livestock finance for farmers triples in last year

Financing for smallholder farmers is growing at its fastest pace ever, according to micro financiers, some of which report a tripling of loans dispersed to agricultural producers in 2010, compared with the year before. Between 2009 and 2010, Kenya Livestock Finance Trust (K-Lift) a micro finance offering credit for the livestock sector, recorded a 300 percent rise in loan applications from small holder farmers from all over the country.

Over 80 percent of the loans were extended to small holders in poultry, running agro-veterinary shops and in dairy farming, the organisation reports. It also highlights a surge in loans to animal health providers, milk value addition processors, animal feed manufacturers, hides and skins dealers, fish mongers and processors, bee keepers, livestock traders, artificial inseminators and pig farmers.

The swift extension of credit into livestock farming follows on earlier moves to provide credit facilities to small holders for crops and farming inputs.

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New study places livestock among drivers of economy
Livestock’s contribution to the Kenyan economy is two and a half times larger than official estimates, according to a new study based on the data collected in the 2009 national census, which has estimated livestock incomes at some Sh320bn a year with informal sales, by-products and asset values included.
The study on the Contribution of Livestock to the Kenyan Economy by the Inter-Governmental Authority on Development (IGAD) Livestock Policy Initiative (LPI), has found that the contribution of livestock to agricultural GDP is only slightly less than the Sh399bn earned from crops and horticulture, which have traditionally been believed to be the prime drivers of the agricultural sector.

Using figures from the census, the IGAD study estimated the amount of physical product generated, on average, by a given population of animals and valued this output at producer prices. By contrast, the lower, official estimates of the economic importance of livestock are based on recorded sales of livestock and livestock products.

 However, because only a small portion of Kenya’s livestock production is exchanged through recorded channels, these figures undercount the size and economic significance of the livestock sector.

 According to the revised estimates, milk is far and away Kenya’s most economically important livestock product, with a value of Sh257.8bn in 2009, or about 70 per cent of the total value of livestock’s contribution to the agricultural sector.

 The disparity on the milk figures between the official sales and the census-based figures was particularly wide, with officially recorded milk production standing at just one twentieth of total re-estimated milk production in 2009.

 The study also found much greater benefits from the livestock owned by rural dairy farmers who keep 85per cent of the livestock in Kenya, with the previously calculated benefits of milk and meat supplemented by manure for fertilising crop fields, traction for pulling ploughs, and through using livestock as a means of savings, credit and insurance.
 
For pastoralists, for example, the value of livestock includes the ability to get assistance from fellow pastoralists in times of need. Collective schemes for sharing risk within pastoral communities see large herd owners donating animals and less well-off pastoralists drawing support in the form of livestock received as gifts, or on loan. Recent research suggests that about 10.5 per cent of pastoral animals in Kenya are involved in livestock sharing networks of this kind. With the total capital value of pastoral livestock in Kenya valued at Sh295.2bn, the collective insurance value of pastoral herds is alone estimated at Sh31bn.

 “What we have is a massively untapped investment opportunity in these regions and I am glad a few of the insurance companies and financial institutions are now seeing this. The recently launched index insurance scheme which UAP and Equity Bank are involved in is a step in the right direction,” said Dan Kithi a financial Consultant with Financial Rise East Africa.

 The report comes at a time when government institutions, research centers and private institutions have heightened their commitment to increasing the productivity of livestock and encouraging more uptake.
This is translating into considerable investment in the area. Typical is the IFAD-funded Smallholder Dairy Commercialisation Programme (SDCP), which has been hailed as key in moving dairy farmers from producing milk just for consumption towards looking for markets for their milk. The programme is helping farmers build profitable small dairy enterprises that can be sustained throughout the year.

It begins by expanding and strengthening farmers’ organisations. Groups are encouraged to assess their needs and identify viable goals. Training then teaches the importance of feed, breed and zero-grazing, as well as animal health and disease awareness, business training and marketing.

Nor have these drives been confined to cattle. Recently, the Kenya Agricultural Research Institute launched a project of encouraging the uptake of free range chicken by as many rural Kenyans as possible, which has recorded an impressive uptake of 60 per cent in its first year.

 The project hopes to provide a source of income for rural Kenyans with the lowest costs, in that these chickens can source food for themselves, unlike the labour and capital intensive broiler breeds.

