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ADRIAN MUKHEBI

Kenya,

Adrian facilitates competitive and efficient trade in agricultural commodities, providing reliable and timely marketing information and intelligence, providing a transparent and competitive market price discovery mechanism and harness and apply information and communication technologies (ICTs) for facilitating trade and information access and use, in East Africa.

This profile below was prepared when Adrian Mukhebi was elected to the Ashoka Fellowship in 2005.

INTRODUCTION

By facilitating the flow of information between small-scale farmers and commodity markets, Adrian Mukhebi is increasing farmers’ negotiating power and improving rural food distribution and household food security.




THE NEW IDEA

Dr. Mukhebi is reducing the exploitation of small-scale farmers by equipping them with information that allows them to negotiate better prices for their produce. Unlike programs that work for farmers or adjust markets around them, Dr. Mukhebi is empowering poor farmers to be fully informed market participants so that they can remain legitimate forces in the open market without risking exploitation.

Through the establishment of Market Information Points (MIPs) across rural Kenya and the creative use of modern information and communication technologies (ICTs), Dr. Mukhebi collects, processes, and disseminates accurate and timely information on commodity prices, offers to sell and bids to buy, and available markets. A simulated stock exchange at each MIP and the distribution of information through both text message and voice technology gives even illiterate small-scale farmers greater bargaining power when dealing with buyers. At the same time, Dr. Mukhebi’s model channels commodity supply and demand information from farmers into the trading system, allowing a more responsive market that balances the distribution of surplus and scarcity.




THE PROBLEM

By early 2000, census results showed that 80 percent of Kenya’s 30 million people were surviving from agriculture, dominated by small-scale farming, and that agriculture made up 25 percent of the Kenyan GDP. The sector employs more than 70 percent of the formal and informal labor force. As in many African countries, the agricultural sector has been identified as key to poverty alleviation. However, despite the fact that a significant proportion of Kenya’s population derives its livelihood from agriculture, an estimated 63 percent of people living in rural areas of Kenya live below the poverty line (earning less than $1 a day). According to the Food and Agricultural Organization of the United Nations, 33 percent of the Kenyan population (over 10 million people) does not have access to sufficient food. Indeed 80 percent of Kenya’s population depends on agricultural produce supplied by 3 million small-scale farmers scattered around the country. In the last fifteen years, Kenya has experienced three major droughts and is currently facing major food shortages in numerous parts of the country, putting over two million people in need of relief aid. Although it is believed that the country has the capacity to produce enough food to feed its entire population, the government has resorted to importing food from neighboring Uganda and Tanzania.

Since independence, Kenya has relied heavily on its agricultural sector as a base for economic growth, employment creation, and foreign exchange earning. By 1993 the government of Kenya had started intensifying policy formulation and reforms aimed at market liberalization and, along with citizen sector organizations, encouraged farmers to use mechanized production techniques and fertilizers to increase production on their small farms as a way of alleviating poverty. Previously, the government had taken responsibility for seeking out markets for farmers’ produce through commodity marketing boards. The mechanization of farming led to increased production levels for those who could afford the technology, but liberalization meant that farmers had to begin sourcing markets on their own.

Ignorance about markets has lowered the bargaining power of small-scale farmers. They are exploited by middlemen who pay next to nothing for high-value commodities on the pretext that such produce does not have a market in urban areas. In reality, urban food demand is on the rise as population expands. Small-scale farmers getting minimal prices and often burdened by surplus produce do not have incentives to invest in production. Their households remain trapped in a vicious circle of poverty and food insecurity. The result is nationwide limitations for economic development.

Current approaches to addressing poverty through improved food security focus on increasing yields from small-scale plots and acquiring markets on behalf of the farmers for the surplus produce. However, these approaches only marginalize farmers from the market economy and expose them to greater exploitation. In addition, the focus on supply, with little attention to demand, contributes to price distortions and overall market volatility.

Alternatively, Fair Trade initiatives put farmers into direct relationship with consumers by removing the exploitative middlemen from the equation and allowing farmers to capture a greater margin of their product’s value. However, Fair Trade volume is limited by the niche demand for such products, which often comes at a higher cost to the consumer. Dr. Mukhebi is instead giving farmers the tools they need to be full players in the pure market economy.




