, and financial service provider’s suppliers of equipment, inputs, veterinary service providers and extension services. The agribusiness service providers are all important players in the commercialization process. Increased utilization of service providers by CIGs would speed up the commercialization process and enhance the CIGs chances of sustainability.

ConsequencePoor linkages and support from agribusiness service providers translates into poor performing CIGs with low levels of sustainability.

Recommendations• The implementingarmsofthesectorministriestosupportthedevelopmentofandactas

a platform through CIG formation at the primary level. They should also be a focal point for other development and agribusiness service providers (secondary) to come in and assist the CIGs to commercialize their businesses. The ministry extension staffs are responsible for CIG formation and capacity building for members with a minimum level of business skills development. Other development organizations (often donor and foundation funded) should now be linked to these CIGs instead of forming their own CIGs in the same districts and should build upon what has already been started at the primary level. Once CIGs show a potential or have the capacity to pay for services and inputs they should be linked to service providers from the private sector.

• BuildingaPPP:TheCIGs inventorywhich includesname,typeandlocationofenterprise;type of support required, contact person, address, phone number etc. should be recorded by extension staff and stored by a central coordinating information management body. This will ensure that this information is available to all the interested stakeholders and this can be made possible through the stakeholder Fora.

• AgribusinessdepartmentstogetherwiththeNALEPPCUshouldfacilitateameetingbetweenstakeholders and agribusiness service providers (senior management “Think Tank”) on a quarterly or biannual basis to enhance the PPP- by sharing information on CIG development. The information flow will in this way be two way; stakeholders will share CIG area of activity,

1 E.g. M-Kesho accounts with Equity bank.

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level of development and business service need, while the agribusiness service providers will list experiences in supplying services to CIGs and what business characteristics can be adopted to make CIGs more attractive to do business with. The Stakeholder Fora should be the starting point for this interaction. The striving towards a strong PPP- should be a continuous process both at the national and Stakeholder Fora levels.

• SupportforCIGbusinesstrainingshouldbeflexibleenoughtobeabletoincludedepartmentalcontributions in the development of CIGs skills base to enhance their attractiveness to agribusiness service providers

• TheStakeholderForaatthedistrictlevelshouldbesupportedwithcapacityandresourcesunder the harmonization process to successfully carry out a similar activity to help increase the level of private sector services to CIGs.

• EachimplementingdonorsupportedprojectshouldprovidebudgetsupporttotheDistrict/Division Stakeholder Fora in the geographical areas they are working in.

2.7.8 Summary of CIG Commercial ViabilityIn developing CIGs to reach commercial viability a number of factors need to be considered. First, is changing CIG member attitudes to a level where the member is interested in investing in an enterprise/business and be willing to take ownership of the process.From this point the processes of developing the group’s business skills is followed through capacity building support including development of a business plan at the planning stage.The next step is resource mobilization to start the business and to implement the business plan. At this stage it is important that linkages are established to agribusiness service providers having identified them during the planning stage. Together with extension staff these service providers can provide business mentoring support in implementing the business as well as supplying key inputs. The CIG needs to be supported and encouraged to continue developing to reach a level of sustainability. It should be noted that the objective of profit maximization is the driving force towards commercializing of CIGs and should always be emphasized. Farmers will source for information and commit resources on their own if the profit is large or perceived to be large.

In supporting the commercialization development of CIGs the following activities need to be undertaken:

• Extensionmanualstobeupdatedtoincludeguidelinesonenterpriseselection,CIGbusinessactivities as a group, legal requirements, opportunity identification processes and risk mitigation

• ExposurevisitstobefacilitatedbetweenstrongandweakCIGsasaformofcross-pollinationof ideas and capacity building

• SensitizeCIGmembersontherevisedCooperativeAct2005andfacilitateregistrationCIGsas business entities

• Sensitization of CIGs on the financial service providers and packages available and theirterms and conditions.

• Facilitate links betweenCIGs and financial service providers in development of bankablebusinesses plans.

• Facilitatelinkstosuppliersofagribusinessservicesproviders.• Support PPP and strengthen the development of these partnerships through improved

information flows at both the National and District Stakeholder Fora levels

2.8 Improving CIG Competiveness Through Linkages to Larger Entities

In supporting CIGs competiveness through larger supply entity formations it is important for all parties to have a common understanding of the word competiveness.

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2.8.1 Definition of Competiveness:Competitiveness is being able to supply produce of a similar quality to either a processor / manufacturer or directly to a consumer at the same or at a lower price than the competitors and still make a profit. To be competitive normally takes careful planning and placing the business in a good position; either a site for marketing or a site for accessing the raw material. The cost of transport in relation to quantity of produce to be moved and/or distance is often one of the main factors in determining if one is competitive or not in order to supply a particular market.

Bulking centers assist farmers’ to bulk and hold their produce so as to reduce the cost of transport in delivering the produce to the processor so as to be competitive; this is seen as a marketing competiveness. Cost of processing and cost of production are other areas that help increase or reduce the cost of business and thus the competitive position. By organizing CIGs into larger structures one is implying that from a marketing perspective larger market supply contracts will be targeted and those will normally be some distance from the production areas. The higher the level of perishability of the produce the higher the management skills required in supplying the contract. Competitiveness can be through location, production, processing, cost advantages or uniqueness of a product or service as illustrated in box 8.

Box 8: Some competitive advantages for Kenya

Kenya has a competitive geographical location. It is well placed as trade hub for East Africa, with ports and access to sea transport. Kenya has easy (competitively placed) preferential market access to North African, Asian and European markets when compared to many other African countries. Further, Kenya has a large tourism industry which through the nature of flying in tourists offers competitive transport rates to businesses wishing to export fresh produce.

Due to its wide and diverse climatic conditions the country is able to produce a wide selection of produce over an extended harvest time. For example Kenya is able to supply fresh mangoes to the market for 8 months of the year where India and Pakistan have only a three month harvest period. On the other hand, Mango exporters complain that 20% of the cost in exporting fresh mangoes is in the form of taxes; this is making them un-competitive in supplying the North African market.

Box 9: Factors to consider in increasing competiveness

• Strategy:ThestrategyistolinktheCIGstothebiggertraderssupplyingbothforthelocalandexport markets where the CIGs have a competitive advantage and can lower the costs of doing businesses for bigger supply contracts held by large traders, processors and manufacturers.

• Riskmanagement:Inlookingatwhichlargerapexmarketingstructurestosupportonealsohas to consider which markets will be able to perform well in an oversupply (surplus) situation without the farm gate price dropping too much and the produce continues to be bought and it is still worthwhile for the farmers to sell. Kenya has a high capacity to mobilize resources to produce food and if there are no droughts in the near future the country should be in a position of surplus supply of certain agriculture produce within the next 2 to 3 years. It has to be considered, however, how the market will respond to this situation. Kenya is ideally placed in the EAC (East African Countries) and COMESA to take advantage of supplying these trade blocks and has a number of competitive advantages.

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2.8.2 Identified CIG Commercial ModelsThe following organizational structures providing marketing services were identified:

• Horticulture export supply syndicates were organized on an out grower basis, where a buyer provided a market for e.g. snow peas together with some technical support. With this agreement in place the CIG was able to access input support for its members from a separate service provider

• Milk collection centers were organized as cooperatives or companies; are member owned and members negotiate milk supply contracts with processors or smaller private buyers. Two CIGs visited gave a good and poor example of this model. Both were milk collecting centers, one was charging KES. 2/Litre of milk and was providing a high level of service to its members (had a hired manager with staff), and the second CIG was charging KES. 0.8 /Litre of milk. This CIG was offering a low level of services to its members, complaining of having little working capital and most of the work was being done on a voluntary basis. Members refused to increase the service charge paid for milk marketing services, thus restricting the service level that the center was able to supply to its members.

Two of the Dairy CIGs visited; the Kahuro Livestock Breeders Association CIG and Manunga Kianda Farmers Cig in Naivasha; illustrated in box 11, give good examples of successful CIG commercial models.

Box: 10 Cottage industry processing

Cottage industry processing is a powerful tool in lowering business costs and making products more competitively priced for certain products. Cottage industry processing is advantaged to central processing in that the rewards to the farmer are higher than a highly mechanized high capital investment unit. For high cost equipment models the profits go to the supplier/manufacturer e g. to owners and workers making the equipment in other countries. Cottage industry processing is competitive when raw materials for processing are in smaller quantities and are only available on a reasonable basis. This also pertains to where transport costs are high due to distance and a high percentage of the raw material ends up as waste matter left over after processing e.g. it is expensive to transport waste.

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• Larger processors / buyers offer a market to CIGs, they use their own agents to coordinate and organize collection of produce. These agents charges approximately KHS. 500/day to the large buying businesses as field costs, not including the labor cost, and are organized in small teams. Mango was the main fruit purchased with this arrangement. Middlemen arranged for agents to purchase produce from CIGs and individual farmers. Sweet potato buyers located in the main wholesale market in Nairobi had appointed buyer agents in Rachuonyo district to purchase and bulk sweet potatoes from CIGs and farmers in this area.

• Small CIGs organized themselves where the members bulked together but sold individually. Here members hired a 7 ton truck together sharing the transport cost according to their share of the load; all the farmers accompanied the produce and sold individually to buyers in Nairobi.

• CIGs producing small quantities marketed as individuals on a cash sales basis.

2.8.3 Larger Rural Hubs for the Promotion of Increased Business Services to CIGsThe following are some proposed service structures based on business development principles to enhance CIGs competitiveness. The objective is that by investing in the business hubs these will increase CIG competiveness by acting as primary business service providers and acting as catalysts and drivers of other business services. The wholesale hubs which are highlighted in vision 2030 and principally found in the rural areas can be recognized in this report as “Business Hubs”.

These business hubs feed into a larger marketing system. The common characteristic of the business hubs are that they provide some form of sustainable marketing service to CIGs as their primary service. They also offer multiple services like cattle sale yards with ramps, abattoirs, tanneries, milk collection centers, juice pulping centers, horticulture bulking centers, stock feed processing warehouses coffee pulping, tea grading sheds and fish bulking centers and supply of secondary services in support of livestock, crops and fishery and non-primary sectors such as Gum and resins hubs. Increased levels of services translate into potentially more successful CIGs and increased group incomes and profits.

Box 11Case Study/models

Kahuro Livestock Breeders Association CIG – Muranga East DistrictThe common interest here is milk marketing and breeding of dairy cows. The CIG started with 100 members and now have 485; this CIG is 5 ½ months old. The first month (August 2009) milk sales were 27,000 liters and had reached 56,352 liters in December 2009. Before the CIG was formed farmers were selling their milk at KSH. 12 per liter. The CIG has currently negotiated a selling price of KSH.22.8/liter under a supply agreement where KSH.0.8/liter goes to the CIG for operational costs and Kes.22/liter to the members. Each member owns an average of 2 milk cows with an average yield of 6.5 liters per cow per day. Total accumulated sales income for the 5 months is KSH.6, 242,000 of which KSH.5, 510,000 has been paid to CIG members for milk supplied.

Mununga Kianda Farmers CIG –Naivasha District.This CIG was formed in 2005 with 7 farmers attending the first meeting. The current membership is 400 of which 225 on average are active members delivering milk. Current milk delivery is 2,000 liters per day, but if the CIG can access a bigger market; production potential is estimated to reach 10,000 liters per day.

The CIG has stopped enrolling new members as they don’t have a market for any additional milk supplies. Milk is sold through retail outlets at KES.28/liter in Naivasha, to buyers from Nairobi at KES.25-26/liter and surplus milk to KCC at KES.22/liter. The estimated breakeven price by the CIG is KES.26/liter including the CIG charge. It was reported that members do not make money when selling the milk at KES.22/liter. The CIG deducts KES.2/liter from every liter handled of milk supplied by its members. Feed is the biggest expenditure and there are high levels in price variations when purchasing the feed. The costing profile for feed is that for every liter of milk produced the cost is between KES 18 to 21 /liter. KES.15, 000,000 was paid out in 2009 to members as milk income. The retail price charged by KCC for milk to the final consumer is KES.28 per ½ liter, about KES0.56/liter equivalent.

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The strategy should be to use the list developed below as an opportunity identifier at the Stakeholder Fora level, and further develop proposals for them. There are two approaches; (1) to identify existing hubs and to link CIGs to them, (2) to identify a potential need and opportunity for a hub and to identify means of getting the business hub established through writing a concept paper / proposal.

