Project Concept Note - World Bank
Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No. 50850-KE
EUROPEAN UNION FOOD PRICE CRISIS RAPID RESPONSE FACILITY
EMERGENCY PROJECT PAPER
ON A PROPOSED GRANT
UNDER THE
GLOBAL FOOD CRISIS RESPONSE PROGRAM
IN THE AMOUNT OF EURO 19.13 MILLION
TO THE REPUBLIC OF KENYA
FOR THE
ENHANCING AGRICULTURAL PRODUCTIVITY PROJECT
March 8, 2010
Sustainable Development Department
Agriculture and Rural Development Unit
Eastern Africa Country Cluster 2
Africa Region
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
CURRENCY EQUIVALENTS
|Currency Unit |= |Kenya Shillings (KSh) |
|I Euro (€) |= |KSh 110 |
| | | |
FISCAL YEAR
|July 1 |– |June 30 |
ABBREVIATIONS AND ACRONYMS
|ACSU |Agriculture Sector Coordination Unit |
|AGMARK |Agriculture Development and Marketing Trust |
|AGRA |Alliance for the Green Revolution in Africa |
|AHBFI |Africa Harvest Biotech Foundation International |
|AISP |Agriculture Input Supply Project |
|ALRMP |Arid Lands Resource Management Project |
|APL |Adaptable Program Loan |
|ASAL |Arid and Semi-Arid Lands |
|ASDS |Agricultural Sector Development Strategy |
|ATC |Agricultural Training College |
|CAN |Calcium Ammonium Nitrate |
|CAS |Country Assistance Strategy |
|CBO |Community Based Organization |
|CGA |Credit Guarantee Agreement |
|CIFA |Country Integrated Fiduciary Assessment |
|CPIA |Country Policy and Institutional Assessment |
|DA |Designated Account |
|DAEO |Divisional Agriculture Extension Officer |
|DAO |District Agricultural Officer |
|DAP |Di-Ammonium Phosphate |
|DSF |District Stakeholders Forum |
|EAPP |Enhancing Agricultural Productivity Project |
|EPP |Emergency Project Paper |
|ESMF |Environment and Social Management Framework |
|EU |European Union |
|FAO |Food and Agriculture Organization |
|FCR TF |Food Crisis Response Trust Fund |
|FCRP |Food Crisis Response Program |
|FM |Financial Management |
|GAP |Governance Action Plan |
|GDP |Gross Domestic Product |
|GFRP |Global Food Crisis Response Program |
|GoK |Government of Kenya |
|GSBPB |Governance Strategy for Building a Prosperous Kenya |
|IAD |Internal Audit Department |
|IBRD |International Bank for Reconstruction and Development |
|IDA |International Development Association |
|IDP |Internally Displaced Person |
|IFAD |International Fund for Agricultural Development |
|IFR |Interim Financial Report |
|IPMP |Integrated Pest Management Plan |
|IRCBP |Institutional Reform & Capacity Building Project |
|KAPAP |Kenya Agricultural Productivity and Agribusiness Project |
|KAPP |Kenya Agriculture Productivity Project |
|KARI |Kenya Agriculture Research Institute |
|KENAO |Kenya National Audit Office |
|KEPHIS |Kenya Plant Health Inspection Service |
|Kg |Kilogram |
|KSh |Kenya Shilling |
|KSU |KARI See Unit |
|KWFT |Kenya Women Finance Trust |
|M&E |Monitoring and Evaluation |
|MoA |Ministry of Agriculture |
|MoF |Ministry of Finance |
|MT |Metric Tonnes |
|MTP |Medium-term Plans |
|NAAIAP |National Accelerated Agricultural Inputs Access Program |
|NGO |Non-Governmental Organization |
|NPSC |National Program Steering Committee |
|OCP |Orphan Crop Program |
|PDG |Program Design and Guidelines |
|OCP |Orphan Crops Program |
|PMP |Pest Management Plan |
|PMU |Project Management Unit |
|PS |Permanent Secretary |
|PSC |Project Steering Committee |
|SOE |Statements of Expenditure |
|SWAp |Sector-Wide Approach |
|WRMA |Water Resources Management Authority |
| | |
|Vice President: |Obiageli Katryn Ezekwesili |
|Country Director: |Johannes Zutt |
|Sector Director |Inger Andersen |
|Sector Manager: |Karen McConnell Brooks |
|Task Team Leader: |Andrew Mwihia Karanja |
Kenya
KENYA: Enhancing Agricultural Productivity Project
Contents
Page
A. INTRODUCTION 1
1. Country and sector issues 1
B. EMERGENCY CHALLENGE, COUNTRY CONTEXT, RECOVERY STRATEGY AND RATIONALE 2
1. Rationale for Bank involvement 2
2. Sector Context 3
3. Project Rationale 3
C. BANK RESPONSE - THE PROJECT 4
1. Brief Description of Bank’s Strategy for Emergency Support 4
2. Project Development Objectives 5
3. Summary of Project Components 5
4. Consistency with Country Strategy 7
5. Expected Outcomes 8
D. APPRAISAL OF PROJECT ACTIVITIES 8
1. Economic 8
2. Technical 9
3. Social 9
4. Fiduciary 9
5. Lessons Learned and Reflected in the Project Design 10
6. Environmental 12
E. IMPLEMENTATION ARRANGEMENTS AND FINANCING PLAN 13
F. PROJECT RISKS AND MITIGATING FACTORS 14
G. TERMS AND CONDITIONS FOR PROJECT FINANCING 14
Annex 1: Detailed Description of Project Components 16
Annex 2: Results Framework and Monitoring 31
Annex 3: Summary of Estimated Project Cost 34
Annex 4: Financial Management (FM) Report 35
Annex 5: Procurement Arrangements 44
Annex 6: Implementation Arrangements 44
Annex 7: Project Preparation and Appraisal Team Members 57
Annex 8: Global Food Response Program and the European Union Food 58
Price Crisis Rapid Response Facility 58
Annex 9: List of Project File/Supporting Documents 59
