Linking Farmers to Markets in Kenya: KACE Model Kenya: KACE Model James Kundu and Adrian Mukhebi Kenya Agricultural Commodity Exchange Limited Brick Court 2 nd Floor, Mpaka Road, Westlands, Nairobi P.O. Box 59142-00200, Nairobi; Tel: 254-20-4441829 Email: [email protected]; Web: www.kacekenya.co.ke An Abstract for a Paper for Presentation at the workshop “Agricultural Market Information Systems in Africa: renewal and impact” Montpellier, France March 29-31, 2010
Transcript
Linking Farmers to Markets in Kenya: KACE ModelKenya: KACE Model
James Kundu and Adrian MukhebiKenya Agricultural Commodity Exchange Limited
An Abstract for a Paper for Presentation at the workshop “Agricultural Market p p gInformation Systems in Africa: renewal and impact”
Montpellier, France March 29-31, 2010
Background: Agricultural markets do not work for poor farmerswork for poor farmers
Liberalization reforms undertaken by theGovernment in Kenya in the late 1980s andGovernment in Kenya in the late 1980s andearly 1990sConstraints in agricultural markets: Longg gchains of transaction between the farmer andthe consumer; poor access to reliable andtimely market information; small volumes ofproducts of highly varied quality offered byindividual smallholder farmers; and poorly
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individual smallholder farmers; and poorlystructured and inefficient markets.
Institutional innovations to make marketsInstitutional innovations to make markets work for the poor
Pro-poor market information innovationsneeded to empower farmers to choose whatpcommodities to produce, what technologies toapply for production, when to produce, for
iwhom to produce and when and at what priceto sellM k t li k i ti d d t blMarket linkage innovations needed to enablethe farmer to sell her produce or purchaseneeded inputs on time and at competitive prices
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needed inputs on time and at competitive prices
Revolution in information andRevolution in information and communication technologies
The liberalization of the communications sectorin many African countries including Kenya has
ll d ll l h i d FMallowed cellular phone companies and FMradio stations to enter rural areasModern ICTs now offer unprecedentedModern ICTs now offer unprecedentedpotential to deliver information to poor ruralcommunities and link them to remunerativemarkets, and thus contribute to alleviating foodinsecurity, poverty and transforming social andeconomic conditions.
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economic conditions.
What is KACE?The Kenya Agricultural Commodity Exchange
Limited (KACE), a private sector firm, was launched in 1997 to:launched in 1997 to:Provide the services of an agricultural commodity exchange in Kenya following y g y gmarket liberalization policy reforms: price discovery, improve market transparency/efficiency increase liquidity intransparency/efficiency, increase liquidity in commodity markets, link farmers to input and output markets more profitably, etc.
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The KACE Market Information andThe KACE Market Information and Linkage System (MILS)
MILS designed to enhance the bargaining power of poorsmallholder farmers for a better price in the market place,and hence guard her from exploitation by middlemen;launched in 1997
Components of MILS:Components of MILS:Rural based Market Resource Centres (MRCs)Mobile Phone Short Messaging Service (SMS)g g ( )Interactive Voice Response (IVR) serviceInternet based database system
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RadioKACE Hub
Rural based Market Resource CentresRural based Market Resource Centres (MRCs)
Information kiosks located in rural markets and serveas sources of reliable and timely market informationyfor farmers (e.g. current commodity prices indifferent markets), as well as provide market linkagethrough matching commodity offers and bids. Thereare 10 MRCs located in Western, Nyanza, RiftValley and Eastern Provinces of KenyaValley and Eastern Provinces of Kenya
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Market Information at an MRC
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Staff at Chwele MRC updating the centre market information board.
Mobile Phone Short Messaging Service (SMS)(SMS)
Uses mobile telephony for information delivery to farmersThe service is provided in partnership with theSafaricom Limited, the leading mobile phoneservice provider in Kenya with currently over12 million subscribers. The Service will also beon Zain network before end of the yearon Zain network before end of the year.
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Mobile Phone Short Messaging Service (SMS)(SMS)
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A farmer accesses cattle prices via his mobile phone from his farm.
RadioRadio
KACE in conjunction with the Kenya BroadcastingCorporation (KBC) radio (the national radio service)disseminates price information on a limited number ofdisseminates price information on a limited number ofcommodities in selected markets daily in English andKiswahiliKiswahiliThe KBC radio network covers the whole country
even in remote areas, and is therefore widely listened, yto by the public (5million daily), including smallholderrural farmers.
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Virtual trading floor through the use of local FM radiostations branded Soko Hewani (Supermaket on Air).
