BDS voucher

FINAL REPORT FOR BDS DIAGNOSTIC IN KENYA 1
FIT RESOURCES JANUARY 2009
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 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 opportunities 31
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, profitability,
existing contractual arrangements and promotional/marketing strategies
34
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 existing
supply, demand and transactions
48
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 failures 53
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 interventions for future 72
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 incountry 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)
Average number of
litres consumed in
7.8 9.7 8.1 8.5 6.6 6.4 7.1
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:
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
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

through increasing price
1
3
23 28 6 7 10 4
Improve building
1
2
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
1
0
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.

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
Inadequate
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
37
75
76
98
92
93
59
99
Milk
collection/bulking
Veterinary
vaccination
Milk coolers
Supplementary
feeds
Insecticides & tick
sprays
Mineral
supplements
Artificial
Insemination (AI)
Veterinary
treatment services
27
61
22
45
82
75
39
80
30
60
24
59
92
87
45
92
54
93
84
91
92
93
95
99
32
47
25
29
40
31
Used
nowadays
purchased Amount
Purchased in
P12M
Aware
33
31

Base: Total
Sample 600 360 240 100 100 96 104 101 99
% % % % % % % % %
Veterinary
treatment
services
9
9
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
9
2
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
3
7
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

19
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

20
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

21
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.
FINAL REPORT FOR BDS DIAGNOSTIC IN KENYA
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
4
5
43 77 39 31 40 42
70
96
100
50
30
11
4
17
70
8 8
33
Artificial Insemination (AI)
n=37
Veterinary treatment services
n=23
Supplementary feeds n=8
Milk coolers n=6
Information/training on animal
husbandry n=10
Too expensive Dont know where to get it Quality Others

22
Disease outbreaks
3
1
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
2
5
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
1
4
10 14 6 21 11 19
Inaccessible roads
1
3
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

23
FINAL REPORT FOR BDS DIAGNOSTIC IN KENYA

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; Cooperatives 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 buyer
homes 34
Direct to
Farmers
Cooperative/group/association
Broker
Direct to institutions
Cooling plant
Hawker
12
23
31
41
45
47
50
76
to
3
3
10
16
26
16
27
29
39
3
2
12
6
26
4
11
34
3
1
2
2
16
3
5
27
5

Processor
Milk bar
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
2
1
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 requiredServices received
Information on market prices
Delivery/Transport of farm inputs and animal feeds
Training on animal husbandry
AI services
Animal health services- treatment, vaccination and
drugs 39
Farm inputs - seeds, fertilizer
Advance on milk payments
Milk collection from the farm or near farm
Animal feeds/supplements
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.
37
35
27
27
31
33
19
22
28
25
22
21
18
16
11
10
6

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.
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
20 17
58
51
16
26
4 4
1 1
Mode of payment Preferred mode
Barter - exchange milk for other
services
Receives a cheque
Cash deposited to a financial
institution
Paid in cash after a specified
period
Paid cash on delivery

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:
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.
%
32
%
62
61%
%
56
%
52
48%
%
47
%
47
%
44
Animal health services
treatment and prevention
Milk collection from the
farm or near farm
Animal feeds
Farm inputs - seeds,
fertilizer
AI services
Credit facility
Information on market
prices
vaccination and drugs
Training on animal
husbandry

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.
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
63%
59%
51%
14%
16%
18%
23%
%
23
33%
38%
%
50
Awareness of government policies
Record keeping Buyers
Buyers
Dairy farm record keeping
Public health issues and requirements
Drug administration
Milk prices
Cattle breeding
Improvement of milk production
New animal feeds
Disease identification, treatment and prevention

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
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?
No,
73 Yes
, 28
%
68
43%
37%
30%
27%
16%
Milk sales
AI services records
Milk production
Record on animal
births
Treatment and
vaccination records
Feeds record
farm records?

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
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).
33%
25%
%
17
%
5
4%
4%
1%
11%

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

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
Unreliable animal health Enable suppliers to both expand their outreach to SMEs and 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/
clinicals
Agrovets/ Animal
feeds
Transporters Cooling
plants
Total
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
(Annexes/Databases).
providers is attached to this report
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.
Nature of
Business Total KEIYO KIPKAREN KIPKELION MWEIGA
OL-
KALAU SIONGIROI
Base 64 10 9 13 10 10 12
Cooperative 9 0 0 1 3 3 2
Self help group 5 0 5 0 0 0 0
Private owned 49 10 4 11 7 7 10
Government 1 0 0 1 0 0 0
Although a good number of suppliers had fixed premises a good number of them were also operating
as mobile service providers. Almost all had operated their businesses for more than two years. The
businesses were mainly operated by 1 person or with the help of the family members.
Business
Type Total KEIYO KIPKAREN KIPKELION MWEIGA
OL-
KALAU SIONGIROI
Base: 64 10 9 13 10 10 12
Mobile 18 3 4 6 1 0 4
Fixed premises 34 7 4 5 6 8 4
Both 12 0 1 2 3 2 4
Types of services and price of services, how providers cover costs, profitability,
existing contractual arrangements/relationships and
promotional/marketing strategies
Types of services offered
The suppliers indicated they provide a host of services and products to the farmers. Across all the
towns, majority of the suppliers offered multiple services and products to the farmers, for both
specialized and non specialized products and services.
For instance, a number of veterinary “doctors” operated Agrovets businesses and even offered
transport for feed and milk. Some of the Artificial insemination providers also doubled as veterinary
doctors as well as Agrovet operators.
In the Agrovets, although a number of products were stocked, the majority of them stocked the following:
• Insecticide and tick sprays
• De-wormers

