The liberalization of informal milk markets in the country has now seen producers, vendors and consumers reaping large from an improved value chain as the dairy sector records the highest turnover ever, a move that has now seen even banks scramble to finance the sector.
Jane Wanjiku buys a litre of milk from farmers at Sh.15 and sells to New Kenya Co-operative Creameries (KCC) at Sh.20.80. “While hawked milk takes care of my expenses, the earnings from milk sold to KCC add up in my bank account boosting my savings. It is a win-win situation”, notes Wanjiku, a Murang’a based milk hawker who buys the commodity from the farmers and retails it in the populated residential estates in Nairobi like Dandora and Kayole.
“We cannot just hawk milk to shops only. We also take some of the milk to New KCC so that we re paid like farmers at the end of the month. It is a matter of not putting all the eggs in the same basket”, observes Wanjiku.
An increasing number of hawkers have become marketing agents and brokers, earning a handsome income in the process. Recent findings from an assessment of the impact of the Kenya dairy policy change show that changes in the sector, which incorporated small-scale milk producers and traders into the milk value chain and liberalised informal milk markets, have led to an increase in the amount of milk marketed, increased licensing of milk vendors.
Financial organizations have also boosted milk sales through formal processors. For farmers to benefit from loans, their milk revenues must be regular and channeled through the banks.
“Farmers need to be members of an organized marketing channel such as Sacco or a company like KCC, Brookside or Buzeka in Western Kenya. The milk must be delivered through the agent and money channeled through our bank account”, said David Odongo, Agri-business Manager with Family Bank, Kenyatta Avenue Branch in Nakuru Town.
Family Bank is one of the institutions offering farmers loans to increase their herds and construct zero grazing units among other development projects. According to Odongo, a dairy farmer may obtain a minimum of Ksh.5,000 to a maximum of Sh.5 million to a maximum of Sh.5 million. The repayment period is negotiable based on one’s ability but the norm is usually 24 months for Sh.250,000 and below.
For Sh.250,000 to 500,000, repayment period is 48 months. Above half a million shillings farmers will be required to clear their debts in 6 months. Service providers such as those offering Artificial Insemination (AI), farm inputs and veterinary services require that farmers deal with financial institutions if they want to obtain these services on credit.
With the expanding dairy sector, the East Africa Dairy Development (EADD) project has launched a feeding manual for dairy farmers and extension officers. High demand for fresh milk as population grows and the need for value-added milk products for an expanding urban middle class has prompted farmers to acquired new skills in dairy management to be able to supply milk.
The manual covers information on the basic nutrients a dairy cow requires, the available feed resources that provide these nutrients and practical aspects of feeding the animals.
It also has information on live-stock production systems and pasture production and management. Issues of pasture utilization and use of feed supplements are also discussed in language rural farmers and extension officers can understand.
The manual also discusses feeding of calves, heifers and dairy cattle. The EADD is a regional programme led by the Heifer International in partnership with International Livestock Research Institute, Techno Serve, the World Agro forestry Centre and the African Breeder Service Total Cattle Management. It is implemented in Kenya, Rwanda and Uganda.
Funded by the Bill & Melinda Gates Foundation, the project works with 179,000 farmers living in 1-5 acre plots and keeping a few dairy cows. With nearly 800,000 Kenyan smallholder households depending on dairying for their livelihoods, and the dairy sector providing employment to over 350,000 people in milk collection, transportation, processing and sales; the dairy industry plays an important role in meeting the livelihood needs of poor Kenya household as well as in contributing to Kenya’s economic development.
“Clearly, our economic prospects would have been worse if milk sale had been low in recent years. We have sustained our families, educated children and invested some of the milk returns in real estate and shares at the Nairobi Stock Exchange”, notes John Kamau, a dairy farmer in Ol Joro orok West, Nyandarua County.
Another new report by the International Livestock Research Institute (ILRI) suggests that the liberalization of informal milk markets has producers, vendors and consumers reaping large from an improved value chain with the Kenya dairy industry now making a turnover of over Ksh.17 billion (US$230 million), following a policy change six years ago.
“Allowing licensed small-scale milk vendors to operate leads to increased milk supply to the retail market and continual increase in the number of small-scale milk vendors acquiring licenses to run milk bars to meet the increased demand for milk,” says the document.
Already multinationals have started positioning themselves to tap in to the impressive growth of the sector in the country. Nestle’s Regional head, Pierre Trouilhat, is hopeful that Kenya’s dairy sector has a place in the Common Market for East and Central Africa (COMESA), through the company’s established value chain.
Nestle is already counting on a partnership that the equatorial regional branch entered with the East Africa Dairy Development (EADD) project in April, as a bridge through which the company will be able to purchase powdered milk from Kenya.
“The ultimate aim will be to produce cream milk powder enabling Nestle to export milk products to other COMESA countries and thus boost both availability and affordability in equatorial Africa,” said Mr. Trouilhat.
While there are more than 60,000 small scale dairy farmers in Kenya, the dairy sector supports some 800,000 households, with over 350,000 Kenyans being employed directly and indirectly by the industry.