Business Development Services (BDS) Market Diagnostics in Kenya

FINAL REPORT

CONSULTANCY SERVICES FOR BUSINESS
DEVELOPMENT SERVICES (BDS) MARKET
DIAGNOSTIC IN KENYA

CONDUCTED BY:

FIT RESOURCES

SUBMITTED TO:
EAST AFRICA DAIRY DEVELOPMENT (EADD) PROJECT

FINAL REPORT FOR BDS DIAGNOSTIC IN KENYA 1
FIT RESOURCES JANUARY 2009

JANUARY 2009


CONTENTS

Background and introduction 4
Methodology and activities 4
Preplanning 5
Training 6
Field work 6
Sampling 7
Key challenges of fieldwork 7
Data processing 8
Presentations 8
Key conclusions of the methodology 8
Findings of fieldwork and data analysis 10
CONSUMER SURVEY by location 10
Locations covered and key informants interviewed 10
Targeted SME consumers interviewed 10
Market profiles 12
Key demand side constraints and opportunities 18
Business development services that address those constraints and 31
opportunities
Specific policy constraints that are affecting MSE product markets 31
SUPPLIER DIAGNOSTIC by location 32
Existing providers/ services and their locations 32
A workable data base of the BDS actors 33
BDS suppliers interviewed 33
Types of services and price of services, how providers cover costs, 34
profitability, existing contractual arrangements and promotional/marketing
strategies
Capacity gaps of interviewed suppliers 40
Priority supply side constraints, market failures, and market opportunities 40
Comparison of interviewed suppliers 44
The enabling environment for BDS 47
Conclusions 48
Characteristics of the market for BDS in each specific region in relation to 48
existing supply, demand and transactions
An insight into the potential of each target market location 51
Level of market distortion 51
Comparative information on the in-country sites and the 3 markets 52
Recommendations 53
Other current or proposed dairy sector interventions 53
Sustainable solutions to address priority market constraints and market 53
failures
Illustrative market based interventions 59
Approaches and methodologies 62
Strategies which ensure effectiveness and efficiency 63
Strategies which ensure sustainability 69

Suggested BDS providers/delivery channels to target for future 72
interventions
Selecting appropriate BDS providers 72
BDS performance measurements at the BDS market level 73
Annexes 78
Database of SME actors including persons interviewed
Database of BDS suppliers including persons interviewed
Database of targeted suppliers
Itinerary
FIT/RI scope of work
Final instruments
Data collected
BDS training report
Researcher training report


Background and introduction

In a bid to improve life through poverty reduction, a consortium of organisations
comprising of Heifer International as lead, TechnoServe Inc, ILRI, ABS-TCM and ICRAF
launched a 4 year program dubbed EADD (East Africa Dairy Development) funded by Bill
and Melinda Gates Foundation. The programme aims to move smallholder farmers out of
poverty by delivering farmer-focused, value-chain activities that are implemented
simultaneously to stimulate dairy farm production, dairy-sector services, business
development and dairy market pull. The vision of success for the EADD is that the lives of
179,000 families—or approximately one million people—are transformed by doubling
household dairy income by 2018 through integrated interventions in dairy production,
market-access and knowledge application.

The consortium deemed it important to carry out a market assessment to understand the
characteristics of the BDS markets in relation to existing supply, demand and transactions
in the dairy sectors in some key sites in Kenya, Uganda and Rwanda. The information
would:
• Provide an insight into the potential of each market
• Clarify opportunities for interventions
• Define broad strategic approaches

FIT Resources Kenya (FIT) in collaboration with Research International East Africa Ltd
(RIEAL) were contracted to coordinate the market diagnostic in key locations in Kenya.
The findings and recommendations of this consultancy will contribute to the market
focused, sub sector approach of the EADD aimed at improving the functioning of BDS
markets. The final scope of work is attached to this report (Annexes/Final Revised
SOW).

FIT Resources act as the lead agency and contract holder, to provide strategic leadership
in devising and conducting the business development service consumer research and
supplier diagnostic. Research International conduct the field work as a sub contractor, to
collect primary and secondary qualitative and quantitative information, analyse, process
and present the data.

Methodology and activities

To achieve the above results the following activities were agreed on:
• Preplanning (planning meetings, research boundaries on the basis of project
resources, existing sub sector information, market assessment
goal/objectives/research hypothesis, developing and testing the tools, screening
interviewers, target locations in each country, preliminary key informants, other
current or proposed interventions)
• Training (training of EADD staff, field research teams and BDS training workshop)


• Field work (target groups, sample size, areas covered, team structure, consumer
survey and supplier diagnostic)
• Data processing (developing the data base of BDS actors, profiling the markets,
choose priority constraints, identifying and scoping out sustainable solutions,
defining ‘illustrative’ market based interventions and strategies, suggest appropriate
BDS providers, establishing comparative information, identifying BDS performance
measurements)
• Presentations (stakeholder workshops and final presentation)

Preplanning

Relevant background information was sourced via a series of planning meeting with
Technoserve and EADD consortium members. Meeting presentations and minutes are
attached to this report (Annexes/Process meetings). These meetings also included
setting the research boundaries on the basis of project resources, preliminary selection of
target locations and the agreed definition of ‘small holder farmer’.

The market assessment goal, objectives and research hypothesis were agreed as follows:

The market assessment goal is:
To understand the characteristics of the BDS markets in relation to existing supply,
demand and transactions in key sites in Kenya.

The market assessment objectives are:
• To provide an insight into the potential of each market
• To clarify opportunities for interventions
• To define broad strategic approaches

The research hypothesis is:
If current BDS market dynamics are better understood then strategic approaches and
interventions can be devised to develop BDS markets in a sustainable manner and benefit
SMEs.