• Disinfectants
• Mineral supplements- mainly “mineral salt”
• Seeds and fertilizers
• Poultry feeds
• Simple farm equipment- pangas, jembes, wheelbarrows etc.
Other products stocked though not in many outlets included:
• Animals feeds
• Milk churns
• Drugs for bloat and other minor animal ailments
The co-operatives in the areas were also found to be offering several services which included:
• Milk collection – transport and marketing
• Animal feeds supply
• Information and training to the dairy farmers
• AI and veterinary services
• Credit/advance payments to the farmers
• Yoghurt processing (small quantities)
Among the AI and the veterinary doctors, apart from offering their professional services – treatment and
insemination, were offering other services like:
• Dehorning
• Food trimming
• Bulls castration
• Training on animal husbandry
The table below is a summary of key services offered across the six sites:
Which services or
goods do you provide
to dairy farmers Base KEIYO KIPKAREN KIPKELION MWEIGA
OL-
KALAU SIONGIROI
Base 64 10 9 13 10 10 12
Supplementary feeds 45 10 9 6 6 7 7
Mineral supplements 42 9 7 7 6 6 7
Veterinary treatment
services 41 8 6 10 6 4 7
Insecticides & tick sprays 41 10 8 7 6 5 5
Veterinary vaccination 32 7 3 9 5 2 6
Information/training on
animal husbandry 29 4 2 6 6 6 5

Seeds to grow feed 24 3 0 3 6 7 5
Artificial Insemination
(AI) 23 5 5 3 4 3 3
Disinfectants – for
cleaning and sterilizing 20 3 1 6 0 4 6
Milk collection/bulking 14 0 0 4 4 3 3
Information on dairy
markets 11 1 1 4 1 2 2
Milk testing kits 8 1 1 2 0 4 0
Milk coolers 7 0 3 0 2 2 0
Milk advance payments
or credit services 7 1 0 1 2 1 2
Metal milk churns 6 0 0 0 2 2 2
Hay bailers 2 1 0 1 0 0 0
Chaff Cutters 1 1 0 0 0 0 0
According to the suppliers, some of the products they considered to be of high cost were only
stocked or supplied to the farmers on special request especially farm equipments and animal feeds
e.g. dairy meal.
Majority of the suppliers also indicated most of the services and products they were offering to the
farmers were readily available from other suppliers within their localities - an indication of existence
of competitors.
The suppliers indicated that farmers who are mainly small scale regularly visit the outlets to buy the
services or inputs by themselves. However, for some services especially treatment emergencies, the
farmers would call the suppliers from their cell phones.
The customer base for most of the suppliers is spread between 3-5 sub-locations, though a few were
actually spreading even far further.
During the interaction with the farmers when buying their products and services, the key information areas
that farmers usually seek from them include:
• Product usage e.g. mixing mineral supplements with other feeds, dossage
• Signs and symptoms of different diseases
• Importance of certain products to their animals e.g. supplements
• How to improve production
• Cost of different services and products especially what is offered by other suppliers
• Milk prices
• Management of diseases e.g. mastitis
• ‘Heat’ detection in cows
• Where to get quality breeds

Based on the consumer survey, the above results correspond with the information farmers indicated they
seek from suppliers.
Prices of services offered
Majority of the suppliers claimed to give information freely as either an after sales service or as a way
of building rapport with their customers. This was vividly summarised by an Agrovet operator in
Mweiga who quipped, “I need to look knowledgeable to the farmers otherwise they will not have the
confidence with what I’m selling to them. The more information I give, the more likely the farmer to
come back for more inputs,”
Expectedly, in regard to products and services (not information related) suppliers do not charge uniformly
but apply a number of parameters to arrive at the cost.
Some of the key variable that are usually applied in determining the selling price Include:
• Product origin - Whether the product is local or imported. In the AI service provision the locally
produced semen is cheaper than imported semen
• Quality of product
• Competition – If competition existed, the suppliers had to charge reasonable prices
• Prices at which service/product was purchased. Those who bought at wholesale paid less that those
buying at retail.
• Transport costs - Transportation of goods and services raised the overall cost of the product and
service. This depended on the distance between the farmer and the supplier – the longer distance
the more the consumer pays
• Ability to pay for the service - The service providers said they lowered their charges so as to attend
to some farmers who cannot afford to pay. One supplier in Kipkelion remarked, “The animal has to
be treated. It can’t be left to die as I will have not had a market to sell my drugs. I would therefore
better make less profit from some farmers and sustain the business”
• Time of the day - Charges also depend on the time of the day, the fee is higher at night and lower
during the day
• Availability of milk in the Market - when the supply of milk is high, the prices go down and vice versa
• In cases where the transporters offer added services such the cleaning of milk churns the farmers
pay more.
• Product movement - If the expiry dates for some products drew nearer, some suppliers opted to
sell it to farmers at discounted prices, they do not disclose the intention to them
Further, despite the above reasons, farmers were also said to drive hard bargain and prices could range
between farmers.