THE STRATEGY

Dr. Mukhebi’s model focuses on improving the returns on small-holder agricultural produce while empowering both farmers and buyers with better information. Through his organization, the Kenya Agricultural Commodities Exchange (KACE), he collects production and price information from farmers and markets and feeds it back into the system such that farmers have more control over price negotiations and buyers can adjust more readily to changes in production levels. He does this by using modern ICTs to link farmers and markets and by creating a common, public space where farmers and buyers conduct their transactions in the presence of all available information about commodity markets.

To connect farmers to the market in a just way, Dr. Mukhebi is creating a network of Market Information Points (MIPs) (information kiosks) in rural markets where small-scale farmers can consult information about commodity prices from national, regional and international markets. With this information at hand, middlemen can no longer misinform and exploit farmers. Each MIP, of which there are now 13 in 11 of Kenya’s 60 districts, also simulates a stock exchange trading floor to increase competition based on going market prices. The trading floors are equipped with a blackboard on which farmers list available products and quantities and middlemen place their bids, thus increasing the value of farmers’ produce to the highest bid. Each MIP has a manager who ensures that up-to-date information is received and posted in time for market day. At MIPs in areas with electricity, KACE is also installing computers with Internet access so that the MIP can easily exchange information with KACE headquarters and directly access current information about regional and international markets. A Web site will soon provide a virtual library of agriculture information, including various export requirements, and a virtual trading floor.

To expand the reach of his idea, and more efficiently collect and disseminate information, Dr. Mukhebi has created a technology-based distribution system through partnerships with the leading service providers of ICTs in Kenya. His partners’ services cover nearly all of Kenya and provide viable media to reach farmers in the most remote areas of the country. Through partnership with Safaricom, the leading mobile phone service provider in Kenya, Dr. Mukhebi is able to collect and disseminate information through short message service (SMS) via mobile phones. The partnership with the Safaricom Limited, the leading mobile phone service provider in Kenya, also makes cell phones affordable to farmers through a cost-sharing agreement in which farmer groups pool money to cover half the cost of a phone, and KACE subsidizes the other half. Over 120 farmer groups now have cell phones, allowing them to receive text messages from KACE of relevant and timely market information from local, domestic, regional and international markets.

To cover the cost of the information system and that of continually updating it, Dr. Mukhebi negotiated a revenue-sharing agreement with Safaricom such that KACE receives 10 percent of the revenue on each SMS message downloaded by farmers accessing KACE’s market information system. Traffic is currently at 5,000 SMS messages a month.

Farmers and buyers who are not near an MIP and do not have a cell phone can access the same information via an Interactive Voice Response (IVR) hotline. Through a partnership with another leading telecommunications service provider, the Interactive Media Services Limited, KACE has created a program that automatically transfers the information available through SMS to the IVR hotline. Through this service, available in both English and Swahili, farmers call in, can choose language, commodity, and market and get information tailored to their choices on voice mail. KACE has 20 percent revenue sharing on all calls placed, of which there are currently 1,500 a month.

The KACE market information system has shown remarkable results in the areas where it has been piloted. In Bungoma District of western Kenya during the 2004-2005 crop season, farmers who utilized the system sold their maize crop at prices 22 percent higher than farmers who did not use the system. During the same harvest season the average price for a 90-kilograms bag of maize rose 150 percent to US$16.25 compared to the previous season’s price of US$13.33. Although these improvements in prices cannot be solely attributed to the market information system, it is clear that it is having a positive impact on prices for farmers. In addition, twelve month data showed a growing convergence of prices between urban and rural areas, implying an increasing fairness in rural purchasing prices. Dr. Mukhebi has also found that the system facilitates greater participation of women in trading: with the introduction of these services, 29 percent of the system’s users engaged in commodity trading are now women, compared to 14 percent women before.