2.8.3.1 Potential Business Development HubsLivestock based Business Hubs

• Cattlesalesyardswithramps• Abattoirstogetherwithtanneries• Milkcollectioncenterswithcoolingplants

Crop based Business Hubs• JuiceCollectionCenters• HorticultureBulkingSheds• WarehousessupportedbyWarehouseReceipts&KACE

Fisheries based Business Hubs • Fishlandingshedsandthecoldchaintothemarket• Fishprocessingindustries

2.8.4. Possible Models for Institutional StructureThe challenge is to identify different institutional structures which the CIGs can form and work with in order to link to these business hubs so as to improve competiveness. Several options are suggested below

2.8.4.1 OptionsThe design of these models will be influenced by the type, (nature of the product) of supply contract negotiated and the volumes required. The following possibilities are for:• CIGstoregisterasCooperativeswherelargesupplyordersarenegotiatedandsupplyorganized

through their membership structure • CIGs formcompanieswhere organization is byprofessionally hired staff (this often has high

overhead costs)• BulkingCenterswhere theCIGs’ role is toorganize themembers tobulk theirproduceata

central place in order to supply negotiated market contracts and operational costs are kept low• Agencymodel;whereCIGscontractanoutsideagenttoprovidespecificmarketingserviceson

an agreed commission rate• CIGs hire their ownCIGmember to act as amarketing agent to supply specificmarketing

services on an agreed commission rate. If a member of a CIG became the goat agent seller for other members this social stigma can be avoided and the member gets a higher sales price for the goat

• Valueaddedmodelwhereamixtureoftheaboveisusedtoaccessdifferentmarkets

2.8.4.2 Representation Structures for Influencing Favourable PoliciesThe development of large institutional structures should not be limited to business activities only, but can be expanded to policy. In helping CIGs be able to lobby for a more favorable business environment (improved competitiveness and marketing infrastructure) it is important that they are aware of this possibility and how to create a lobby voice. The greater the number of members in lobbying; the bigger the voice. The bigger/louder the voice the increased the chance for the CIGs of getting changes to be made in their favor. The Kenya National Federation of Agricultural Producers (KENFAP) and the cooperative movement are active bodies where linkages can be facilitated as potential voices for improving CIGs voices and business environment.

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ConsequencesWithout a unified front CIGs will find it difficult to influence favorable policy changes, old marketing problems will continue to trouble daily business transactions

Recommendations• SensitizeCIGstothedifferentinstitutional/preferredstructuremodels,clarifytheirstrengths

and weaknesses• Investigatefurthertheeffectivenessofcontractfarmingasatooltoimprovedcompetiveness.

Small out grower schemes developed as a CIG business structure as a strategy to bulk produce and access input credit. This is a suitable model where resources are difficult to access to start the commercialization process.

• ExposeCIGstootherCIGsthathavesuccessfullyorganizedthemselvesandnetworksimilarCIGs producing same commodities.

• FacilitateCIGstoadoptoneofthepreferredorganizationalstructure’s.• LinkCIGstoapexassociationsthatcanrepresentthemonpolicye.g.GiveCIGsavoice• FacilitatenegotiationsbetweenCIGsand InstitutionssuchasWorldFoodProgramme for

supply contracts. CIGs supported to link together so as to be able to meet the volumes required for these supply agreements.

• LinkCIGtootherdevelopmentprogrammesofferingsupportinorganizationaldevelopment• CIGstotakeupboardpositions/sharesofagricultureprocessingmanufacturingcompanies

(long-term strategy).

30


PART III –POLICY

3.1 IntroductionThe different activities in agribusiness sub-sector can be classified into four broad categories which include agri-input business enterprises, agri-output business enterprises, agro-processing enterprises and agri-distribution sub system. Agri-input business enterprises is comprised of production and marketing of agricultural inputs such as seeds, vaccines, animal feeds, drugs, fertilizers, plant protection chemicals, agricultural implements, farm machineries and equipment. The enterprises in agri-output business include production of crops, forestry, dairying, fishery, sericulture, mushroom and apiculture. Agro-processing enterprises involve beverage, sugar, cotton, textiles, sisal, fruit, milk, meat, leather, fruit and vegetable processing and packaging and grain milling industries. Agri-distribution sub-system involves storage, transportation and marketing of various goods produced and services of agri-input, agri-output and agro-processing activities.

The development of agribusiness is critical to the realization of Vision 2030, due to its enormous contribution in creating employment opportunities and improvement of the economic status of players along the value chains. It also fosters development of suitable infrastructural facilities like roads, electricity supply, storage, transportation, communication and refrigeration. Establishment of agro-based industries helps in better dissemination of knowledge or technology in production which in-turn helps in improving quality standards of agri-business products and further may enhance the export potentiality of these products in future. Agribusiness further helps in stabilizing the prices of agricultural commodities through better forward linkages.

To streamline the activities of various players along the value chains a policy framework is necessary. Policy provides for an effective institutional framework to ensure coordinated development of the industry. In addition, policy lays down strategies for the development of input supply, production, storage, agro-processing and marketing.

This policy environment is crucial for the success of CIGs and their commercial viabilities in the country. While conducting field visits and meeting with different stakeholders, partners, CIGs and agribusiness service providers a number of policy issues were raised. Broadly the policy issues identified were: role of Government, the private sector and issues of general nature. It was felt that these policy issues if dealt with will help improve market access and increase the competitiveness of CIGs and their trade/business partners.

3.1.1 Role of GovernmentThe role of the government is to provide an enabling environment that allows the private sector to operate with minimal hindrances. Thus, the government’s impact on success of CIGs has to do with how well public policies enable the private sector to expand.

Reforms in the agricultural sector, starting with the SRA, have focused on commercialization of agriculture-farming as a business. Key institutional reforms were done to implement SRA, one of them being the formation of the Agricultural Sector coordination Unit (ASCU) to coordinate the sector. ASCU in fulfilling its mandate as the national agricultural coordination sector unit is ideally placed to take up these policy issues.

The Thematic Working Group-Agribusiness, marketing and value addition, provides a platform of PPP at a national level where policy issues can be dealt with and changes fast tracked to respond to the industry needs.

The government formulated and launched’ Vision 2030’ whose main thrust is to transform Kenya into a middle income country by the year 2030. To realize this vision, the agricultural sector has

31


to be transformed to be more vibrant and competitive through deliberate efforts to create market linkages to agricultural producers and traders. This is emphasized in the new Agriculture Sector Development Strategy (ASDS).One of the key interventions that is being fast tracked in the ASDS is: ‘addressing marketing challenges with a view of increasing competitiveness of agricultural produce in both domestic and external markets

The government is in the planning stage of developing a National Agribusiness Policy and is currently preparing the ToR where identified issues can be included and investigated further on behalf of the CIGs and SMEs in general

3.1.2 Private Sector RepresentationCIG member and farmers interests are best channeled through the cooperative framework, apex farmer and business associations (e.g. Stakeholder Fora, KENFAP, AAK, KFA, KSC, STAKetc.) in lobbying for ASCU to facilitate improved agricultural policies and business environment. The findings of this study should be shared with these apex body representatives and effective lobbying encouraged on areas identified as being important to these bodies. (Box 12)

The CIGs representation should be cascaded from National to village level. This will be the true representation of the farmers’ interest as compared to the current situation.

3.2 Key factors to be Addressed in Commercialization OF CIGsSome general findings which need to be addressed at the policy level are:

3.2.1 Addressing Cottage industryThe CIGs have the potential of becoming small, micro and medium enterprises (SMEs). SMEs are effective tools which drive growth and create jobs. There is often a gap in the availability of sufficient quantities of raw material for large processors to source at the beginning of their investment cycle. This gap can be addressed by encouraging cottage industry processing in large numbers to attract CIG members to respond by increasing their production base. Once the production base reaches a targeted level then bigger processors can be invited to invest. There are two possible relationships that can develop between the cottage industry processors and the big processor. The cottage industry processors become bulkers and suppliers of semi-processed product to the bigger processor or the two compete head on for the final customer and market share.

Where small quantities of produce are available for processing and or the transport distance to the processor is long (300 km. plus), cottage industry processing offers a low cost solution to the bulking of produce into a higher value product that makes it competitive to supply to the market e.g. fresh mangoes into mango juice pulp. . There is a need for specific pro-policies on cottage industry promotion at the Small and Medium Enterprise (SME) level CIGs.

Box 12: Farmers’ RepresentationKENFAP: Is a farmers’ umbrella organization representing all sectors of the country’s agriculture in general. Its key role is to articulate issues affecting its members and agriculture sector.

Box 13: Legal status of CIGs to enter into Contracts

The legal framework of CIGs registration under the Ministry of Culture, Sports and Social Services is weak for CIGs to enter viable marketing contracts as they cannot be sues or be sued. Contract farming arrangements are important for small holder producers. While CIGs continue registration with MOCSS, CIGs should be encouraged to register under various possible options for commercialization

32


3.2.2 Addressing InfrastructureIt was noted that the rural access roads in producing areas and the physical markets are in poor conditions. Rural access roads in producing areas with potential for increased agricultural production needs to be developed and maintained to improve connection between the CIGs and markets . Policies targeting infrastructure support at the district level based on “market access barriers” need to be strengthened. The government policy is to encourage investment in access roads infrastructure upgrading and construction of markets in every constituency for fresh produce which is hoped will improve CIGs accessibility to markets.

Recommendation• Cottage industry juice processing specifically targeted for supportwhereCIGs and trade

partners are able to access development funds and technical support.• Fundingsupportshouldbe increased forcottage industryprocessingsoas tobeable to

create greater impact in achieving the Vision 2030. There are two key components that can make the financial support more effective, firstly for government to take a greater portion of the risk by offering increased support to the loan guarantee (e.g. increase their guarantee share to between 20% to 50%, currently in one scheme government is taking 10% of the guarantee risk) together with the commercial financial institutions and secondly, to ensure that technical support is part of the financial package during the lifespan of the loan.

• Thistechnicalsupporthastwooutputs,(1)toreducethenumberofloandefaultersand(2)to increase the chance of the supported cottage industry enterprises level of success and impact. This support should continue through existing institutions, there is no need to start new initiatives as a number of the current financial service institutions have developed some very effective models, their capacity just needs to be increased.

• TargetedInfrastructuredevelopmentandrepairsthroughdirectinvestmentintoaccessroadsand market infrastructure will support improved market access” where the main selection criteria is to “remove infrastructure related market barriers.

3.2.3 Addressing Agribusiness in ExtensionAgribusiness is valued as being an important part of extension services. The agriculture sector ministries have addressed farming as business in their extension services. NASEP spells out modalities for effective agricultural extension management and organization in a pluralistic system where both public and private service providers are active participants. The policy provides a point of reference for service providers and other stakeholders on matters of standards, ethics and approaches and guides all players on strengthening coordination, partnering and collaboration. The overriding factor of the policy is for the farmer to access demand-driven extension service for improved productivity and livelihood.

However, gaps still exists in understanding agribusiness (market oriented agriculture) and its implementation into practice is still low. There is still little understanding of agribusiness concept both on the part of ministries technical staff and farmers on the interrelationships connection between production, productivity and markets.

RecommendationAgribusiness should be mainstreamed into the extension service, all extension staff should be able to facilitate the Level I basic business tools to CIGs (see part III). Agricultural extension service providers both private and public need to be capacity built on agri-business.

33


3.3 SUMMARY of Specific Issues to address in Commercialisation of CIGs

3.3.1 Market InfrastructureMarket infrastructure and service levels offered by local authorities (County, District, Municipal and City) are not in satisfactory conditions and lack basic facilities such as, electricity, water and sanitation and cold storage. There is little investment by Local authorities from the collected market levies into improved market infrastructure and services.

RecommendationPhysical Public Market Infrastructure should be improved through an amendment to the Local Authority Act. Whereby an agreed percentage (+ %) of all levies collected from a market be re-invested back into the same market for improved market infrastructure and services. The law should be very clear that there should be no taxation without commensurate service.

3.3.2 Legal Framework for CigsThere is a weak legal framework for CIGs to transact businesses under Ministry of Culture, Sports and Social Services (Cannot sue or be sued, increased risk).

Recommendation The Legal status of CIGs registration under the Ministry of Culture, Sports and Social Services in conducting business should be reviewed. The CIGs should be registered under appropriate laws to acquire legal identity so that they can enter into legal business transactions.

3.3.3 Market InformationMarket information is not distributed quickly and efficiently at a national level. There are a number of market information services but are not well coordinated to provide single source information hub and generally the information is restricted to members or supplied on a fee basis.

Recommendation• Develop a Central Information Hub that is linked to all suppliers of market and business

information, where the information is processed into a user friendly format that is easily accessible to rural based clients. The management of this information database should be by a neutral body serving all without “Bias”.

3.3.4 Competitive export marketsThe country’s is not competitive in supplying certain export markets with produce, the taxation levels are too high (20% of total costs). There is a need for these to be reviewed and amended e.g. one exporter pays 22 direct and indirect taxes on export produce (fresh fruit). Private sector businesses complained that policy changes in removing trade barriers such as taxation and external tariffs on and international market requirements on exports and duties on imported inputs to improving the country’s competitiveness are too slow in amendment

RecommendationApex associations need to lobby government for tax relief (here impact assessment studies on the area of interest are a useful tool) The Government should adopt a policy of promoting import substitution targeting to increase market access for farm produce e.g. juice concentrate (local vs. imported)2

2 There is a difference between tax relief and subsidies here. A subsidy requires funding to be found to cover the cost of a subsidy; tax relief is relinquishing the right to earn income from taxation. In negotiating with donors on receiving funding support we can agree on the concept of no subsidies but not at what levels we should tax our farmers/agri-business companies in helping them maintain their competitiveness.