How providers cover costs & profitability
Just like in many business ventures, suppliers reckoned that they strived to make a profit whenever
possible. However, given that costs have to be met and some profit made in order to remain in
business, the main alternative to the supplier was to transfer the cost directly to the farmers.
To some suppliers, to cover full cost, they were also factoring in some bad debts which they usually
encounter as a result of sometimes offering the services to the farmers on credit.
Other loses unforeseen loses that suppliers mainly complained about were associated with price
fluctuation in the market especially when they had huge stocks.
However, according to some veterinary doctors, in some instances especially on vaccinations, the
government provided the medicines free and they were only charging for the service.
Majority of the suppliers indicated they have expertise and experience to offer more than what they
are offering to the farmers. This ranged from products like farm machineries, farm inputs and
animals feeds to services like marketing, offering training on animal husbandry and general animal
care.
The key constraints that inhibited most of them in supplying the products or services was said to be the
cost and low incomes among their target market.
In their opinion, most suppliers indicated that despite existence of high competitions in their areas of
operation, the market is still vibrant and the demand for their products has been growing and
sometimes, they do not have enough stock.
Existing contractual arrangements
To some extent there were contractual arrangements between suppliers and consumers in the six
sites. These contracts were either verbal or written although a majority of them were verbal and
based on trust.
The table below gives examples of contracts signed between farmers and suppliers:
Example of signed contracts between farmers and suppliers
Name of contact person Supplier type Contract with Reason
Site: Kipkelion
Benard Kirui Transporter 15 farmers To avoid some
misunderstanding

Leonard Langat ABS AI Service
provider
Chepsion
5 farmers To enable them claim
their money
Jonathan K. Langat American
Breeding
Services
Kipkelion
3 farmers To avoid payment delays
Joseph Kiteri Transporter 100 farmers To get legal backing for
payment defaulters
Jonathan K. Langat American
Breeding
Services
Kipkelion
A B S
(supplier)
Get their semen and sell
to farmers
Site: Olkalou
Joseph Onganga Olkalou Dairies 4 groups of
farmers
To observe regulations of
the plant
Kamau Cooler - Ndemi 500 farmers To pay them in time
John Chege Equator
Agrovet
Olkalou
20 farmers
and 3 groups
Offer service with or
without ready cash
Site: Mweiga
Endarasha Farmers
Association
cooperative A group of
farmers
To pay them in time
Siongiroi
Stanely Lang’at AI A group of
farmers
To commit farmers to pay
Siongiroi Dairy Plant Cooling plant Both
Individual and
groups
To settle
disagreements in case
they arise
Paul koech Veterinary
services
With
individuals
Enhance trustworthiness
Joseph Bett AI With
individuals
Commitment in service
and payments
Hilary kibet Agrovet With
individuals
To make sure they pay for
products they receive on
credit
Keiyo
Peter sigei Transport With
individuals
and payments
Kipkaren

Kitur Agrovet With an
individual
To make sure they pay for
products they receive on
credit
John Tanui Agrovet With
individuals
and payments
Promotional/Marketing strategies
The suppliers mentioned a number of promotional activities that they engage in to be able to interact
and promote their products and services to the farmers.
The activities ranged from high level advertising like using print and electronic media to visiting the
farmers in their farms. Specifically, here are a number of marketing activities that suppliers claimed
to employ in order to get a share of the farmer’s wallet:
• Advertising the services on radio, e.g. Kass FM
• Printing posters
• Advertising new products on the notice board in the shop.
• Having products drawn on the outer walls of the shop
• Printing calendars and business card bearing the name of the business, services offered and location
• Displaying different types of products in the shop to capture the farmers
• Attending farmer’s meetings e.g. chief baraza’s, field days, annual general meetings etc. and
introducing their services to the farmers
• Moving from one home to the next introducing oneself and the services offered
• Informing farmers about other services available as one offers the service that the farmer had
requested.
• For those offering transport services, parking the transport vehicle in a strategic place in town where
it seen by all.
• Organizing farmers’ field days with companies like Kenya Seed.
• Giving farmers telephone contacts through business cards
• Exercising good public relations, giving quality service and fair charges.
• Offering quality products and services
• Asking farmers to inform their fellow farmers
• Liaising with Government workers in the region so that they tell the farmers about the services the
supplier is offering (Kipkelion)
• Visiting cattle dips to meet the farmers as they take their cows there ( specifically in Kipkelion)
Some suppliers also claimed to rely heavily on the product distributors and manufacturer to support products
awareness creation for the mutual gain.
Capacity gaps of interviewed suppliers
Overall, due to the nature of the market targeted - low income farmers - s, a number of capacity
gaps were identified amongst the interviewed suppliers in the six sites. These included:

