Agriculture and Livelihood Diversification in Kenyan Rural Households

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Agriculture and Livelihood Diversification in
Kenyan Rural Households

• Simon C. Kimenju
• and
• David Tschirley

Tegemeo Institute Conference Agriculture
Productivity, Competitiveness and Rural Poverty
in Kenya-Laying the Foundation for
V2030 17th-18th September 2008
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Outline

• What do we mean by diversification?
• Diversification/specialization and agricultural
  development
• Key findings
• Trends in hh portfolios and levels of
  diversification
• Regionally, by type of hh
• Policy and programmatic implications

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Diversification and Specialization

• Diversification refers to how broadly a rural hh
  distributes its economic efforts
• A diversified hh distributes its efforts across
  many activities
• E.g., food crops, several cash crops, livestock,
  and off-farm
• A specialized household distributes its efforts
  across few activities
• E.g., focuses on a few cash crops and buys most
  of its food
• Diversification and specialization are the
  inverse of each other

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Diversification Ag Development

• Many countries in Africa wish to promote greater
  diversification among farmers
• Kenyas government also promotes this in SRA
• increasing the growth of the sector by
  encouraging farmers to diversify farming into
  non-traditional high value crops
• Yet Vision 2030 sees a problem in too much
  diversification
• The proliferation of enterprises on a typical
  small-scale farm reflects lack of
  specialization due to risk and lack of organized
  marketing
• Vision 2030 recognizes that specialization is
  needed in long-run to drive income growth and
  reduce poverty

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Diversification Ag Development (2)

• Bottom line
• In early stages of ag development, hhs can
  benefit from greater diversification
• E.g., adding cash crops to the food crop
  portfolio
• E.g., adding off-farm to the farm portfolio
• But as the economy develops, as cities grow, and
  as barriers to local, regional, and international
  are reduced, those farmers who can will
  increasingly specialize
• Over time, those that do not specialize will
  either be pushed out of agriculture or will
  remain poor

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Diversification Ag Development (3)

• Whether diversification is positive or negative
  for a hh depends on the stage of development of
  the agricultural sector and the households
  position in it
• E.g., more isolated households may need to
  diversify
• But households near large markets probably want
  to specialize to serve that market
• Understanding a countrys stage of ag development
  is important for designing proper policies,
  programs, and technology packages

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Objectives

• Examine trends in portfolios to see which
  enterprises are becoming important to rural hhs
• Determine levels of diversification for different
  zones and types of households
• Using a Diversification Index
• Highlight policy and programmatic implications

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Household income sources
Share of household income from various sources
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Household income sources
Share of household income from various sources
61
60
40
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60/40 balance each year No real change between
ag and non-ag
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Household income sources
Share of household income from various sources
Business has grown substantially
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Off-farm business (real income)
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Off-farm business (real income)
Rapidly and widely increasing earnings
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Off-farm business (real income)
Widely increased participation
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Mean number of crops
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Mean number of crops
Reduced number of crops in all zones more
specialization?
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Share of area to tea, coffee and sugarcane
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Share of area to tea, coffee and sugarcane
Steady throughout
Falling
Falling
Steady
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Share of area to fodder
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Share of area to fodder
Rapid growth in all zones apart from Coastal
Lowlands
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Proportion of Improved Cattle
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Proportion of Improved Cattle

• Proportion highest in Central Highlands, HPMZ,
  and MRS

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Proportion of Improved Cattle

• But improving in almost all zones

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Proportion of Improved Cattle
(Not shown) Also higher for higher income
households (70-79 vs. 26-33) but improving for
all income groups
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Diversification Indices

• Crop diversification
• Number of crop categories and share of each in
  gross value
• Agricultural diversification
• Number of crop livestock categories and share
  of each in gross value
• Livelihood diversification
• Number of crop livestock off-farm categories
  and share of each in gross value
• We will focus just on crop and livelihood

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Diversification Indices (2)

• Crop diversification
• Increases, then falls
• Begins of crop
• specialization

Livelihood diversification - Increases throughout

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Specializing zones (in crops)
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Diversifying zones (in crops)
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Richer HHs are more specialized

• - Each year, higher income
• less diversification (more
• specialization)
• Richer hhs specialized more
• dramatically than others
• between 2004 and 2007

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Additional findings

• Better local infrastructure allows households
  that were far from roads and services to benefit
  through diversification
• While proximity to a major market (large city) is
  an important driver of crop specialization
• Opportunity to sell large quantities of fresh
  produce or other crops

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Policy programmatic implications

• Kenya may be at a turning point in crop ag
• From increasing diversification to increasing
  specialization
• Previously, most hhs benefited from
  diversification
• But in future more will benefit by specializing,
  in response to policy liberalization and
  urbanization
• So policies and programs need to change in
  response to this turning point

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Policy programmatic implications (2)

• Policies for an innovative, commercially
  oriented and modern agricultural sector
• More high yielding tech packages even if more
  risky
• Extension messages more finely tuned to each
  farmer
• Access to the right inputs at the right time
• Be sure that government programs do not undermine
  private sector input development
• More collaboration with private sector

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Policy programmatic implications (3)

• More supply chain efficiencies
• Market information
• Physical market places
• Cold chains
• Must be conceived and implemented in a highly
  collaborative fashion with private sector
• Better risk management
• Forward contracts
• Commodity exchanges
• Early warning for pest and disease infestations
• Crop insurance

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Policy programmatic implications (4)

• While specialization is beginning in ag,
  diversification continues into non-ag
• Micro-credit, training for SME
• Primary and secondary education
• Other research shows that individuals need
  secondary education, not just primary, to take
  advantage of off-farm opportunities