It was agreed that the FIT/RI team would build capacity of the project staff to undertake
future market assessments during the life of the project. Due to budget constraints a
targeted number of sites were discussed that affords the best opportunities to kick-off the
project and generate some ‘quick wins’. A training itinerary was also agreed upon to
capacitate EADD project staff in BDS and research skills. FIT Resources provided lead for
the overall assignment and liaison with Technoserve and the country office on all the pre
planning activities. FIT Resources coordinated the field preparation with Research
International and Technoserve including: tool development and testing, researcher
selection and training and itinerary development. Different tools were developed to cover
the demand (consumer) side and supply (supplier) side of the market. The final
instruments and itinerary are attached to this report (Annexes/Final Instruments). The
following activities were undertaken prior to the commencement of fieldwork: screening of
team members, preparation and translation of questionnaires and preparation of reporting
tools and manuals. Research International personnel met field staff/counterparts and
finalised the selection of target locations and identification of key informants in each
location. Research International finalised the training of field researchers including EADD
project staff and preparations for field research.

No secondary information was used as the project is building on a baseline survey and an
existing value chain assessment. The comprehensive examination of targeted BDS
markets and value chains will assist EADD in designing systemic solutions to key market
problems. The two subsystems—BDS markets and value chains—are complementary
components of the larger market system into which MSEs must integrate.

Training

1. BDS training workshop - FIT Resources personnel implemented an in-depth staff
stakeholder training in Kenya. This 2 day formal training in diagnostic skills covered
the principles and practices of BDS, BDS market development, BDS market
assessment and BDS market development programme design and performance
measurement. The aim of this training was to capacitate project staff and provide
stakeholders with a contextual framework for the research. The workshop
presentations, training materials and training reports are attached (Annexes/BDS
Training).

2. Training of field research teams - teams including Technoserve and consortium
member staffs, were subject to an in country briefing session prior to fieldwork
commencement. The training sessions covered methodology of the assessment
stages, sampling, tools and stimulus methods to use with market players and how
to complete reporting formats. The aim of this training was to capacitate project
staff to engage in further market diagnostics beyond the life of this collaboration.
The workshop presentation and training reports are attached (Annexes/Research
Training).

Field work

In order to complete this assignment within the defined period, a large team of
interviewers, team-leaders and supervisors were assigned. Team members were recruited
from the RIEAL regional offices, according to specifications based on experience and
qualifications. The RIEAL Principle Researcher and a field coordinator coordinated the
research at all stages, and focused on ensuring that outputs were planned in advance so
time-schedules were met. They worked alongside the RIEAL existing field management
structure that forms the line management for the field departments. Daily reporting of
results and activities from each team was channeled back through this central
management team.

Research International led and implemented the field research in collaboration with EADD
project staff. However no staffs were on the ground during the Kenya fieldwork.
Consultations and market observation were undertaken during the fieldwork which
included visiting identified target locations plus identifying and holding interviews with key
informants and targeted dairy sector stakeholders relevant to the selected sites.

Consumer survey - Consumer research was implemented with a selection of consumers
from the core market itself with a focus on farmers and chilling plant stakeholders.
However the definition regarding ‘small holder farmer’ was reviewed and altered during a
process meeting and the ceiling lifted of the number of cows as many farmers in Uganda
and Rwanda are large compared to Kenya’s extensive small holder population.

Constraints and opportunities were then identified in the areas of market access, input
supply, technology/product development, management and organisation, policy, finance
and infrastructure. The size and strength of the market in each specific area of the country
for those services was estimated broadly plus key sub sector constraints, market failures
and market opportunities defined from the demand side. Key business development
services were identified that address the specific constraints and opportunities.

Supplier diagnostic - Based on the identified priority services, relevant suppliers were
identified and a supplier survey implemented with service providers from the support
markets to determine who is supplying BDS and how. Constraints, market failures and
opportunities were then determined from the supply side. A comparison of suppliers was
also undertaken and the level of market distortion anticipated. Stakeholders from the
business environment such as local authorities, regulators/policy makers were contacted
as required to provide an overview of the business environment. Fieldwork commenced on
15th November and ended on 30th November. Three separate field teams of 6
enumerators were used with each team covering 2 sites. The three teams were
supervised by 2 co-ordinators who visited all the 6 sites. The sites covered in the survey
are shown below:

Mweiga Kipkeleon Keiyo
Ol Kalau Siongiroi Kipkaren

New sites not included will be covered by Technoserve staff beyond the life of this
consultancy.

Sampling
• The sample included 660 interviews spread across 6 sites.
• 600 farmers were interviewed.
• As per the briefing instructions, the teams covered a 20KM radius from the location
of the chilling plant. Depending on the number of locations located within the 20 KM
radius, an equal number of sampling points were picked in each location to ensure
spread of interviews.
• For each location, the team leader picked the starting point randomly, and using the
random route method, farmers who fitted the set criteria were interviewed. Selection
criteria:
o Dairy Farmer
o Have less than 5 mature milking cows
• As for suppliers (60 were interviewed), the team picked supplier names from the
farmers, other suppliers and also those they came across in the market places.
From the list, a score was given to each an every supplier based on set criteria
(capacity to deliver services, closeness to SMEs (In terms of understanding their
culture and geography, commercial focus e.g. level of profitability, focus on
services, SMEs or BDS, organizational independence- especially from donor funds,
legally registered and willingness/interest/ability to partner). From the list, suppliers
who met the above criteria were selected for the interviews.

Key challenges of the fieldwork
• Some areas in Kipkeleon and Mweiga were challenging to the interviewers because
of the large distances they had to walk to reach the farmers due to large acreage of
the farms, hilly terrain and lack of public transport.

• Kipkelion, having been one of the areas affected by post election violence, the
farmers received the research team with a lot of caution. They needed assurance
that the team had not been sent with political motives by their perceived political
aggressors. The farmers wondered why the chief had not told them to expect the
team. Fortunately, one of the team members hailed from that community and even
after introducing herself as such, she was required to tell her genealogy.
• The farmers complained that the questionnaire was too long as it was taking at least
one hour to answer.
• The Technoserve team was absent on the ground in all the sites apart from Mweiga
where one staff joined the RI team towards the end of data collection. This caused
delays in data collection as the research team had to find their way in the sites.

Data processing

Research International processed all the data collected on an ongoing basis. Research
International personnel have developed a database of actors (BDS providers in each of
the areas under study are listed, categorized by service provision and their location
recorded). A further database defines specific provider gaps and capacities including a
score against agreed selection criteria for determining target partner providers. A
database of the small and micro enterprises (SMEs) interviewed has also been
developed. The full data set is attached to this report (Annexes/Databases).