34


3.3.6 Conclusion on PolicyImproved public market infrastructure, strengthened regulation for small business investors (CIGs), improved competitiveness through the lowering of taxes and a quick response of government to creating favorable policy changes will greatly enhance the chances of CIG sustainability in the commercialization process. The Government has already put in place mechanisms through ASCU and the new agricultural sector development strategy to address policy issues, strengthen PPP and improve harmonization levels between all players in the agricultural sector; what is remaining is to fine tune the implementation by identifying some gaps and areas where some improvements can be made. This will help address the problems of market infrastructures, market and information deficiencies. Business is conducted in dynamic environment where markets and technologies are changing all the time. In supporting the commercialization of CIGs there is a need to respond to these changes by being pro-active policies rather being re-active in giving support and assistance.

35


PART IV: TRAINING TOOLS FOR IMPROVEDCIG BUSINESS SKILLS

4.1 IntroductionIn Part II recommendations have been made on how CIGs can further be involved with the market. To enhance the chances of CIGs successfully taking up and implementing these opportunities CIGs need to develop some minimum “business skills”. A set of business tools was developed by the team to help CIG members understand business better and develop their skills. The reward for learning and applying what is taught through the existing extension services supported by NALEP should be “profit”. We should constantly bear this in mind.

4.2 Extension Service ProvidersThe business performance of CIGs will be improved with the increased supply of quality extension services. There are three main sources of extension that CIGs are able to access. These are:• Government/NGOs/Donorsextensionsupportprogrammes• Farmertofarmerextensionservices• Privateextensionservices

It is important that while developing the PPP relationship in the supply of extension services to CIGs all players in each category are encouraged to work together in supporting CIGs develop their business enterprises.

4.3 General Findings on Extension ServicesThe overall target group in Kenya is approximately 4 million farmers. The NALEP programme uses a selective strategy to reach 1.1 million farmers per year. According to the operational guidelines the support should be approximately 3 years but because of lack of resources and personnel, in practice the intensive extension support is one year only. Kenya’s population has increased by 33% in the last 9 years. This translates into an increased number of farmers requiring extension services in the future. Extension service resources have been additionally strained with the increase in the number of districts from 72 districts to 256 districts. Full staffing of the new districts has not been completed and a number of staff is operating with a dual role responsibility.In some districts visited the extension service capacity will drop considerably post NALEP as the budget support to districts will reduce by an estimated 60% for routine extension systems and by 90% for livestock extension.Extension staffs are challenged in finding acceptable cultural solutions in supporting the development of business in Women CIGs business development. It is common that the head of the household (male) feel threatened or challenged by the success of his wife when she belongs to a successful CIG. District staff is busy having to support a multitude of development programmes. Some districts have many development programmes while some have few.In the NALEP programme the CIG development process starts with a 2 day training. The Cigs are on average visited 6 times in the first year. There is preference in the visits made to certain CIGs e.g. closer groups are visited more often than groups located further away. The demand for quality extension services by CIGs is much greater than the capacity to supply in the medium term (3yrs). This means that the CIGs are not visited as often as necessary in achieving the output of sustainable CIG development.The “Performance Appraisal System” is working very well with field staff, these extension officers are on their toes.It was noticed that it is very easy to mobilize CIGs to produce in the high potential areas. CIG groups of 400 or more members are easy to cluster together in these areas in order to respond to an opportunity. These members generally have adequate resources to mobilize and to implement an identified opportunity. In these areas, in the long term, the biggest risk is oversupply if an accurate

36


market study has not been undertaken and potential demand not matched with the supply potential on a macro level.

4.4 Perceived constraints to extension deliveryBelow follows a number of constraints, found to be negatively affecting the extension delivery to the CIGs. • “Good opportunities” are not being promoted, promotions have often been done tomeet

extension officer targets and are in line with the specific extension officers skills • “Personalexpenditure”requirementsfortheCIGmembersarenotbeingincludedaspartof

the budgeted costs in the commercialization process. Minimum personal expenditure identified requirements range from KES.250/day/CIG household for rural families and KES.500/day/CIG household for rural and urban based families. These expenditures cover food purchases, medical, schooling to name some of the more important personal costs

• CIGslocatedinmarginalpotentialareasoftenfinditdifficulttoaccessinputsandhavea“poorcapacity to mobilize resources”

• Livestockasabusinessisobservedtobeata“lowbusinesslevelforsmalllivestock”production,current models are only generating small income levels

• Asfarmersare“riskaverse”theyareoftennotcomfortabletotakeupnewinitiativesduetolowskills and knowledge base

• Someextensionofficersare identifyingthebusinessopportunitybutarenottransferringthe“business ownership” over to the CIGs e.g. when an oversupply of produce occurs the CIGs tasks the extension officer to find a market solution instead of the CIG having a plan two in place. This gives indications of a top down approach and that the CIG members have not taken full ownership of the business.

• “BusinessMentoring” in taking the firstbusinesssteps requiresmoresupport.The levelofbusiness mentoring for CIGs in the implementation stage was found to be low

• “Harmonization”withacommonimplementationstrategybetweenstakeholdersanddifferentdevelopment programmes is still at a low level in the visited districts

• The levelof interaction “ThinkTank”between thepublic (Governmentanddonors)and theprivate service sector in achieving sustainable CIG has the potential for greater interaction – “Opportunities are being missed here”.

4.5 Recommendations for Improved Extension in Agribusiness• Thetrainingtoolsdevelopedbytheconsultantandattachedtothisreportshouldbefurther

tested, updated, agreed upon and rolled out as part of the national programme.• A training tools stakeholder evaluation committee should be formed as part of the

recommendations from the workshop held at KARI on February 18 to test and make contributions to the new proposed training material

• PersonalexpenditurerequirementsforthemembersoftheCIGsshouldbeincludedasacostin CIG individual business plan budgets

• CIGsshould formulatean“own-strategy” todevelop theirbusinessskillsbaseandsupportnetwork where they are able to continue business and increase their sustainability for post-NALEP support (to include government extension, farmer to farmer, donor support programmes and private sector agribusiness service providers)

• For improvedimpactandbenefitandtobeabletocrossculturalbarrierstheCIGindividualhousehold should be treated as a business unit (household approach) where the CIG members receiving business training share their knowledge with all household members. In that way the business becomes the interest of the whole family. If the wife and school going children are involved in the business, it is more likely to withstand shocks, for example if a household member falls ill.

• Agribusinessshouldbemainstreamedintotheextensionservicewhichmeansthatallextensionstaff is able to facilitate the Level I basic business tools to CIGs. Level I business skills is

37


described as having a basic understanding of using and being able to facilitate the developed business and supporting tools from this consultancy (Annex 1). The minimum skills base is to understand the marketing matrix, the questionnaire business plan, budgets, cashbook, transport cost analysis table, the market supply chain analysis tools and be able to facilitate these to CIGs. The use of cash-flows, computers and excel is considered to be level II.

• Thereisneedforstrongersupportandincreasingtheproductionsizeforsmalllivestockunitsas a business. Sales should be planned on a monthly basis rather than based on seasonal or annual needs which are the case today.

• FundingavailabilityshouldbeincreasedforCIGs/SMEs’tostart-uptheirbusiness,partofthedonor support should be targeted for this use, using existing financial and technical support service suppliers. This is start-up capital based on a part grant basis or with below market interest rate charges. The CIGs to be targeted here are those with low capacities to generate savings, how can we help them kick-start (create seed capital) the business and use the training skills that have been invested and developed in these CIGs.

• AsurveyonthelegalstatusoflistedCIGsshouldbeundertaken

4.6 Training Tools to Support Agribusiness in ExtensionOne of the tasks for the consultant was to develop some training tools to support the capacity building of CIGs. These are described in the section below. The design of the training tools for business development was based on field findings and programme review reports. The aim of the training tools is to help CIGs take up and implement profitable business opportunities as part of their sustainable commercialization process.

4.6.1 Marketing MatrixA revised version of the CIG market analysis and development tool was prepared. (Annex 1) The tool was tested in Kilifi and Kitui. The feedback on these tools should be submitted to the proposed “training tools stakeholder evaluation committee” (4.5) as one of the workshop recommendations for review and inclusion to the final amendments. The Marketing Matrix Evaluation and Training Tool has two functions, firstly to evaluate the CIGs marketing skills level, and secondly, as training needs assessment tool (TNA.

4.6.2 Business PlanA simplified model for a business-plan was developed to be used by the CIG (but also by individual households) for achieving long-term viability and up scaling of their enterprises. The design of the business plan is in the form of a questionnaire in hard copy format which is user friendly. The business plan has two functions, firstly, to help plan the implementation of the business idea in a structured manner making sure key business activities are identified and adequately addressed. Secondly where the beneficiaries are not able to answer the information needs adequately of the planned activities a capital T which stands for training is placed next to the listed activity. The business plan questionnaire now becomes a Training Needs Assessment tool to help identify specific areas of training support. The CIG should keep one copy of their business plan to guide implementation and the extension officer keeps a second copy. Follow-up visits should target the areas identified (T) for training support. At the completion of the extension programme support a final business plan can be prepared and comparisons between the first and last business plan done in order to assess how affective the training has been. This is provided in Annex 2A second business plan was developed for the larger CIGs that wish to develop a bankable business and provided in Annex 3.

38


Additional tools to help support the business development of CIGs include:These are provided in

ANNEX 3.• Businessmentoring• Budgetingformats• Asimplecashbook• Investmentplanning• Amarketsupplychainanalysisfromthefarm-gatetothefinalconsumer• Atransportcostanalyses• Anenterprisecash-flowprofitanalyses(Excelspreadsheet)

These tools with explanations on their use have been submitted as attachments (Annex 4)

4.6.3 Improved CIG Enterprise ProfitabilityThe following are some recommendations on how CIG profitability can be enhanced through use of the business plan and supporting tools:• Theuseoftheenterpriseproductionandmarketingbudgetsarethefirstpartoftheprocess

in increasing CIG profitability; this will help in the enterprise selection. The profitability for production (gross margins) needs to be assessed for the individual CIG members, while the profitability of marketing should be done as a CIG group activity for the specific enterprise. The later assessments will guide the minimum quantities required to supply the market at the lowest cost when bulking CIG produce. From this point targets can be set on what are the minimum quantities group members need to produce (area planted * yield) for crops or number of animals for livestock in order to be able to take advantage of reducing the marketing costs

• CIGmembersneedtonowestimatetheminimumareatobeplantedpermemberorlivestockbreeding units to be kept, so that adequate profit levels can be achieved for the targeted farm gate price identified from the market survey. The cash-flow is a useful tool in helping farmers identify these minimum areas to be planted at different price levels.

• TheCIGsshouldalways identifyasecondbuyer/marketasanalternativetothe firstoptionshould the first buyer arrangement fail

• Complementarydiversification to themainenterprisewill strengthenCIG income flowsandimprove the sustainability. Selection of the other enterprise(s) should be aiming at generating income on a monthly - quarterly basis as well as lowering the costs of doing business.

• The combinationof using the above listed tools andplanningwill enhanceCIGaswell asindividual member’s profits and sustainable CIG development will be achieved.

4.6.4 Future StudiesThe following areas have been identified as potential areas for study that can help CIGs in their commercialization process:• Developcottageindustryvalueaddingcasestudybusinessplanmodelsandsharethesewith

CIGs and potential financiers of the projects• Investigate further the effectivenessof contract farming (outgrowing) as a tool to improved

competitiveness• Savingsmobilizationcapacityandstrategiesinvestigatedanddevelopedfurther• AsurveyconductedonthelegalstatusoflistedCIGs• DairySectorStudyincludingprocessingcapacityandmatchingsupplywithdemandbasedon

the processing capacity • MarketStudyLinkingCIGmemberstoAvocadoOilBuyers• ValueAddingFruitSectorStudy

39


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d pr

oduc

e

CIG

s lin

ked

to a

nd b

ecom

e m

embe

rs o

f coo

pera

tive

and/

or a

ssoc

iatio

n bo

dies

in th

e co

ntex

t of

repr

esen

tatio

n an

d lo

bbyin

g fo

r im

prov

ed p

olici

es

Thes

e bo

dies

see

k re

pres

enta

tion

and

are

part

of th

e m

arke

t com

mitt

ees

in th

e pl

anne

d PP

P ar

rang

emen

t.

