1. Linking Farmers to Markets in
Kenya: KACE Model
James Kundu and Adrian Mukhebi
Kenya Agricultural Commodity Exchange Limited
Brick Court 2nd Floor, Mpaka Road, Westlands, Nairobi
P.O. Box 59142-00200, Nairobi; Tel: 254-20-4441829
Email: kundu@kacekenya.co.ke ; Web: www.kacekenya.co.ke
An Abstract for a Paper for Presentation at the workshop “Agricultural Market
p p g
Information Systems in Africa: renewal and impact”
Montpellier, France March 29-31, 2010
2. Background: Agricultural markets do not
work for poor farmers
Liberalization reforms undertaken by the
Government in Kenya in the late 1980s and
early 1990s
Constraints in agricultural markets: Long
g g
chains of transaction between the farmer and
the consumer; poor access to reliable and
timely market information; small volumes of
products of highly varied quality offered by
individual smallholder farmers; and poorly
structured and inefficient markets.
www.kacekenya.com
3. Institutional innovations to make markets
work for the poor
Pro-poor market information innovations
needed to empower farmers to choose what
p
commodities to produce, what technologies to
apply for production, when to produce, for
whom to produce and when and at what price i
to sell
Market linkage i
M k t li k innovations needed t enable
ti d d to bl
the farmer to sell her produce or purchase
needed inputs on time and at competitive prices
www.kacekenya.com
4. Revolution in information and
communication technologies
The liberalization of the communications sector
in many African countries including Kenya has
allowed cellular phone companies and FM
ll d ll l h i d
radio stations to enter rural areas
Modern ICTs now offer unprecedented
potential to deliver information to poor rural
communities and link them to remunerative
markets, and thus contribute to alleviating food
insecurity, poverty and transforming social and
economic conditions.
www.kacekenya.com
5. What is KACE?
The Kenya Agricultural Commodity Exchange
Limited (KACE), a private sector firm, was
launched in 1997 to:
Provide the services of an agricultural
commodity exchange in Kenya following
y g y g
market liberalization policy reforms: price
discovery, improve market
transparency/efficiency,
transparency/efficiency increase liquidity in
commodity markets, link farmers to input and
output markets more profitably, etc.
www.kacekenya.com
6. The KACE Market Information and
Linkage System (MILS)
MILS designed to enhance the bargaining power of poor
smallholder farmers for a better price in the market place,
and hence guard her from exploitation by middlemen;
launched in 1997
Components of MILS:
Rural based Market Resource Centres (MRCs)
Mobile Phone Short Messaging Service (SMS)
g g ( )
Interactive Voice Response (IVR) service
Internet based database system
Radio
KACE Hub www.kacekenya.com
7. Rural based Market Resource Centres
(MRCs)
Information kiosks located in rural markets and serve
as sources of reliable and timely market information
y
for farmers (e.g. current commodity prices in
different markets), as well as provide market linkage
through matching commodity offers and bids. There
are 10 MRCs located in Western, Nyanza, Rift
Valley and Eastern Provinces of Kenya
www.kacekenya.com
8. Market Information at an MRC
Staff at Chwele MRC updating the centre market information
board.
www.kacekenya.com
9. Mobile Phone Short Messaging Service
(SMS)
Uses mobile telephony for information delivery
to farmers
The service is provided in partnership with the
Safaricom Limited, the leading mobile phone
service provider in Kenya with currently over
12 million subscribers. The Service will also be
on Zain network before end of the year
year.
www.kacekenya.com
10. Mobile Phone Short Messaging Service
(SMS)
A farmer accesses cattle prices via his mobile
phonewww.kacekenya.com
from his farm.
11. Radio
KACE in conjunction with the Kenya Broadcasting
Corporation (KBC) radio (the national radio service)
disseminates price information on a limited number of
commodities in selected markets daily in English and
Kiswahili
The KBC radio network covers the whole country
even in remote areas, and is therefore widely listened
, y
to by the public (5million daily), including smallholder
rural farmers.