To understand the markets, RI examined three key issues - demand, supply and
transactions (the interaction between demand and supply) during the market assessment.
The outcome of analyzing this information forms a picture of each BDS market showing
how it works, where the opportunities for growth are, and where significant problems lie.
Data analysis was undertaken to profile the markets, establish comparative information on
the in-country sites (and the 3 countries) and draw conclusions from the data.

A round table meeting was held in early December 08 with stakeholders to overview the
methodology and process of data processing and analysis and reach consensus on the
priority constraints/opportunities and identify possible solutions. The meeting presentation
is attached to this report (Annexes/ Process meetings). Sustainable solutions that
address priority supply side and demand side constraints were discussed. Illustrative
market based interventions were also developed with a focus on potentially
sustainable/profitable services that are replicable in the private sector. Strategies which
ensure effectiveness, efficiency and sustainability were also discussed alongside
suggested BDS performance measurements. The data processing plan was then
circulated for stakeholder feedback during the analysis process and the data plan is
attached to this report (Annexes/Process meetings). Comparative information on the in-
country sites and 3 BDS markets was also produced.

Presentations

FIT Resources and Research International personnel collaboratively implemented a
presentation and action planning at a stakeholder workshop in Kenya with staff,
consortium members and key informants on the 7th of January 09. This workshop included
a short review on the basic principles and practices of BDS and the Market Development
Paradigm. All the research findings were presented and proposed illustrative solutions and


performance measurements discussed (Annexes/Process meetings). Feedback was
recorded and an action plan developed.

FIT Resources then prepared this final draft report as and will present the final report to
Technoserve with support from Research International in Nairobi, Kenya by FIT
Resources and Research International on January 30th 2009.

Key conclusions of the methodology

• Outsourcing the market assessment to a research company ensured a more
effective and efficient MA process.
• A combination of outsourcing and internal capacity building ensured the best
possible results. The likelihood of useful research results was ensured as EADD
stayed close to the market assessment process.
• The ability of EADD staff to remain consistent to the process was questionable.
Staffs were not always available for the trainings and meetings as required plus
EADD field staff were not available to partner on the field work in some locations
drawing into question the long term ability of field staff to implement further
diagnostics in new locations.
• Determining a clear hypotheses and outlined market assessment goal and
objectives ensured a more effective delivery of analysed data from Research
International.
• The market assessment focused on a holistic picture of the market and
incorporated both sides of the market equation—demand and supply.


Findings of fieldwork and data analysis

CONSUMER SURVEY by location

Locations covered and key informants interviewed

This study covered six locations, namely:

Locations Sample size
Kipkaren 100
Keiyo 100
Kipkelion 96
Siongiroi 104
Olkalou 101
Mweiga 99
Total 600

Targeted SME consumers interviewed

As per the recruitment criteria, all consumers interviewed were small scale farmers
currently engaging in cattle keeping among other farming activities. The study targeted
farmers with less than 5 mature milking cows.

Overall, a total of 600 farmers were interviewed. The number comprised of 360 (60%)
males and 240 (40%) females were interviewed in the six locations. Their ages ranged
from 18- 65 years as shown in the table below:

SAMPLE TOTAL Male Female 18-25 26-35 36-45 46-55 56-65 65+
BASE: Total
Sample 600 360 240 63 189 148 87 88 25
%
Kipkaren 17 20 12 22 20 20 16 7 -
Keiyo 17 16 17 11 17 18 21 17 4
Kipkelion 16 14 19 14 19 15 15 18 4
Siongiroi 17 18 16 35 22 14 17 3 8
Olkalou 17 13 23 8 12 18 15 31 32
Mweiga 17 19 13 10 11 16 16 24 52

Overall, majority of the farmers had small farms ranging from less than acre to 5 acres.
However, in Keiyo and Kipkaren, a relatively high number of farmers had 5 acres of land
and above.


Farm Sizes TOTAL Kipkaren Keiyo Kipkelion Siongiroi Olkalou Mweiga
BASE: Total
Sample 600 100 100 96 104 101 99
%
Below 1 acre 11 6 1 18 17 16 10
Between 1-5 48 46 43 46 49 50 56
Above 5 acre 40 48 56 36 34 34 33

Across the six sites, farmers reported to be selling at least ¾ of their milk production.
Farmers in Kipkaren followed by Kipkelion reported the highest production and sale per
day milk compared to the other sites visited.

Milk Production TOTAL Kipkaren Keiyo Kipkelion Siongiroi Olkalou Mweiga
BASE: Total Sample 600 100 100 96 104 101 99

Average number of
litres produced per
day 10.8 12.5 10.6 12 10.1 8.7 10.9
Average number of
litres sold per day(L) 7.8 9.7 8.1 8.5 6.6 6.4 7.1

Average number of
litres consumed in
the household 3 2.8 2.5 3.5 3.5 2.3 3.8

When asked about the contribution of the dairy farming to their total household income,
half of the farmers estimated the contribution to be over 30%. On specific sites, farmers in
Siongiroi, Ol Kalau and Mweiga respectfully showed a relatively heavy dependence on
dairy as their main source of income.

Income
proportion
from dairy
farming TOTAL Male Female Kipkaren Keiyo Kipkelion Siongiroi Olkalou Mweiga
BASE: Total
Sample 600 360 240 100 100 96 104 101 99
%
Less than 10% 13 11 17 12 10 13 9 23 14
11-30% 37 36 38 41 44 44 36 24 32
31-50% 34 35 31 24 29 36 42 32 37
51-70% 12 14 9 19 14 7 7 17 9
71-90% 4 4 3 4 3 - 7 3 4
Refused/Not
mentioned 1 0 2 - - - - 2 3


Market profiles

Respondents interviewed in all the six sites practiced mixed agriculture; cattle keeping
(100%), food crops farming (78%) and cash crops (29%). A majority (81%) of the
respondents kept mixed breed of cattle. Only 14% kept indigenous while 9% kept pure
breeds.

