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

1. 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. Email:kace@kacekenya.com;Website: www.kacekenya.com

2. Background:Agricultural 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.

3. 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

4. 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.

5. 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

6. 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.

7. Rural based Market Information Points (MIPs) Staff at Kimilili MRC updating the centre market information board.

8. 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.

9. 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.

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

11. 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

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

13. 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).

14. Radio A group of farmers tune in to Soko Hewani, a virtual trading floor on a local FM station.

15. 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

16. 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

17. A Franchised MRC

18. 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

19. 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.

20. 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.

21. 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).

22. 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. • KACE’s 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.

23. Vision of success • KACE’s 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

24. Special Visitor to KACE on July 15, 2007 Dr. Adrian Mukhebi (left) explains KACE’s services to Mr. Kofi Annan

25. Thank You!