Bringing Policy to Practice

The Concept of Dairy Hubs

Presentation to the FSNWG by Stuart WorsleyAcknowledgments to Isabelle Baltenweck, Amos Omore and Jo Cadilhon

• People know a lot

• People know what they want

• People are quite capable

• Context often blocks action, especially when

there is a big power difference

• Knowledge and technology can transform

• Development facilitation seeks to link potential

• Important to think across whole systems

• Clustering is proving to be an effective way to

link and unleash potential, and offer system

coherence 2

Principles of Development to Think About

Clusters are geographic concentrations of interconnected

companies, specialized suppliers, service providers, and

associated institutions in a particular field that are present

in a nation or region.

Clusters arise because they increase the productivity with

which companies can compete. The development and

upgrading of clusters is an important agenda for

governments, companies, and other institutions.

Cluster development initiatives are an important new

direction in economic policy, building on earlier efforts in

macroeconomic stabilization, privatization, market opening,

and reducing the costs of doing business4

Clustering"Clusters and the New Economics of Competition“ Michael E. Porter, Harvard Business Review, 1998

• 1902 – Europeans bring exotic cattle and produce milk

• 1954 – African dairy farmers allowed to produce

commercially

• 1964 – Kibaki Commission opens KCC to all producers

• 1991 – Privatization of key services

• 1992 – Liberalization of markets – KCC monopoly ends

• 1996 – Brookside is born

• 1999 – KCC almost bankrupt. Markets become informal

and volatile no investment

• 2003 – NARC commits to reviving KCC and KMC

• Now – Still waiting for the new Dairy Act

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A Little History about Dairy in Kenya

• No money in dairy!!

• Volatile Prices

• Milk Quality Control

• Perishability

• Seasonality and feed supply

• Collective dysfunction

• Access to capital

• Uncertain and high service and input

prices 6

The Issues Arising

ILRI in brief

ILRI

a member of the CGIAR Consortium which conducts food and

environmental research

to help alleviate poverty and increase food security

while protecting the natural resource base

700 staff

100 scientists and

researchers

more than 30 scientific

disciplines

Two large campuses

(Kenya, Ethiopia).

2012 budget USD 60 mill.

ILRI works with a range of

partners

Mali

Nigeria

Mozambique

Kenya

Ethiopia

India

Sri Lanka

China

Laos

Vietnam

Thailand

ILRI’s vision: A world made better for poor people in developing countries by

improving agricultural systems in which livestock are important.7

An Outline

1. Hubs for pro-poor livestock value chains

development

2. The East Africa Dairy Development Project

EADD background, vision and objectives

EADD hubs model

Assessment results: provision of extension services

by EADD hubs

3. Way forward for Cluster Hubs

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Pro-poor Livestock Development and Value Chains

ILRI fosters a demand-led development model

Informal markets provide substantial opportunities and can

be made to function well

Market access and utilisation can be improved by: Access to inputs

Access to services

Training and institutional capacity building

Reduced transaction costs

Better risk management

Improved market access and utilisation improve the

livelihoods of the poor Involving multiple actors

With benefits to women

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The Role of Hubs in Pro-poor Livestock Development

Hubs show promise:

As an ORGANISATIONAL arrangement

As a means of intervening

What are appropriate organizational and

institutional mechanisms in various contexts?

Intensive versus extensive production systems

Strong versus poor government support

Dynamic versus low private sector involvement

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What do hubs do?

Hubs provide a critical mass of producers, products or

inputs use, thus attracting other market actors

Hubs provide a contact point

They reduce communication

costs

They reduce transactions costs

Hubs enable countervailing

market power

They provide for network effects:

knowledge, technology and

innovation

Hubs facilitate peer pressures 11

ILRI contributions to dairy hubs projects

Design, implement and analyse baseline survey

Support the design and implementation of a monitoring

and evaluation system for hubs

Analyse results from monitoring system

Collate and document lessons learned, including on

issues related to gender and youth

Design, pilot test and monitor selected interventions

related to feed, animal production and marketing

Support projects’ technical activities on extension,

breeding and improving milk quality, etc.

