Kundu KACE CIRAD 2010

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Kundu KACE CIRAD 2010

  1. 1. Linking Farmers to Markets in Kenya: KACE Model James Kundu and Adrian Mukhebi Kenya Agricultural Commodity Exchange Limited Brick Court 2nd Floor, Mpaka Road, Westlands, Nairobi P.O. Box 59142-00200, Nairobi; Tel: 254-20-4441829 Email: kundu@kacekenya.co.ke ; Web: www.kacekenya.co.ke An Abstract for a Paper for Presentation at the workshop “Agricultural Market p p g Information Systems in Africa: renewal and impact” Montpellier, France March 29-31, 2010
  2. 2. Background: Agricultural markets do not work for poor farmers Liberalization reforms undertaken by the Government in Kenya in the late 1980s and early 1990s Constraints in agricultural markets: Long g g chains of transaction between the farmer and the consumer; poor access to reliable and timely market information; small volumes of products of highly varied quality offered by individual smallholder farmers; and poorly structured and inefficient markets. www.kacekenya.com
  3. 3. Institutional innovations to make markets work for the poor Pro-poor market information innovations needed to empower farmers to choose what p commodities to produce, what technologies to apply for production, when to produce, for whom to produce and when and at what price i to sell Market linkage i M k t li k innovations needed t enable ti d d to bl the farmer to sell her produce or purchase needed inputs on time and at competitive prices www.kacekenya.com
  4. 4. Revolution in information and communication technologies The liberalization of the communications sector in many African countries including Kenya has allowed cellular phone companies and FM ll d ll l h i d radio stations to enter rural areas Modern ICTs now offer unprecedented potential to deliver information to poor rural communities and link them to remunerative markets, and thus contribute to alleviating food insecurity, poverty and transforming social and economic conditions. www.kacekenya.com
  5. 5. What is KACE? The Kenya Agricultural Commodity Exchange Limited (KACE), a private sector firm, was launched in 1997 to: Provide the services of an agricultural commodity exchange in Kenya following y g y g market liberalization policy reforms: price discovery, improve market transparency/efficiency, transparency/efficiency increase liquidity in commodity markets, link farmers to input and output markets more profitably, etc. www.kacekenya.com
  6. 6. The KACE Market Information and Linkage System (MILS) MILS designed to enhance the bargaining power of poor smallholder farmers for a better price in the market place, and hence guard her from exploitation by middlemen; launched in 1997 Components of MILS: Rural based Market Resource Centres (MRCs) Mobile Phone Short Messaging Service (SMS) g g ( ) Interactive Voice Response (IVR) service Internet based database system Radio KACE Hub www.kacekenya.com
  7. 7. Rural based Market Resource Centres (MRCs) Information kiosks located in rural markets and serve as sources of reliable and timely market information y for farmers (e.g. current commodity prices in different markets), as well as provide market linkage through matching commodity offers and bids. There are 10 MRCs located in Western, Nyanza, Rift Valley and Eastern Provinces of Kenya www.kacekenya.com
  8. 8. Market Information at an MRC Staff at Chwele MRC updating the centre market information board. www.kacekenya.com
  9. 9. Mobile Phone Short Messaging Service (SMS) Uses mobile telephony for information delivery to farmers The service is provided in partnership with the Safaricom Limited, the leading mobile phone service provider in Kenya with currently over 12 million subscribers. The Service will also be on Zain network before end of the year year. www.kacekenya.com
  10. 10. Mobile Phone Short Messaging Service (SMS) A farmer accesses cattle prices via his mobile phonewww.kacekenya.com from his farm.
  11. 11. Radio KACE in conjunction with the Kenya Broadcasting Corporation (KBC) radio (the national radio service) disseminates price information on a limited number of commodities in selected markets daily in English and Kiswahili The KBC radio network covers the whole country even in remote areas, and is therefore widely listened , y to by the public (5million daily), including smallholder rural farmers. Virtual trading floor through the use of local FM radio stations branded Soko Hewani (Supermaket on Air). www.kacekenya.com
