Impact of dairy hubs on smallholder welfare: empirical evidence from Kenya

Vincent Ngeno

doi:10.1186/s40100-018-0107-3

Abstract

This paper identifies the factors that affect farmers’ decision to participate in a dairy hub. It also examines the impacts of dairy hub participation on rural household welfare measured by farm yields and net returns in Kenya. The study utilises farm-level data of 826 Kenyan small-scale dairy farmers. The casual impact of dairy hub participation is estimated by utilising endogenous switching regression. This helps in estimating the true welfare effect of dairy hub participation by controlling the role of selection problem on participation decision. The empirical results indicate that farmers’ education, extension services, credit access, landholding, tropical livestock unit, distance to dairy hub, off-farm work and household size mainly determine participation in dairy hub. It was also found that dairy hub participation significantly increases yields and net returns.

Highlights

Smallholders, owning one to three cows, account for about 80% of the milk production in Kenya (Makoni et al 2013)
The growing demand for milk products in Kenya is widely recognised, the dairy sector has failed to produce adequate milk to satisfy this demand, mainly due to challenges in dairy farming. These challenges are largely similar across other developing countries and include, among others, the following problems: (1) low productivity driven by limited access to quality and affordable inputs and services, and output markets (Rao et al 2016b); (2) limited access to input market that heightens the cost of production, further restricting households to low-input-low-output vicious cycle (Rao et al 2015); (3) remote and scattered location of smallholder dairy households with limited access to reliable infrastructure, which leads to higher transaction costs and presents further challenges in terms of access to input and output markets (Rao et al 2016a).; (4) inappropriate cattle
The results show that the selected instruments can be considered as valid as it is statistically significant in explaining participation decision [χ2 = 8.71 (p = 0.000)] but is not statistically significant in explaining the milk yield function [F = 1.71 (p = 0.514)] and [F = 1.07 (p = 0.214)] for participants and non-participants, respectively

Summary

Introduction

Smallholders, owning one to three cows, account for about 80% of the milk production in Kenya (Makoni et al 2013). The growing demand for milk products in Kenya is widely recognised, the dairy sector has failed to produce adequate milk to satisfy this demand, mainly due to challenges in dairy farming These challenges are largely similar across other developing countries and include, among others, the following problems: (1) low productivity driven by limited access to quality and affordable inputs and services, and output markets (Rao et al 2016b); (2) limited access to input market that heightens the cost of production, further restricting households to low-input-low-output vicious cycle (Rao et al 2015); (3) remote and scattered location of smallholder dairy households with limited access to reliable infrastructure, which leads to higher transaction costs and presents further challenges in terms of access to input and output markets (Rao et al 2016a).; (4) inappropriate cattle

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Methods

Results