Linking Farmers to Markets through Modern Information and Communication Technologies in Kenya

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Linking Farmers to Markets through Modern
Information and Communication Technologies in
Kenya

• A Paper submitted for the Web2forDev Conference,
• FAO Headquarters, Rome, September 25-27, 2007
• Presented by
• Wycliffe Ochieng Arua, IT Manager
• The Kenya Agricultural Commodity Exchange Ltd.
  Emailkace_at_kacekenya.comWebsite
  www.kacekenya.com

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BackgroundAgricultural 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 chains of transaction between farmer
  consumer
• poor access to reliable and timely market
  information
• small volumes of products of highly varied
  quality offered by individual smallholder farmers
  
• poorly structured and inefficient markets.

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Institutional innovations to make markets work
for the poor

• Pro-poor market information needed for farmers to
  choose
• what commodities to produce
• what technologies to apply for production
• for whom to produce and when and at what price to
  sell
• Market linkage innovations to enable the farmer
  sell her produce or purchase needed inputs on
  time and at competitive prices

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Revolution in information and communication
technologies

• Following liberalisation, FM radio stations
  cellular phone companies are operating in rural
  areas
• Modern ICTs now offer unprecedented potential to
  deliver information to poor rural communities and
  link them to remunerative markets
• ICTs contribute to alleviating food insecurity,
  poverty and transforming social and economic
  conditions.

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The KACE Market Information and Linkage System
MILS designed to enhance the efficiency of
agricultural markets, targeting smallholder
farmers launched in 1997

• Rural based Market Information Points (MIPs)
• District-level Market Information Centres (MICs)
• Mobile Phone Short Messaging Service (SMS)
• Interactive Voice Response (IVR) service
• Internet based database system
• Radio

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Rural based Market Information Points (MIPs)

• Information kiosks located in rural markets and
  serve as sources of reliable and timely market
  information 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 MIPs located in Western, Nyanza,
  Rift Valley and Eastern provinces of Kenya.

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Rural based Market Information Points (MIPs)
Staff at Kimilili MRC updating the centre market
information board.
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District-level Market Information Centres (MICs)

• Have internet connectivity and serve as liaison
  points between KACE and the remote MIPs
• There are 4 MICs Bungoma in Bungoma District,
  Eldoret in Uasin Gishu District, Kisumu in Kisumu
  District and Machakos in Machakos District.

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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 5
  million subscribers.

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Mobile Phone Short Messaging Service (SMS)
A farmer accesses cattle prices via his mobile
phone from his farm.
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Interactive Voice Response (IVR)

• Uses voice mail for information delivery, where a
  user dials a special phone number (0900552055) to
  access the information through simple menu steps
• The service is provided in partnership with the
  Interactive Media Services Limited

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Internet based database system

• Information is disseminated through the internet
  based electronic database and website
  www.kacekenya.com

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Radio

• KACE national radio service (KBC) started in
  Sept 2004 to disseminate price info of selected
  commodities markets daily in English and
  Kiswahili
• The KBC radio network covers the whole country
  even in remote areas, and is therefore widely
  listened to by the public (5million daily),
  including smallholder rural farmers.
• Virtual trading floor through the use of a local
  FM radio station branded Soko Hewani (Supermaket
  on Air).

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Radio
A group of farmers tune in to Soko Hewani, a
virtual trading floor on a local FM station.
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Financial sustainability
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 (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 foreign visiting groups (US
  2,000 5,000/visit negotiable)
• Franchised Market Resource Centres

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Franchised Market Resource Centers (MRCs)

• MIPS and MICs are being franchised into MRCs to
  local entrepreneurs to operate them on a
  commercial basis
• MRCs are developing brokering a range of demand
  driven services, e.g. transport, storage, quality
  control, input supply, e-services such as
  cash-transfers
• MRCs are bridging the technology gap / digital
  divide between urban rural areas

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A Franchised MRC
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Soko Hewani, the Supermarket On Air

• Provides an opportunity to integrate the MIS
  components and radio to concurrently provide
  timely market info
• Also facilitate market linkages for farmers and
  SMEs through an interactive radio program
• The radio programme is in collaboration with West
  Media Limited (WML), proprietors of the West FM
  Radio Station located in Bungoma town in Western
  Province of Kenya

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Soko Hewani, the Supermarket On Air

• KACE provides the content of the radio program
  (verified offers, bids, prices)
• WML provides the radio platform, and the design,
  production and management of the program.
• The catchment zone covers Western part of Kenya
  and eastern Uganda, a region of an estimated 5
  million inhabitants, most of whom are smallholder
  farmers.

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Impact, lessons and challenges

• In a study of MIC and MIP users, 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.
• They are asking for services such as commodity
  grading, storage, transportation, short-term
  credit, access to inputs, document preparation,
  mobile phone and e-mail.
• However, there are no local entrepreneurs with
  the knowledge and capacity to develop and deliver
  the services in the remote rural areas where most
  farmers live.

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Impact, lessons and challenges - continued

• Meuleman (2007) in a study of the impact of the
  KACE market information system 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).

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Impacts, lessons and challenges - continued

• Meuleman also highlights the challenges faced by
  the KACE MILS, including poor infrastructure that
  imposes high transport costs to markets, high
  costs of mobile phone calls and SMS and small
  quantities of produce of varying quality offered.
  
• KACEs future plans involve the scaling out of
  the Soko Hewani and franchised MRCs so that more
  smallholder farmers and other SMEs in Kenya can
  benefit from the system.
• KACE is willing to facilitate those interested in
  learning and adapting its MIS in other countries.

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Vision of success

• KACEs vision of success is of 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

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Special Visitor to KACE on July 15, 2007
Dr. Adrian Mukhebi (left) explains KACEs
services to Mr. Kofi Annan
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Thank You!