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EADD background

A large proportion of the farming population in East

Africa consists of subsistence farmers with low market

orientation for both farm inputs and outputs

Smallholders are limited by low levels of production,

product quality and market infrastructure:

Low feed and fodder quality

Post-harvest losses

Lack of processing equipment

ILRI partnered with Heifer International and other

organizations to pilot test a new dairy development

model in East Africa: the East Africa Dairy Development

Project was launched early 2008 with financial support

from the Bill & Melinda Gates Foundation13

EADD vision and objectives

Vision

Transform the lives of 179,000 smallholder farming

families (approximately 1 million people) by doubling

their household dairy income in 10 years (Aiming at $33

million)

Objectives

Harness information for decisions and innovation

Expand access to markets

Increase productivity and

efficiencies of scale

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EADD hubs

TRANSPORTERS

TESTING

FARMERS

FIELD DAYS

FEED

SUPPLY

AI &

EXTENSION

OTHER RELATED

MEs

CHILLING or BULKING

FACILITIES

HARDWARE SUPPLIERS

VILLAGE BANKS

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EADD1 pilot phase – Factsheet

Scope

Duration: Jan 2008-Jun 2012

Budget: USD42.85m (BMGF)

Investment fund: USD5.0m

BMGF: USD2.5m

Heifer: USD2.5m

Partners

BMGF

HI – lead

TNS – business development

ILRI – knowledge-based learning

ABS – genetics & breeding

ICRAF – feeds & feeding

Structure (>120 staff)

Country offices

Kenya

Rwanda

Uganda

Regional office

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EADD hubs

At the heart of EADD is the hub approach which aimed to increase dairy

income of poor dairy farmers through various interventions along the value

chains so as to improve farm productivity and market access

Dairy hubs serve as community anchors for industry knowledge sharing,

business services and market access

The hub approach as implemented by EADD facilitates the emergence or

strengthening of a network of inputs and services providers and the set up

of a credit facility mechanism

Progressively the hub becomes a platform used by other inputs and

services providers to reach smallholder farmers

Possible add-ons include inputs for activities other than dairy, savings and

credit facilities, household expenses (food, medical and school expenses),

energy saving solutions (bio-gas and solar panels)

When fully functioning, the dairy hub is a dynamic cluster of services and

activities that generate greater income for dairy farmers

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1. Beneficiaries are selected based on need, opportunity and initiative

2. Farmers are mobilized into cooperatives, associations or producer

companies

3. Companies are assisted to set up infrastructure to market milk and

deliver inputs to members through the ‘Dairy Hub.’

4. EADD staff provide technical assistance to producer companies to

achieve farmer goals in a sustainable manner

EADD approach

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Some lessons learned from

the EADD hub approach

Hubs should be seen as an approach, rather than a model, with

various ‘options’ to choose from, depending on farmers’ capacity,

state of the industry and external environment:

Hubs centered around provision of inputs and services

Hubs centered around bulking without cooler

Hubs centered around chilling plants

In some locations, the chilling plants were not successful to catalyse

farmers around the hub but other services provided were useful to

farmers

Provision of inputs and services, including advisory services can be

done in-house, like in the case of a cooperative, or out-sourced

For advisory services, it is important to embed services in the hub

for accountability and sustainability issues

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Assessment of extension services

provision by hubs

Overall, 82 dairy farmer business association (DFBAs) were

supported in three countries and their progress monitored in early

2012

EADD-supported sites were assessed on 5 dimensions:

Feeding

Breeding

Animal health

Milk quality

Extension services structures

Scores can vary between 0 (low level of development) and 100 (fully

developed sites which no longer require external assistance)

Sites with scores above 60% are considered ‘mature’ and require

only minimal external support

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Actual development scores are distributedfrom 7.5 to 62 (%)

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

55.00

60.00

65.00

70.00

- 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 55.0 60.0 65.0 70.0 75.0 80.0 85.0 90.0 95.0 100.0

Sco

re

Percentile

Kenya Rwanda Uganda

Lowest

7.5 (NSAMBYA, Uganda)

25% quartile

27.3 (KIBOGA WEST, Uganda)

Median

34.8 (ZIGOTI, Uganda)

75% quartile

42.0 (GASI,Rwanda)

Highest

62.0 (TANYIKINA, Kenya)

Source: 2012 Stage Gate Assessment Data, May 2012 22

Way forward: capacity building models

for hubs

Focus on provision of advisory and technical services

Assess effectiveness, efficiency and sustainability of four main

extension approaches using hubs in various environments

What approach works best to reach out to women, youth and poor

farmers?

Bundled services by private extension agents

Private extension agents contracted by hub

Value chain partner provides extension to farmers

Use public service extension services

Assess whether the approach can be used in other livestock value

chains (pigs and small ruminants)

Compare hubs with other capacity building models: cooperative,

private franchised system (SIDAI), etc.

Exploration of different cluster nodes – check off systems23

Thank You

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