6

40


Long

val

ue c

hain

s (m

any

acto

rs)

Whe

n th

ere

is st

iff c

ompe

titio

n be

twee

n bu

yers

the

mar

gins

cha

rged

are

nor

mal

ly fa

ir;

wher

e co

mpe

titio

n is

low

or c

arte

l beh

avio

r pr

actic

ed m

argi

ns fo

r the

trad

ers

are

high

an

d pr

ices

to fa

rmer

s un

nece

ssar

ily lo

w.

The

long

sup

ply

valu

e ch

ains

redu

ce th

e pr

ice

paid

to th

e fa

rmer

or i

ncre

ases

the

price

the

cons

umer

pay

s, o

r bot

h.

CIG

s tra

ined

to p

repa

re a

ccur

ate

mar

ketin

g bu

dget

s CI

Gs

shou

ld c

ompi

le a

ccur

ate

mar

ketin

g an

d tra

nspo

rt bu

dget

s at

the

plan

ning

sta

ge

CIG

s sh

ould

be

linke

d to

geth

er to

sha

re b

ulkin

g se

rvice

s fo

r ide

ntifie

d en

terp

rises

.

6

High

mar

ketin

g co

sts

(e.g

. tra

nspo

rt of

bul

ky

prod

uce)

CIG

s fa

ce h

igh

trans

port

cost

s wh

en

trans

porti

ng s

mal

l vol

umes

of p

rodu

ce o

ver

long

dist

ance

s.

With

out b

ulkin

g an

d pr

oduc

ing

suffi

cient

m

inim

um q

uant

ities

CIG

s wi

ll not

be

able

to

acce

ss c

erta

in m

arke

ts re

sultin

g in

was

tage

of

prod

uce

and

loss

of i

ncom

e.

If bu

lking

is n

ot p

ract

iced

the

com

petiv

enes

s ca

nnot

be

impr

oved

by

redu

cing

the

cost

s of

su

pply.

The

trans

port

cost

s an

d m

inim

um b

ulk

quan

titie

s ne

ed to

be

iden

tified

as

part

of th

e pl

anni

ng

proc

ess.

In

the

prod

uctio

n st

age;

to re

ach

the

requ

ired

min

imum

crit

ical m

ass

plan

ting

date

s an

d qu

antit

ies

need

to b

e co

ordi

nate

d wi

thin

and

bet

ween

CIG

s Th

e de

velo

pmen

t of b

usin

ess

rela

tions

hips

bet

ween

di

ffere

nt C

IG g

roup

s in

the

form

of m

arke

t sup

ply

agre

emen

ts in

cludi

ng c

oord

inat

ion

of p

rodu

ctio

n.

7

Mar

ket

Led

CIG

Op

po

rtun

itie

s

Valu

e ad

ding

Valu

e ad

ding

will

incr

ease

the

prod

uct

rang

e, in

crea

se th

e sh

elf l

ife a

nd in

clude

s ta

king

larg

e qu

antit

ies

and

brea

king

them

do

wn in

to s

mal

ler u

nits

CIG

S wi

ll con

tinue

to lo

se

out o

n in

com

e ge

nera

ting

oppo

rtuni

ties

and

impr

oved

m

arke

t acc

ess

if th

ey d

o no

t in

vest

in c

otta

ge in

dust

ry

valu

e ad

ditio

n

Trai

ning

of C

IGs

in m

arke

ting

usin

g tr

ied

and

test

ed tr

aini

ng to

ols

Prom

otio

n of

bul

king

and

grou

p m

arke

ting

Deve

lop

cotta

ge in

dust

ry v

alue

add

ing

busin

ess

plan

trai

ning

mod

els

and

shar

e th

ese

with

CIG

s an

d po

tent

ial fi

nanc

iers

of t

he p

roje

cts

Incr

ease

ava

ilabi

lity o

f inf

orm

atio

n co

verin

g co

ttage

indu

stry

val

ue a

ddin

g m

odel

s to

geth

er w

ith a

ppro

pria

te m

arke

t lin

kage

s

9

Bulki

ng o

f ce

real

s, le

gum

es,

pulse

s an

d ho

rticu

lture

pr

oduc

e

EAG

C is

prom

otin

g an

d su

ppor

ting

the

War

ehou

se R

ecei

pts

mod

el to

hel

p fa

rmer

s pr

oduc

ing

cere

als,

legu

mes

and

pu

lses

to h

ave

bette

r mar

ket a

cces

s.

The

Horti

cultu

ral C

rop

Deve

lopm

ent

Auth

ority

(HCD

A) is

offe

ring

tech

nica

l ad

vice

and

crea

ting

plat

form

s th

roug

h wh

ich fa

rmer

s ca

n le

arn

how

to a

dd v

alue

to

hor

ticul

ture

cro

ps a

s we

ll as

secu

ring

mar

kets

KA

CE fa

cilita

tes

linka

ges

betw

een

selle

rs

and

buye

rs o

f agr

icultu

ral c

omm

oditie

s,

prov

ides

tim

ely

mar

ketin

g in

form

atio

n an

d in

tellig

ence

(ICT

s) fo

r rur

al v

alue

add

ition

and

empo

werm

ent.

If CI

Gs

do n

ot u

se s

ervic

e su

ppor

t ins

titut

ions

and

pr

ivate

ser

vice

prov

ider

s su

ch a

s EA

GC,

KAC

E an

d HC

DA th

en C

IGs

are

not

takin

g ad

vant

age

of th

e ta

x pa

yers

’ mon

ey a

nd w

ill ha

ve th

e sa

me

mar

ketin

g ch

alle

nges

eve

ry y

ear

Impr

oved

CIG

linka

ges

to in

stitu

tions

and

agr

ibus

ines

s se

rvice

pro

vider

suc

h as

HCD

A, E

AGC,

KAC

E It

is im

porta

nt th

at th

ese

inst

itutio

ns a

re p

art o

f and

are

inclu

ded

in th

e pr

omot

ion

of P

PP.

This

can

be d

one

when

sta

keho

lder

s ar

rang

e to

mee

t with

agr

ibus

ines

s se

rvice

pr

ovid

ers

on a

qua

rterly

or b

iann

ual b

asis

to g

et p

artn

er fe

edba

ck o

n CI

G

deve

lopm

ent i

n th

e fie

ld.

12

41


Publ

ic Pr

ivate

Pa

rtner

ship

s (P

PP)

Opp

ortu

nitie

s

Ther

e is

little

inve

stm

ent b

y Lo

cal

Auth

oritie

s fro

m th

e co

llect

ed m

arke

t le

vies

into

impr

oved

mar

ket i

nfra

stru

ctur

e an

d se

rvice

s.

Lack

of i

nves

tmen

t int

o m

arke

ting

infra

stru

ctur

e an

d se

rvice

s wi

ll con

tinue

to a

ct

as a

bar

rier t

o de

velo

pmen

t an

d lim

it na

tiona

l gro

wth.

Deve

lop

Publ

ic Pr

ivate

Par

tner

ship

(PPP

) at t

he C

ount

y, D

istric

t Mun

icipa

l and

Ci

ty le

vels

Lobb

y fo

r col

lect

ed le

vies

to b

e re

-inve

sted

for i

mpr

oved

infra

stru

ctur

e an

d se

rvice

sup

ply

and

be m

anag

ed b

y th

e pr

ivate

sec

tor o

n be

half

of th

e co

uncil

CIG

mem

bers

thro

ugh

apex

repr

esen

tatio

n of

eith

er c

oope

rativ

es o

r far

mer

as

socia

tions

sho

uld

take

pos

itions

at t

he C

ount

y, D

istric

t, M

unici

pal

& Ci

ty

Mar

kets

und

er th

e PP

P as

par

t of t

he M

arke

t Man

agem

ent C

omm

ittee

Se

cond

ary

mar

ket s

ervic

es s

uch

as in

form

atio

n, s

ecur

ity, l

ivest

ock

hold

ing

pens

, val

ue a

ddin

g su

ppor

t inf

rast

ruct

ure

and

acce

ss ro

ads

can

be c

onsid

ered

af

ter t

he p

rimar

y se

rvice

s ha

ve b

een

impr

oved

Regu

latio

ns fo

r Ces

s an

d Le

vy c

olle

ctio

n sh

ould

be

revie

wed

15

Co

mm

erci

al V

iab

ility

16

Com

mer

cial

Viab

ility

It wa

s id

entifi

ed th

at th

e co

mm

ercia

l via

bility

of t

he v

isite

d CI

Gs

as a

ser

vice

cent

er w

ere

depe

nden

t on

two

mai

n fa

ctor

s:

The

size

of m

embe

rshi

pTh

e to

tal s

ales

vol

ume

of th

e bu

sines

s

The

net p

ositio

n fo

r co

mm

ercia

l via

bility

is th

at

the

mon

thly

oper

atio

nal

cost

s fo

r the

CIG

hav

e to

be

cove

red

in fu

ll by

the

serv

ice

fee

char

ged

to in

divid

ual C

IG

mem

bers

for s

ellin

g th

eir

prod

uce

thro

ugh

the

grou

p.

If th

is am

ount

is n

egat

ive a

t th

e en

d of

the

prog

ram

me

supp

ort,

the

CIG

will

mos

t lik

ely

stop

func

tioni

ng a

fter

this

perio

d.

Sing

le e

nter

prise

sel

ectio

n fo

r CIG

bus

ines

s de

velo

pmen

t sho

uld

be u

sed

as

an e

ntry

mec

hani

sm b

ut th

e CI

G s

houl

d no

t be

limite

d to

onl

y on

e en

terp

rise.

Dive

rsific

atio

n of

bot

h en

terp

rises

inve

sted

in a

nd s

ervic

es o

ffere

d ar

e ke

y to

th

e su

stai

nabi

lity a

nd c

omm

ercia

lizat

ion

of s

uppo

rted

CIG

s.

The

CIG

sho

uld

expa

nd in

to a

bus

ines

s se

rvice

cen

ter f

or m

embe

rs

16

Iden

tified

CIG

Co

mm

ercia

l M

odel

s

Ente

rpris

e Di

vers

ificat

ion

CIG

s

Dive

rsific

atio

n of

Ser

vices

with

in C

IGs

Self-

Drive

n Re

sour

ce M

obiliz

atio

n CI

Gs

Gra

nt

Assis

ted

Reso

urce

Mob

ilizat

ion

CIG

s

CIG

s wi

ll not

dev

elop

if th

ey

don’

t ide

ntify

and

ado

pt a

su

itabl

e co

mm

ercia

l mod

el

Succ

essf

ul c

omm

ercia

l CIG

mod

els

shou

ld b

e id

entifi

ed w

here

an

inve

ntor

y is

cond

ucte

d id

entif

ying

succ

essf

ul C

IGs,

ana

lyze

them

furth

er a

nd u

se th

em fo

r CI

G e

xpos

ure

visits

W

eak

and

new

CIG

s lin

ked

and

expo

sed

to s

ucce

ssfu

l CIG

s of

sim

ilar m

odel

de

sign

to s

hare

exp

erie

nces

and

to le

arn

from

CIG

mem

bers

sho

uld

prod

uce

as in

divid

uals

and

mar

ket a

s gr

oups

.)CI

Gs’

are

the

star

ting

proc

ess

for S

ME

(Sm

all &

Med

ium

Ent

erpr

ise)

deve

lopm

ent

Savin

g m

echa

nism

s sh

ould

be

furth

er in

vest

igat

ed in

ord

er to

hel

p CI

Gs

mob

ilize

reso

urce

s in

the

impl

emen

tatio

n of

ent

erpr

ises

as b

usin

esse

s

17

42


Choi

ce o

f En

terp

rise

In th

e cu

rrent

ent

erpr

ise s

elec

tion

proc

ess

(flag

ging

out

of o

ppor

tuni

ties)

go

od o

ppor

tuni

ties

are

ofte

n ge

tting

lost

Poor

ent

erpr

ise s

elec

tion

can

jeop

ardi

ze th

e su

stai

nabi

lity

of C

IGs.

Star

t CIG

impl

emen

tatio

n wi

th a

sin

gle

ente

rpris

e bu

t gra

duat

e to

mul

tiple

se

rvice

s an

d or

mul

tiple

ent

erpr

ises

- Dive

rsify

!O

ppor

tuni

ty id

entifi

catio

n in

impr

ovin

g bu

sines

s pe

rform

ance

is a

con

tinuo

us

proc

ess

and

shou

ld b

e do

ne a

t lea

st o

nce

a ye

arRi

sk m

itigat

ion

to b

e in

clude

d in

the

plan

ning

pro

cess

whe

n th

ere

is go

od

qual

ity in

form

atio

n av

aila

ble

18

Lega

l Sta

tus

of

CIG

sTh

e le

gal f

ram

ewor

k to

tran

sact

bu

sines

ses

is lo

ose

for C

IGs

regi

ster

ed

unde

r Min

istry

of C

ultu

re, S

ports

and

So

cial S

ervic

es (M

CSSS

) as

they

can

not

sue

or b

e su

ed.