• Business size - Most of the suppliers operated relatively small retail shops which offered limited inputs
and services. Again because of the capital constraint, products on offer were mainly dictated by cost
and not quality
• Technical competence - Due to the nature of the business, sole proprietorship, some business were
not professionally managed as any member of the family was left to attend to the farmers in some
instances without due regard to the experience they may require in handling some requests from the
farmers
• Access to credit facilities - Just like the many farmers they were serving, most suppliers claimed they
were cash constrained and therefore they could not expand their enterprises to their desired level.
Further, their capabilities were cut by farmers who in most cases came begging for credit facilities
• Due to their size also, some suppliers claimed not to have ever been linked with manufacturing
companies and therefore little knowledge on how use some products or even products existence. o
According to them, this limited the amount of knowledge they could pass on to the farmers or
services/products they could offer to the farmers
Priority supply side constraints, market failures, and market opportunities
In analysisng the priority supply constraints two perspectives are considered; the suppliers
understanding of products and service, sourcing limitations amongst farmers and the suppliers own
challenges in business operations.
1. Suppliers Business operation challenges:
Lack of capital: All the suppliers mentioned capital as one of their main constraints. They said that
they had many plans to increase or improve their businesses but this had been hindered by their lack
of capital. Some suppliers observed that sometimes they bought products that were moving at a
slow pace or that farmers took on credit and delayed payment or never paid at all. This meant that
they could not raise money to replenish their stocks as they would like.
Price instability: Other suppliers identified price instability as their constraint. They revealed that
price instability was the order of the day, meaning that the price of a product bought at some
amount goes down within a short period in terms of prices wiping out chances of making some profit.
Examples were given of instances where suppliers had no choice but to sell their products either at
the buying price or at a loss.
Loans/ credit facilities: Some suppliers said they were not in a position to take up credit facilities
because they did not meet the requirements. Some of the requirements were that the business
should be registered, should have certain daily sales to demonstrate the possibility of repaying back
the loans. This they said has denied them opportunities to access loans because their businesses are
not registered or that they do not make the required profits. Other suppliers were worried that
taking a loan is risking the little they have.

Credit extension to the farmers: Their main concern was that most customers can only survive
through the credit system because their milk is collected and paid at a particular date. Before their
pay date animals get sick or are in need of some goods or services. As a result, farmers find
themselves asking for credit. Suppliers observed that their main challenge is that some of their
customers do not pay on the agreed on time while other will not pay at all.
Legal requirements: All the suppliers interviewed were aware that they were required to meet
some legal requirements. However, they were of the opinion that these requirements were not
achievable because of the following reasons:
• They were expensive and therefore ate into the business: The suppliers said there were so many
certifications required from various parts of the government and none for free.
• Bureaucratic and time wasting: Suppliers did not understand why a simple certificate should go
through many offices and why one has to travel for long distances to get it. They did not see a
justification to this process.
• Encouraged corruption: Suppliers observed that due to the delays in getting the documents
processed, they found themselves paying bribes so that the process can be hurried.
Transport: Suppliers reckoned that the transport network in their areas of operation was very poor.
This meant that the price of their goods and services went up to cover the transport aspect. This
impacted negatively on the farmers because they had to pay extra coins. On the part of those who
had to take their services to the farmers found it very expensive in terms of time and money. Those
supplying AI’s were disappointed by the fact that they have to walk for long distances meaning they
can only attend to very few farmers.
Competition: Some suppliers felt that there was competition from other suppliers especially those
who had their own transport. Also depending on where products were sourced from, the prices
varied and therefore some suppliers lost their customers. Suppliers felt that dairy farmers face the
following constraints as they source for suppliers:
• Poor road network in the area which makes it impossible for the goods and services to be
distributed into the farms and when they are they become extremely expensive
• Prices of the goods and services may not be affordable to the farmer
• Price fluctuations while milk prices remain fixed at a low price
2. Products and service sourcing limitations amongst Farmers
Specifically, amongst the farmers the limitations to BDS purchase are pegged on:
Products knowledge: As attested by the farmers, low disposable incomes have limited their
choices and they usually buy products and services not because of their (?) but based on the price.
This has limited their scope of knowledge and experience with new products and technologies. For
instance, the AI services have been criticized by some farmers although a majority of the farmers
have stated they are not fully aware of its benefits. This has directly affected suppliers in terms of
diversification.

Purchasing power: A good number of farmers claimed milk sales contributed to more than 30% of
their total household income which is equivalent to about Ksh 100. Due to this a majority of them
would not attach “high value for money” of some services that suppliers were offering in the market
rendering suppliers to sell their offers at almost the cost price. This limits growth of the suppliers. It
is contributes to erratic purchase which in some cases have reduced suppliers to speculators - leading
to over stocking which at times have led to some products expiring on the shelf.
To overcome the above constraints suppliers gave a number of suggestions as shown below:
Suppliers business operation
challenges
Products and service sourcing limitations
amongst farmers
• Legal requirements - Due to their
small size, it would be prudent to
encourage them to form an umbrella
organisation to regulate their
operations. They can also bargain
with both the licensers and financiers
• Training and products offered - the
manufacturer and key service
provider should educate the
suppliers on their products. This will
enable them to offer the right
expertise to the farmers for greater
benefits and thus improved incomes
• Creating linkages with big suppliers
who can provide some
credit facilities
• Milk marketing - farmers to be encouraged
to sell milk through the formal channels. The
formal channels can then link the farmers to
the suppliers of dairy inputs and services.
Due to security offered, the suppliers can
give credit facilities as they can recover their
monies through check-off system
• Training - By exposing farmers to the benefits
of the products and services on offer, despite
the income limitations, more farmers are
likely to seek these products and services
• Training farmers on best dairy farming
practices that can help improve raise their
incomes
Market opportunities
Despite the limitations and challenges the suppliers are facing, majority of them were optimistic that there
is an opportunity to grow their businesses.
1. Most of the suppliers indicated that at some instances they run out of stock for some products
an indication of high demand for products and services. However, since the number of market
players is relatively high in these area, widening of product offers by the existing suppliers is
where the opportunity lies
2. Most businesses in the six sites are sole proprietorships and thus the possibility of having family
members being in charge most the time. To ensure the right products and services are offered
to the farmers, for increased output, there is a need to train the owners adequately so that they
can in return train their assistants