Soko Hewani the Supermarket On AirSoko Hewani, the Supermarket On Air
An interactive rural FM radio program to assist franchisedAn interactive rural FM radio program to assist franchised MRCs to broaden their market coverage / reach in matching commodity offers & bidsTh di i i ll b ti ith W t M diThe radio programme is in collaboration with West MediaLimited (WML), proprietors of the West FM Radio Station locatedin Bungoma town in Western Province of KenyaKACE provides the content of the radio program (verified offers,bids, prices), while WML provides the radio platform, and thedesign, production and management of the program. Sokog p g p gHewani is broadcasted once a week on Tuesdays from 0900 – 1000hrsThe catchment zone, with radius of 200 km, covers Western,
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The catchment zone, with radius of 200 km, covers Western,parts of Nyanza and parts of Rift Valley Provinces of Kenya andeastern Uganda, a region of an estimated 5 million inhabitants,most of whom are smallholder farmers.
Financial sustainability of MILSy
Private sector business approach: users pay for services:Placement fees on initial offers or bids (US$ 1.5 – 15 per offer/bid depending on volume)offer/bid depending on volume)Commission (0.5% - 5%) on concluded dealsSubscription fees (US$ 65 for 6 months and US$ 125 for 12 p (months)Negotiated revenue sharing agreements with the SMS andIVR service providers.IVR service providers.Fees to organized visiting groups (US$ 2,000 – 5,000/visit negotiable)F hi d M k R C
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Franchised Market Resource Centres
KACE MILS Lessons
In a study of MRCs, Asaba et al (2005) found that farmers andother SMEs in rural areas are willing and able to pay foradditional marketing services beyond market information foradditional marketing services beyond market information formore effective linkage to input and output markets.Farmers are demanding services such as commodity grading,storage transportation short term credit (for example to hirestorage, transportation, short-term credit (for example to hiretransport to market), access to inputs (timely and at affordableprices), document preparation, and e-services such as e-mail.Th KACE i i th t k t i f ti iThe KACE experience is that market information per se innecessary but not sufficient condition for poor smallholderfarmers to actually access better input and output markets,h th d ti f th f hi d l
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hence the adoption of the franchise model.
KACE MILS Lessons Contd.
ICTs have a critical role to play inenabling poor smallholder farmers in
t l t i t dremote rural areas to access input andoutput markets; however, they must beaffordableTo be financially self-sustaining marketinformation services must cover large
i di lareas, connecting commodity surplusand deficit areas, in domestic, andbetter still, regional markets
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better still, regional markets
KACE MILS Impacts
Meuleman (2007) in a study of the impact of theKACE MILS concluded that the proportion offarmers and traders that say their incomes hasincreased and their bargaining positions haveimproved is very high (75% farmers and 60%improved is very high (75% farmers and 60%commodity traders). Furthermore, Meulemanconcluded that it was clear that during the years inconcluded that it was clear that during the years inwhich the KACE MILS has been operational, marketintegration improved for two commodities studied (i.e.
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maize and beans).
KACE MILS Impacts
Institutionalization of KACE activities inKenya: the Agribusiness Training Centre at theCooperative College of Kenya; the EasternCooperative College of Kenya; the EasternAfrica Grain Council; and incorporation of“markets” in government & NGO developmentplans programmes projects and activitiesplans, programmes, projects and activities
Adoption or adaption of the KACE Model inth t i i Af i M l i i thother countries in Africa: Malawi in southern,
Uganda and Ethiopia in eastern, and Ghanaand Nigeria in western Africa, through
l i f C h h i i d
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consultancies from KACE or through visits andlearning from KACE
KACE MILS Challenges
ICT illiteracy among smallholder farmersPoor ICT infrastructure in rural areasHigh ICT costs: mobile phone calls, IVR calls, SMSand internet accessPoor other infrastructure that imposes hightransport costs to marketsFarmer-unfriendly government policiesLimited KACE resource capacity (human &
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financial) for scaling up & out
KACE Future Plans for MILS
Scaling out of the Soko Hewani and franchised MRCs so that moresmallholder farmers and other SMEs in Kenya can benefit from thesystem.Bulking of farm inputs and products (including value-addition) foraccess to large volume markets.Forging alliances with other emerging commodity exchanges in easternand southern Africa to facilitate regional agricultural trade.
KACE’s vision of success is of smallholder farmers well linked toagribusinesses, with significantly increased incomes through effectiveand profitable participation in agricultural input and output markets
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with the help of modern ICTs, hence a contribution to the MillenniumDevelopment Goal No. 1 of eradicating extreme poverty and hunger byhalf by the year 2015
Special Visitor to KACE on July 15, 2007
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Dr. Adrian Mukhebi (left) explains KACE’s services to Mr. Kofi Annan
