Commercialised supply of training & certification to improve quality and safety of animal products and exploit market de...
Outline <ul><li>Overview </li></ul><ul><ul><li>Role of informal businesses in pro-poor development </li></ul></ul><ul><ul>...
Overview <ul><li>Small-scale & informality dominate the supply animal products and employs many (e.g., >80% in dairy). Inf...
Role of informal businesses in pro-poor development <ul><li>Because they dominate, the majority poor (& many not-so-poor) ...
Integrating informal into formal value chains? <ul><li>Formal </li></ul><ul><li>legal </li></ul><ul><li>richer </li></ul><...
The problem being addressed <ul><li>Informal markets, small volumes, and largely generic products make product differentia...
Training & certification <ul><li>T&C provides an appropriate level of justification in this context by addressing two key ...
Commercialised supply of training and certification using a BDS Approach Traders Training Service Providers  (BDS) Certifi...
Justification <ul><li>Livestock offers the main opportunity in ASALs </li></ul><ul><li>Overcoming market barriers in these...
Where promoted <ul><li>T&C has been piloted in Kenya (now with over 200 accredited BDS providers) and initiated in Tanzani...
Key partners <ul><li>ASARECA </li></ul><ul><li>East Africa Dairy Regulatory Authorities Council members </li></ul><ul><li>...
Users <ul><li>Certification authorities including regulators, standards bureaus, BDS providers, associations representing ...
Critical factors for promotion <ul><li>Recognition that: </li></ul><ul><ul><li>most consumers are poor and have few afford...
Challenges and how to overcome them  <ul><li>Overcoming mind-sets against the role of informal agribusiness in development...
Lessons learnt <ul><li>The combination of practical demonstration with generation and dissemination of robust evidence  </...
Gender considerations <ul><li>Women control of income derived from dairy, even though men may own the production assets </...
Thank you Authors: Simeon Kaitibie, Amos Omore, Karl Rich, Beatrice Salasya, Nicholas Hooton, Daniel Mwero and Patti Krist...
Estimates of welfare benefits  Annual change in benefits (with 2005 as year when benefits start accruing)  Scenario Econom...
Impact Analysis: Distribution of benefits <ul><li>Reduction in margin due to  </li></ul><ul><li>reduced spoilage, rent-see...
Appendix 1.  PORIA data sources and methods <ul><li>SDP findings and SDP costs  </li></ul><ul><ul><li>SDP reports and file...
Appendix 2: ODI Study <ul><li>Informal Traders Lock Horns with the Formal Dairy Industry: The role of research in dairy po...
Appendix 3: Values for estimating welfare changes attributed to new dairy policy   Variable description  Value  (Nairobi a...
Appendix 4: Counterfactual- NPV with/without SDP  Based on NPV with SDP of $230M Time delay Real interest rate (%) NPV wit...
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Commercialised supply of training & certification to improve quality and safety of animal products and exploit market demand

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Presentation by Amos Omore to Conference on Climate Change Adaptation Strategies, Capacity Building and Agricultural Innovations to Improve Livelihoods in Eastern and Central Africa: Post-Copenhagen, Addis Ababa, Ethiopia, 7 – 9 June 2010

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Commercialised supply of training & certification to improve quality and safety of animal products and exploit market demand

  1. 1. Commercialised supply of training & certification to improve quality and safety of animal products and exploit market demand Conference on Climate Change Adaptation Strategies, Capacity Building and Agricultural Innovations to Improve Livelihoods in Eastern and Central Africa: Post-Copenhagen (UNFCCC/COP15), Addis Ababa, Ethiopia, 7 – 9 June 2010 Amos Omore, ILRI, Nairobi, Kenya
  2. 2. Outline <ul><li>Overview </li></ul><ul><ul><li>Role of informal businesses in pro-poor development </li></ul></ul><ul><ul><li>Can they be integrated into formal value chains? </li></ul></ul><ul><li>Description of the innovation </li></ul><ul><li>Users </li></ul><ul><li>Critical factors for promotion </li></ul><ul><li>Challenges in dissemination </li></ul><ul><li>Overcoming the challenges </li></ul><ul><li>Lessons learnt </li></ul><ul><li>Gender considerations </li></ul>
