Department of Agricultural, Food, and Resource Economics Food Security Group

IDWP 122. Melinda Smale, Mary K. Mathenge, Thomas S. Jayne, Eduardo Magalhaes, John Olwande, Lilian Kirimi, Mercy Kamau, and James Githuku. 2012. Income and Poverty Impacts of USAID-Funded Programs to Promote Maize, Horticulture, and Dairy Enterprises in Kenya, 2004-2010

EXECUTIVE SUMMARY:
Since 2002, the United States Agency for International Development (USAID) has funded
programs to promote maize, dairy, and horticulture enterprises among smallholder farmers in
Kenya under the Strategic Objective 7 of Increased Rural Household Incomes. On behalf of
USAID, Tegemeo Institute has conducted household surveys to help track key indicators that
monitor progress in the implementation of these programs. The first survey was conducted in
2004. Subsequent surveys were conducted every two years (i.e., 2006, 2008, and 2010). The
sample comprises households participating and those not participating in the programs. The
programs monitored include the Kenya Maize Development Program (KMDP), the Kenya
Horticulture Development Project (KHDP), and the Kenya Dairy Development Program
(KDDP), which is now known as the Kenya Dairy Sector Competitiveness Program
(KDSCP).

The analyses presented relate to the economic impact of three programs that received
financial support from the USAID. These include the Kenya Maize Development Program
(KMDP), the Kenya Horticulture Development Project (KHDP), and the Kenya Dairy
Development Program (KDDP). The KDDP preceded the current Kenya Dairy
Competitiveness Program (KDSCP).

The Kenya Maize Development Program (KMDP) began in late 2002, with Agricultural
Cooperative Development International/Volunteers in Overseas Cooperative Assistance
ACDI/VOCA as the lead implementing agency working with a diverse consortium of
partners, including the Cereal Growers Association of Kenya (CGA), Farm Input Promotions
Africa (FIPS) Ltd., and the Kenya Agricultural Commodity Exchange (KACE). The KMDP
focuses on smallholder producers in high and medium potential maize producing districts of
Kenya, which include Trans Nzoia, Uasin Gishu, Bungoma, Lugari, Nandi, Kisii/Nyamira,
Nakuru, Bomet, and Laikipia. The program also operates on a lesser scale in maize deficit
districts of Kitui, Mwingi, and Machakos. The Program’s objectives have been to improve
maize productivity, enhance access to business support services, increase participation in
markets and trade, and strengthen the effectiveness of smallholder organizations. The KMDP
incorporates a business development services paradigm that emphasizes non-financial
services in the maize value chain. Major activities include business fairs, business skills
training for farmer organizations, and a network of Market Information Centers (MIC) that
serves as locations for prices and trade information. The KMDP also offers practical on-farm
training (through using demonstration plots) on the use of improved varieties of seed and
fertilizer and on conservation tillage (CT) and other natural resource management practices,
through collaboration with FIPS, the Ministry of Agriculture and other stakeholders.

The Kenya Horticulture Development Project (KHDP) was established in October 2003
under the management of Fintrac, Inc., with the aim of supporting the development of the
fresh and processed food sector. KHDP activities have marketing, postharvest handling,
processing, and agronomic assistance to smallholders and allied agribusinesses. In its initial
work program, the KHDP targeted six product categories: passion fruit (fresh and processed),
chili products (fresh, processed, and dried), vanilla and spices, smallholder flowers, tree crops
for processing (cashew and mango), and local market vegetables (onions, carrots, cabbage,
tomato, and indigenous vegetables). The KHDP was discontinued in April 2010 to give way
to a new program, the Kenya Horticulture Competitiveness Program (KHCP).

The Kenya Dairy Development Program (KDDP) was initiated in October 2002 and was
implemented by a consortium of agencies led by Land O’ Lakes. The program’s goal was to
raise the economic benefits earned by stakeholders in the dairy value chain and bolster rural
household incomes. Activities aimed to enhance the productivity of smallholder dairy
producers and to develop the capacity of processors and informal marketers ability to deliver
higher-quality, safe, affordable, products to the marketplace. The KDDP also sought to
stimulate the demand for quality dairy products in domestic and export markets, and to
promote sustainable, local capacity of businesses, co-operatives, and enterprises to provide
services demanded. The program’s activities have been concentrated among the following
districts: Murang’a, Kiambu, Nyandarua, Nyeri, Nakuru, Bomet, Kakamega, Kericho,
Kirinyaga, Laikipia, Migori, Nairobi, South Nandi, Trans Nzoia, and Uasin Gishu. A new
dairy program known as the Kenya Dairy Sector Competitiveness Program (KDSCP) was
launched in May 2008, with the overall goal of increasing household incomes from the sale
of quality milk.

In this study, Tegemeo/MSU have conducted an in-depth econometric analysis of the
quantitative impacts of the three programs on household income and poverty from 2004 to
2010. The methods employed control for other factors affecting income and poverty during
the same time period, and compare participants to non-participants (treatment vs. control
groups) in each survey year relative to a baseline in 2004. The data used were drawn from the
household surveys mentioned above. As a check on the reliability and generality of findings,
data from a nationally representative panel household survey by the Tegemeo Institute were
also used to construct a comparative group (counterfactual) in addition to the control
mentioned above. The following broad results were obtained:

1) Using 2004 as the baseline, USAID programs significantly improved incomes of
households targeted by the programs in the subsequent years; by an average of Kenyan
Shilling (Ksh) 74,414 in 2006; Ksh 125,320 in 2008; and Ksh 124,071 in 2010. This
finding holds not only when comparing beneficiary households to non-beneficiary
households selected for the study, but also when comparing the beneficiary households to
the Tegemeo’s nationally representative sample of households. There were also
significant average impacts on households that benefited indirectly from programs.
2) Although the beneficiary and non-beneficiary households moved gradually out of poverty
during the period of study (2004-2010), the movement out of poverty among nonbeneficiaries
was not consistent, and sometimes negative (between 2006 and 2008), while
that among the beneficiary households was consistent and always positive throughout the
period. Taking into account other factors, only less than 3% of USAID programs’
beneficiaries were predicted to be poor in 2010, compared to 18% of non-beneficiaries.
3) USAID programs had significant impact on beneficiary households’ off-farm income in
2010 (an average increase by Ksh 77,207 compared to non-beneficiaries), suggesting that
the programs may have improved the capacity of program participants to generate income
from non-farm sources. This finding holds not only when comparing beneficiary
households to non-beneficiary households selected for the study, but also when
comparing the beneficiary households to the Tegemeo’s nationally representative sample
of households in 2010 relative to 2004.
4) There were limitations in analyzing individual program impacts due to small sample
sizes, particularly with respect to poverty impacts. The following specific program results
were obtained.