3. Both the suppliers and the farmers are struggling to purchase products and services for sale and
for use respectfully. Both have a similar problem of access to credit. There is therefore an
opportunity to bring in more players in the market to link the two groups.
a. The cooling plant can effectively act as a link between the farmer and suppliers, while
the suppliers can be linked to the manufacturers and big service providers by
encouraging them to form some umbrella bodies
Comparison of interviewed suppliers
Comparatively the suppliers interviewed in the six sites during the assessment were generally small
scale private business owners. They can be grouped into four categories; Agro-vet shop owners,
mobile treatment, AI providers and cooling plant.
The interviewers were asked to rate them based on some factors as indicated below. The score
ranges from 1-5, where 1 means “does not meet the criteria at all” and 5 means “fully meets the
criteria”.
However, it is important to note that the exercise was to some degree subjective as the interviewer did not
have all the details to enable them make an ideal judgment.
Murmet
Agrovet
Keiyo 2 1 4 4 2 5 1
Kipchemen
Agrovet
Keiyo 5 5 3 5 2 5 1
Kauaney
Agrovet
Keiyo 3 3 4 3 4 5 2
Ogilgei Agrovet Keiyo 4 5 4 4 3 4 5
William
Agrovet
Keiyo 4 5 4 4 3 4 5
Anac
Investment
Keiyo 4 4 3 4 3 4 3
Kaiko Agrovet Keiyo 4 3 4 4 3 4 3
Emco Keiyo 5 5 5 5 4 5 5
Tachasts Plaza Keiyo 3 3 4 2 3 4 4
Serkem Keiyo 5 5 4 4 4 5 5
Kogo
Business
Kipkaren 4 5 4 4 4 5

Kipkaren
Holdings
Kipkaren 5 4 4 4 5 5
Emkoin Kipkaren 5 5 5 5 1 5 5
Kipkaren
Holdings
Kipkaren 4 3 4 3 4 3 4
Kipkaren
Holdings
Kipkaren 4 4 5 4 3 4 1
John Koech Kipkaren 3 3 3 2 4 5
Chemototin Kipkaren 2 4 4 4 4 4 3
Kapyemit
Agrovet
Kipkaren 4 5 4 4 2 5 5
Ndalat Agrovet Kipkaren 4 4 3 4 2 2 2
Teta
Enterprise
Kipkelion 4 5 5 4 4 4 5
Kaplaba
Agrovet
Kipkelion 5 4 4 4 4 4 5
Kiletien
Agrovet
Kipkelion 5 4 4 5 5 5 5
Tumaini
Agrovet
Kipkelion 4 4 3 4 4 4 4
ABS-
American
Kipkelion 5 4 4 4 3 4 5
Breeding
Services
J.A Kipken Kipkelion 4 5 4 4 5 4
Kvs 166 Green Kipkelion 4 4 4 3 3 3 4
Ainamoi
Agrovet And
Advisory Centre
Kipkelion 5 4 5 4 4 5 5
Mini Agrovet Kipkelion 3 4 3 3 2 4 3
Abs Kipkelion 5 5 5 5 5 5 5
Wakulima A. Kipkelion 3 3 2 3 3 4 3
Kipkelion
Dairy Limited
Kipkelion 4 5 4 5 5 4
Ministry Of
Livestock
Kipkelion 3 4 2 2 3 4 4
Endarasha
Farmers
Association
Mweiga 5 5 4 5 5 5 4
Endarasha
Farmers
Mweiga 3 4 3 4 2 3 4
Watuka
Farmers Society Mweiga 3 4 4 3 2 5 5
Classic Agrovet Mweiga 1 2 3 4 4 4 3

Ndungu
Agrovet
Mweiga 4 5 3 4 4 5 4
Gataragana
Agrovet
Mweiga 4 3 4 3 3 5 3
Kariuki Vet
Services
Mweiga 3 4 2 3 3 4 4
Mweiga
Agrovet
Mweiga 3 4 3 2 3 4 2
Emma
Enterprises
Mweiga 2 1 3 2 3 2 1
Kasuku Farmers Ol-Kalau 3 4 3 4 3 4 4
Kasuku
Farmers Store Ol-Kalau 1 1 1 1 3 1 1
Central Agrovet Ol-Kalau 4 3 3 4 2 4 4
J.K Holdings Ol-Kalau 4 5 4 3 3 5 2
Young
Farmers
Farm Inputs
Ol-Kalau 3 3 2 3 3 2 2
Ndemi Agrovet Ol-Kalau 3 3 2 3 3 3 3
Equator
Agrovet
Ol-Kalau 4 3 4 4 4 5 3
Farm Factors Ol-Kalau 4 4 4 4 4 5 5
Olkaluo Dairy
Farmers
Ol-Kalau 4 4 4 4 4 4 4
Richard Ngetich Siongiroi 4 4 4 3 4 3 4
Lisma Agrovet Siongiroi 4 4 3 4 4 4 4
J. Kirui Vet
Services
Siongiroi 3 5 3 4 5 4 5
Kaptich Agrovet Siongiroi 5 5 4 5 5 5 5
Bluegrown
Collection Place Siongiroi 2 3 3 4 3 1 3
Olbutyo A.I.
Services
Siongiroi 4 4 4 5 4 4 4
Siongiroi
Agrovet
Siongiroi 3 3 4 3 4 4 3
ABS Siongiroi 4 3 3 4 2 4 5
Falcon Agrovet Siongiroi 4 5 5 4 5 5 5
Chirchir Agrovet Siongiroi 4 4 4 5 4 4 4
Siongiroi Dairy
Plant
Siongiroi 4 5 4 3 3 4 5
Peter Sigei Siongiroi 5 3 4 4 5 3 4