Lack

of l

egal

izing

the

CIG

tra

nsla

tes

into

them

not

bei

ng

able

to a

cces

s co

mm

ercia

l le

gal s

ervic

es a

nd n

on-

busin

ess

(Gra

nts)

.Hi

gher

leve

l of r

isk in

co

nduc

ting

busin

ess

in a

lo

ose

fram

ewor

k

Cont

inue

CIG

lega

lizat

ion

of o

pera

tion

by re

gist

erin

g wi

th th

e M

inist

ry o

f cu

lture

, spo

rts a

nd s

ocia

l ser

vices

In

gro

w th

e CI

G b

usin

ess

phas

e up

grad

e th

e le

gal s

truct

ure

to a

co-

oper

ative

or

com

pany

Sens

itize

CIG

mem

bers

of t

he re

vised

Coo

pera

tive

Act

19

Acce

ss to

fina

nce

Ther

e ar

e a

num

ber o

f fina

ncia

l in

stitu

tions

ser

vicin

g th

e ag

ricul

tura

l se

ctor

in K

enya

, offe

ring

finan

cial a

dvice

at

no

extra

cha

rge.

Wea

k CI

Gs

had

low

savin

gs le

vels

and

are

ofte

n re

ques

ting

for 1

00%

sta

rt-up

fin

ancia

l sup

port.

Wea

k an

d ne

w CI

Gs

were

foun

d to

be

hold

ing

mem

bers

mon

ey w

ith th

e gr

oup

treas

urer

and

wer

e no

t abl

e to

dep

osit

mon

ey in

to a

ban

k ac

coun

t bec

ause

th

ey h

ad n

ot c

ompl

eted

the

regi

stra

tion

proc

ess.

Fina

ncia

l man

agem

ent a

nd

cont

rol is

ver

y di

fficu

lt wi

thou

t a

bank

acc

ount

.It

is di

fficu

lt fo

r CIG

s’ to

gro

w th

eir b

usin

esse

s wi

thou

t ac

cess

to fi

nanc

e an

d wi

thou

t th

e us

e of

a b

ank

acco

unt.

CIG

s sh

ould

be

sens

itized

to o

pen

a ba

nk a

ccou

nt u

pon

com

plet

ion

of th

e le

galiz

atio

n re

gist

ratio

n pr

oces

s.W

eak

CIG

s sh

ould

be

taug

ht o

n ho

w to

sav

e an

d su

ppor

ted

to s

ave

thro

ugh

the

open

ing

of g

roup

sav

ings

acc

ount

sCI

Gs

shou

ld b

e se

nsitiz

ed to

ope

n ba

nk a

ccou

nts

with

fina

ncia

l ser

vice

prov

ider

s th

at in

clude

fina

ncia

l adv

isory

ser

vices

as

part

of th

e se

rvice

pac

kage

in

pre

fere

nce

to th

ose

who

don’

t offe

r suc

h se

rvice

s.CI

Gs

sens

itized

to re

ques

t tha

t the

fina

ncia

l ser

vice

prov

ider

sta

rts to

give

fin

ancia

l adv

ice to

the

CIG

gro

up im

med

iate

lyCI

Gs

shou

ld b

e ta

ught

how

and

whe

n to

bor

row

mon

eyCI

G s

houl

d de

velo

p a

bank

able

bus

ines

s pl

an w

ith th

e he

lp o

f the

fina

ncia

l se

rvice

pro

vider

and

ext

ensio

n st

aff

CIG

s sh

ould

be

sens

itized

on

the

bene

fits

of u

sing

Mpe

sa to

pay

mem

bers

and

su

pplie

rs ra

ther

than

usin

g ca

sh; t

his

redu

ces

the

busin

ess

risk

cons

ider

ably

from

cas

h m

isuse

and

robb

ery

20

43


Link

ages

to

Agrib

usin

ess

Serv

ices

Ther

e ar

e a

larg

e nu

mbe

r of

agrib

usin

esse

s se

rvice

s pr

ovid

ers

with

th

e po

tent

ial t

o su

pply

serv

ices

to C

IGs

Poor

linka

ges

and

supp

ort

from

agr

ibus

ines

s se

rvice

pr

ovid

ers

trans

late

s in

to p

oor

perfo

rmin

g CI

Gs

with

low

leve

ls of

sus

tain

abilit

y

The

impl

emen

ting

arm

s of

the

sect

or m

inist

ries

to s

uppo

rt th

e de

velo

pmen

t of

and

act a

s a

plat

form

at t

he p

rimar

y le

vel t

hrou

gh C

IG fo

rmat

ion.

Bu

ildin

g a

PPP

rela

tions

hip:

CIG

nam

e, e

nter

prise

type

, are

a of

sup

port

requ

ired,

con

tact

per

son

and

phon

e nu

mbe

r to

be c

olle

cted

by

exte

nsio

n st

aff

and

pass

ed o

n to

a c

entra

l coo

rdin

atin

g in

form

atio

n bo

dy to

be

shar

ed w

ith a

ll in

tere

sted

par

ties

and

stak

ehol

ders

Agrib

usin

ess

depa

rtmen

ts to

geth

er w

ith th

e PC

U to

facil

itate

a m

eetin

g be

twee

n st

akeh

olde

rs a

nd a

grib

usin

ess

serv

ice p

rovid

ers

(sen

ior m

anag

emen

t “T

hink

Tan

k”) o

n a

quar

terly

or b

iann

ual b

asis

Supp

ort f

or C

IG b

usin

ess

train

ing

shou

ld b

e fle

xible

eno

ugh

to b

e ab

le to

in

clude

“Thi

nk T

ank”

con

tribu

tions

in th

e de

velo

pmen

t of C

IGs

skills

bas

e to

en

hanc

e th

eir a

ttrac

tiven

ess

to a

grib

usin

ess

serv

ice p

rovid

ers

The

striv

ing

towa

rds

a st

rong

PPP

rela

tions

hip

shou

ld b

e a

cont

inuo

us p

roce

ss

both

at t

he n

atio

nal a

nd d

iffer

ent s

take

hold

er F

ora

leve

lsSt

akeh

olde

r For

a at

the

dist

rict l

evel

to b

e su

ppor

ted

with

cap

acity

and

re

sour

ces

unde

r the

har

mon

izatio

n pr

oces

s to

suc

cess

fully

car

ry o

ut a

sim

ilar

“Thi

nk T

ank”

act

ivity

as

at H

Q to

hel

p in

crea

se th

e le

vel o

f priv

ate

sect

or

serv

ices

to C

IGs.

Ea

ch im

plem

entin

g do

nor s

uppo

rted

proj

ect s

houl

d pr

ovid

e bu

dget

sup

port

to

dist

rict s

take

hold

er F

ora

in th

e di

stric

ts th

ey a

re a

ctive

in.

21

Imp

rove

d C

IG C

om

pet

iven

ess

Thr

oug

h La

rger

Ent

itie

s22

Com

petit

ive

mar

ket s

uppl

y ch

ains

Ther

e is

a ne

ed to

dev

elop

or

gani

zed

supp

ly st

ruct

ures

to

ach

ieve

com

petit

ive m

arke

t su

pply

chai

nsTh

ere

is a

need

to d

evel

op

larg

er ru

ral h

ubs

for t

he

prom

otio

n of

incr

ease

d bu

sines

s se

rvice

s to

CIG

s

By o

rgan

izing

CIG

s in

to la

rger

mar

ket

supp

ly st

ruct

ures

the

obje

ctive

is to

ac

cess

big

ger s

uppl

y co

ntra

cts

and

lowe

r our

cos

t of d

oing

bus

ines

s.

With

out t

his

focu

s th

e CI

Gs

will n

ot b

e ab

le to

ben

efit f

rom

this

oppo

rtuni

ty.

Sens

itize

CIG

s to

the

diffe

rent

org

aniza

tiona

l stru

ctur

e m

odel

s, c

larif

y th

eir

stre

ngth

s an

d we

akne

sses

Inve

stig

ate

furth

er th

e ef

fect

ivene

ss o

f con

tract

farm

ing

as a

tool

to im

prov

ed

com

petiv

enes

s e.

g. o

ut-g

rowe

r sch

emes

Expo

se C

IGs

to o

ther

CIG

s th

at h

ave

succ

essf

ully

orga

nize

d th

emse

lves

Facil

itate

CIG

s to

ado

pt o

ne o

f the

pre

ferre

d or

gani

zatio

nal s

truct

ure

Link

CIG

s to

ape

x as

socia

tions

that

can

repr

esen

t the

m o

n po

licy

e.g.

Give

CI

Gs

a vo

iceFa

cilita

te n

egot

iatio

ns b

etwe

en C

IGs

and

Inst

itutio

ns s

uch

as W

orld

Foo

d Pr

ogra

mm

e fo

r sup

ply

cont

ract

s. C

IGs

supp

orte

d to

link

toge

ther

so

as to

be

able

to m

eet t

he v

olum

es re

quire

d fo

r the

se s

uppl

y ag

reem

ents

Li

nk C

IG to

oth

er d

evel

opm

ent p

rogr

amm

es o

fferin

g su

ppor

t in

orga

niza

tiona

l de

velo

pmen

t

24

Polic

y27

44


Opp

ortu

nitie

s

Barri

ers

Ther

e ar

e al

so o

ppor

tuni

ties

to im

prov

e th

e bu

sines

s en

viron

men

t by

impr

ovin

g ex

istin

g po

licie

s.

Ther

e ar

e a

num

ber o

f pol

icy

issue

s ac

ting

as b

arrie

rs to

tra

de.

Polic

y iss

ues

if le

ft un

-reso

lved

will

decr

ease

mar

ket a

cces

s an

d re

duce

th

e co

mpe

titive

ness

of C

IGs

and

thei

r tra

de/b

usin

ess

partn

ers

Opp

ortu

nitie

sTh

e fu

ndin

g su

ppor

t sho

uld

be in

crea

sed

for c

otta

ge in

dust

ry p

roce

ssin

g To

ens

ure

that

tech

nica

l sup

port

is pa

rt of

the

finan

cial p

acka

ge d

urin

g th

e life

span

of t

he lo

an.

Mar

ket D

eman

d an

d Su

pply

need

to b

e co

ordi

nate

d an

d su

rplu

ses

deal

t with

in

an

effe

ctive

ly st

rate

gize

d m

anne

r esp

ecia

lly w

here

Nat

iona

l Pol

icy o

n fo

od

secu

rity

is a

prio

rity

over

the

mar

ket

Stab

ilizin

g m

echa

nism

s at

pol

icy le

vel c

an b

e pu

t in

plac

e to

hel

p st

abiliz

e pr

ices

paid

to th

e fa

rmer

. The

regi

onal

mar

ket t

rade

agr

eem

ents

nee

d to

be

inclu

ded

in th

is pl

anni

ng p

roce

ss w

hen

deve

lopi

ng th

is st

rate

gy. S

o as

not

to

be in

con

flict w

hen

acce

ssin

g m

arke

ts u

nder

thes

e tra

de a

gree

men

ts.

Targ

eted

Infra

stru

ctur

e re

pairs

and

dev

elop

men

t; a

polic

y su

ppor

ting

impr

oved

m

arke

t acc

ess

thro

ugh

dire

ct in

vest

men

t int

o in

frast

ruct

ure

wher

e th

e m

ain

sele

ctio

n cr

iteria

is to

“rem

ove

infra

stru

ctur

e re

late

d m

arke

t bar

riers

”. Ag

ribus

ines

s m

ains

tream

ed in

to th

e ex

tens

ion

serv

ice s

o th

at a

ll ext

ensio

n st

aff w

ill be

abl

e to

facil

itate

the

Leve

l I b

asic

busin

ess

tool

s to

CIG

s

Barri

ers

Phys

ical P

ublic

Mar

ket I

nfra

stru

ctur

e im

prov

ed th

roug

h an

am

endm

ent t

o th

e Lo

cal A

utho

rity

Act.

Whe

reby

an

agre

ed p

erce

ntag

e (+

%) o

f all l

evie

s co

llect

ed

from

a m

arke

t be

re-in

vest

ed b

ack

into

the

sam

e m

arke

t for

impr

oved

mar

ket

infra

stru

ctur

e an

d se

rvice

s Th

e Le

gal s

tatu

s of

CIG

s in

con

duct

ing

busin

ess

to b

e re

viewe

d un

der t

he

Min

istry

of c

ultu

re, s

ports

and

soc

ial s

ervic

esDe

velo

p a

Cent

ral I

nfor

mat

ion

Hub

that

is lin

ked

to a

ll sup

plie

rs o

f mar

ket a

nd

busin

ess

info

rmat

ion,

whe

re th

e in

form

atio

n is

proc

esse

d in

to a

use

r frie

ndly

form

at th

at is

eas

ily a

cces

sible

to ru

ral b

ased

clie

nts.

