KMT Livestock Case Study

Increasing Small-Scale Dairy Farmers' Participation to Formal Milk Markets

Kenya’s informal dairy markets are central to the livelihoods, food security and nutrition of the majority of its citizens, particularly the poor, women and children. About 86 per cent of Kenya’s milk (approx. 5.2 billion litres) is sold by unorganised, small-scale businesses in informal markets or consumed directly at home.

However, the recent ban from the Kenya Dairy Board on the sale of raw milk, coupled with the high costs of acquiring or accessing milk pasteurising equipment by small-holder dairy farmers, brought about significant constraints in the milk market, and livelihoods of dairy farmers.

Increasing Small-Scale Dairy Farmers' Participation to Formal Milk Markets

Kenya's milk sector

86 per cent

Percentage of Kenya’s milk sold by unorganised, small-scale businesses in informal markets or consumed directly at home

70 per cent

Share of the 40,000 jobs that the informal sector generates in dairy marketing and processing

14 per cent

Sector contribution to agricultural GDP. This is 3.5 per cent of the total GDP.

40 per cent

Rate of the utilisation of formal dairy markets, which is grossly below its capacity

80 per cent

of all marketed milk goes through the informal markets

4 – 5 per cent

Annual projected growth of informal milk markets in Kenya for the next 10 years

Despite the importance of small-scale dairy farmers, the regulation by Kenya Dairy Board prohibiting the sale of raw milk and the high cost of processing equipment greatly disadvantaged them and the milk supply chains.

Our Intervention

Kenya Markets Trust ventured into the dairy sector in 2012 to facilitate improvements in the breed, feed, veterinary services, and supply chain management and structures for the smallholder dairy farmers.

The intended outcome was to reform informal milk markets and develop stable milk markets, profitable dairy enterprises, secure businesses in the informal milk trade by enhancing compliance, access to finance by milk traders from group security, and creation of more jobs in the value chain while providing safe milk through the informal markets to the bottom of the pyramid consumers.

To facilitate the transformation of the informal dairy sector, KMT partnered with Dairy Africa Limited (DAL).  The intended outcome was to facilitate sector players to solve the milk quality and safety challenges by supporting them to formalise the sector and increase processing capacity. This was to be achieved through working with milk traders and facilitating them to establish pasteurising enterprises and encouraging processers to utilise their pasteurising capacity.

Dairy Africa Limited explored business opportunities within the market to drive milk pasteurising opportunities within the informal milk markets. The firm developed three generic business models:

1. Dairy trader-owned – trader-led pasteurisation model

piloted by Home-best Dairy Limited (Pangani Dairy Traders Association in Nairobi).

2. Dairy hub / processor-owned – dairy hub / processor-led pasteurisation model

piloted by Kangema Dairy Limited

3. Dairy hub/investor owned- dairy hub /investor led pasteurisation model

piloted by Njabini Dairy Group

Results and most significant change

Increasing Small-Scale Dairy Farmers' Participation to Formal Milk Markets
  • Significant increase in milk production by smallholder farmers, who benefitted from training initiatives from the hubs. The training curriculum was centred on innovative ways to increase milk yields, milk handling processes, management of milk bars and value addition procedures.
  • Increase in production capacity by the hubs. For example, Njabini Dairy Group was increased its production capacity from 200 litres per hour in 2016 to 3,000 litres per hour by October 2018.
  • Increase in the number of registered dairy farmers supplying the hubs
  • Increase in the number of direct jobs created
Increasing Small-Scale Dairy Farmers' Participation to Formal Milk Markets

KMT Livestock Case Study

Increasing Small-Scale Dairy Farmers’ Participation to Formal Milk Markets

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