Annex 10: Statement of Loans and Credits 60
Annex 11: Country at a Glance 62
Annex 12: Map 65
KENYA
KENYA: Enhancing Agricultural Productivity Project
EMERGENCY PROJECT PAPER
AFRICA
AFTAR
|Date: March 8, 2010 |Team Leader: Andrew Mwihia Karanja |
|Country Director: Johannes C.M. Zutt |Sectors: Crops (100 percent) |
|Sector Manager/Director: Karen Mcconnell Brooks |Themes: Global food crisis response (100 percent) |
|Project ID: P119736 |Environmental category: Partial Assessment |
|Lending Instrument: GFRP |Joint IFC: |
| |Joint Level: |
|Project Financing Data |
|[ ] Loan [ ] Credit [ ] Grant [ ] Guarantee |[ X ] Other: |
|Food Crisis Response Trust Fund (Global Food Crisis Response Program Framework) |
|For Grants: |
|Total Operation Cost: Euro 19.13 million |
|Financing Plan (€ million) |
|Source |Local |Foreign |Total |
|Recipient |2.27 | 0.00 |2.27 |
|Trust Funds (Euro 19.13 million) |0.00 |19.13 |19.13 |
| | | | |
|Total |2.27 |19.13 |21.40 |
|Estimated disbursements (Bank FY/ € million) |
| |2010 |2011 |2012 |
|Recipient: |
|Republic of Kenya |
|Responsible Agency: |
|Ministry of Agriculture |
| |
|Project implementation period: Start: March 15, 2010 End: December 30, 2011 |
|Expected effectiveness date: March 15, 2010 |
|Expected closing date: December 30, 2011 |
|Does the project depart from the CAS in content or other significant respects? Ref. PAD I.C. |[ ]Yes [X] No |
|Does the project require any exceptions from Bank policies? | |
|Ref. PAD IV.G. |[ ]Yes [X] No |
|Have these been approved by Bank management? |[ ]Yes [ ] No |
|Is approval for any policy exception sought from the Board? |[ ]Yes [X] No |
|Does the project include any critical risks rated “substantial” or “high”? |[X]Yes [ ] No |
|Ref. PAD III.E. | |
|Does the project meet the Regional criteria for readiness for implementation? Ref. PAD IV.G. |[X]Yes [ ] No |
|Project development objective Ref. PAD II.C., Technical Annex 3 |
|The objective of the Project is to assist the Recipient to increase access to agricultural inputs and technologies among targeted smallholder |
|farmers in selected districts. This improved farmer access is expected to contribute to higher yields, household food self-sufficiency and |
|the generation of surpluses for sale, as well as reduced gap between domestic production and consumption in 2010 and 2011. The support will |
|also contribute towards improving access to credit and towards promotion and diversification to other food crops other than maize. |
|Project description [one-sentence summary of each component] Ref. PAD II.D., Technical Annex 4 |
|The Project will focus on enhancing smallholder farmers’ access to farm inputs. The support will leverage additional resources to upscale two|
|ongoing Government programs for increasing access to farm inputs: (a) Kilimo Biashara, the input credit scheme for farmers channeled through |
|commercial banks, and (b) Kilimo Plus, an ongoing input voucher scheme for the very poor and vulnerable. 150,000 farmers will be targeted for|
|input supply under input voucher scheme. The Project will also ensure availability of seeds and other planting materials for |
|traditional/orphan crops to around 500,000 smallholder farmers. There are four components under the Project: |
| |
|Component One: Up-scaling the existing Kilimo Biashara Agricultural Credit Program at a cost of €5.07 million. |
|Component Two: Up-scaling the existing Input Voucher Scheme (Kilimo Plus) in selected districts through the Government’s National Accelerated |
|Agricultural Inputs Access Program (NAAIAP) at a cost of €9.47 million. |
|Component Three: Up-scaling the adoption of orphan crops at a cost of €3.02 million. |
|Component Four: Support to the Government of Kenya’s (GoK) coordination and operational costs estimated at €1.5 million. |
|Which safeguard policies are triggered, if any? Ref. PAD IV.F., Technical Annex 10 |
|This Project has minimal if any potential adverse impacts on human populations or environmentally-important areas, such as wetlands, forests, |
|grasslands, or other natural habitats; the impacts are site specific; few if any are irreversible and specific mitigation measures can |
|normally be designed; hence this Project has been assigned Environmental Category B. |
|Nonetheless, it has been determined that the Project should trigger Environment Assessment (OP/BP/GP 4.01) and Pest Management (OP 4.09). A |
|partial Environmental Assessment in the form of an Environmental and Social Management Framework (ESMF) and a Integrated Pest Management Plan |
|(IPMP), which were developed for the KAPAP, will be used. The draft instruments were disclosed on April 1, 2009. |
|Significant, non-standard conditions, if any, for: |
|Ref. PAD III.F. |
|A. Board presentation: |
|This Project does not involve any exceptions to Bank policies. |
|B. Effectiveness Condition: |
|None |
|C. Disbursement Conditions |