  3. 3. Overview <ul><li>Small-scale & informality dominate the supply animal products and employs many (e.g., >80% in dairy). Informal dairy traders in Kenya alone estimated at >40,000 </li></ul><ul><li>But they often operate without official support due to policies addressing quality and safety concerns </li></ul><ul><li>Consumers are also concerned and willing to pay for improved quality and safety </li></ul><ul><li>The policies and concerns are important barriers to market access, esp for livestock products </li></ul><ul><li>Training & certification (T&C) thro’ BDS providers has been demonstrated as a high impact mechanism for addressing the concerns and improving market access </li></ul>
  4. 4. Role of informal businesses in pro-poor development <ul><li>Because they dominate, the majority poor (& many not-so-poor) depend on them </li></ul><ul><li>Policy has historically focussed on their displacement by formal capital intensive production & marketing </li></ul><ul><li>Protection of public health is often the excuse, but rules are often unrealistic and not based on locally derived information, which is usually lacking </li></ul><ul><li>Vested interests often re-enforce their displacement </li></ul><ul><li>Available services have not tailored to them </li></ul><ul><li>Basis for more widespread agro-industrial development has thus been stultified </li></ul>
  5. 5. Integrating informal into formal value chains? <ul><li>Formal </li></ul><ul><li>legal </li></ul><ul><li>richer </li></ul><ul><li>highly capitalized </li></ul><ul><li>highly organized </li></ul><ul><li>well-connected </li></ul><ul><li>higher-priced products </li></ul><ul><li>In dairy : cold chain, pasteurization, packaging </li></ul><ul><li>Informal </li></ul><ul><li>legal status? </li></ul><ul><li>poor, small-scale </li></ul><ul><li>myriad, often part-time </li></ul><ul><li>haphazardly organized </li></ul><ul><li>voice-less </li></ul><ul><li>discouraged / no policy support </li></ul><ul><li>Lower priced products </li></ul><ul><li>In dairy : raw milk sales </li></ul>Informal actors Formal industry How?
  6. 6. The problem being addressed <ul><li>Informal markets, small volumes, and largely generic products make product differentiation difficult </li></ul><ul><li>This stifles innovation toward value addition in response to market signals </li></ul><ul><li>Certification, for which training is a pre-requisite, provides a differentiation mechanism in such market settings, and upon which further marketing innovation can be built </li></ul><ul><li>Policy makers also require well-documented justification for departures from prevailing procedures toward the informal sector </li></ul>
  7. 7. Training & certification <ul><li>T&C provides an appropriate level of justification in this context by addressing two key problems: </li></ul><ul><ul><li>a) the need to bridge the gap between regulated and unregulated markets, and </li></ul></ul><ul><ul><li>b) the need to overcome food safety concerns by consumers and health regulators. </li></ul></ul><ul><li>The approach been shown to address safety concerns and bridge the regulatory gap, while creating employment and providing greater access to quality nutrition for the poor. </li></ul>
  8. 8. Commercialised supply of training and certification using a BDS Approach Traders Training Service Providers (BDS) Certification Authority Certification/licensing Training & certificates of participation in training Accreditation / monitoring Reporting Cess fee Training guides Training fees
  9. 9. Justification <ul><li>Livestock offers the main opportunity in ASALs </li></ul><ul><li>Overcoming market barriers in these areas is one way to adapt under climate change. </li></ul><ul><li>Available evidence: </li></ul><ul><ul><li>Milk- and meat – borne health risks are often over-played and are largely eliminated through cooking. </li></ul></ul><ul><ul><li>Consumers are willing to pay price premiums for improved product image e.g., 2x for Nyirinyiri </li></ul></ul><ul><ul><li>T&C allows a balance between strict implementation of regulations, which creates strong incentives for markets to avoid them due to the costs of compliance, and market access. </li></ul></ul>
