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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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Observations Recommendations
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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Observations Recommendations
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
• 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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Strengthening the Viability of CIGs for Agribusiness Development
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.
29
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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.
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Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
SU
MM
AR
Y O
F A
GR
IBU
SIN
ES
S C
ON
SU
LTA
NC
Y M
arch
201
0
Tabl
e 3:
Sum
mar
y of
Agr
ibus
ines
s C
onsu
ltanc
y
Issu
eO
bse
rvat
ion
Co
nseq
uenc
eR
eco
mm
end
atio
nP
age
Mar
ket
Link
ages
Str
eng
then
ed2
Size
of C
IGLa
rge
CIG
200
to 4
00 m
embe
rsM
ultip
le in
com
e ea
rnin
gs 6
000
to 3
0000
/m
onth
/mem
ber
Sour
ces
high
bus
ines
s sk
illsSm
all C
IGs
15 to
40
mem
bers
, ear
ning
s 22
5 to
500
0/m
onth
/mem
ber,
com
mon
pro
duct
ion
units
Smal
l leve
ls of
inco
me
gene
rate
d fro
m s
ales
tra
nsla
tes
into
low
fees
ear
ned
by C
IGs
for s
ervic
e re
nder
ed to
mem
bers
and
low
capa
citie
s to
sup
ply
serv
ices
CIG
s wi
th s
mal
l num
bers
(15
to 4
0) n
eed
to
incr
ease
the
valu
e of
pro
duct
ion
thro
ugh
incr
ease
d vo
lum
es a
nd o
r inv
est i
n hi
gh v
alue
ent
erpr
ises.
Whe
re p
ossib
le s
mal
l CIG
s clu
ster
ed to
geth
er to
fo
rm la
rger
uni
ts
1
Lack
of a
cces
sible
m
arke
t inf
orm
atio
n (e
spec
ially
buy
er
cont
act d
etai
ls)
Diffi
cult
to fi
nd o
ut p
rices
offe
red
by
mar
ketin
g ag
ents
. Far
mer
s co
me
with
poo
r kn
owle
dge
of p
rices
to th
e m
arke
t.
Farm
ers
have
a p
oor n
egot
iatio
n po
sitio
n. T
hey
feel
exp
loite
d by
mid
dlem
en.
Use
of th
e ce
ll pho
ne te
chno
logy
as
an in
form
atio
n lin
kA
buye
rs a
genc
y/tra
ders
dire
ctor
y at
all l
evel
s
2
Inad
equa
te c
olle
ctive
m
arke
ting
by C
IGs
Colle
ctive
mar
ketin
g ha
s be
en s
ucce
ssfu
l wi
th th
e bi
g gr
oups
but
not
with
the
smal
l gr
oups
visi
ted.
With
out b
ulkin
g in
divid
uals
and
grou
ps w
ill be
le
ss c
ompe
titive
, hav
e hi
gher
sup
ply
cost
s an
d ca
n ex
pect
lowe
r far
m g
ate
price
s.
Link
cer
eal,
pulse
and
legu
me
prod
ucin
g CI
Gs
to
the
War
ehou
se R
ecei
pts
Prog
ram
me
Cont
inue
sup
porti
ng d
airy
CIG
s to
form
milk
co
llect
ion
cent
ers
(bul
king)
Ad
opt t
he m
ilk c
olle
ctio
n ce
nter
mod
el d
esig
n fo
r fru
it an
d ve
geta
bles
mar
ket s
uppl
y wh
ere
ther
e ar
e su
fficie
nt p
rodu
ctio
n vo
lum
es
3
Mar
ketin
g sk
ills
amon
g CI
GS
Low
leve
l of m
arke
ting
skills
in p
oor
perfo
rmin
g CI
Gs
CIG
s wi
th lo
w le
vels
of m
arke
ting
skills
are
vu
lner
able
in s
ellin
g th
eir p
rodu
ce w
ith th
e fin
al
cons
eque
nce
of g
ettin
g le
ss fo
r the
ir pr
oduc
e th
an th
e m
arke
t is
able
to re
ward
.
Adop
t the
Tra
inin
g of
CIG
s in
mar
ketin
g us
ing
trie
d an
d te
sted
trai
ning
tool
s Al
l CIG
s sh
ould
kee
p so
me
form
of r
ecor
ds to
mak
e be
tter i
nfor
med
bus
ines
s de
cisio
ns.