Thi

s ha

s to

be

a ne

utra

l bo

dy s

ervin

g wi

thou

t “Bi

as”

To im

prov

e th

e co

untry

’s co

mpe

titive

ness

on

expo

rt pr

oduc

e, th

e ta

xatio

n le

vels

need

to b

e re

viewe

d an

d am

ende

dG

over

nmen

t ado

pts

a po

licy

of p

rom

otin

g im

port

subs

titut

ion

targ

etin

g to

in

crea

se m

arke

t acc

ess

for f

arm

pro

duce

e.g

. jui

ce c

once

ntra

te (l

ocal

vs.

im

porte

d)AS

CU -

TWG

s ca

n be

stru

ctur

ed o

n a

“Per

form

ance

App

raisa

l Sys

tem

”Ap

ex a

ssoc

iatio

ns n

eed

to lo

bby

gove

rnm

ent f

or ta

x re

lief (

here

impa

ct

asse

ssm

ent s

tudi

es o

n th

e ar

ea o

f int

eres

t are

a u

sefu

l too

l).

27

45


Trai

ning

To

ols

fo

r Im

pro

ved

CIG

Bus

ines

s S

kills

31

Impr

oved

CIG

Bu

sines

s Sk

illsCI

Gs

mar

ketin

g sk

ills

are

low

with

the

poor

so

urcin

g of

pro

duce

pr

ice in

form

atio

n an

d th

e us

e of

info

rmal

m

arke

ting

supp

ly ar

rang

emen

ts re

sultin

g in

low

prod

ucer

pric

es

to C

IG m

embe

rsTh

e us

e of

com

plex

bu

sines

s pl

ans

has

not b

een

well

unde

rsto

od b

y CI

Gs

and

is no

t hel

ping

de

liver

sus

tain

able

CIG

en

terp

rises

It sh

ould

be

note

d th

at lo

w le

vels

of

CIG

s en

terp

rise

sust

aina

bility

will

cont

inue

unl

ess

the

abov

e sk

ills b

ase

are

impr

oved

Com

plet

e m

arke

ting

train

ing

tool

s as

sess

men

t, de

velo

pmen

t and

test

ing

with

st

akeh

olde

r par

tner

s A

follo

w-up

mad

e to

Kitu

i ext

ensio

n of

ficer

s at

tend

ing

moc

k tra

inin

g on

ef

fect

ivene

ss o

f too

ls an

d re

com

men

ded

chan

ges

Exte

nsio

n m

anua

ls to

be

upda

ted

to w

ith n

ew b

usin

ess

tool

sEx

pand

ext

ensio

n st

affs

skil

ls ba

se to

inc

lude

the

new

mar

ketin

g &

busin

ess

tool

s on

ce d

evel

opm

ent i

s co

mpl

eted

Trai

n CI

Gs

in m

arke

ting

& bu

sines

s sk

ills u

sing

new

tool

sEx

posu

re v

isits

facil

itate

d be

twee

n st

rong

and

wea

k CI

Gs

as a

form

of c

ross

-po

llinat

ion

of id

eas

and

capa

city

build

ing

31

46


AN

NE

X 1

: Mar

keti

ng S

kills

Eva

luat

ion

(Sta

ge

of D

evel

op

men

t) &

Tra

inin

g M

atri

x fo

r C

om

mo

n In

tere

st

Gro

ups

(CIG

s)

Tab

le 5

: M

ark

eti

ng S

kill

s E

valu

ati

on

Stag

e 1

(1-2

0%)

Stag

e 2

(21-

40%

)St

age

3(4

1-60

%)

Stag

e 4

(61-

80%

)St

age

5(8

1-10

0%)

PLAN

NING

O

UTCO

ME

Indi

cato

rAs

sess

men

t Le

vel

Trad

itiona

l- n

on

ente

rpris

ing

grou

p(S

core

1)

Awar

e - n

on

ente

rpris

ing

grou

p(S

core

2)

Self-

confi

dent

-ent

erpr

ising

gr

oup

(Sco

re 3

)

Emer

ging

-en

terp

risin

g gr

oup

(Sco

re 4

)

Succ

essf

ul-

Ente

rpris

ing

grou

p (S

core

5)

1. Im

prov

ed

appl

icatio

n of

m

arke

ting

skills

New

Busin

ess

Gro

up u

nawa

re o

f ho

w to

mar

ket t

he

prod

uce

1.1

Gro

up a

ware

of

pote

ntia

l of h

ow to

m

arke

t the

ir pr

oduc

e

1.1

Gro

up p

lann

ing

to o

r is

in

the

proc

ess

of m

arke

ting

thei

r pr

oduc

e

1.1

Gro

up h

as

succ

essf

ully

mar

kete

d th

eir p

rodu

ce o

nce

1.1

Gro

up h

as e

stab

lishe

d a

re

gula

r (m

ore

than

two

sale

s)

supp

ly of

pro

duce

to th

e m

arke

t suc

cess

fully

Mar

ket Q

uality

of

Supp

ly

1.2

Gro

up u

nawa

re o

f th

e va

lue

of q

uality

in

supp

lying

the

mar

ket

1.2

Gro

up a

ware

of

but h

as n

ot p

lann

ed

to a

dopt

qua

lity in

su

pplyi

ng th

e m

arke

t

1.2

Gro

up is

awa

re o

f sup

ply

qual

ity s

tand

ards

and

has

pl

anne

d to

or i

s in

the

proc

ess

of a

dopt

ing

thes

e m

arke

t sup

ply

stan

dard

s

1.2

Gro

up h

as a

dopt

ed

impr

oved

qua

lity s

uppl

y st

anda

rds

1.2

Gro

up h

as a

dopt

ed

impr

oved

sup

ply

qual

ity

stan

dard

s an

d ha

s su

cces

sful

ly su

pplie

d a

buye

r

Mar

ket Q

uant

ity

(bul

king)

of

Supp

ly

1.3

Gro

up u

nawa

re

of a

dvan

tage

s fo

r bu

lking

pro

duce

for

supp

lying

the

mar

ket

1.3

Gro

up a

ware

of

pos

sibilit

y of

in

crea

sing

supp

ly qu

antit

ies

by b

ulkin

g bu

t not

takin

g an

y ac

tion

1.3

Gro

up a

ware

of p

ossib

ility

and

has

plan

ned

to o

r is

in th

e pr

oces

s of

incr

easin

g qu

antit

ies

of s

uppl

y

1.3

Gro

up h

as

parti

cipat

ed in

gro

up

bulki

ng a

nd s

ucce

ssfu

lly

supp

lying

a b

uyer

1.3

Gro

up h

as in

crea

sed

thei

r in

com

e by

mar

ketin

g th

roug

h a

CIG

by

mor

e th

an 2

0%

Mar

ket R

elia

bility

of

Sup

ply

1.4

Gro

up u

nawa

re o

f po

ssib

ility

of lo

sing

a su

pply

cont

ract

by

not

deliv

erin

g on

tim

e as

ag

reed

1.4

Gro

up a

ware

of

poss

ibilit

y of

losin

g a

supp

ly co

ntra

ct b

y no

t de

liver

ing

on ti

me

but

not t

akin

g ac

tion

1.4

Gro

up a

ware

of p

ossib

ility

and

has

plan

ned

to o

r is

in th

e pr

oces

s of

sup

plyin

g on

the

agre

ed s

uppl

y da

te

1.4

Gro

up h

as

succ

essf

ully

supp

lied

on ti

me

one

supp

ly ag

reem

ent

1.4

Gro

up h

as re

liabl

y su

pplie

d (m

ore

than

two

sale

s) a

buy

er

2. Im

prov

ed

Mar

ketin

g Su

rvey

sM

arke

t Sur

vey

Skills

2.1

Gro

up u

nawa

re

of h

ow to

do

a m

arke

ting

surv

ey

2.1

Gro

up a

ware

of

how

to d

o a

mar

ket

surv

ey b

ut n

ot ta

king

any

actio

n

2.1

Gro

up a

ware

of m

arke

ting

surv

ey m

etho

ds a

nd h

as

plan

s to

or i

s in

the

proc

ess

of

cond

uctin

g a

surv

ey

2.1

Gro

up h

as id

entifi

ed

pote

ntia

l buy

ers

from

th

e m

arke

t sur

vey

and

has

thei

r con

tact

det

ails

2.1

Gro

up h

as s

ucce

ssfu

lly

sold

pro

duce

to a

buy

er u

sing

a m

arke

t sur

vey

to id

entif

y th

e be

st d

eal

47


IMPL

EMEN

TA-

TIO

N O

UTCO

ME

Indi

cato

rAs

sess

men

t Le

vel

Trad

itiona

l- n

on

ente

rpris

ing

grou

p(S

core

1)

Awar

e - n

on e

nter

prisi

ng

grou

p(S

core

2)

Self-

confi

dent

- ent

erpr

ising

gr

oup

(Sco

re 3

)

Emer

ging

-en

terp

risin

g gr

oup

(Sco

re 4

)

Succ

essf

ul-

Ente

rpris

ing

grou

p (S

core

5)

3. S

ucce

ssfu

l M

arke

t Sup

ply

Tran

sact

ions

(A

gree

men

ts)

Succ

essf

ul

Prod

uce

Sale

s as

par

t of a

CIG

G

roup

3.1

Gro

up u

nawa

re

of t

he b

enefi

ts o

f su

pplyi

ng m

ore

than

on

e m

arke

t as

a gr

oup

but s

uppl

ies

as a

n in

divid

ual

3.1

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up a

ware

of

supp

lying

mor

e th

an o

ne

mar

ket a

gree

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t as

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p bu

t doe

s no

t and

ha

s no

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ns to

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ply

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e th

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t as

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gro

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r inc

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than

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% b

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mar

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rt of

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IG g

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4. Im

prov

ed

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ncia

l M

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emen

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Skills

4.1

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up u

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re o

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et

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up a

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g co

sts

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g th

ese

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tail

4.1

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4.1

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of p

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ce to

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e bu

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nd

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ove

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r pro

fits

5. V

alue

Add

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Valu

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O

ppor

tuni

ties

5.1

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re

abou

t val

ue a

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d th

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ial b

enefi

ts

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of v

alue

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ding

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1 G

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arte

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usin

ess

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tted

from

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crea

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ome

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N

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: P

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uest

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and

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sho

uld

be u

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durin

g th

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terv

iew

48


1. Marketing Skills Evaluation Matrix Scoring Sheet

Section I: Preliminary Details

Province …………………………………….

District ……………………………………...

Division ……………………………………..

CIG Name - Code ……………………………………..

Name of Supervisor ……………………………………..

Name of Extension Officer / Lead Farmer ……………………………………...

Section II: Details

Gro

up V

isits

Dat

e

No.

mem

bers

P

rese

nt

1.1

Sco

re

1.2

Sco

re

1.3

Sco

re

1.4

Sco

re

2.1

Sco

re

3.1

Sco

re

4.1

Sco

re

5.1

Sco

re

Tota

l CIG

Sco

re

CIG

% s

core

CIG

Sta

ge o

f D

evel

opm

ent

1

2

3

4

Note: The group visits column reflects each training visit starting with the first visit which is an evaluation visit in marketing skills. The sheet can also be used as an individual assessment tool replacing the group entry with word individual.

2. Marketing Skills Evaluation Matrix Scoring Instructions

INTRODUCTIONIn supporting the development of Common Interest Groups (CIGs’) marketing is seen as a key function in helping these groups achieve sustainable business success. A Marketing Skills Evaluation (Stage of Development) and Training Matrix for CIGs’ has been developed. The strategy here is that the matrix has the following important roles:

A Marketing Skills Evaluation Matrix which can be used to assess the groups marketing skills from level 1 through to 5. This gives us a tool with which we can grade the groups marketing skills level and to be able to measure their marketing skills development over time.The matrix has a second value as a training tool where the marketing skills GAPs can be identified at each level and training targeted specifically to capacity build the groups GAPs, where with training support the group will graduate to the next skills level. The following will be a continuous process

49


targeting to develop the groups marketing skills to level 5 over time.The matrix is very simple in design, is user friendly and requires a low business skills level in implementation. This design has been intentional with the understanding that a number of field staff at the National level have not had training in agribusiness but are expected to be able support CIGs in achieving improved market linkages.The matrix helps identify key benchmarks that can be used in project monitoring and impact assessment in marketing skills development and capacity building of CIGs’. The matrix score sheet should be filled out by the extension officer together with the interviewed group.

Marketing Skills Level Scouring InstructionsBelow is an explanation of how to use the Market Skills Evaluation Matrix (MSEM), to classify groups into various development levels/stages.Level of development is determined by the group’s total score of 8 (1.1 – 5.1) variables for the MSEM.Each variable score ranges from 1-5, with 1 being the lowest and 5 the highest score. For the MSEM there are 8 variables with each having the highest possible score of 5. Therefore, the total possible score that any group can have is 8 x 5 = 40.Steps to follow when scoring groups in the two development matrices:• Each group is given a score ranging from 1-5 on each of the 8 variables for the MSEM.• The scores of each variable are then added up to get the group’s total score for each matrix.• The group’s total score is then divided by the total possible score, i.e. 40 for the EDM.• The result in C is then multiplied by 100 to get the group’s percentage score.

