FSD Kenya set out to explore ways of using finance to build livelihoods of poor households in Kitui. The survey identified indigenous poultry and pulses as the agriculture value chains with the greatest opportunity for low-income households.
Small scale chicken farming is common in rural Kenya. Almost every household has a few chickens. Chicken farming seems core to their livelihoods, yet its scale remains limited. What can finance do to improve the livelihoods of such households? Early 2018, FSD Kenya set out to explore ways of using finance to build livelihoods of poor households. It carried out a scoping exercise in Kitui, one of the poorest and arid counties in Kenya. The survey identified indigenous poultry and pulses as the agriculture value chains with the greatest opportunity for low-income households. FSD Kenya then designed and conducted a small experiment to explore how finance could sustainably improve low-income households’ livelihoods through chicken farming. The aim of the experiment was to understand if the farmers can: increase productivity through access to the right quantity and quality of inputs, increase investments size, manage production risk, and competitively engage with markets. It also sought to explore if there was a role that finance could play in these.
A total of 60 farmers in two groups participated in the experiment. A key aspect in the experiment was to test farmers’ ability to effectively brood and raise chicks to maturity. An improved kienyeji (indigenous) chicken breed was selected for its fast maturity. Day-old chicks were supplied to one group and one-month-old birds, pullets, to the other. Most of the farmers were women. The experiment was conducted jointly with a community financial service provider and a social investor with a commercial interest in the poultry value chain. The partnership was crucial for coordination. It ensured access to the right breed of chicken, quality and quantity of feeds, production skills and vaccination services. All these were loaned to the farmers in-kind. Close monitoring and data collection were a crucial part of this experiment. Below is what we learnt from this experiment.
Smallholder farmers can effectively brood and rear chickens.
With access to the right services, technical support, and quality inputs, each of the day-old chick farmers made on average a 35% return on her investment of KShs 9,064 (US$ 90). This was underpinned by a low (4%) bird mortality rate. This compared very favourably with the about 50% mortality reported during the scoping exercise. The group that reared the pullets suffered higher than normal mortality and were unable to recoup their investment due to high level of diseases – the birds were sick at delivery to the farmers. Contrary to expectations, the day-old chicks’ farmers proved better at brooding than the semi-commercial brooder who supplied the month-old pullets.
Smallholder farmers are knowledgeable and open to new practices.
Farmers already have extensive knowledge about their environment and chicken farming. They understand their limitations and the related risks. One of the farmers highlighted the need for insurance to cover risks in farming. Due to the need to optimise the value of their money, they are economically savvy. Those participating in the experiment had a good perception of value for their money. Farmers can identify opportunities and are keen to learn and practice new ideas which hold promise to improve their livelihoods. The day-old chicks farmers’ group learnt new husbandry skills and were successful in brooding which significantly reduced mortality rates and gave them good returns. Although the second group made losses due to the poultry disease challenge, both groups saw the potential in the venture. They were confident enough to rear improved kienyeji chickens again – a few restocked soon after the conclusion of the experiment. The farmers have a good understanding of what works for them. For instance, they were to make a balloon payment of the loan at the end of the production cycle using proceeds from chicken sales as per the experiment design. They, however, expressed preference for flexible repayment using alternative income sources.
An effective market engagement model is critical.
Smallholder chicken farmers are aware of their challenges. They also know the strength in numbers. They either already belong to informal groups or are quick to form one where necessary. These groups are their social capital. They appreciate that some of their challenges could only be solved while in groups. Together, they are able to attain much more than the sum of their individual achievements. For instance, during the experiment, the farmers were able to access services such as vaccination which was not possible before given their scale of production. There was sequenced delivery of the inputs and services. The production cycle for each group was harmonised which made it easy for the inputs and service providers to deliver the inputs and services. The farmers realised real value by buying good quality feeds in bulk. Marketing their produce collectively gave them access to competitive markets for better prices outside their locality. They had the volumes and bargaining power they required.
Tailored financial solutions are needed for building of livelihoods.
The lessons about smallholder farmer outlined here are probably not new. The important question is: what are their implications in developing a sustainable finance model for building livelihoods? What would inclusive finance for small scale chicken farmers look like? Finance alone has limited value to smallholder chicken farmers unless embedded in a model that enables access to quality inputs and services, and marketing of the produce. To deliver real value for livelihoods, finance should only be used to lubricate the relationships that present potential for building livelihoods and not as an end. The focus should be on what is not working and if finance can be used to fix it. The typical financial products and services have little to offer in building livelihoods. In this experiment, the community financial service provider availed an ‘asset finance’ solution to individual farmers in the groups to meet the investment costs. Effective coordination of the various pieces was crucial for farmers to gain value from this experiment. The experiment also demonstrated potential for use of insurance to mitigate mortality risk.
FSD Kenya will explore how to use finance to improve livelihoods through poultry farming in a sustainable and scalable way in a follow-on experiment. Look out for findings from this next iteration of the experiment.