 The same institute has also developed a new, cheaper, and convenient poultry vaccine to end out the Newcastle disease which is responsible for over 90 per cent of livestock deaths in Kenya, mostly of free range animals.

 “With only Sh3000, a farmer has a chance to rear about50 indigenous chicken, which within 3-4 months can start laying eggs with the market for indigenous eggs being bigger and better paying than the broiler market.
This has made for turnarounds in farmers’ economic lives very fast,” said Dr. Ann Mumbi from KARI, who has been involved in the indigenious chicken rearing programme in KARI. Currently there are 26m free range chickens reared in the country worth about Sh7bn in meat and eggs.
Written by Bob Koigi for African Laughter

Camels rise as Kenya’s livestock industry of the future
Drought is changing the face of Kenya’s livestock industry, as farmers turn away from keeping cattle and build up their camel herds as demand moves from beef to camel meat, further driven by its power in relieving the widespread conditions of diabetes and tuberculosis.
The difficulties of raising cattle when rainfall is scarce have seen farmers across the entire country, and not only in the traditional arid areas of North Eastern Kenya, move to camels in the last two years.
The Ministry of Livestock now puts the camel population at more than five million, compared to seven million cattle, with the cattle population having declined 30 per cent, from 10 million, just three years ago.
“The prediction is that camel is the animal to watch in coming years if recent history is anything to go by. The camel population has grown by over 1 million in the last two years, which have equally seen a huge dip in cattle population, thanks in part to drought,” said Daniel Kutu from the Ministry of Agriculture.
The Kenyan Private Sector Alliance (KEPSA) estimates that camel will surpass beef to become the most common type of meat eaten in the country by 2015.
The uptake is being attributed to the camel’s ability to withstand droughts, through being able to survive without food and water for up to three weeks. The hump of the camel stores fluids, preventing dehydration and allowing it to transport people and goods over long distances. By contrast, cows require daily access to water and pasture.
At the same time, camel farming has become more lucrative, with a camel now worth three times the value of a cow. This has driven the marked uptake of camel beyond the traditional North Eastern part of the country to the rest of the country.  The Kenyan government has also launched several initiatives to encourage camel rearing, such as providing loans to camel breeders to expand their herds and developing potential markets.
“More and more people are responding to these incentives with time and the roll out is happening across the country. At the moment, Kenya is among the top five camel breeding nations of the world,” said Daniel.
Typical of the newxomers is the Mwihoti farmers group in Central Kenya’s Nyeri area, which is rearing 200 camels mostly for commercial purposes, and has found a lucrative local market in surrounding hospitals, where the demand for the milk and meat has grown due to its higher nutritional value.
Leading scientists at the Kenya Medical Research Institute (KEMRI) detected a protein similar to insulin in the camel milk in Kenya, and in Germany, some years ago. This is a significant health bonus, with 2010 figures reporting over 6 million diabetics in Kenya, with a condition that is aided by insulin.
Clinical trials carried out by KEMRI in Nairobi have also shown that tuberculosis patients enjoy a quicker recovery rate after consuming camel meat and milk. This discovery is what has birthed the need for meat and milk in the diet for those in hospitals.
“The demand has been astronomical. Not only do we sell it to the hospitals, but the local butcheries have been demanding it and it sells so fast. It has to do with its tenderness and nutritional value. We can’t meet the demand which is why we are clearing more land to accommodate another stock we hope to get by June,” said Justus Rionge the head of Mwihoti farmer group.
The group earns around Sh630 per kg for the camel meat, which is double the price of a kilo of beef at a Nairobi butchers. In a daym they sell over 200kgs of the meat. The leather industry has also been a big customer buying a fresh camel skin for Sh10,000 compared to a cattle one for Sh4,000.
In Isiolo, a women’s group has bought  a Land Rover to tour the challenging local terrain collecting camel’s milk from farmers, which it then delivers to the group in Isiolo. The milk is put in a freezer until the following day, and then transported by bus to Nairobi’s Eastleigh estate, where demand ahs been rising fast from the Somali community.
The women sell the camel milk by the litre, for Sh60 in Isiolo and Sh100 in Nairobi, compared to the Sh30 a litre that cow’s milk generally sells for.
The venture has been so lucrative that the members of the group, who have mobilized farmers to sell their milk, themselves earn up to Sh60,000 a month, which has meant a complete change in lifestyles.
In contrast to cattle or goat farming, camel farming requires little attention, supervision or infrastructure, as the animals can go days without water or fodder.  Camels can eat a thorny twig without hurting their mouths because the lining in its mouth is so tough that the sharp thorns cannot push through the skin. If food is very scarce, a camel will eat anything--bones, fish, meat and even leather. This scores it highly among the candidates that can survive harsh climatic conditions.
A 2011 study by a South African institute concluded that camel farming could be an option for 20m to 35m people living in semi-arid areas of Africa, who will soon be unable to grow crops because of climate change.
The study predicted that an additional 500,000 sq km to one million sq km in Africa – about the size of Egypt - would have become marginal farmland by 2050. But rethinking agricultural production now, boosting production of the hardier types of livestock - goats, donkeys, camels and some types of cattle – could protect millions from a future loss of income.
Written by Bob Koigi for African Laughter