Cattle breeds Total Kipkaren Keiyo Kipkelion Siongiroi Olkalou Mweiga
Base: Total sample 600 100 100 96 104 101 99
% % % % % % %
Cross breed 81 78 85 82 80 83 78
Indigenous 14 5 9 21 25 8 13
Pure breed 9 21 10 4 1 9 11

Kipkaren had a comparatively higher percentage of respondents (21%) with pure breeds
followed by Mweiga (11%) and Keiyo (10%). Siongiroi had the least number of
respondents (1%) with pure breeds compared to the rest of the sites. Siongiroi also had
the highest percentage (25%) of respondents with indigenous breeds followed by
Kipkelion with 21%. Kipkaren had the least percentage (5%) of respondents with
indigenous cattle breeds followed by Olkalou (8%) and Keiyo (9%).

When the farmers were asked if they had plans to change anything in their dairy farming,
over ¾ of them expressed intent to change something in their dairy farming. Farmers in
Keiyo had the highest percentage (93%), of those who had plans to change and was
closely followed by Siongiroi (85%) and Mweiga (84%).

Plans to change something
in dairy farming Total Kipkaren Keiyo Kipkelion Siongiroi Olkalou Mweiga
Base: Total sample 600 100 100 96 104 101 99
% % % % % % %
Yes 79 77 93 71 85 66 84
No 21 23 7 29 15 34 16

The intended changes mentioned by the respondents are presented in the table below:

Intended changes TOTAL Kipkaren Keiyo Kipkelion Siongiroi Olkalou Mweiga
BASE: All plan to change 476 77 93 68 88 67 83
%
Improve breeding / breed of cattle
through breeding methods / use
AI 60 71 83 75 35 54 45
Improve feed through growing
better / more feed 47 56 61 41 42 42 35
Change feeding to zero grazing 39 64 76 16 17 28 28
Enlarge size of herd / Buy more
cattle 37 35 54 21 26 45 39
Improve feed by buying
supplements 33 47 65 24 25 15 13
Improve the veterinary treatment
/ drugs used on cattle 30 56 66 13 11 13 11
Improve my knowledge about
dairy farming 26 34 46 9 8 36 22

Improve the quality of my milk /
improve my milk handling skills 23 36 53 9 8 16 12
Improve feed storage methods 21 36 35 9 14 9 19
Improve the management of my
dairy as a business 21 34 48 4 7 15 11
Group together with other
farmers / join association / join
coop / join producer group 19 34 47 6 11 6 2
Get more money for my milk
through changing buyer (general) 18 27 33 7 11 10 13
Grouping with other farmers to
get a better price 17 26 39 12 7 9 5
Get more money for my milk
through increasing price 13 23 28 6 7 10 4
Improve building 12 21 24 9 1 15 4
Grouping with other farmers to
get cheaper inputs 11 19 31 1 - 7 2
Buy farm equipments 11 16 26 7 3 10 4
Improve technology 10 25 20 3 1 6 4
Improve transport / invest in
transport 8 18 22 1 1 1 1
Improve record keeping skills and
related skills 7 17 15 1 - 6 1

Improving breeds of cattle reared topped (60%) the list of the changes the respondents
planned to undertake. These respondents reckoned that, pure breeds produced more milk
compared to the cross-breeds that a majority kept.

Almost half of the farmers (47%) noted the importance of giving their animal’s high quality
feeds and disclosed that they were planning to improve the feeds they give to their cattle.
These respondents said they had plans to start feeding their animals on processed feeds
and also that they would farm their own feeds including Napier grass.

About two fifths (39%) of the farmers said they intended to practice zero grazing. They
observed that through zero grazing they would be able to feed their cattle adequately thus
increasing their milk production.

A significant number of farmers also indicated their plan was to increase their herds
(37%). To them, the move would help increase their milk production for more income.

Further, on being asked how certain they were on making the intended changes in dairy
farming, majority of the farmers indicated they were “definite” or “very likely” to implement
their plans as shown in the chart below.


Definatey will do so Very likely to do so Somewhat likely

Buy farm equipments 57 39 4
Improve technology 67 25 8
Improve building 57 38 5
Improve record keeping skills and related skills 64 36
Improve my knowledge about dairy farming 60 37 3
Improve the management of my dairy as a business 58 29 13
Improve the quality of my milk / milk handling skills 72 23 5
Improve transport / invest in transport 39 39 21
Get more money for my milk through increasing price 53 44 3
Grouping with other farmers to get cheaper inputs 50 40 10
Grouping with other farmers to get a better price 45 39 16
Join association/ coop /producer group 43 42 14
Get more money for my milk through changing buyer
48 42 9
(general)
Improve the veterinary treatment / drugs used on cattle 65 28 7
Improve feed storage methods 59 33 8
Improve feed by buying supplements 65 33 2
Improve feed through growing better / more feed 61 36 2
Change feeding to zero grazing 62 30 7
Enlarge size of herd / Buy more cattle 54 38 9
Improve breeding / breed of cattle through use AI 64 33 3

Awareness and frequency of use of the BD services
Awareness and usage of different services among farmers was investigated. Results show
that farmers had purchased a couple of services/ inputs for their dairy cattle.

Almost all the farmers were aware of veterinary treatment and vaccination services,
mineral supplements and supplementary feeds and also pest control related sprays.
However, for AI, despite high awareness, the number of those who have ever used the
services declined significantly.

Further, those who claimed to be using AI services “nowadays” also showed a decline
implying there was likelihood that farmers are more inclined to be using bulls for
insemination. Notably, 60% of the farmers aware of AI indicated the service was adequate
low demand for the service.


The chart below summarises awareness and usage of dairy related services and inputs.
Ever Used Inadequate
Purchased in
Aware purchased nowadays Amount
Veterinary P12M
treatment services 99 99 31
92 80
Artificial
Insemination (AI) 95 59 45 39 40

Mineral
supplements 93 93 87 75 29

Insecticides & tick
sprays 92 92 92 82 25

Supplementary
91 98 59 45 47
feeds

Milk coolers 84 76 32
24 22
Veterinary
vaccination 93 75 31
60 61
Milk
collection/bulking 54 37 30 27 33

The table below presents services/inputs that the respondents had ever purchased by
sites.

