71point4 > Projects > Agriculture > Deep-Dive Study on Farmer Service Centres (FSCs) in Kenya

Deep-Dive Study on Farmer Service Centres (FSCs) in Kenya

CLIENT

Farm to Market Alliance (FtMA) // Financial Sector Deepening Kenya (FSD Kenya)

DATE
2023/24

DATA SOURCES

Internal primary survey data collected by FtMA, national surveys (e.g. Integrated Household Budget Survey and Population and Housing Census), in-depth interviews, telephone survey conducted by research team, and key informant interviews

CAPABILITIES

Survey design, survey analysis, segmentation and in-depth interviews

Objective

This study, commissioned by FSD Kenya in collaboration with FSD Africa and the Farm to Market Alliance (FtMA), aimed to understand FSC business models, their viability and sustainability, with a specific focus on those owned by females and youth. The research also explored FSCs’ access to finance and assessed the role of digitization in facilitating access to finance for both FSCs and smallholder farmers.

Methodology

A mixed-method approach was followed to fulfil the research objectives. An initial analysis of secondary data sources including the Integrated Household Budget Survey (2015/16) and Population and Housing Census (2019) were used to understand the Kenyan context including the number and profile of farmers in Kenya. The next phase involved analysing internal survey data collected on an on-going basis by FtMA from FSCs in their network. In addition, additional key informant interviews with FtMA stakeholders and agri-business coordinators were conducted.

To get a better understanding of the different FSC operating models and to identify the dimensions along which FSCs could be segmented, Gmaurich Insights ran in-depth interviews with 15 FSCs. To quantify these segments, a telephone survey was conducted with 380 FSCs (40% of active FSCs). Videos and photo profiles of five FSCs were captured by Stephen Ouma Photography.

Outcomes

Segmentation

The in-depth qualitative interviews identified three key segments of FSCs: Established FSCs, Transitional FSCs, and Subsistence FSCs. These segments were sized and analysed using data from the telephone survey. Established FSCs (~20% of all FSCs) tend to offer services all year round, and while many operate their own farms, their FSC business is their primary source of income. Transitional FSCs (~30% of all FSCs) are starting out or are beginning to establish themselves as FSCs. While transitional FSCs may not be very successful yet, they are growing and show potential. The FSC business of Subsistence FSCs (~50% of all FSCs) is not their primary income source. These FSCs tend to operate only in-season (usually in six or less months of the year).

Digitisation and financial services

Digital apps and digital financial services can create visibility on the transactions and cash flows of FSCs for FtMA and other stakeholders. However, the digital space is crowded and fragmented. It is by no means clear which apps will reach critical mass and become permanent features of the market, and which are not sustainable. In addition, there are no mechanisms in place to enable efficient data sharing between those apps or digital platform providers that do attain critical mass and other FtMA stakeholders. Only half of FSCs report to be using a digital app with 31% stating consistent usage.

The utilisation of digital payments by FSCs is widespread and creates visibility on the cashflows of both the FSC business and smallholder farmers (SHFs). 61% of FSCs use a bank account for their FSC business, and the majority (just over 70%) of FSCs state that the primary method of receiving funds is through their Mpesa wallet or bank account. However, while most FSCs are receiving funds digitally, many aggregating FSCs still pay farmers in cash, with only 40% indicating that the main way of payment to farmers for their produce is via Mpesa or a bank account.

More than 40% of FSCs have taken a loan for their FSC business. Interviews conducted with FSCs indicate that many have leveraged their digital transaction records to access credit from a bank. FSCs which fall into the established segment are more likely to have accessed credit for their business, with half having taken a loan for their FSC business. FSCs that fall into the subsistence segment are the least likely to access credit for their FSC business.

PROJECT RESOURCES