Supporting an extensive network is a foreseeable challenge for KACE. Dr. Mukhebi started KACE with personal savings and never intended to have the system dependent on donor funding. The system is all fee-for-service, though fees vary across the clientele, depending on location and the scale of production or purchase. A large-scale farmer, middleman, or consumer who buys in bulk and accesses the information in the capital city pays 500 Ksh (US$6.67) to place an offer or bid. A small-scale farmer who accesses information at a rural MIP pays only 100 Ksh (US$1.33). KACE also collects commission on successful transactions that accrue to the use of the market information system. The commission varies between 0.5 and 5 percent depending on the volume of the transaction. Through these fees and commission, Dr. Mukhebi expects that each new MIP can become self-sustaining in six to seven years. Through the revenue sharing with Safaricom, the SMS system will fully cover its costs once it reaches 100,000 messages per month.

Because Dr. Mukhebi realizes that farmer groups need more than just information to succeed, he also provides training to the 150 groups that are currently part of his network in areas such as group dynamics and management, microfinance and credit decision making, and lobbying. At first done in an ad hoc manner, he has now institutionalized this training by approaching the Cooperative College of Kenya to open an agrobusiness training center. KACE is helping develop course modules on marketing and market information, and though based in Nairobi, the center will have traveling trainers that can take advantage of farmer training centers that the government runs throughout the country.

The KACE model has attracted a lot of attention and interest not only in Kenya but also from other African countries as indicated by a constant stream of visitors to KACE, and award of consultancies to Dr. Mukhebi to help set up similar systems in some other countries. As a result, the KACE system has now been adopted in Malawi and Uganda, and requests for assistance have come from Nigeria, Tanzania and South Africa.

Dr. Mukhebi believes his model has significance beyond commodity marketing and can have a wider application to other aspects of society. Through a franchising model under development, he plans to convert MIPs into community market resource centers in rural areas to provide a wider range of demand driven services including value addition, access to information on education, health, development, technology and other issues affecting rural populations.




THE PERSON

Dr. Adrian Mukhebi was raised on a two-hectare farm in Bungoma in western Kenya and spent most of his childhood helping his parents grow crops and raise livestock. He experienced firsthand the exploitation of poor farmers by middlemen as he accompanied his father to sell produce and saw how prices were dictated by the buyers. In many cases, the price they received was less than the cost of production. The poor returns forced his sisters to drop out of school after their primary education so that he and his brother could continue on to secondary school. Despite this sacrifice, however, his family still did not have enough money for the boys’ education. In a desperate move, his sisters were married off and the dowry used to send Dr. Mukhebi and his brother to school.

The fate of Dr. Mukhebi’s sisters is not unique in rural Kenya and across East Africa, but it has bothered him throughout his life and was a key factor that led him to pursue a career as an agricultural officer to try to improve conditions for small-scale farmers. He took full advantage of the education that came at such a high cost to his sisters, pursuing his agricultural studies all the way to the United States, where he earned his bachelor’s, master’s and doctorate in agricultural economics. While studying at Kansas State University, he visited the Chicago Board of Trade, where he learned of its history based on linking farmers to better markets and fairer prices. He came back to Kenya intent on finding a way to provide a similar opportunity for poor African farmers.

He also knew, however, that an exchange could only work in a liberalized economy, which didn’t yet exist in Kenya. Therefore, he spent the 1970s and 1980s preparing for that moment by advancing his knowledge and experience in the agricultural sector as an extension officer, university lecturer, international researcher, and consultant. He went on to start his own consultancy firm, and by 1992 when liberalization finally happened, Dr. Mukhebi registered KACE, leaving his other work to officially launch the initiative in 1997.

Dr. Mukhebi visited existing commodity exchanges in Zimbabwe and South Africa but discovered that the people using and benefiting from them were large-scale commercial farmers. He knew that setting up a system to help small-scale farmers would be more problematic since they produce small quantities at varying levels of quality. Farmers would have to be organized into associations for collective bulking and marketing. Because he didn’t have sufficient capacity to do this work on his own, he sought out other organizations working to build small-scale farmer capacity. Dr. Mukhebi began promoting farmer associations, providing training and capacity building on how to produce for liberalized markets, and developing and piloting the market information system. Through this work, he realized that he could not help farmers from Nairobi, that he would have to go to them. In 2002, he began piloting his first four Market Information Points in rural Kenya.




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