Services/inputs
ever purchased
or received Total Male Female Kipkaren Keiyo Kipkelion Siongiroi Olkalou Mweiga
Base: Total
Sample 600 360 240 100 100 96 104 101 99
% % % % % % % % %
Veterinary
treatment
services 99 99 98 98 98 99 98 100 99
Insecticides &
tick sprays 98 97 98 92 98 97 99 100 99
Veterinary
vaccination 93 93 94 92 96 95 90 92 95
Mineral
supplements 92 93 92 85 91 100 100 89 88
Supplementary
feeds 76 80 70 87 72 79 70 70 76
Artificial
Insemination
(AI) 59 66 48 87 65 32 14 75 80
Milk collection/
bulking 37 40 34 10 11 58 30 55 61
Milk coolers 30 31 28 56 4 75 41 3 1
Seeds to grow
feed 25 26 24 16 12 22 19 44 39
Information/
training on 23 21 26 15 19 8 14 37 43


animal
husbandry
Disinfectants -
for cleaning and
sterilizing 19 20 17 11 6 31 21 22 22
Metal milk
churns 18 21 13 2 2 16 22 28 37
Milk advance
payments or
credit services 12 14 9 3 3 7 14 25 20
Information on
dairy markets 9 9 8 10 12 1 2 21 5
Hay bailers 7 8 4 2 8 7 6 6 10
Chaff Cutters 7 7 6 8 16 5 1 4 6

On familiarity with the benefits of the dairy related services and inputs, almost half of the
farmers indicated they were not completely familiar with AI benefits.

Despite low awareness, a significant number of farmers were also not very familiar with
the benefit of training in animal husbandry.

When farmers were asked their opinion on ease of availability of services/inputs they were
aware of, key services mentioned were rated as reasonably available. However, training
on animal husbandry and milk advance payments were rated as unavailable though
strongly needed.

Overall, veterinary treatment, was rated as the most important service with AI being
mentioned a distant second.

Further, in terms of purchase of the services/inputs, almost all the farmers claimed to
purchase on their own indicating insignificant market distortions.

The chart below summarises feedback on familiarly, ease of availability, need and
affordability of some of the services/inputs that farmers were aware of.
Not affordable
Aware (n=600) Completely familiar Easily available Very strongly even after Most important
with benefit of needed saving up overall

99 75 89 82 51 45
Veterinary treatment services
Artificial Insemination (AI) 95 54 70 69 57 18

Veterinary vaccination 93 69 81 77 41 8

Mineral supplements 92 76 89 78 61 6
Insecticides & tick sprays 54
91 83 94 82 5
Supplementary feeds
84 69 77 65 62 5
Milk coolers 3
64 56 45 72 73
Milk collection/bulking
54 75 56 73 49 1
Information/training on
Animal husbandry 47 40 22 78 41 9
Metal milk churns 45 75 34 61 46
Milk advance payments or 38 70 1
57
credit services
Milk testing kits 36 39 13 47 53
Chaff Cutters 36
FIT RESOURCES JANUARY 2009 34 9 48 69

Hay bailers 35 27 7 47 57
Information on dairy markets 35 36 76
Disinfectants - for cleaning 31 60 22 68 47
and sterilizing

Other services that farmers mentioned to be getting from suppliers include:
• Animal reproductive health and good breeds
• Dehorning
• Foot trimming
• Transport of feeds
• Credit facilities to individuals and groups (Aina Moi Advisory Centre)
• Teaching on diseases
• Castration
• School fees and emergency loans (Olkalou Dairy)
• Organizing farmers field days
• Tick control
• Processing yoghurt in small quantities

The overriding reason for non use of some key services and inputs like AI and
supplementary feeds was said to be mainly cost. However, for information on training,
“where to get it” was a key constraint.

Information/training on animal
30 70
husbandry n=10

Milk coolers n=6 50 17 33

Supplementary feeds n=8 100

Veterinary treatment services
96 4
n=23

Artificial Insemination (AI)
70 11 8 8
n=37

Too expensive Dont know where to get it Quality Others


Key demand side constraints and opportunities

To establish demand side constraints, farmers were asked to highlight the key problems
they experience with their dairy enterprise. Low milk prices (45%), disease outbreaks
(31%), inadequate foliage (27%), and unreliable animal health (27%) were some of the
constraints identified by the respondents. All in all, for the challenges encountered varied
to some extent with the location as shown in the table below.

Problems encountered TOTAL Kipkaren Keiyo Kipkelion Siongiroi Olkalou Mweiga
%
Low milk prices 45 43 77 39 31 40 42
Disease outbreaks 31 38 37 32 30 25 25
Inadequate foliage e.g. grass,
Napier grass etc 27 18 28 20 34 19 42
Unreliable animal health
services- treatment, vaccination
and drugs 27 46 41 19 23 20 11
Lack of adequate foliage e.g.
grass, Napier grass etc 26 35 27 20 31 23 17
Unaffordable animal health
services- treatment, vaccination
and drugs 26 35 42 11 10 31 26
Unaffordable supplementary
feeds e.g. dairy meal 25 37 33 11 11 37 22
Fluctuating milk prices 25 50 46 11 15 15 11
Unaffordable AI services 20 25 45 23 6 11 13
Irregular AI services 15 25 42 9 4 7 4
Delayed milk payments 14 26 37 5 4 5 7
Poor climatic conditions 14 10 14 6 21 11 19
Inaccessible roads 13 34 25 5 2 4 6
Unreliable source of
supplementary feeds e.g. dairy
meal 11 24 19 9 3 7 1
Low quality foliage e.g. grass,
Napier grass etc 11 17 17 5 6 12 7
Exploitation by middle men 10 10 20 2 6 17 2
Unavailability of milk cooling
facility 10 7 51 1 - 1 1
High transport cost 9 19 26 2 - 4 3
Inaccessible loan facilities 9 18 18 5 3 7 2
Lack of milk handling skills 8 16 21 1 1 3 4
Lack of feed storage and
management skills 8 11 19 2 3 5 5


Market Access
Across all the sites, farmers were aware of several channels where they can sell their milk.
The non-formal outlets appeared to be more popular than the formal channels.