The enabling environment for BDS
A number of issues were raised by suppliers in connection to the operations of their businesses in the six
sites. These included:
Lack of capital to expand business
High competition from others in the area
Lack of information on where and how to access a loan Legal
requirements:
o Too many licenses required o Issuing of some licenses based in Nairobi
which was time wasting o Corruption to be able to get the licenses on
time
o High costs of licenses
Poor infrastructure translating to high transportation costs which and an impact on the final
product/service cost
Lack of technical skills especially in treatment and AI provision
Product price fluctuations which affected profits
Conclusions
Characteristics of the market for BDS in each specific region in relation to existing
supply, demand and transactions
Although there are no set criteria for plotting a location on the matrix, a form of benchmarking has
been used that compares the quality (productivity and practices) of one BDS market against another
within the country and between locations across the 3 countries. Supply and demand have been
evaluated as a one off event during the assessment process in relation to best practice which forms
the basis of this informal comparison exercise. The exercise was undertaken during a group
discussion between the team leaders of the research teams for each country.
The findings reveal that Kipkelion and Siongiroi are characterized by strong supply and low demand of
goods and services while Mweiga and Ol-kalau had strong supply and strong demand. On the other
hand, Kipkaren and Keiyo had strong demand and low supply.

STRONG SUPPLY
LOW DEMAND
Kipkelion
Siongiroi
STRONG SUPPLY
STRONG DEMAND
Mweiga
Olkalau
LOW SUPPLY
LOW DEMAND
STRONG DEMAND
LOW SUPPLY
Keiyo
Kipkaren
The common characteristics of the BDS market are presented in table below:
Supply Demand Transactions
Key
Characteristics
• Relatively high supply of
BDS services and inputs
apart from training and
finance
• Mainly private players
• No subsidies
• Relatively strong
marketing/promotional
activites though not very
professionally executed
• Small enterprises in terms
of size (sole proprietorship
• High Demand for BDS
services
• Milk market divided
between the formal and
the informal channels.
• Limited skills in dairy
production
• Limited information on
milk market
• For BDS especially with
regard to milk
transportation from
• The transactions are
done mainly by cash
payments. However
members of
cooperatives and farmer
associations can use
check-off system to
make payments
• Generally there is poor
access to credit facilities
among farmers and
• A number of the services
providers have the skills
but are limited capital.
farm gate to collection
centres and other
markets.
cooperatives. This has
tended to limit the
transactions they can
execute to benefit them.
KENYA CONSUMERS – DEMAND SIDE CONCLUSIONS
• Local breeds are predominant across all the locations however farmers specifically want to improve
breeds to enlarge herd size and improve milk production via adopting zero grazing methods, growing
feed and AI services.
• Dairy is an integral source of household income and improvements in the sector are likely to impact at
the household level.
• The services farmers are most aware of are basic veterinary treatment services, vaccination and
products such as mineral supplements, sprays and insecticides. These are also the most acquired
services.

• Although farmers are aware of many services and do acquire some services they choose not to
purchase specialist services (such as AI) and are not clear as to the benefits they should expect.
Demand for basic services exists but is low for more specialised services such as AI and appropriate
technology.
• Buyers currently provide few required services to farmers yet the opportunity for such embedded
services is apparent.
• Consumers shy away from purchasing services due to the expense involved and the poor
quality/unreliability of many products. Some services are also just not available such as information
on training. Information and training on animal husbandry, dairy farming and milk advance payments
is also non existent. Information on dairy markets is considered to be ‘very little’ across all sites.
• Key problems for farmers include low milk prices and disease outbreaks.
• Farmers sell predominantly to homes, brokers and cooling plant/coops. Sales to formal channels are
preferred. Farmers sell on credit but prefer cash.
• Farmers are aware of the local cooling plants and would like to receive such services as health services
and milk collection with a high willing ness to pay and to use a check off system. Milk advances are
currently offered by existing cooling plants.
• Dairying skills are inadequate especially in regards to disease identification, treatment and prevention,
available feeds plus improvements in milk production.
• The media and other farmers are currently the main source of information.
• Farmers keep few records and cannot determine the true profitability of their business activities.
• Farmers struggle to self fund their operations as milk production and prices are low. Few acquire loans
or other financial services (despite a desire to do so) due to inaccessible or unaffordable loans.
• Most farmers have access to a mobile phone and are willing to pay for important information via SMS
such as disease alerts and milk prices.
• Few farmers are aware of organisations that can support them and few belong to formal groups,
cooperatives and associations.
• There is very little knowledge among farmers regarding policy issues and the legal and regulatory
authorities and standards/regulations that concern their operations.
• Poor roads hinder transportation and milk collection especially in the wet season.
SERVICE PROVIDERS – SUPPLY SIDE CONCLUSIONS
• A broad range of general services such as basic health treatment services from veterinary “doctors”
and animal products (health products and feeds) from Agrovets are on offer but more specialised
services beyond AI are scarce.
• The key services on offer from the vets and Agrovets include supplementary feeds, veterinary
treatment services, mineral supplements and insecticides and tick sprays. Competition between such
providers is high.
• The range of visible services across all locations is rather limited and undiversified.
• Demand for services is relatively high.
• The few coops who are service providers offer a more diversified range from milk collection to
advances and information.
• Kipkelion and Olkalou have the most amounts of visible providers and Kipkaren the least offering
different opportunities for intervention to develop supply.