|Disbursement Conditions for Kilimo Biashara and orphan crop Components |
|MoA will develop and adopt Agricultural Credit Guarantee Scheme operations in form and substance satisfactory to IDA. |
|MoA will develop and adopt the Orphan Crop Program manual in form and substance satisfactory to IDA. |
|D. Legal Covenants: None |
|Covenants applicable to Project implementation: None |
INTRODUCTION
Country and sector issues
This Emergency Project Paper (EPP) proposes financing for the Enhancing Agricultural Productivity Project (EAPP) in Kenya. The proposed Project is to be financed from the European Union (EU) Food Crisis Rapid Response Facility under the Global Food Crisis Response Program (GFRP) in the amount of Euro 19.13 million. The proposed Project will upscale two ongoing programs of the Government of Kenya (GoK). It will also strategically complement the IDA supported Agricultural Inputs Supply Project (AISP) and the Kenya Agricultural Productivity and Agribusiness Project (KAPAP). The proposed Grant would help finance the costs associated with the provision of inputs to 150,000 smallholder farmers, up-scaling of an ongoing agricultural input credit scheme, and the provision of planting materials for “orphan crops”[1] to over 500,000 smallholder farmers. The overall objective is to increase smallholder crop (mainly cereals) production and through improved access to inputs, technologies and credit during the next three planting seasons, starting in October 2009.
Kenya is facing a food shortage due to poor rains in 2009 and an estimated 4 million people require famine relief. The expected 2009 long rain season maize production is estimated at 1.84 million metric tonnes (MT), which is 28 percent below normal. There is a growing apprehension that the estimated production could further be revised downwards due to insufficient and erratic rains in some parts of the main maize producing areas in North Rift Valley. Continued export bans in neighboring countries (in particular Tanzania) are likely to reduce cross border maize inflows by 46 percent. The reduced levels of production and imports are likely to compound the tightening maize supply situation. High food prices persist throughout the country with average price of maize at 100-130 percent above normal. As a result, terms of trade of pastoralists, agro-pastoralists and marginal agriculture farmers and purchasing power of urban households have deteriorated significantly given that over 65 percent of Kenyans are net buyers of maize. The effects of high fuel prices in 2008 have also increased the prices of farm inputs thereby adversely affecting farmers’ ability to buy inputs. Although the prices of fertilizers have come down from their highest levels in December 2008[2], they are still above the pre-oil crisis level.
The proposed EAPP seeks to enhance domestic food production by supporting smallholder farmers to produce more maize and other crops in 2010 and 2011 planting seasons. This will not only enhance food availability and price stability in the country, but will also ensure that farmers get higher incomes from sales. Furthermore, the operation will enhance household food security, reduce the high dependence on maize, and improve incomes by promoting smallholder production of alternative cereals/crops such as millet, sorghum, cowpea and cassava.
The World Bank through the AISP mobilized US$5 million for input supply in the 2009 long rains planting season, providing valuable lessons for the proposed intervention. The Food and Agriculture Organization (FAO) also supported the GoK inputs program, the National Accelerated Agricultural Inputs Access Program (NAAIAP) in 2009, with funds that allowed 6,000 farmers to access farm inputs.
EMERGENCY CHALLENGE, COUNTRY CONTEXT, RECOVERY STRATEGY AND RATIONALE
Rationale for Bank involvement
The food and fuel price crisis have had major economic and agricultural impacts. Kenya’s inflation has been high since the beginning of 2008, mirroring developments in international food prices. The official overall inflation rate increased rapidly from 12 percent in December 2007 to 31.5 percent in May, 2008 before easing off in 2009 to stand at 18.4 percent in August 2009. Rising food prices and the cost of fuel and transportation have been the main drivers of inflation. While the price surge in Kenya was less steep than the overall global trend, Kenyan prices have remained high, even after global prices eased off, mainly due to constrained local supply. The poor rains in 2009 have escalated the food emergency leading to an estimated 4 million people requiring famine relief. However, the weather forecast for the next planting season in 2009/10 is good with rains expected to be above normal in most parts of the country. Support under the proposed Project is therefore expected to use the opportunity of the good weather to enhance agricultural production.