Among the non-formal channels, homes followed by brokers and direct to institutions
respectfully topped the list in terms of awareness - while in the formal market; Co-
operatives followed by cooling plant co-operative had the highest awareness.

Majority of the farmers claimed to sell direct to homes, followed by co-operatives and
brokers respectifully.

However, in terms of preference, a majority stated they would be prefer the formal
channels an indication of a dislike to the informal market as shown in the chart below.

Base: all farmers n=600
Least preferred
Could sell to Usually sells Preferred buyer
to buyer
Direct to homes 3 34
76 39

Farmers
Cooperative/group/association 50 29 34 5

Broker 27 11 27
47

Direct to institutions 16 4 5
45

Cooling plant 26
41 26 3

Hawker 16
6 16
31
10 2
Processor 23 12

Milk bar 3
2 2
12
3
3 1
Bulking center 6

The table below shows by sites where farmers currently sell their milk.

Places usually sells milk TOTAL Kipkaren Keiyo Kipkelion Siongiroi Olkalou Mweiga
%
Direct to homes e.g.
Neighbours or family
members 39 30 48 45 45 38 29
Farmers
cooperative/group/association 29 16 22 - 36 35 67
Broker at farm gate 27 9 58 10 48 25 7
Cooling plant 26 69 6 68 14 - 1

Direct to institutions e.g.
school, hospital, food kiosk 16 21 19 19 20 8 10
Hawker 16 14 36 3 23 16 3
Processor 10 8 6 13 6 13 13
Milk bar 3 6 10 - 1 2 1
Bulking center 3 3 11 - 1 2 1

Among those who sell to more than one outlet, cooling plant followed by brokers were
rated as the largest buyers in terms of quantity sold. This implies that although, “direct to
homes” is a major market for milk, the quantities sold to them could be little compared to
cooling plants.

Buys most TOTAL Kipkaren Keiyo Kipkelion Siongiroi Olkalou Mweiga
BASE: All who sell to more than
one channel 319 60 71 46 67 40 35
%
Cooling plant 24 67 1 59 12 - -
Broker at farm gate 21 5 41 4 36 20 6
Farmers
cooperative/group/association 19 2 18 - 28 30 49
Hawker 8 7 11 - 7 23 -
Processor 8 7 7 7 3 10 17
Direct to institutions e.g. school,
hospital, food kiosk 7 3 4 13 7 3 11
Direct to homes e.g. Neighbours
or family members 6 5 6 13 4 5 6
Bulking center 3 2 10 - 1 - -
Milk bar 1 2 1 - - 3 -


Apart from buying milk, farmers who sell milk to the processors, cooling plant, bulking
centre or the co-operative, were asked what other services they received from them, if
any, and the extra service they would require. From the study, it was evident that demand
for services and inputs from the milk buyers is bigger than they are currently providing.

Services required Services received

6
Information on market prices
22
10
Delivery/Transport of farm inputs and animal feeds
19
11
Training on animal husbandry
33
16
AI services
31
Animal health services- treatment, vaccination and 18
drugs 39
21
Farm inputs - seeds, fertilizer
27
22
Advance on milk payments
27
25
Milk collection from the farm or near farm
35
28
Animal feeds/supplements
37

When asked whether they pay for the services, it was evident that apart from inputs, the
suppliers hardly charged for the services or farmers were not aware of the charges if they
were levied.

Where suppliers (milk buyers) levied the charges, the main mode of payment was check
off system.

In terms of payment of milk proceeds, majority of the farmers claimed they were paid in
cash after a specified period. This is mainly due to the fact that informal market leads in
terms of milk sale channel.

Barter - exchange milk for other
1
4 1
4 services
16 Receives a cheque
26

Cash deposited to a financial
institution
58
51 Paid in cash after a specified
period
Paid cash on delivery
20 17

Mode of payment Preferred mode

Asked to explain what they felt about information they had in regard to where they can sell
their milk, 25% of the farmers felt they have very little information. See table below.

Feeling on
information of
where to sell
milk Total Male Female Kipkaren Keiyo Kipkelion Siongiroi Olkalou Mweiga
Base: Total
Sample 600 360 240 100 100 96 104 101 99
% % % % % % % % %
Very little 25 23 28 19 18 39 44 19 10
Just enough 66 66 66 65 72 57 52 75 76
A lot 9 11 6 16 10 4 4 6 14

Cooling Plant
Asked whether they were aware of any cooling plants, 75% of the farmers indicated they
were aware of at least one cooling plant within their locality. However, in Keiyo, there were
no mentions of a cooling plant but they were aware that plans were underway to put one
in place.

Whether
aware of any
cooling plant Total Male Female Kipkaren Keiyo Kipkelion Siongiroi Olkalou Mweiga
Base: Total
Sample 600 360 240 100 100 96 104 101 99
% % % % % % % % %
Yes 75 77 72 97 - 99 92 73 88
No 25 23 28 3 100 1 8 27 12

Below are the cooling plants mentioned including: Siongiroi dairies, Angina, Kipkelion
cooling plant, Watuka society,Olkalou dairy farm,Endarasha dairy ,Tuzo cooling plant,
Brookside, Kamaus, Tuzo dairies,Ngina Kenyatta ,K.C.C, Kiganjo

When the farmers were asked about ownership of the cooling plants, the majority
indicated the facilities were owned by the co-operatives.


Asked what services they would like to receive from a cooling plant, farmers indicated they
would expect to get a number of services which include:

Training on animal
32%
husbandry

vaccination and drugs 44%

Information on market
prices 47%

Credit facility 47%

AI services 48%

Farm inputs - seeds,
fertilizer 52%

Animal feeds 56%

Milk collection from the
farm or near farm 61%

Animal health services-
62%
treatment and prevention

On probing further about what they would feel if they were to pay for the desired services,
over 80% of the respondent indicated they would be willing pay to get the services.

Information and training needs
Across all the 6 sites sampled, majority of the farmers (88%) pointed out that they do not
have the skills required to be good dairy farmers. The same trend was observed the two
gender slits although, a slightly higher proportion of males felt they were more skilled than
their female counterparts. The results below indicate that majority of the farmers are not
well equipped to handle dairy efficiently as a business though they are practising it.