5
Publ
ic m
arke
tsPo
or m
arke
ting
infra
stru
ctur
e an
d a
poor
le
vel o
f mar
ket s
ervic
es a
t cou
nty
publ
ic m
arke
ts
Poor
mar
ketin
g se
rvice
cap
acity
for t
he ru
ral
base
d pr
oduc
e, re
sultin
g in
lowe
r pric
es to
the
farm
ers
and
a hi
gher
leve
l of w
aste
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Gro
up a
ware
of
supp
lying
mor
e th
an o
ne
mar
ket a
gree
men
t as
a
grou
p bu
t doe
s no
t and
ha
s no
pla
ns to
sup
ply
mor
e th
an o
ne m
arke
t as
part
of a
gro
up
3.1
Gro
up h
as p
lann
ed to
or i
s in
the
proc
ess
of s
uppl
ying
mor
e th
an o
ne m
arke
t tra
nsac
tion
as
part
of a
CIG
gro
up
3.1
Gro
up h
as
succ
essf
ully
supp
lied
mor
e th
an o
ne m
arke
t su
pply
trans
actio
n /
agre
emen
t as
part
of a
CIG
gro
up
3.1
Gro
up h
as in
crea
sed
thei
r inc
ome
by m
ore
than
20
% b
y su
pplyi
ng a
sec
ond
mar
ket s
uppl
y co
ntra
ct a
s pa
rt of
a C
IG g
roup
4. Im
prov
ed
Fina
ncia
l M
anag
emen
tBu
dget
ing
Skills
4.1
Gro
up u
nawa
re o
f ho
w to
do
a m
arke
ting
budg
et
4.1
Gro
up a
ware
of
mar
ketin
g co
sts
but n
ot
iden
tifyin
g th
ese
cost
s in
de
tail
4.1
Gro
up a
ware
of m
arke
ting
cost
s an
d ha
s pl
ans
to o
r is
in
the
proc
ess
of re
cord
ing
thes
e
4.1
Gro
up h
as
iden
tified
thes
e m
arke
ting
cost
s an
d ke
eps
reco
rds
of
them
4.1
Gro
up h
as u
sed
the
reco
rded
mar
ketin
g bu
dget
co
sts
of p
rodu
ce to
mak
e bu
sines
s de
cisio
ns a
nd
impr
ove
thei
r pro
fits
5. V
alue
Add
ing
Valu
e Ad
ding
O
ppor
tuni
ties
5.1
Gro
up u
nawa
re
abou
t val
ue a
ddin
g an
d th
e po
tent
ial b
enefi
ts
5.1
Gro
up a
ware
of v
alue
ad
ding
but
has
no
plan
s of
va
lue
addi
ng
5.1
Gro
up h
as p
lann
ed to
or i
n th
e pr
oces
s of
val
ue a
ddin
g5.
1 G
roup
has
st
arte
d th
e va
lue
addi
ng b
usin
ess
5.1
Gro
up h
as b
enefi
tted
from
val
ue a
ddin
g an
d in
crea
sed
thei
r inc
ome
by
20%
N
ote
: P
robi
ng Q
uest
ions
and
not
dire
ct q
uest
ions
sho
uld
be u
sed
durin
g th
e in
terv
iew
48
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
Strengthening the Viability of CIGs for Agribusiness Development
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
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Strengthening the Viability of CIGs for Agribusiness Development
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 jacobmwandikwa@yahoo.com
2. JAMES K. KARIITHI 0722 377150 Jameskariithi06@yahoo.com
3. KABUI MACHARIA 0721 588737 mkabui@yahoo.com
4. PRISCILLA MUIRURI 0722 607533 prissywm@yahoo.com
5. GRACE G. KIMANI 0720 830393 gathonikimaru@yahoo.co.uk
6. JOAN A. OTIANG 0720 490412 joanotiang@yahoo.com
7. JOSHUA A. OGOLA 0720 317176 cgurdians@yahoo.com
8. JOHN MAINA 0722 874975 mainalmd@yahoo.co.uk
9. BENARD MWANGANGI 0727 037680 mwangangi@nalep.co.ke
10. MONICA R. MUENI 0725 777217 monicamueni2004@yahoo.com
11. ANNASTACIA KIVUVA 0722 366927 annastaciakiio@yahoo.com
12. JOHN NJOROGE 0726 088502 Irungu.njoroge@yahoo.com
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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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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Strengthening the Viability of CIGs for Agribusiness Development
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)