Although maize is Kenya’s main staple food, there is too much overdependence on maize both at the national food policy level and amongst households. This is despite the fact that in the recent past the non-cereal components of agricultural GDP have performed significantly better than cereals, particularly maize. Historically, maize has received a great deal of policy and investment attention. Given that the country seems to be headed for a structural maize deficit arising from population growth, urbanization and poor and erratic weather conditions, shifting consumption and production patterns towards other cereals and non-cereals food items has become a necessity. This would not only help improve food security; it would also help to diversify farmers' incomes while coping with the effects of climate change.
The food crisis has had a significant impact on the GoK’s budget. For instance, the GoK’s maize flour subsidy program, which was in place in 2008, had an estimated cost of Kenya Shilling (KSh) 7 billion (US$89 million). The GoK has also waived import duty on maize imports until January 2010. A total of 670,000 MT of maize are planned to be imported by the GoK and the private sector to close the consumption gap. While most of these interventions are geared towards easing the current food shortage, there is need to boost production in the coming seasons, thereby ensuring adequate supply in the coming years. The proposed Project will therefore assist to ease the budgetary burden by ensuring that local food production is enhanced.
Sector Context
The performance of agriculture greatly affects the poor in Kenya, as 67 percent of the population and 80 percent of the poor live in rural areas and depend on agricultural activities for their livelihood. The sector directly contributes 24 percent of the GDP. Annual agricultural growth averaged 3.5 percent in the 1980s, but declined to 1.3 percent in the 1990s. In this decade, GoK’s efforts focused on reversing agriculture’s poor performance have started to bear fruit, with the compound average sector growth rate increasing by 5 percent between 2001 and 2007. This improved performance suffered a setback in 2008, due to disruptions in production associated with the unrest after the elections, poor rains in some localities, and uncertainty about the GoK’s policy on agricultural pricing and marketing, with production suffering a 20 percent reduction from the previous year.
9. Agricultural sector is identified as one of the key sectors of the economic pillar in the “Kenya Vision 2030”[3] and Medium Term Plans, with an annual growth projection of 5-7 percent. The sector priorities are articulated in the Agricultural Sector Development Strategy (ASDS) which was approved by GoK in August 2009. The sector is also developing a food and nutrition policy to guide on food security and nutrition matters. On input side, Kenya has a well established fertilizer market which is fully liberalized with the bulk of fertilizers imported and distributed by the private sector. Private sector importers have established their distribution network of about 300 wholesalers and 5,000 agro-dealers situated in major towns and market centers country-wide. In the last six months, the GoK, through various agencies, has intervened in the market by importing around 241,000 MT of fertilizers, of which some will be financed by a credit from the African Development Bank. This intervention is seen as temporary, and is aimed at stabilizing the market after the high fertilizer prices witnessed after the fuel crisis.
Project Rationale
The proposed Project takes a three-pronged approach aimed at enhancing the production capacity of smallholder farmers and diversifying their production systems. This will be done by up-scaling two ongoing GoK programs, which target: (i) the poor and vulnerable smallholder farmers in maize production zones; (ii) smallholder farmers in marginal areas where maize does not do well; and (iii) other smallholder farmers and traders through provision of input credit to purchase agricultural inputs. The support to poor and vulnerable farmers will involve the provision of input vouchers aimed at enhancing their maize production. This will mainly benefit farmers in the medium to high potential areas of the country where maize production takes place. To address the plight of smallholder farmers in the marginal areas, where maize performs poorly and to diversify production, the proposed Project will support the production and distribution of planting materials for the drought tolerant crops (orphan crops). For the benefit of other farmers who can be able to buy fertilizers and other inputs but are unable to finance their purchase, the proposed Project will upscale the existing Input Credit Program to enhance its scope and out-reach.
To ensure quick results and impact, the proposed Project will scale-up two on-going GoK programs. These programs are: the NAAIAP and the Orphan Crops Program (OCP). The choice of these two GoK programs is informed by the valuable lessons learned from the AISP implementation and the need to have activities that are quick disbursing and can immediately address the emergency situation. Through the support provided under AISP, 48,000 smallholder farmers (96 percent of the targeted beneficiaries) received input vouchers during the 2009 long rains planting season.
This operation will be integrated into the proposed agriculture sector-wide approach being developed as part of the overall Agricultural Sector Development Strategy (ASDS). Targeted poverty interventions aimed at increasing the productivity of the poorest smallholder and pastoral communities are one of the key interventions identified under ASDS. The proposed operation will focus on smallholder agriculture to the exclusion of others as there are other programs in the sector that support pastoral communities, including the IDA and EU financed Arid Lands Resource Management Project (ALRMP II) and the Drought Management Initiative. FAO through support from EC TF is also preparing an operation to support the livestock sector.