Whether feels
have the skills
needed for a good
dairy farmer Total Male Female Kipkaren Keiyo Kipkelion Siongiroi Olkalou Mweiga
Base: Total Sample 600 360 240 100 100 96 104 101 99
% % % % % % % % %
Yes 22 24 18 22 24 25 19 22 18
No 78 76 82 78 76 75 81 78 82

To further understand, the skill that they feel was needed to bring them to a level of skilful
dairy farmers, the following information need areas were identified by a significant number


of them. The results indicate there is a higher demand for skills that would enable them
transform to modern farming.

Disease identification, treatment and prevention 63%

New animal feeds 59%

Improvement of milk production 51%

Cattle breeding 50%

38%
Milk prices

Drug administration 33%

Public health issues and requirements 23%

Dairy farm record keeping 23%

Buyers 18%

Record keeping Buyers 16%

Awareness of government policies 14%

Apparently, of the farmers who indicated to have attended training in the past (35%),
issues that were addressed in the training were the same farmers would like to be trained
on.
Information/advice
received Total Male Female Kipkaren Keiyo Kipkelion Siongiroi Olkalou Mweiga
Base: Those who
ever received
information/advice 211 125 86 40 59 15 26 37 34
% % % % % % % % %
Disease
identification,
treatment and
prevention 55 59 48 63 69 20 27 57 53
New animal feeds 53 53 52 58 76 40 38 38 38
Improvement of
milk production 43 35 53 50 49 27 27 38 47
Cattle breeding 37 39 35 28 49 40 23 46 29
Drug administration 34 40 24 35 54 20 15 27 24
Dairy farm record
keeping 18 17 20 30 31 13 4 11 3
Milk prices 14 18 8 28 20 - - 14 6
Public health issues
and requirements 9 10 8 10 15 20 - 11 -

Record keeping 9 8 9 5 14 13 8 8 3


Buyers 7 7 7 - 14 - - 16 3
Awareness of
government
policies 5 5 6 8 8 7 - 5 -

This could be an indication that either:

• Training needs highlighted by the farmers have already been identified by the
suppliers and necessary actions are being taken or
• Those who attended the trainings have to some extent sensitised or influenced the
other farmers on the need to have the skills or information.

The table below indicates different training areas/information 35% of the farmers
interviews have been exposed to:

To be able to reach farmers, the study sought to know where they often sought different
types of information from. According to the farmers, the media (mainly radio) was
identified as a key source of information. Farmers and suppliers were also stated to be key
sources of information. The table below underscores the importance of media, fellow
farmers and the suppliers in disseminating information to the farmers.

Farmers Sources of Information

Milk prices n=30 63 50 3 13 73

Buyers n=15 47 53 13 27 20 7

Record keeping n=18 50 11 17 22 17

Improvement of milk production n=90 53 32 11 7 30 8

Public health issues and requirements n=20 65 20 25 35 5

Awareness of government policies n=11 27 73 9

Cattle breeding n=79 51 28 14 6 25 11

Disease identification, treatment and prevention n=115 59 30 17 2 30 4

Drug administration n=71 56 21 21 35 4

New animal feeds n=111 61 25 13 4 15 8

Dairy farm record keeping n=38 58 8 18 16 18

Media Farmers Extension Worker (GOV)
Buyer Supplier NGO

The study also sought to establish if farmers keep their own record. Results indicated that
over 70% of the farmers do not keep farm records. Among those who keep records, it was
evident that majority of them keep only some basic records- milk sales and AI services.


This reinforces the need for further training on record keeping if farmers were to seriously
transform their dairy farming as commercial enterprises.

Do you keep any Types of Records Kept?
farm records?
Feeds record 16%

Treatment and
vaccination records 27%

Record on animal
No, 30%
births
73 Yes
, 28

Milk production 37%

AI services records
43%

Milk sales 68%

Finance
Overall, 75% of the farmers indicated they need some lump sum capital to finance their
dairy farming operations. Asked where they think they can get the money from, Banks
followed by co-operative topped the list as shown in the figure below.

However, based on the fact that majority of them are selling milk to the informal market, it
is clear that financial constraint will continue to derail commercialisation of the dairy
among these target farmers unless concerted efforts are put to encourage them to sell
milk to the formal institutions which can in return offer the much needed financial support.

No wonder, when farmers were prompted on their willingness to pay for services and farm
inputs on check-off systems, majority of them, over 80%, indicated the idea was very
welcome.


Finance Sources

11%
1%
4%
33%
4%
5%

17%

25%

Banks Cooperative SACCO Cooling plant NGOs
Micro finance institutions Family/friends Suppliers No source

Technology and product development
Most of the farmers interviewed (65%) attested to owning or at least having some access
to a mobile telephone. On follow up on how the technology can be used innovatively,
farmers who sell milk to the formal channels were asked the types of information they
would like to access on their phones through a short message services alerts (sms).

The most desired piece of information was on disease alerts followed by milk prices as
shown in the figure below.

If the services were to be provided at the current SMS charge, majority of the farmers
confirmed they would pay for it.

Some respondents disclosed that mobile phones are an important asset in their dairy
farming citing incidences where they have had to call veterinary personnel to attend to
emergencies in their farms. Some farmers also appreciated that they received a lot of
information from friends for example about arrival of milk buyers at the buying centres,
availability of feeds and sometimes making orders of feeds through the phones and
sending their workers to collect.


Information Via SMS

70 60

60
50

50
40

40
Required Information
30
Information Ready to pay for
30

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20

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10

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Policy and Advocacy
There are hardly any noticeable policies and advocacy initiatives that are currently taking
place in the dairy sector that farmers can identify with.

Over 70% of the farmers said they were not aware of any groups/ organizations that
represent their own interests as dairy farmers.

This could have been occasioned by the fact that only a small number (31%) of them
belong to a co-operative movement.