  10. 10. Where promoted <ul><li>T&C has been piloted in Kenya (now with over 200 accredited BDS providers) and initiated in Tanzania and India. Uganda and Rwanda appear convinced through EADRAC </li></ul><ul><li>Recent impact analysis of the T&C pilot by the Kenya Dairy Board (KDB) in Kenya showed significant benefits to the economy amounting to USD 33 million annually </li></ul><ul><li>A version involving training, packaging and branding of camel meat ( Nyirinyiri) has also been tried among women groups in Garissa, Kenya. </li></ul>
  11. 11. Key partners <ul><li>ASARECA </li></ul><ul><li>East Africa Dairy Regulatory Authorities Council members </li></ul><ul><li>Kenya Agricultural Research Institute </li></ul><ul><li>Ministry of Livestock Development </li></ul><ul><li>Kenya Camel Association </li></ul>
  12. 12. Users <ul><li>Certification authorities including regulators, standards bureaus, BDS providers, associations representing market chain actors and development agencies </li></ul><ul><li>The innovation relies on application of BDS to bridge the gap through building capacity, assuring product quality, labelling and branding </li></ul><ul><li>The BDS approach extends the reach of the certification authorities while providing employment and income opportunities </li></ul><ul><li>  The market chain actors benefit through increased knowledge, reduced post-harvest losses, official recognition and increased consumer confidence in the products they sell. </li></ul>
  13. 13. Critical factors for promotion <ul><li>Recognition that: </li></ul><ul><ul><li>most consumers are poor and have few affordable alternatives, hence their dependence on informal markets </li></ul></ul><ul><ul><li>movement along the continuum between informality and formality is a gradual process that does not simply involve moving from one fixed state to another </li></ul></ul><ul><ul><li>informal actors require some of the protective benefits that formality can offer to overcome the constraint of low investment into business often related to low education, awareness, information and lack of capital </li></ul></ul><ul><ul><li>livestock-mediated livelihoods improvement backed by, increasing demand for livestock products (e.g., growth in dairy ranked by ASARECA as the most important sub-sector in the ECA region in terms of potential GDP gains </li></ul></ul>
  14. 14. Challenges and how to overcome them <ul><li>Overcoming mind-sets against the role of informal agribusiness in development </li></ul><ul><li>Tendency to adopt international food-quality-assurance standards without considering local contexts and consumer health protection </li></ul><ul><ul><li>– Need effective dialogue based on robust evidence </li></ul></ul><ul><li>Promotion of investment by value chain actors in the T&C (besides other businesses) upon which further marketing innovations can be built </li></ul><ul><ul><li>Public investment initially then work on appropriate split between public and private responsibility </li></ul></ul>
  15. 15. Lessons learnt <ul><li>The combination of practical demonstration with generation and dissemination of robust evidence </li></ul><ul><li>Collaborative and participatory approaches in both the generation of evidence and engagement of beneficiaries </li></ul><ul><li>Commercializing the supply of the innovation and reducing public responsibility as it catches on </li></ul><ul><li>Documentation and dissemination of the impacts to stakeholders and the economy at large </li></ul><ul><li>Involvement and leadership by a mandated government agency </li></ul>
  16. 16. Gender considerations <ul><li>Women control of income derived from dairy, even though men may own the production assets </li></ul><ul><li>Direct participation of women in marketing declines relative to that of men as marketed output increases </li></ul><ul><li>Women are more likely to receive money from milk sold informally </li></ul><ul><li>No evidence that any specific gender is unduly disadvantaged in as far as BDS provision is concerned </li></ul>