BANK RESPONSE - THE PROJECT
Brief Description of Bank’s Strategy for Emergency Support
The Bank’s strategy for emergency support will be focused on improving the immediate to medium-term supply of food produced and available in the country. While the GoK and other humanitarian agencies are focusing on ensuring that relief food is available and distributed to needy households, it is also critical to focus on increasing domestic food supply in the country in the coming two years. This can only be done by helping food producers, and especially smallholder farmers, to access credit, inputs, services and technologies.
Other programs are addressing the needs of the arid and semi-arid areas of Kenya. The Arid Lands Resource Management Project (ALRMP), co-financed by the World Bank and the EU, focuses on drought preparedness and mitigation in the 28 Arid and Semi-arid Lands (ASAL) districts. This Project is providing resources to deal with drought-related food insecurity. While the situation in the ASAL districts is not serious, the eastern marginal agriculture zone, known as Ukambani, is under severe stress. The ALRMP Project is providing needed resources for water supply, support to human and animal health, and, along with the EU, the provision of inputs for marginal farmers starting in the short rains season of 2009[4]. This intervention would build on this experience and on the experience of NGOs who operate in the eastern ASAL districts. The Eastern lowland will be the main target region of the up-scaled OCP.
The World Bank is intensifying its long term support to agricultural productivity. In the medium- to long-term, the Bank is helping the GoK to increase agricultural productivity by supporting sector reform as well as the generation and dissemination of agricultural technologies and services. In this regard, KAPAP, a Bank-supported Project, was approved by the Board in June 2009. This Program will be part of the Sector-Wide Approach (SWAp) being developed for the sector, in which the EU is expected to participate.
Project Development Objectives
The objective of the Project is to assist the Recipient to increase access to agricultural inputs and technologies among targeted smallholder farmers in selected districts. This improved farmer access is expected to contribute to higher yields, household food self-sufficiency and the generation of surplus for sale, as well as reduce the gap between domestic production and consumption in 2010 and 2011. The support will also contribute towards improving access to credit, promotion and diversification to other food crops other than maize.
Summary of Project Components
This support will focus on enhancing smallholder farmers’ access to farm inputs. The support will leverage additional resources to upscale two ongoing Government programs (NAAIAP and OCP) aimed at increasing access to farm inputs. The NAAIAP has two components which will be supported under this operation: Kilimo Plus and Kilimo Biashara. Kilimo Plus supports the provision of inputs grants to the poorest farmers through a voucher program. Kilimo Biashara is a low-interest credit package for better endowed enterprise-oriented farmers who are constrained by capital. The OCP program is focused on multiplication and distribution of orphan crop planting materials to smallholder farmers in semi arid areas. (See Annex 1 for details).
There are four Components under the Project:
a. Component One: Up-scaling the existing Agricultural Credit Program (Kilimo Biashara) at a cost of €5.07 million. The Project will build on the partnerships already established between the Government, IFAD, Alliance for Green Revolution in Africa (AGRA), and Equity Bank to leverage additional credit and scale up loans to farmers. The overall strategy is to leverage Equity Bank’s enormous resources through a 10 percent guarantee fund on the basis of which Equity Bank will provide credit facilities of up to US$50 million to smallholder farmers, agro-input dealers and other value chain players in the agricultural sector. Although the experiences so far gained from the Equity Bank’s Kilimo Biashara Program will be used, the facility will be opened to other financial institutions that will be selected on set criteria (see Annex 1 for details). This will ensure that outreach is expanded while promoting rural financial intermediation in the next two years. Sixty percent of the funds under this Component (around Euros 3 million) will be used to expand quickly the Equity Bank facility while the remainder will be used to establish similar facilities in three other financial institutions, one of which will be geared towards women farmers.
b. Component Two: Up scaling the existing input voucher scheme (Kilimo Plus) in selected districts through the Government’s NAAIAP Program at a cost of €9.47 million. This seed and fertilizer voucher scheme targets more vulnerable farmers who cannot access credit for various reasons. A total of 150,000 smallholder farmers will be targeted in 85 districts. Each beneficiary under the Kilimo Plus Program will receive a voucher with a total face value of KSh 6,100[5] (approximately €56) to cover the cost of 10 kg hybrid seed, 50 kg basal fertilizer and 50 kg top-dressing fertilizer. These inputs are sufficient for approximately 1 acre (0.4 ha) of maize. Existing community committees would identify farmers based on agreed criteria. Capacity building of farmers, community committees and agro-dealers on input use, crop husbandry and other farming technologies would be financed. Beneficiary farmers would then access inputs through private sector agro-dealers. MoA district teams would supervise, monitor and provide quality control.