• Most of the providers are enterprises privately owned and managed by individuals mainly offering
retail services and the majority with fixed premises.
• Fee based stand alone services are the norm but limited embedded services are apparent such as
product benefits and usage.
• The business acumen of existing service providers is relatively low but with some entering into
contractual arrangements. Business formalisation is weak and many are not registered and do not
understand the requirements or process.
• Most providers are clear regarding how the market impacts on pricing but do not have clear pricing
strategies.
• Few are implementing well focused marketing strategies but a broad range of above and below the
line marketing is evident.
• Cash payments are the norm but credit services are often required from providers to a farmer which
limits business capacity. Defaults are high and payment recovery is often staggered.
• Despite an overall lack of technical knowledge and abilities to delivery more specialised services, some
providers have the skills to offer more varied services such as farm inputs, marketing information and
training on animal husbandry.
• Capital for operations and expansion is very limited and access to affordable finance is limited.
• Poor roads and lack of public transport hinder service delivery impacting negatively on prices.
• All evident services are focused on production support and non on market support.
• Limited of knowledge relating to public health issues, regulations and standards.
An insight into the potential of each target market location
A diversity of potential was exhibited across the six sites visited. Majority of the farmers were keen to
improve their milk production through change of breeds and animal feeding habits.
Also, majority of the farmers across were unhappy with the current milk buyers and were all showing
a higher preference to the formal market. This is a great potential for the cooling plants to collect milk
from the farms and offer the farmers the much needed credit facility.
Training and information was another key opportunity with high demand among both the suppliers
and farmers. Majority of them were ready to pay a fee to access the service even if it is through an
‘sms’
Farmers in Keiyo complained they did not have a cooling plant nearby, a need which EADD can look into.
In Kipkaren, the number of suppliers was found to be few and usually and at times they were unable
to meet the demand. This presents a growth opportunity to the existing suppliers and new ones.
Level of market distortion

Across all the six sites, the market mainly operated based on market forces with very insignificant traces of
subsidies. However, some suppliers indicated some outlets were getting subsidies but on close scrutiny, the
differences in pricing were mainly as a result of where products for sale were being sourced.
Comparative information on the in-country sites and the 3 markets
As shown in the matrix, all the six sites could broadly be classified into three groups based on
demand and supply levels. Mweiga and Ol-kalau had the highest number suppliers’ compared to the
other four.
Kipkaren, Keiyo and Mweiga were ahead of the others in terms ownership of pure breeds and
incidentally they had the highest milk production compared to the other three sites namely,
Siongiroi, Kipkelion and Ol-kalau.
Whereas the farm sizes were big in Kipkaren and Keiyo (majority have more than 5 acres), land in Mweiga
and Ol-kalau is relatively small.
Across the six sites, low milk prices was however a big issue followed by lack of enough feed for the
animals. Other common challenges facing the farmers were diseases, lack of capital and skills in dairy
farming
However, in comparison to Uganda and Rwanda, the dairy market in the surveyed sites was relatively
developed in Kenya. The table below shows some comparison between the three markets.
Uganda Rwanda Kenya
Breeds kept Mainly exotic Mainly exotic Mainly cross breeds
Use of BDS services Low Low Average
Dairy as business At infant stage At infant stage At development stage
Market linkages Poor poor Average
Market distortion Exist (few compared to
Rwanda)
Exist Minimal
Number of Suppliers Very few Very few Relatively high
Milk delivery channels Mainly informal Mainly informal Shared almost equally
between formal &
informal
Milk market - formal
channels
Low Low High
Marketing/promotional
activities by suppliers
Very few Very few Relatively high

Recommendations2
Other current or proposed dairy sector interventions
It is very important to coordinate INGO/donor efforts. It is very difficult, and not at all effective, for
one INGO donor funded project to pursue a market development approach if others continue to
subsidize transactions and offer publicly-funded services in the same market. Suppliers will almost
always choose to work with a donor who will subsidize transactions rather than one advocating
market development. Free services also dampen SME willingness to pay. Even if all donors pursue a
market development approach, coordination across projects and programmes is critical. In markets
with relatively few suppliers, these suppliers can be overloaded or lose their commercial focus if they
receive significant financial resources from several donors. EADD must be aware of the other projects
supporting the sector and liaise with the facilitators to ensure that efforts are appropriately
coordinated.
Sustainable solutions to address priority market constraints and market failures
The project must ensure that all interventions have a market focus (private sector domination with
numerous competitive BDS suppliers selling commercially to large numbers and types of SMEs). It is
possible to ensure impact and outreach of BDS if the interventions focus on profitable services, focus
on services that are replicable in the private sector and build on what is already being offered by the
private sector. Always ask: “What problems do businesses have and why isn’t the market
environment providing solutions to these?” The end result of a market focused programme is
numerous SME’s buying BDS of their choice from a wide selection of products offered from
unsubsidized private sector suppliers in a competitive and evolving market. Remember that the
provision of subsidies to particular suppliers may crowd out other, private sector suppliers who do
not receive subsidies. Supplier costs must ultimately be appropriate for the SME market and not
skewed by donor funding. It is important to promote as many suppliers as the market will bear. That
is not to say that subsidies are a bad thing. Subsidies can be used to stimulate demand and supply for
a finite period of time with an explicit reason and exit strategy.
The project should group services as per the following recognized categories:
MARKET ACCESS - These services identify/ establish new markets for SME products. They
facilitate the creation of links between all the actors in the market and enable buyers to expand their
outreach to, and purchases from, SMEs. They also enable SMEs to develop new products and produce
them to buyer specifications. Key dairy sector examples include:
2 Some of the narrative and ideas in this section have been drawn from various papers and presentations placed in the public domain by
BDS practitioners and sourced from the following website: www.mmw4p.org