  17. 17. Thank you Authors: Simeon Kaitibie, Amos Omore, Karl Rich, Beatrice Salasya, Nicholas Hooton, Daniel Mwero and Patti Kristjanson www.ilri.org and http//:impact.cgiar.org
  18. 18. Estimates of welfare benefits Annual change in benefits (with 2005 as year when benefits start accruing) Scenario Economy-wide (Million US $) Nairobi area gross benefits (Million US $) Benefits to consumers 8.01 1.46 Benefits to producers 16.04 2.98 Benefits to SSMVs 4.32 0.75 Benefits to input suppliers 5.09 0.90 Total benefits 33.46 6.09 Less annual SDP expenditure (1997-2004) 0.63 Less annual costs of training and licensing by SSMVs (2005-2039) 0.58 Less annual cess fees (2005-2039) and municipal, council costs 12.72 Annual Benefits minus costs (2005-2039) 19.53 Net Present Value (@5.00%) (to 2039) 230
  19. 19. Impact Analysis: Distribution of benefits <ul><li>Reduction in margin due to </li></ul><ul><li>reduced spoilage, rent-seeking 10+% </li></ul><ul><li>Annual benefits to Kenya economy </li></ul><ul><ul><li>To consumers: $8M </li></ul></ul><ul><ul><li>To producers: $16M </li></ul></ul><ul><ul><li>To traders: $4M </li></ul></ul><ul><ul><li>To input suppliers: $5M </li></ul></ul><ul><ul><li>Total gains: $33M </li></ul></ul><ul><li>Incremental gain at individual level, but substantial at aggregate level </li></ul>
  20. 20. Appendix 1. PORIA data sources and methods <ul><li>SDP findings and SDP costs </li></ul><ul><ul><li>SDP reports and files, ODI/ILRI study on SDP learning processes </li></ul></ul><ul><li>SDP outputs </li></ul><ul><ul><li>SDP reports and other outputs </li></ul></ul><ul><li>Policy influence, policy and behavioural changes </li></ul><ul><ul><li>SDP reports and other outputs, interviews with policy makers, regulators and SSMVs </li></ul></ul><ul><li>Economic impacts </li></ul><ul><ul><li>SDP reports; Equilibrium displacement model (see Freebairn, Davis, and Edwards, 1982; Wohlgenant, 1993); NPV </li></ul></ul><ul><li>Attribution of impacts/counterfactual </li></ul><ul><ul><li>Interviews with SDP actors; NPV with SDP compared NPV without SDP </li></ul></ul>
  21. 21. Appendix 2: ODI Study <ul><li>Informal Traders Lock Horns with the Formal Dairy Industry: The role of research in dairy policy shift in Kenya. ODI Working Paper 266, Leksmono et al, 2006 </li></ul><ul><li>RAPID Outcome Assessment (Research and Policy in Development Assessment) </li></ul><ul><ul><li>Tracking back from policy change: Episode Studies of specific policy change </li></ul></ul><ul><ul><li>Tracking forward from research: case study analysis </li></ul></ul><ul><ul><li>Outcome mapping: observing behaviour change among policy-makers and stakeholders </li></ul></ul>
  22. 22. Appendix 3: Values for estimating welfare changes attributed to new dairy policy Variable description Value (Nairobi area) Value (Kenya-wide) Source of information Raw milk production 493 million liters 4016 million litres SDP, updated (SDP Policy Brief #10, September 2006) Retail price Ksh 21.70/liter Ksh 21.57/litre Study survey (averaged over all locations and SSMV sales Farm price Ksh 15.97/liter Ksh 15.58/litre Study survey (averaged over all locations and SSMV purchases Non-market input cost per unit of output Ksh 6.90/liter Ksh 7.06/litre Estimated using data from Salasya et al. (2006) and updated SDP milk production data Elasticity of milk demand at retail -0.97 -0.97 Salasya et al. (2006) Elasticity of milk supply at farm 0.35 0.35 Salasya et al. (2006) Elasticity of marketing services supply 2 2 Freebairn et al. (1982) Cost reduction due to changes in transaction costs and elimination of NTB Ksh 0.80 KSh 0.54/litre Study survey, decrease in retail farm price margin (comparing before and after policy change)
  23. 23. Appendix 4: Counterfactual- NPV with/without SDP Based on NPV with SDP of $230M Time delay Real interest rate (%) NPV without SDP (US$ million) NPV (with SDP minus without SDP) (US$ million) Legalization occurs 10 years later 5 124.01 106.43 IRR(%) 108 Legalization occurs 20 years later 5 56.07 174.37 IRR(%) 62

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