Aware of
group/organization that
represent own interest
as a dairy farmer Total Male Female Kipkaren Keiyo Kipkelion Siongiroi Olkalou Mweiga
Base: Total Sample 600 360 240 100 100 96 104 101 99
%
Yes 31 37 20 37 29 32 33 18 34
No 70 63 80 63 71 68 67 82 66


Conclusions on consumer research
The following conclusions on the BDS services consumed can be drawn from the research
findings:

• Although farmers interviewed practice mixed farming, dairy is an integral source of
their household income. Therefore, any effort aiming at raising production in this
sector will definitely have a significant effect on these farmers livelihoods
• Whilst milk production across the six sites in below potential, farmers are on
average selling milk worth about USD 1.5 per day totaling to approximately USd 45
per month
o However, since majority of the farmers are selling to the informal channels, it
is unlikely that payment are received as lump sum denies them the
opportunity to make reasonable savings hence minimal access to credit
facilities/loans
• Majority of the farmers showed a high inclination towards getting more services
from the cooling plant and paying later through check- off system. It would therefore
be prudent for the cooling plant to extend these services as a bait to lure farmers
into the formal market
• AI services- Although all farmers were aware of the AI services, only 39% of the
farmers are using the service currently. Most of them claim the cost of the service
is high, however, this does not seem to be the underlying reason for non-use as
half of the respondents are not fully aware of it’s benefits
o Education on this will help more farmers attach some “value for money” to
the services based on the expected benefits
• From the study a number of farmers stated they are not aware where they can
receive training or some information on dairy farming. On being prompted where
they usually get information from; Radio, suppliers and farmers were mentioned as
key sources of information
o It would therefore be prudent for EADD to:
Bring closer the suppliers and consumers for this mutual benefit
Have more interactive sessions with farmers as the training they give
is likely to filter down to other farmers
Where possible, establish the key media consumed and target to
reach farmers through it
o Two thirds of the farmers have access to the mobile phone and in fact, a
good number of them are already using it to communicate with service
providers. Further, a majority of them are willing to pay to access certain
services via short messages service (sms), although in actual fact, usage of
sms have been confirmed to be low among the rural population.
Despite the limitation, we feel the technology can be used more
effectively if implemented in phases
• Phase 1- EADD picks a number of farmers (particularly those
who are likely to influence other farmers). Train them and be
channeling information through them on non-commercial basis.
Through this, the impact of the service can be monitored.
• Phase 2- If phase 1 pick, commercialize the service

Other conclusions
• Insecticides and tick sprays are easily available and widely used in the six sites
visited.


• Veterinary treatment services are available but expensive for many farmers. The
high cost makes some farmers in Kipkelion turn to traditional healers for animal
treatment.
• Mineral supplements and supplementary feeds are stocked in the Agrovets in the
six sites and the consumers are aware though not all of them are able to purchase
due to high cost.
• Veterinary vaccination in all the six sites is carried out by the Government
periodically when there is a disease outbreak.
• Artificial Insemination is available in the six sites though farmers complained of the
high charges and sometimes they opt to get the services from the bulls in their
neighborhood.
• Milk collection/ bulking was reported to be working well during the dry season but
challenging during the wet season due to poor infrastructure and an increase in
transport cost by transporters.
• Milk testing kits were found to be in use only in the cooling plants.
• Milk advance payments or credit services were given to the farmers who requested
by the cooling plants in all the six sites.
• Disinfectants - for cleaning and sterilizing were widely used by the farmers to clean
the milk churns and other milking equipment.
• Information/ training on animal husbandry were observed to be inadequate in all the
six sites.
• Seeds to grow feed were widely used in Olkalou and Mweiga but not so in the other
sites.
• Hay bailers and chaff cutters were not in use by farmers in the six sites.
• Information on dairy markets was not adequately available to the farmers in the six
sites visited.
• Metal milk churns were used by the farmers to deliver milk though farmers
expressed concern on the high buying cost.

Business development services that address those constraints and opportunities

The following key constraints can be addressed by the described BDS services1:

Key constraints Examples of BDS service required
Low milk prices Identify/ establish new markets
Develop input suppliers capacity to offer better, less expensive
inputs
Identify new technologies to lower costs of production
Develop the capacity of enterprises to better plan and manage
their operations and improve their technical expertise
Establish sustainable infrastructures that enable lower
production/storage costs increased sales
Disease outbreaks Identify policy constraints and opportunities for SMEs
Promote the interests of SMEs via advocacy
Inadequate foliage Facilitate links between SMEs and suppliers
Develop input suppliers capacity to offer better quality inputs
Identify and promote new technologies that produce better inputs
Develop the capacity of enterprises and suppliers to improve their
technical expertise

1
Please refer to recommendations for more in depth solutions that address priority market constraints and market failures

Unreliable animal Enable suppliers to both expand their outreach to SMEs and
health develop their capacity to offer better, less expensive inputs
Facilitate links between SMEs and suppliers
Identify and promote new technologies that produce better inputs
Develop the capacity of enterprises to improve their technical
expertise
Promote the interests of SMEs via advocacy

Specific policy constraints that are affecting MSE product markets

The targeted farmers did not mention any policy issues that affect them. This can be
interpreted to mean that the farmers were not aware of the existing policies.


SUPPLIER DIAGNOSTIC by location

Existing providers/ services and their locations

Across all the six sites visited, a number of suppliers were mentioned by the farmers, their
fellow suppliers and also, as the interviewers visited the local market centre, they came
into contact to a number of them.

Overall, Veterinary “doctors” and Agrovets were more prominent than suppliers of other
services as summarised below.

Kipkaren had the least number of suppliers mentioned by farmers or sighted by the
interviewers.

Number of suppliers by category per site:

AI Veterinary/ Agrovets/ Transporters Cooling Total
Animal feeds plants
clinicals
Kipkelion 5 14 4 5 1 29
Olkalou 9 9 9 1 1 29
Mweiga 4 8 5 1 2 20
Siongiroi 6 3 10 2 1 22
Kipkaren 4 3 4 1 0 12
Keiyo 7 10 8 1 0 26

Total 35 47 40 11 5 138

A workable data base of the BDS actors

A workable data base of these BDS providers is attached to this report
(Annexes/Databases).

BDS suppliers interviewed

To select the suppliers to be used, a set criteria was followed which was mainly based
on:
• Services provided
• capacity to deliver services
• closeness to SMEs,
• commercial focus on services,
• organizational independence

As per the table below most of the suppliers interviewed were privately owned enterprises
mainly offering retail services.


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