WB study improves coffee, cotton, pyrethrum sectors

June 13, 2012
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Past dependence on government agencies for these services, often at highly subsidised rates, has blunted MSMEs’ orientation toward seeking private providers/FILE
NAIROBI, Kenya, Jun 13 – The implementation of value addition practices to all supply chain levels has the potential to boost income for farmers, processors and small traders, according to results collected by the government from a World Bank funded initiative it started seven years ago.

The initiative has been implemented under the Ministry of Industrialisation as the MSME Competitiveness Project. Its coordinator Joseph Njeru announced that pilot projects in the coffee, cotton, pyrethrum and leather sectors have produced impressive results in the quality and quantity of production thanks to the value chain matching grant fund program that is managed by Deloitte.

“The project was put together to develop and to give businesses a platform to become more productive and competitive so that Kenya is able to prosper and move forward,” he explained.

“We have also done tremendously well in being able to provide businesses with opportunities to access funding fast and when they need it with minimal constraints,” he added.

Past dependence on government agencies for these services, often at highly subsidised rates, has blunted MSMEs’ orientation toward seeking private providers.

In order to close these gaps, the government, together with the World Bank, launched the MSME Competitiveness Project in December 2004 to provide short-to-medium term support designed to leverage sustained willingness of MSMEs to pay for services, as well as to catalyse potential suppliers to consider product adaptation and innovation for the MSME market.

The Permanent Secretary at the Ministry of Industrialisation Karanja Kibicho said the lessons learned in the pilot programs have shown increased coffee prices from a low of Sh20 per kilogram (kg) in 2005 to over Sh100 per kg in 2011.

Cotton prices have also improved from an average of Sh15 per kg of seed cotton to an average of Sh65 per kg in 2011 and value addition in the leather sector has the potential to earn the country an additional Sh1 billion profits annually.

“If the players apply the necessary skills in farming and basic value chain activities, farmers will fetch better prices for their farm produce and propel the country’s economic growth,” he stated.

“Value addition in agriculture is important in determining the competitiveness of Kenya’s produce on world markets,” he added.

Over the course of the project’s existence, several organisations have been formed to aid businesses such as the Cotton Development Authority (CODA), the Kenya Leather Development Council (KLDC) and the implementation of international coffee certification in local markets.

The PS reiterated that the four sectors have a high potential for growth despite the challenges in high cost of inputs, poor livestock husbandry, limited extension services, over dependence on rain-fed agriculture, lack of markets and limited application of agricultural technology and innovation.

Despite these challenges, the project coordinator Njeru said: “the initiative has recorded great successes with some of the key highlights being the development of financial products such as warehouse receipts, assets financing, equity financing and weather insurance amongst others.”

The MSME Project also supported a study on financial access in Kenya that has encouraged banks to open more branches and get closer to their clients.

Njeru revealed that they’ve been able to get risk capital firms to tap into a $4 million Financial Assistance (FA) Fund in order to support MSME’s business processes.

“The project has imparted knowledge on business planning to over 1,500 entrepreneurs who participated in the recently concluded first and second phases of the JITIHADA business plan competitions,” he said.

After seven years of implementation by both private and public organisations, the MSME Project is coming to a close and Njeru said they decided to initially complete the pilot projects to produce demonstration models for value addition activities that can be replicated across Kenya.

“The reason for doing the pilot projects is because resources are limited and they must be used in a way that is fairly selective,” he acknowledged.

“But now, the responsibility is upon ourselves to take the story and results to everybody else in the country,” he emphasised.

The initiative has been spearheaded by apex committees with representation from the four sectors and to further strengthen MSME entrepreneurship skills, they’ve trained lecturers from Strathmore University, Kenyatta University and Jomo Kenyatta University of Agriculture and Technology (JKUAT) on case development and teaching.

They’ve also successfully introduced credit reference bureaus that have boosted MSME’s access to finance and they have presented the Ministry with recommendations for rolling out the value chain projects, while highlighting areas that need to be addressed post the MSME project completion.

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