c. Component Three: Up-scaling of the Orphan Crop Program at a cost of €3.08 million. This component would focus on supplying planting materials of orphan crops to smallholder farmers in semi-arid areas. This will involve promoting farmer involvement in seed bulking and multiplication of orphan and other crops, including sorghum, cassava and millet. These crops are drought tolerant and more suitable for such areas and could be important substitutes to maize both for human consumption and in providing alternative ingredients to maize in animal feed production. The proposed program will involve production of about 1,500 metric tonnes of seeds and other planting materials for distribution to100 districts spread across all the provinces. This will directly benefit about 500,000 households in the next one and half years. An additional 2,400,000 households are expected to benefit in later years from seed multiplied by the 500,000 households. Ministry of Agriculture (MoA) will contract Kenya Agricultural Research Institute (KARI) to produce the planting material, at its seed unit and through contract farmers. The planting material will then be distributed by MoA to farmers in the country through District Agricultural Officers and other means. Support will also include expanding the irrigated area for breeder seed multiplication at KARI seed production centers (Katumani, Marimanti, Mtwapa and Kakamega) and in selected MoA Agricultural Training Colleges (ATCs).
d. Component Four: Support to project administration costs: In addition, the Project would cover Government operating costs, monitoring and evaluation (M&E), and communications and information sharing at a cost of €1.5 million and the World Bank Administration fee of €0.9 million.
Component one will have a national coverage while the other two components will cover selected districts. The Kilimo Plus component will cover 85 districts mainly in the medium to high potential areas where maize production takes place. The targeted districts will be in the Coast, Rift Valley, Western, Eastern, Central and Nyanza provinces. The six Rift Valley districts covered under the IDA supported AISP are excluded. The OCP will cover 100 districts mainly in the marginal areas spread across the eight provinces. Although there will be some overlap in districts covered under the Kilimo Plus and Orphan Crop components, the divisions and locations to be covered in each district will be different based on their agricultural potential and suitability for maize and the orphan crops.
For Components Two and Three, beneficiaries will be selected by Community Committees. The committees are composed of various stakeholders (local administration, agriculture and social services officers, church leaders, community leaders, village development committee members, Community Based Organizations (CBOs) and Non-Governmental Organizations (NGOs) operating in the area. The farmer identification process includes open air meeting “barazas” at location and sub-location (village) levels to ensure transparency (see Annex 1 for details).
Extension workers and accredited agro-dealers have been trained to help farmers make sound decisions in choosing varieties and fertilizer types. However, due to the expanded coverage, there is a need to train more extension staff and agro-dealers especially in the newly created districts. The Project will reimburse the GoK for the associated training, as well as for logistical costs associated with the implementation, monitoring and evaluation of the program. A retroactive financing provision will allow financing of activities undertaken after April 1, 2009. A detailed Project description and costing can be found in Annexes 1 and 3, and implementation arrangements in Annex 6.
Visibility plan and communication strategy is included. In accordance with the visibility provision under the EC-World Bank Trust Funds and Co-financing Framework Agreement, the Bank and the EC together with MoA and other implementing organizations will work together to ensure appropriate visibility actions for the Program as a whole, as well as for specific interventions and activities under the Program. Such a visibility plan is being developed and has been budgeted for and will be submitted as part of a larger, global plan for World Bank funded projects in collaboration with the visibility action plans of other agencies. To ensure timely and relevant project information is availed to the beneficiaries and other stakeholders, an outreach and a communication strategy will be developed and implemented as part of the communication and visibility plan. Adequate resources have been set aside for this purpose.
Consistency with Country Strategy
The Kenya Country Assistance Strategy (CAS) is under preparation. The former CAS and a 2007 CAS Progress Report, which extended the CAS period, expired in June 2008. Nevertheless, most of the main pillars of the lapsed CAS and its update are still relevant. This emergency operation, linked with the Adaptable Program Loan (APL) series for agricultural productivity, remains in line with the earlier CAS and the proposed strategic priorities of the CAS now under preparation. The 2007 CAS Progress Report (Report No. 38055-KE) cited the contributions that the World Bank has made to the sector, most notably increasing the focus on equity and more directly targeting the poor.
Expected Outcomes
The Project is expected to result in 650,000[6] smallholder farmers having access to an appropriate package of seed and fertilizer. In addition, it is expected that 15,000 farmers and agro-dealers will also receive input credit. See Annex 2 for the Results Framework for the Project.
Overall impact indicators include:
• Incremental staple food production in targeted areas (tones); and
▪ Yields of maize in targeted areas (bags per acre).
Project outcome indicators include[7]:
• Number of farmers benefiting from the Project.
• Number of farmers receiving improved seeds.
• Number of farmers receiving fertilizers
• Area cultivated with hybrid maize seeds (in hectares).
• Area cultivated with orphan crop seeds developed under the project (in hectares).
• Number of Farmers adopting at least one improved technology for food production[8] .