The following are then the resultant classification of the group into the various development stages, based on the % score as obtained under (d) for a particular group:• Level 1 (Traditional - non enterprising group): 1- 20%• Level 2 (Aware - non enterprising group): 21- 40%• Level 3 (Self-confident - enterprising group): 41- 60%• Level 4 (Emerging - enterprising group): 61- 80%• Level 5 (Successful - enterprising group): 81- 100%

Example 1 – Marketing Skills Evaluation Matrix

Variable Actual Score Max possible Score

1 1.1 3 5

2 1.2 2 5

3 1.3 2 5

4 2.1 3 5

5 3.1 1 5

6 3.2 2 5

7 4.1 3 5

8 5.1 1 5

Total Score 17 40

The group’s total score across the 8 variables, in example 1 is 17, out of a total possible score of 40.To get the development level of the group we follow steps b-d above, as worked out below:a) The sum of the group’s actual score for each variable = 17.

50


b) Divide the group’s actual total score by the total possible score: 17/40 = 0.425c) Multiply the result in C above by 100 to get the % score: 0.425 x 100 = 42.5 %This group therefore falls in stage 3 on the development matrices scale (self-confident - enterprising group) as 42.5% falls in that category (41-60%).

Note:The assessment and categorization of the group into development levels can be at the start of the group formation and then on regular 3 month intervals until the training is deemed complete.The group development matrix is used to assess a set of characteristics that allow a group to be placed into one of the five development categories mentioned above, namely, traditional, non-enterprising, self-confident, emerging, and successful. The indicators (characteristics) used to measure the level of development of a group are those identified as key to the achievement of the overall program objective.This assessment is conducted for each enterprise selected by the group.

51


ANNEX 2 A: Simple Business Plan Model for CIGs and Members

CIG Information

Name of business: …………………………………………………………….....................

Membership Number* (applicable to CIGs)……………………………………………….....

Type of business: …………………………………………………………………………..

Bank Account Details: Bank Name: ……………………………………………………….

Account No. & Date Opened: ……………………………………………………………..

District: …………………………………………………………………………………….

Division:………………………………….Location……………………………………….

Subi-location………………………………Village………………………………………...

Contact Person:

1. Chairperson …………………………… Phone No:………………………………............

2. Secretary ……………………………… Phone No.………………………………………

3. Treasurer ……………………………… Phone No……………………………………….

Assumptions:

The CIG/Farmer wishes to invest in an enterprise to make a profit

The CIG/Farmer have already identified the enterprise/s they wish to invest in

The CIG/Farmer keeps some form of business records (At least a cash book recording sales &

expenditure)

The CIG/Farmer is able to record a basic production and marketing budget

Vision

(Here we enter our medium term (3yr to 5yr period) goal e.g. we wish to establish a successful

business in dairy, maize, rabbits, vegetables, etc.).

………………………………………………………………………………………………………………

………………………………………………………………………………

Objective Setting

The objectives are the prioritized business enterprises and size for the farm or CIG.

1……………………………………………………………………………………………..

2 …………………………………………………………………………………………….

3……………………………………………………………………………………………..

Planned Implementation Steps (These must explain the how of achieving the listed objectives)

Activity1 ……………………………………………………………………………………………………

………………………………………………………………………………………………………………

………………………………………………………………

52


Activity2 ……………………………………………………………………………………………………

………………………………………………………………………………………………………………

………………………………………………………………

Activity3 ……………………………………………………………………………………………………

………………………………………………………………………………………………………………

………………………………………………………………

Business Model Description & Implementation in Summary of the Selected Enterprises

The business will operate as………………………………………………………………..………………

………………………………………………………………………………………………………………

………………………………………………………………

Reason for choosing these business enterprises ………………………………………………………

……………………………………………………………………………………………………………

……………………………………………………………………………………………………………

……………………………………………………………………………………………………………

……………………………………………

What is the planned viable business model size? (Can the profits (Sales – Business costs) from these

enterprises added together cover our annual personal costs of living and in which year?) ……………

………………………………………………………………………………………………………………

………………………………………………………………………………………………………………

…………………………………………………

Owner(s) of the business …………………………………………………………………………………

………………………………………………………………………………………………………………

…………………………………………………………………

Description of current skills………………………………………………....……………………………

………………………………………………………………………………………………………………

…………………………………………………………………

*Attach detailed list of members

Relevant experience ……………………………………………………………………….......…………

………………………………………………………………………………………………………………

………………………………………………………………………………………………………………

……………………………………………………

Records to be kept & reporting format ……………………………………………………………………

………………………………………………………………………………………………………………

…………………………………………………………………

Market Research & Plan

Quality

Quality………………………………………………………………………………………

Color………………………………………………………………………………………

Size…………………………………………………………………………………………

Packaging &Labeling……………………………………………………………………..

53


Quantity

What is the planned quantity per sale?

Does it pay to bulk with other CIG members? …………………………………………….

Has a transport cost analysis been done? ………………………………………………….

What is the cheapest transport cost per ton/km …………………………..………………...

Frequency of Supply (Reliability)

Who will the produce be sold to and how often will the produce be supplied to the buyer? …..……

……………………………..………………………………………………………………………………

………………………………………………………………………………………………………………

………………………………………………………………………………………………………………

……………………………………

PRICE

Production Cost / Unit.……………………………………………………………………

How much customers are willing to pay……………………………………………………

Competitors’ prices…………………………………………………………………………

Set price…………………………………………………………………………………...

Reasons for setting this price……………………………………………………………….……………

………………………………………………………………………………………………………………

…………………………………………………………………

Staff or Member Labor Allocation forthe Business

Task Required skills and experience Performed by Salary / wages

Total number of staff

Management Duties & SkillsDuties/responsibilities ……………………………………………………………………...………………………………………………………………………………………………………………………………………………………………………………………………Skills Required …………………………………………………………………………….………………………………………………………………………………………………………………………………………………………………………………………………

54


2. Tips on Negotiating a Supply Deal• Know asmuch about prices and demand for the product you are selling before going to

negotiate. Speak to other farmers, traders, extension workers and where price information can be accessed

• Trytofindoutinformationaboutthetrader/buyer.Atpublicmarketsthemarketcommitteemembers are very useful sources of information concerning buyers in the market

• Truckdriversandchildren(tradersorchildrenplayinginthearea)areusefulsecondpartiestoget information from, try and approach them when they are alone, they speak more freely when there are no witnesses

• Alwaysstartwithapricethatishigherthanthecurrentprice,itisdifficulttoaskformore,itiseasier to reduce the price

• Trytolisteninonotherdealsbystandingclosetoadealthatishappeningbutappearingnotto be interested

• Havemorethanonebuyerthatyousellto,phonetheotherbuyersandaskthemtheirpriceoffers on the phone

• Sendsomeoneelseaheadthatyoucantrusttoaskthebuyerwhatprices/he isbuyingatwithout any produce

• Whenonegetsstuckonapricelookatotherwaysofgettingabetterdeale.g.thebuyerpaysfor transport, returns your packaging or gives you their packaging to use, pays the cess / levies, offloading charges

• Alwaysarriveearlyandwithfreshproduceatthemarket• Makesureyourbestlookingproduceisthemostvisible• Takeanybadorlowergradeproduceoutandsellitseparately,buyerswillalwaysgiveonean

average price based on your worst produce value• Ifthesaleinvolvescreditmakesurethatasalesagreementissignedandthattherearesome

safety mechanisms in so that one can claim the produce or a guarantee of some form in case the buyer defaults on payment

• Becarefulwhenbuyersagreetopricesthataremuchhigherthannormalsellingprices,makesure allthe cash is in ones hand before one releases the produce

ANNEX 2 B: Bankable Business Plan Generic Model CIG InformationName of business: ……………………………………………………………....................Membership Number (*Attach detailed list of members)…………………...…..……........Type of business: …………………………………………………………………………..Total Annual Sales for Last Full Trading Year: …………………………………………..Bank Account Details: Bank Name: ………………………………………………………………………………. Account No. & Date Opened: ……………………………………………………………..District: …………………………………………………………………………………….Division: ……………………………...….Location……………………………………….Subi-location………………………………Village………………………………………..

Contact Person:1.Chairperson……………………………Phone No:………………………………............ 2. Secretary………………………………Phone No.……………………………………..3. Treasurer………………………………Phone No………………………………………

55


Assumptions:

The CIG wishes to invest in a service to make a profitThe CIG have already identified the services they wish to invest inThe CIG keeps some form of business records (At least a cash book recording sales & expenditure with stock sheets listing received and dispatched produce)The CIG is able to record basic production and marketing budgetsVision(Here we enter our medium term (3yr to 5yr period) goal e.g. the CIGs wishes to provide the following general services to its members).………………………………………………………………………………………………………………………………………………………………………………………………Objective Setting The objectives are the specific services and size that the CIG will provide to its members.1……………………………………………………………………………………………..2 …………………………………………………………………………………………….3……………………………………………………………………………………………..4……………………………………………………………………………………………..5 …………………………………………………………………………………………….

Planned Implementation Steps (These must explain the how of achieving the listed objectives). The activity is a service which can be marketing or input supply based.

Activity1 ……………………………………………………………………………………....................……………………………………………………………………………………………….......................................................................................................................................................................Activity2 ………………………………………………………………………………………...……………………………………………………………………………………………….......……………………………………………………………………………………………….......Activity3 ……………………………………………………………………………………….………………………………………………………………………………………………………………………………………………………………………………………………Activity4 ……………………………………………………………………………………….………………………………………………………………………………………………………………………………………………………………………………………………Activity5 ……………………………………………………………………………………….………………………………………………………………………………………………………………………………………………………………………………………………

Business Model Description & Implementation in Summary of the Selected EnterprisesThe business will operate as………………………………………………………………..………………………………………………………………………………………………………………………………………………………………………………………………Reason for choosing these business enterprises ……………………………………………........………………………………………………………………………………………………......………………………………………………………………………………..................................……………………………………………………………………………………………….......What is the planned viable business model size? (Can the profits from these enterprises added together cover our annual personal costs of living and in which year?) …………..…………......………………………………………………………………………………………………......……………………………………………………………………………………………….......………………………………………………………………………………..................................

56


Owner(s) of the business ………………………………………………………………………………………………..........................……………………………………………………………………………………………………..............………………………………………………………………………………………........Description of current skills ……………………………………………………………………………....……………………………………………………………………………………………………………………………………………………………………………………………………………….............Relevant experience ………………………………………………………………………...........………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………Records to be kept & reporting format ……………………………………………………..………………………………………………………………………………………………………………………………………………………………………………………………

Market Research & PlanDescription of Product or service………………..………………………………………..Customers to be targeted ………………………………………………………………….…………………………………………………………………………………………….

PRODUCTQuality………………………………………………………………………………………Color ………………………………………………………………………………………Size…………………………………………………………………………………………Packaging & Labeling ……………………………………………………………………..

PRICEProduction Cost / Unit.……………………………………………………………………How much customers are willing to pay……………………………………………………Competitors’ prices…………………………………………………………………………Set price…………………………………………………………………………………...Reasons for setting this price……………………………………………………………….

PLACEMethod of distribution & supply pattern (Reliability)The business will sell to…………………………………………………………………………………………………………………………...………………………………………………………………………………………………………………………………………………………………………………………………Reasons for choosing this way of distribution …………………………………………….………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

PROMOTIONType of advertising…………………………………………………………………………Details of advertising ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

57


Cost of advertising………………………………………………………………………….Type of sales promotion……………………………………………………………………Details of sales promotion ………………………………………………………………….….…………………………………………………………………………………………..……………………………………………………………………………………………...

Staff or Member Labor Allocation for the Business

Task Required skills and experience Performed by Salary/wages

Total number of staff

Management Duties & SkillsDuties/responsibilities ……………………………………………………………………...………………………………………………………………………………………………………………………………………………………………………………………………Skills Required …………………………………………………………………………….………………………………………………………………………………………………………………………………………………………………………………………………Financial Information

The following are attached as appendices (a, b & c)

Cash flow

Budgets Marketing, Crop & Livestock

Financial Resource Allocation

Required Start-Up Capital

Investments

Assets

58


Construction or purchase or hire of building ……………….

Equipment

………………………………………………. ……………….

………………………………………………. ……………….

………………………………………………. ……………….

………………………………………………. ……………….

Working capital

Material – Input costs ……………………… ……………….

Labor costs ………………………………… ……………….

Other costs ………………………………… ……………….

Total Start-Up Capital ……………….

Sources of Start-Up Capital Required start-up capital

……………….

Sources of start-up capital

Owner’s contributions ……………….

Other sources

…………………………… ……………….