Micro-financers report that the wider credit options are now fueling distinct regional farming trends. For instance, “fish farming is becoming popular in Meru,” said Lucy Ogutu of K-Lift. Through K-Lift’s various programs, farmers can borrow up to Sh1.2 million repayable in 3 years. The loan attracts a 13 percent interest rate.

Besides funding individual farmers K-Lift funds farmer groups’ initiatives of a minimum 15 farmers. Last year they funded 25 livestock farmers in Nakuru and 15 in Kisii.

K-Lift requires farmers’ groups to have existed for a minimum of 6 months and be registered by the social services ministry. Where the group opts to buy animals for rearing, K-Lift requires that they pay 10 per cent of each animal’s value upfront. 

For each animal bought there is a 4 per cent premium farmers pay as insurance in case the animal dies. The insurance premiums are processed by Co-operative Insurance Company of Kenya (CIC).

The K-Lift finance has added a new strand besides the programme from K-rep, which has been so successful in offering leasing finance for high-quality cattle that it last year launched an independent subsidiary Juhudi Kilimo to run the credit business, and expanded its lease agreements to include greenhouses, beehives, goats, rabbits and poultry.

Juhudi Kilimo reports growth of over 60 per cent in the loans dispersed to farmers during 2010, with now over Sh400m of cows financed through the programme.

The K-rep scheme works only with farmers groups, where each farmer takes a turn to receive a one-year loan that funds the purchase of a high-yield dairy cow giving farmers extra milk output that they can use to make the repayments for the cow.

The K-lift scheme, however, also works with individual smallholders. They must be Kenyan citizens, with bank accounts, credit worthy with supporting documents and familiar with livestock farming, says K-Lift. Where the loans are being used to expand their agricultural related businesses K-Lift also requires bank statements or accounts detailing the financial status of the business in the last two years, and seeks collaterals that can be in form of land, shares from a public quoted company, electronic appliances, guarantors or motor vehicles.

The two organisations represent just two of many now pouring finance into Kenya’s rising agri-business sector, which accounts for more self-employment and holds more SMEs than any other sector in Kenya.

Equity Bank has been a prominent player in this in its Kilimo Biashara scheme in partnership with the international NGO Alliance for a Green Revolution in Africa, AGRA.

AGRA catalysed the Kilimo Biashara project by setting up a Sh400m “cash guarantee fund” that buffers the bank’s risk of lending money to farmers and small agricultural businesses with little or no collateral. The $5 million was posted jointly by AGRA and the International Fund for Agricultural Development (IFAD).

Nationwide, Kilimo Biashara is set to finance 2.5 million farmers and 15,000 agricultural input retail businesses in rural areas. So far, the programme, launched in May 2008, has disbursed Sh240m ($3.1m) in loans with a 12 per cent interest rate applied when the loans fall due – a rate well below the bank’s standard lending rate of 18 percent.

Kilimo Biashara also works through farmers groups, typically dispersing loans of around Sh50,000 per farmer, and concentrating on improving farming productivity and opening better routes to market.

K-Lift is currently one of the largest schemes offering loans as large as Sh1.2m on the basis of individual track-record and collateral, and represents a further sophistication in the agricultural financing sector, in achieving more sophisticated credit control and a wider palette of credit options.

Written By James Karuga for African Laughter

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