  12. 12. Soko Hewani, the Supermarket On Air Hewani An interactive rural FM radio program to assist franchised MRCs to broaden their market coverage / reach in matching commodity offers & bids The Th radio programme i i collaboration with W t M di di is in ll b ti ith West Media Limited (WML), proprietors of the West FM Radio Station located in Bungoma town in Western Province of Kenya KACE provides the content of the radio program (verified offers, bids, prices), while WML provides the radio platform, and the design, production and management of the program. Soko g p g p g Hewani is broadcasted once a week on Tuesdays from 0900 – 1000 hrs The catchment zone, with radius of 200 km, covers Western, parts of Nyanza and parts of Rift Valley Provinces of Kenya and eastern Uganda, a region of an estimated 5 million inhabitants, www.kacekenya.com most of whom are smallholder farmers.
  13. 13. Financial sustainability of MILS y 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) Commission (0.5% - 5%) on concluded deals Subscription fees ( p (US$ 65 for 6 months and US$ 125 for 12 months) Negotiated revenue sharing agreements with the SMS and IVR service providers. Fees to organized visiting groups (US$ 2,000 – 5,000/visit negotiable) Franchised Market R F hi d M k Resource C Centres www.kacekenya.com
  14. 14. KACE MILS Lessons In a study of MRCs, Asaba et al (2005) found that farmers and other SMEs in rural areas are willing and able to pay for additional marketing services beyond market information for more effective linkage to input and output markets. Farmers are demanding services such as commodity grading, storage, transportation, short-term storage transportation short term credit (for example to hire transport to market), access to inputs (timely and at affordable prices), document preparation, and e-services such as e-mail. The Th KACE experience i th t market i f i is that k t information per se i ti in necessary but not sufficient condition for poor smallholder farmers to actually access better input and output markets, hence th adoption of th f h the d ti f the franchise model. hi d l www.kacekenya.com
  15. 15. KACE MILS Lessons Contd. ICTs have a critical role to play in enabling poor smallholder farmers in remote rural areas t access i t l to input and t d output markets; however, they must be affordable To be financially self-sustaining market information services must cover large areas, connecting commodity surplus i di l and deficit areas, in domestic, and better still, regional markets www.kacekenya.com
  16. 16. KACE MILS Impacts Meuleman (2007) in a study of the impact of the KACE MILS concluded that the proportion of farmers and traders that say their incomes has increased and their bargaining positions have improved is very high (75% farmers and 60% commodity traders). Furthermore, Meuleman concluded that it was clear that during the years in which the KACE MILS has been operational, market integration improved for two commodities studied (i.e. maize and beans). www.kacekenya.com
  17. 17. KACE MILS Impacts Institutionalization of KACE activities in Kenya: the Agribusiness Training Centre at the Cooperative College of Kenya; the Eastern Africa Grain Council; and incorporation of “markets” in government & NGO development plans, programmes, plans programmes projects and activities Adoption or adaption of the KACE Model in other countries i Af i th t i in Africa: M l i i southern, Malawi in th Uganda and Ethiopia in eastern, and Ghana and Nigeria in western Africa, through consultancies f l i from KACE or through visits and C h h i i d learning from KACE www.kacekenya.com
  18. 18. KACE MILS Challenges ICT illiteracy among smallholder farmers Poor ICT infrastructure in rural areas High ICT costs: mobile phone calls, IVR calls, SMS and internet access Poor other infrastructure that imposes high transport costs to markets Farmer-unfriendly government policies Limited KACE resource capacity (human & financial) for scaling up & out www.kacekenya.com
  19. 19. KACE Future Plans for MILS Scaling out of the Soko Hewani and franchised MRCs so that more smallholder farmers and other SMEs in Kenya can benefit from the system. Bulking of farm inputs and products (including value-addition) for access to large volume markets. Forging alliances with other emerging commodity exchanges in eastern and southern Africa to facilitate regional agricultural trade. KACE’s vision of success is of smallholder farmers well linked to agribusinesses, with significantly increased incomes through effective and profitable participation in agricultural input and output markets with the help of modern ICTs, hence a contribution to the Millennium Development Goal No. 1 of eradicating extreme poverty and hunger by half by the year 2015 www.kacekenya.com
  20. 20. Special Visitor to KACE on July 15, 2007 Dr. Adrian Mukhebi (left) explains KACE’s services to Mr. Kofi Annan www.kacekenya.com
  21. 21. Thank You! Th k Y ! www.kacekenya.com

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