…………………………… ………………..

……………………………. ………………...

……………………………. ………………...

Total ……………….

59


Value Added Case StudyOutput: Develop a format and guidelines on evaluation of proposals for linking CIGs to the market to assist the districts. (ToR)

Guidelines on Proposal EvaluationIt is important that expected outputs are first identified to guide the process of supporting CIGs by offering funding support. These targeted outputs should be clearly listed in the proposal information. It is also important that the programme expectations of these outputs are achievable, they should be realistic. The bankable business plan format can be used as a checklist to identify what is required to implement the business, are there any gaps here and can they be addressed? Once the outputs and expectations have been agreed upon by the technical support team of the programme it is now easy to take these and develop an evaluation format for the submitted proposals.

General ChecklistIt is important that we are able to assess that the submitters of the proposal have the capacity to implement the proposed activities.The proposal might have a good idea, but the submitters don’t have the necessary skills base to present the idea and implement it successfully. How much technical support is available to help the groups implement the proposal idea?It is important that in selecting suitable CIG field projects the supporting extension staff are also included in the proposal screening process.

Steps in grading a proposal:• WhatwillbethenetbenefittotheindividualCIGmember?• WhatnumberofCIGmembershasthepotentialtobenefitfromsupportingthisproposalinthe

short and medium term (3 to 5 yrs.)?• Areweabletofurtherstrengthentheproposalmodelwithtechnicalsupporttoachieveabigger

impact in addressing a. & b. with an improved model?

The CIGs submitting the proposal should have completed the marketing training using the new matrix as well as filling in the new business plan questionnaire as part of the supporting proposal application documentation. The evaluation score sheet can be used to further grade the proposal. The benchmark subheadings here can be changed or removed according to the agreed selected outputs. A total grading system can be developed where the following are given a score value to arrive at a total score:• Capacitytoimplementthesubmittedproposal• Ideahasapotentialtobeduplicatedandbenefitalargenumberofmembers• Leveloffieldtechnicalsupportavailabletoprovidementoringduringimplementation• FieldstaffsCIGevaluationscore• Evaluationscoresheet

60


GENERIC EVALUATION SCORE SHEET

Date: ………………………… Application Code No: …………………….

Project Name: …………………………………………………………………………….

County: …………………………………………………………………………………..

District: …………………………………………………………………………………..

Type of Project: …………………………………………………………………………..

Requested Amount: ………………………………………………………………………

Membership Contribution: ……………………………………………………………….

Total Project Value: ………………………………………………………………………

Benchmark Current model

Proposed Model

Comment Poor(0)

Medium(2)

Good(3)

Total farmer /member Income

Individual income/farmer

Investment Impact

Alternative Uses for cottage industry processing units

Competitiveness Status

Secondary Services

Potential to involve more than one CIG

Market linkage no.

Gender

Environment

Child Rights

HIV/AIDS

Total

61


Case Study

Evaluation Format Score Sheet Score

Benchmark Current model

Proposed Model

Comment Poor(0)

Medium (2)

Good (3)

Total Farmer Income in Holland

KES.10,000,000 KES.30,000,000 Total income has tripled 3

Individual Income/Farmer

KES.4/kg fresh mango

KES.6/kg fresh mango

Farmer produce income has increased by 50%/kg

3

Investment Impact Invested KES. 6,840,000 to value add 2,500*KES.17,000 / ton

Total Investment in equipment has leveraged total income generationKES.1-in=KES. 6.2-out

3

Alternative Uses for cottage industry processing units

None 9 months CIGs can process other fruits & vegetables during the 9 remaining months

3

Competitiveness Status Processor Juice Pulp cost/kg

KES.40/kgImports 5% cheaper

KES.20/kg The juice pulp cost has decreased by 50% and made our juice raw material price much more competitive

3

Secondary Services

Increased secondary service levels due increased buying power

3

Potential to involve more than one CIG

None Potential for 9 to 27 CIGs to be included in supply agreements

High potential for CIGs to organize themselves into a larger value adding entity

3

Market Linkage Market linkage with 4 buyer processors

Market linkage strengthened through value addition

The improved linkage has the potential to increase produce sales, a longer product shelf life and improved transport cost efficiencies.

3

Total Score 30= 100%

Gender Based on member gender numbers

Environment The waste and by-products are not toxic, can be made into stock feed or compost

Child Rights

HIV/AIDS

62


ANNEX 3: Institutions and private businesses interviewed

• SNV-Netherlandsdevelopmentorganization

• ASCU–(AgriculturalSectorCoordinationUnit)

• HCDA–(HorticulturalCropsDevelopmentAuthority)

• ASPSDanita–DecentralizedagricultureSupportstructures.

• FarmConcernInternational

• MinistryofLivestockDevelopment

• JihadKilimoK-repbank

• Technoserve

• EquityBank

• AgriculturalBusinessDevelopment–ABDDanita

• SHoMaP-SmallholderHorticultureMarketingProgramme.

• KENFAP–KenyaNationalFederationofAgriculturalproducers.

• PSDA–PromotionofPrivateSectorDevelopmentinAgriculture.

• JAKAL–ExportersofTeaandHorticulturalProduce.

• WabashEnterprisesLtd-ExportersandImportersofHorticulturalProduce

• AIRC-AgriculturalInformationResourcesCentre

ANNEX 4: List Of Participants –Kitui Review Team June 2010

S. No NAME TEL NO EMAIL

1. JACOB M. MUTUA 0722 343413 [email protected]

2. JAMES K. KARIITHI 0722 377150 [email protected]

3. KABUI MACHARIA 0721 588737 [email protected]

4. PRISCILLA MUIRURI 0722 607533 [email protected]

5. GRACE G. KIMANI 0720 830393 [email protected]

6. JOAN A. OTIANG 0720 490412 [email protected]

7. JOSHUA A. OGOLA 0720 317176 [email protected]

8. JOHN MAINA 0722 874975 [email protected]

9. BENARD MWANGANGI 0727 037680 [email protected]

10. MONICA R. MUENI 0725 777217 [email protected]

11. ANNASTACIA KIVUVA 0722 366927 [email protected]

12. JOHN NJOROGE 0726 088502 [email protected]

63


ANNEX 5: References

MoA & MoLD. 2004. Strategy for Revitalizing Agriculture 2004-2014. Nairobi: MoA / MoLFD, March 2004

MoA & MoLFD. 2005. NALEP Training Guidelines 2005. Nairobi: MoA/MoLFD, Nyeri-May 2005.

Government of Kenya. 2005. The Co-operative Societies Act Chapter 490, Revised Edition 2005.

MoA & MoLD. July 2008 – June 2009. Annual Report. NALEP, Nairobi, November, 2009.

Government of Kenya 2009 – 2010.Agriculture sector development strategy. ASDS, 2009

Government of Kenya. 2008 – 2012. Agriculture sector first medium term plan. MoA, June 2009

Government of Kenya 2007 – 2014. Agricultural sector support programme for SRA implementation and support to the agriculture sector coordination unit (ASCU). Programme Document 2007 – 2014

GraFa Development and Consultants Company. Linking CIGs to markets in Mwingi and Uasin –Gishu Districts, Nairobi, June 2008

Karlis Goppers, DEVFIN Advisers AB. Enhancing the Marketing focus of the National Agricultural and Livestock Extension Program, NALEP:

Observations and Conclusions based on an Assessment in November 2008

Teknobyte (Kenya) – Lead Speechnet Techologies Ltd. National Farmers Information Service (NAFIS), NALEP, December 2006

Market Economies Development Ltd. Systemization and analysis of bottlenecks affecting marketing and value addition for selected agricultural commodities in Kenya. Thematic Working Group on Agricultural Marketing and Value Addition, December 2007.

Market Economies Development Ltd. Legal, institutional and taxation framework in relation to systematization and analysis of bottlenecks affecting marketing and value addition for selected agricultural commodities in Kenya. Thematic Working Group on Agricultural Marketing and Value Addition, December 2007

Capital Guardians. Documentation of NALEP success stories in Rift Valley and Nairobi Provinces. NALEP (No date)

Appropriate Development Consultants Limited (ADCL), Kenya 2008. Terminal monitoring & evaluation of economic recovery strategy (ERS) for wealth and employment creation. Office of the Prime Minister, Ministry of State for Planning, National Development and Vision 2030, October 2008. World Bank: Kenya Agricultural Policy Review: Current trends and future options for pro-poor agricultural growth, June 18, 2008,

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Annex 6: Terms of reference

Detailed Terms of Reference for Analysis of links between CIGs and market actors.

BackgroundThe Sida supported National Agriculture and Livestock Extension Programme (NALEP) is a nation-wide programme, jointly implemented by the Ministries of Agriculture (MoA) and Livestock Development (MoLD). At least 4,000 extension staff from the two ministries is directly engaged in the Programme. During the first five years (2000 – 2005), NALEP reached around 800,000 clients (farmers, pastoralist and other land users). In the last two years (July 2007- June 2009), this has increased to at least 1.8million clients. The increase is due to expansion of the Programme to all districts and to the increase of the size of the local focal area. NALEP is expected to have reached 4 million clients by December 2011.

At national level the programme is co-ordinated by the Programme Coordinating Unit (PCU), consisting of 7 full time technical staff (coordinator, advisor and five officers each charged with responsibilities for different project components).

CIGs are one of the grassroots structures promoted by NALEP and others to achieve commercialisation of agriculture. The concept of promotion of opportunities and formation of CIGs aims at empowering the farming communities in the focal areas to take up agri-business opportunities. Emphasis is on enterprise-based opportunities that are market oriented and income driven. CIGs are viewed as business entities and not just extension groups. The NALEP programme stimulates the formation of about 7500 Cigs annually, each with about 15 to 25 members.

There are indications that many CIGs have difficulties in reaching the intended level of being financially viable and significantly contribute to increased income and improved livelihood of the members. The growth and scale of operation is another concern. There are several reasons for that, among them: The activity chosen by the CIG, which may relate back to an opportunity flagged by NALEP staff is not well analyzed with regard to comparative advantages of the area, profitability, risks and possibilities for market linkages;

The required inputs and services are not easily available, sources to secure them are not well known, and marketing chains and prices are not well known;The CIG has not prepared a realistic business plan to analyze the potential profitability and possibilities for growth of the initiated activity; and,The Cig is lacking financial means and or other resources for expansion.

ObjectiveThe objective of the consultancy is to provide a methodology and framework for improved profitability of the CIGs through strengthened links with markets and through preparation, implementation and follow up of business plan for the selected enterprises.

MethodThe consultant shall together with the responsible PCU staff undertake a market value chain analysis and analysis of development for selected CIG enterprises in sample districts. A draft analytical framework for description and assessment of the market involvement of a CIG has been developed a so called CIG development tool. The consultant shall complete and further refine this frame and use it for the analysis of a number of CIGs. The consultant shall undertake a detailed analysis of economic status, general viability and existing and potential market links of a number of sampled CIGs.Analyze and suggest how the CIGs can be further developed as building blocks in the commercialization

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of agriculture and related enterprises.The consultant shall further develop a simplified format for farm business plans, specifically targeted for the CIGs as well as individual members.The consultant shall support and together with PCU staff participates in a workshop on Cig development with relevant stake-holders organized by the PCU.

Expected outcomeDuring the assignment the consultant shall:

• PreparearevisedversionoftheCIGanalysisanddevelopmenttool,

• AnalyzethemarketconnectionsandcommercialviabilityofanumberofsampledCIGs,

• Designasimplifiedmodel forabusiness-plantobeusedbytheCIG(butalsoby individual

households) for achieving long-term viability and up scaling of the enterprises,

• Give recommendations forhow theCIGscanbe further involvedwith themarketandhow

profitability of the CIGs can be improved by using a business plan and other tools,

• ProposevariouswaysfortheCIGstoorganizethemselves into largerentitiesfor increasing

competiveness on the market.

• DevelopaformatandguidelinesonevaluationofproposalsforlinkingCIGstomarkettoassist

the districts.

• PresentfindingstogetherwithPCUstaffatawork-shoparrangedbyPCU,

• PresentafinalreportwithsummaryoffindingsincludingtherevisedCIGdevelopmenttooland

model for a business plan,

Time and durationThe assignment is estimated to 25 working-days starting on the 18th Jan and be completed by the 20th February.

Working station and methodologyThe consultant shall work closely with the PCU agribusiness coordinator Bernard Mwangani at the PCU. He shall be using the office space at the PCU. The assignment shall include field visit to at least 4 different districts covering representative areas of Kenya. The final selection of districts shall be made in the beginning of the assignment.

1. (It is reported that SNV has a successful trial model that can be shared)

Documents

STRENGTHENING THE VIABILITY OF COMMON INTEREST … · STRENGTHENING THE VIABILITY OF COMMON INTEREST GROUPS (CIGs) FOR AGRIBUSINESS DEVELOPMENT National Agriculture & Livestock Extension