APPRAISAL OF PROJECT ACTIVITIES
Economic
The Project will have a significant positive economic impact on maize production and on the production of other staple crops. The Project expects to reach 150,000 farmers with inputs sufficient to produce maize on one acre, in addition to the 500,000 farmers targeted to benefit from the Orphan Crop Program. This is expected to result in gross production of 202,500 MT of maize and increased production of the orphan crops. Using the recommended input package, each farmer producing maize is expected to conservatively produce 15 bags of maize per acre. The value of this production is estimated at KSh 33,000 per farmer (€300) and KSh 2,200 per bag, for a gross benefit to the Project of €45 million. We are assuming that, in a counterfactual without-Project situation and given the high cost of inputs, each farmer would have a yield of only six bags per acre. This would result in an incremental benefit of 121,500 MT of maize valued at €27 million. The value of production expected from those producing other staple crops should be €13.8 million.
It is not envisaged that the voucher scheme will become a permanent feature of the GoK’s support to the agriculture sector. Farmers are expected to graduate to Kilimo Biashara, and access credit for inputs as needed through commercial means. Farmers participating in the input voucher scheme are also trained and required to participate in farmer groups involved in grain storage and warehousing. This arrangement allows the participating farmers to buy inputs on their own from the sales proceeds thereby exiting from dependency on input vouchers. The GoK has committed relatively substantial funding (about KSh 500 million/US$6.6 million) this year to kick-start the voucher scheme and the OCP, and holds it as a high priority.
Technical
The technical aspects of the Project have been appraised and found to be sound. The proposed program will focus on increasing the production of smallholder farmers. See Annex 1 for details.
Social
The Project mainstreams nutrition and gender concerns, as a part of its integrated technical and socio-economic approach. The Project’s activity directed at improving agricultural and food production capacity promotes inclusion of women and income targets that will ensure that they gain financially. The Project will follow a participatory and inclusive process of direct and systematic engagement with beneficiary communities in the selection, implementation, and monitoring of the activities supported by the Project. Through these and other interventions, it is clear that important explicit outcomes of the Project will result in positive social impacts.
Fiduciary
The Project will be implemented through existing capacities within the MoA, through existing NAAIAP structures. The World Bank conducted a Financial Management (FM) assessment of MoA’s NAAIAP on February 26, 2009 as part of AISP appraisal. The objective of the assessment was to determine whether: (a) the entity has adequate financial management arrangements to ensure Project funds will be used for the purposes intended in an efficient and economical way; (b) Project financial reports will be prepared in an accurate, reliable and timely manner; and (c) the entity’s assets will be safely guarded. The FM assessment was carried out in accordance with the World Bank’s Financial Management Practices Manual issued by the Financial Management Sector Board on November 3, 2005.
The Assessment revealed that MoA and NAAIAP have adequate FM capacity to implement the Project. The Program structures, including the National Program Steering Committee (NPSC) and Project Management Unit (PMU), are operational. The PMU has been set up and is already in the process of implementing Program activities using GoK funds. As part of the capacity building measures, the Permanent Secretary (PS) of MoA has designated a Program Accountant to handle the FM aspects of the Grant from Effectiveness. The Accountant has appropriate qualification at the technician level and has over three years experience in Project management within the Ministry. The Ministry’s internal controls over NAAIAP are deemed adequate and the Ministry’s internal audit section is adequately staffed and their scope covers the activities of NAAIAP. The funds flow procedures are also satisfactory. MoA has developed a NAAIAP Program Design and Guidelines setting out the structure of the Program, including fiduciary arrangements, which have been deemed to be adequate. The NAAIAP capacity will be used to support the Orphan Crop Component.
There are also additional internal controls being used. Kenya at the moment is conducting reforms that will help in monitoring the voucher system. The most significant is the involvement of the GoK’s Internal Audit Department (IAD) in monitoring World Bank projects through conducting semi-annual risk-based audit reviews where any issues arising will be followed up by the Ministry's audit committee. There are built-in mitigation measures in the FM assessment report to ensure that the financial management systems function will be including the input vouchers (see Annex 4 for details).
In view of the robust FM arrangements already in place in MoA, the overall risk rating of the implementing entity has been assessed as Moderate with low residual risk rating. There are no FM Conditions for this Project. The FM arrangements will continue to be monitored throughout Project implementation.
Procurement under this trust fund. Goods to be procured under the Project include three vehicles and irrigation equipment for the KARI centers (Katumani, Marimanti, Mtwapa and Kakamega) and in selected MoA Agricultural Training Colleges (ATCs). Agreements with Equity Bank and other financial institutions selected on the basis of pre-determined criteria will be entered into for up-scaling the Kilimo Biashara credit lines and, Agriculture Development and Marketing Trust (AGMARK) will be contracted to undertake the training and accreditation of agro-dealers. Government staff will carry out training workshops under the Capacity Building activity. Small contracts for goods and works, as well as non-consulting services for conducting training workshops under the Capacity Building activity will be awarded following the Shopping procedures in accordance with article 3.2 of the Bank's “Guidelines: Procurement under IBRD Loans and IDA Credits” published by the Bank in May 2004 and revised in October 2006 and the “Guidelines: Selection and Employment of Consultants by World Bank Borrowers”, dated May 2004 and revised October 2006, will be the versions governing this Project and the accompanying standard bidding documents for any new procurement. Contracts subject to Bank’s prior review will be shown in the Procurement Plan (see Annex 5 for details). In addition, this Grant will be subject to the Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, dated October 15, 2006.