Virtual trading floor through the use of local FM radio
stations branded Soko Hewani (Supermaket on Air).
www.kacekenya.com
12. Soko Hewani, the Supermarket On Air
Hewani
An interactive rural FM radio program to assist franchised
MRCs to broaden their market coverage / reach in matching
commodity offers & bids
The
Th radio programme i i collaboration with W t M di
di is in ll b ti ith West Media
Limited (WML), proprietors of the West FM Radio Station located
in Bungoma town in Western Province of Kenya
KACE provides the content of the radio program (verified offers,
bids, prices), while WML provides the radio platform, and the
design, production and management of the program. Soko
g p g p g
Hewani is broadcasted once a week on Tuesdays from 0900 – 1000
hrs
The catchment zone, with radius of 200 km, covers Western,
parts of Nyanza and parts of Rift Valley Provinces of Kenya and
eastern Uganda, a region of an estimated 5 million inhabitants,
www.kacekenya.com
most of whom are smallholder farmers.
13. Financial sustainability of MILS
y
Private sector business approach: users pay for services:
Placement fees on initial offers or bids (US$ 1.5 – 15 per
offer/bid depending on volume)
Commission (0.5% - 5%) on concluded deals
Subscription fees (
p (US$ 65 for 6 months and US$ 125 for 12
months)
Negotiated revenue sharing agreements with the SMS and
IVR service providers.
Fees to organized visiting groups (US$ 2,000 – 5,000/visit
negotiable)
Franchised Market R
F hi d M k Resource C Centres
www.kacekenya.com
14. KACE MILS Lessons
In a study of MRCs, Asaba et al (2005) found that farmers and
other SMEs in rural areas are willing and able to pay for
additional marketing services beyond market information for
more effective linkage to input and output markets.
Farmers are demanding services such as commodity grading,
storage, transportation, short-term
storage transportation short term credit (for example to hire
transport to market), access to inputs (timely and at affordable
prices), document preparation, and e-services such as e-mail.
The
Th KACE experience i th t market i f
i is that k t information per se i
ti in
necessary but not sufficient condition for poor smallholder
farmers to actually access better input and output markets,
hence th adoption of th f
h the d ti f the franchise model.
hi d l
www.kacekenya.com
15. KACE MILS Lessons Contd.
ICTs have a critical role to play in
enabling poor smallholder farmers in
remote rural areas t access i
t l to input and
t d
output markets; however, they must be
affordable
To be financially self-sustaining market
information services must cover large
areas, connecting commodity surplus
i di l
and deficit areas, in domestic, and
better still, regional markets
www.kacekenya.com
16. KACE MILS Impacts
Meuleman (2007) in a study of the impact of the
KACE MILS concluded that the proportion of
farmers and traders that say their incomes has
increased and their bargaining positions have
improved is very high (75% farmers and 60%
commodity traders). Furthermore, Meuleman
concluded that it was clear that during the years in
which the KACE MILS has been operational, market
integration improved for two commodities studied (i.e.
maize and beans).
www.kacekenya.com
17. KACE MILS Impacts
Institutionalization of KACE activities in
Kenya: the Agribusiness Training Centre at the
Cooperative College of Kenya; the Eastern
Africa Grain Council; and incorporation of
“markets” in government & NGO development
plans, programmes,
plans programmes projects and activities
Adoption or adaption of the KACE Model in
other countries i Af i
th t i in Africa: M l i i southern,
Malawi in th
Uganda and Ethiopia in eastern, and Ghana
and Nigeria in western Africa, through
consultancies f
l i from KACE or through visits and
C h h i i d
learning from KACE
www.kacekenya.com
18. KACE MILS Challenges
ICT illiteracy among smallholder farmers
Poor ICT infrastructure in rural areas
High ICT costs: mobile phone calls, IVR calls, SMS
and internet access
Poor other infrastructure that imposes high
transport costs to markets
Farmer-unfriendly government policies
Limited KACE resource capacity (human &
financial) for scaling up & out
www.kacekenya.com
19. KACE Future Plans for MILS
Scaling out of the Soko Hewani and franchised MRCs so that more
smallholder farmers and other SMEs in Kenya can benefit from the
system.
Bulking of farm inputs and products (including value-addition) for
access to large volume markets.
Forging alliances with other emerging commodity exchanges in eastern
and southern Africa to facilitate regional agricultural trade.
KACE’s vision of success is of smallholder farmers well linked to
agribusinesses, with significantly increased incomes through effective
and profitable participation in agricultural input and output markets
with the help of modern ICTs, hence a contribution to the Millennium
Development Goal No. 1 of eradicating extreme poverty and hunger by
half by the year 2015 www.kacekenya.com
20. Special Visitor to KACE on July 15, 2007
Dr. Adrian Mukhebi (left) explains KACE’s services to Mr. Kofi Annan
www.kacekenya.com
