An investigation into dairy value chain financing in Kenya
Dairy products contribute 30% of livestock GDP in Kenya and more than 22 % of livestock gross marketed products. There are many players in the dairy sector: those offering services and inputs; industry facilitators and development partners; and the users of services/inputs and the smallholder dairy farmers dominate the industry at the production level. This study was conducted in the month of January and February 2012 to examine the dairy value chain financing in Kenya. The objectives of the study were to determine the status of financing in the dairy sector in Kenya today, establish the various options/models of dairy value chain financing, determine how effective the current financing mechanisms are and find out if the current policies are adequate for dairy value chain financing in Kenya. The research design was exploratory and the study employed the survey method and non-probability convenience sampling method to sample the target population. The primary data was collected through the administration of questionnaires. Appointments were set up through phone calls and later personal visits made on the appointment date to interview the respondents. The questionnaires were also sent out via email to the respondents who filled them out and where there was need, telephone call follow-ups were done. This was important as it covered a population that was highly targeted and affordable. The study targeted and sampled 72 stakeholders in the dairy sector in Kenya. The sample area was Nairobi and its environs. The key finding of the study was that financing in the dairy sector in Kenya today (in Nairobi metropolis) is through the banks and the MFIs. Various options/models of dairy value chain financing are available but the facilitation model was the most familiar and the warehouse receipt i.e. milk delivery receipts was asserted as the most important financial instrument. The current policies are adequate but the respondents affirm that the government still needs to empower the diary sector in Kenya. A key recommendation to the government and the stakeholders in the dairy sector is to formulate favorable policies that can improve the dairy sector. There is need to have a reduction in prices of farm inputs and suppliers. A vital recommendation to the media houses is to propagate educative material in different dialects on value chain and the models available. This report presents the findings of the research.