• Linkages to processors and informal markets
• Linkages to cooling plants and setting up chilling plants
• Linkages to traders for inputs and access to quality requirements
• Creating access to market information
• Facilitating milk supply contractual agreements with processors
• Linking farmers to steady markets
• Creating awareness of available markets
• Ensuring stable and reasonable milk prices to farmers
• Creating milk collection centers
• Forming milk cooperatives
• Improving access to reliable and affordable transport
INPUT SUPPLY - These services help SMEs improve their access to raw materials and production
inputs. They facilitate the creation of links between SMEs and suppliers and enable the suppliers to
both expand their outreach to SMEs and develop their capacity to offer better, less expensive inputs.
Key dairy sector examples include:
• Create awareness regarding Agrovet shops selling farm inputs
• Facilitate access to Agro-Vet Shops, AI service, Feeds, Livestock Health/Veterinary (quality,
credit services , payment systems, bulk purchase, efficiency, distribution systems, negotiate
delivery contracts)
• Avail vet kits to farmers
• Facilitate access to quality inputs through CP check off system
• Group people together to bring down inputs costs
• Increase access of milk cans and coolers
• Enhance skills and knowledge about feed and fodder to farmers
• Encourage farmers to set up their agro-shops
• Facilitate water drilling services
TECHNOLOGY & PRODUCT DEVELOPMENT - These services research and identify new
technologies for SMEs and look at the capacity of local resource people to produce, market, and
service those technologies on a sustainable basis. They also develop new and improved SME products
that respond to market demand. Key dairy sector examples include:
• Facilitate access to Biogas installers,
• Facilitate feed formulation enterprises
• Raise awareness to feed conservation techniques
• Facilitate provision of new milk handling containers/equipments
• Improving cooling plant MIS through training and computerization
• Facilitate simple milk testing equipment
• Development of market information services
• Enhance farmers ability to identify enterprises and engage in value addition
• Advise processors on how to improve on the product packaging.
• Promotion and adoption of new technology
• Access and training in adoption of relevant ICT e.g. accounting soft-wares
• Raise awareness regarding feeding and feeding systems, housing systems, fodder
production/agronomic practices, milk handling, milk quality testing, milk preservation, water
harvesting, milk transportation and milk storage
• Training and equipping AI experts

• Use ICT to disseminate information
TRAINING AND TECHNICAL ASSISTANCE - These services develop the capacity of
enterprises to better plan and manage their operations and improve their technical expertise. They
develop sustainable training and technical assistance products that SMEs are willing to pay for and
they foster links between service providers and enterprises. Training and technical assistance may be
delivered on any topic. Key dairy sector examples include:
• Cattle registration and milk recording services
• Training on feed conservation and fodder crops
• Business advisory services on chilling plant management
• Technical assistance on improving milk quality
• Research on new milk market opportunities
• Capacity building for farmers, staff and chilling plan management, BOD plus management and
staff of the Coop societies
• Exposure visits and farmer study tours
• Dairy cows registration to the Stud book
• Training on animal husbandry (feeding, pasture production and conservation, health
management) and milk hygiene/handling, storage and transportation
• Group formation
• Capacity building on business development
• Facilitate access to consultancy services in strategic plans, feasibility studies, business
management training, marketing, auditing and book keeping, record keeping, financial
management, governance and group dynamics
• Facilitate TOTs and the development of training manuals
• Training on how to advocate for change
• Facilitate disease surveillance
INFRASTRUCTURE - These services establish sustainable infrastructures that enable SMEs to
increase sales and income. Examples include refrigeration, storage, processing facilities, transport
systems, loading equipment, communication centers, and improved roads and market places. Key
dairy sector examples include:
• Facilitate access to improved road network, water supply, communication facilities and
electricity
• Liaise with Government and private contractors for improvement of road networks, power and
water supply
• Organizational management of the dairy hub
• Facilitate access to improved storage facilities, milk bulking and cooling and milk transport,
• Building cooling plants
• Agro dealer networks
• Access to feed analysis facilities and milk testing facilities
• Social services
• Assist farmers to acquire chilling plants, transport facilities and laboratory equipment
• CP start-up and setting up a hub of business services; feed shops, Agro-Vet shops; hardware
shops; transport and village banks
POLICY/ADVOCACY - These services carry out sub-sector analyses and research to identify
policy constraints and opportunities for SMEs. They also facilitate the organization of coalitions, trade
organizations, or associations of business people, donors, government officials, academics, etc. to
effect policies that promote the interests of SMEs. Key dairy sector examples include:

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