Disbursements under the Project will be managed by MoA. A Designated Account (DA) denominated in Euros will be opened by the Recipient in a commercial bank. Replenishment of the DA will be made based on statement of expenditures (SOEs) with appropriate supporting documentation.
Lessons Learned and Reflected in the Project Design
The design of this operation incorporates important lessons from the implementation of the IDA funded AISP. The AISP was implemented well with 48,000 (96 percent of the target) smallholder farmers receiving input vouchers which they redeemed from 21 agro-dealers in the targeted districts. Although incremental maize yields will be lower than expected due to poor rains, the beneficiary farmers are expected to achieve yields higher than comparable areas that did not receive the vouchers.
The quick targeting of AISP beneficiaries done in less than two months was mainly attributed to the use of existing NAAIAP structures. A key lesson learned was that up-scaling an existing program is advantageous especially in an emergency operation. This lesson informs the design of the current operation whereby two ongoing programs will be up-scaled. The success of AISP could also be attributed to the capacity of farmers, local committees and extension staff that the NAAIAP program had put in place in the targeted districts. Substantial resources have been factored in the design to cater for capacity building activities especially in new districts to be supported under the proposed operation. Another key lesson learned was that the agro-dealers have a central role to play as they are central to the voucher redemption process and the long-term promotion of use of inputs. The proposed Project has therefore included a number of activities to support agro-dealers training and accreditation, and arrangements will be put in place to ensure their financial capacity is boosted through the Kilimo Biashara component. The implementation of AISP was initially slowed down by GoK disbursement procedures that were not suited for an emergency operation. This remains a major challenge which is being addressed by both the Bank and GoK at the portfolio level.
The uptake of the Kilimo Biashara program has been less than expected given that this was the initial year of the program and the drought situation which prevailed for most part of 2008/2009. The expectations are that the program will gain momentum in coming seasons as more beneficiaries become aware of it. The good weather forecast and expanded outreach are also key factors that are in favor of quick expansion. The proposed expanded outreach under the Project will therefore assist in ensuring that the program is broadened to cover more beneficiaries, financial institutions and products. Lessons learned so far indicate that the success of the program depends on capacity building, awareness of potential beneficiaries and organization of farmers into groups for marketing and other purposes. This aspect has been catered for in the design of the Project with substantial resources set aside for capacity building. In particular, the expanded capacity building and accreditation of agro-dealers will enhance their loan uptake as this has been one of the key challenges.
Since its inception, the OCP has been mainly funded by GoK and its outreach have been limited. The main limiting factor has been the availability of good quality breeders’ seed for multiplication. This has mainly arisen due to the fact that the seeds are grown under rain-fed conditions. The irrigation investments under the proposed Project will therefore be of strategic importance to enhance KARI’s and the country capacity to produce orphan crop seeds and other planting materials. The distribution of seeds and other planting materials through the district agricultural offices has worked well in the past and will be maintained. The distribution system not only ensures materials are able to reach most parts of the country, but also the beneficiaries are trained on good crop production practices. To strengthen the program coordination, a technical committee is proposed to offer the needed technical and oversight inputs.
Environmental
The Project has been assigned environmental Category B, because it has minimal if any, potential adverse impacts on human populations or environmentally important areas, such as wetlands, forests, grasslands, or other natural habitats; the impacts are site specific and, few if any are irreversible and specific mitigation measures can normally be designed. The proposed intervention, in the form of seeds and fertilizers, are normal farming inputs that will be applied as per agronomic specification within farms of the identified beneficiaries. The two irrigation installations at KARI Katumani and Marimanti will involve sinking of a bore hole, storm water harvesting and extraction from a permanent river[9], all of which will be undertaken in conformity with Water Resources Management Authority (WRMA) regulations.
Nonetheless, it has been determined that the Project triggers the Environment Assessment (OP/BP/GP 4.01) and Pest Management (OP 4.09) safeguard policies. The Project interventions are likely to have minimal adverse impacts on the environment and human beings, such as possibility of leaching agrochemical into water bodies or wetlands. Therefore, a partial environmental assessment in the form of an Environmental and Social Management Framework (ESMF) and an Integrated Pest Management Plan (IPMP), which were developed for the KAPAP, will be used. These safeguard instruments were disclosed on in Kenya on April 1, 2009; and at the Bank's InfoShop on April 6, 2009. The ESMF for KAPAP includes a checklist for screening environmental and social impacts of the physical investments, including irrigation systems. However, there are no social safeguards triggered under the EAPP i.e., Involuntary Resettlement (OP/BP 4.12) and Indigenous Peoples (OP/BP 4.10). This is because all investments will be done on farmers’ own farms and the project is not going to work with indigenous peoples or impact them in any way. Therefore, in terms of social issues the ESMF will only be used for identifying vulnerable groups to be supported by the project, such as women, youth, people living with HIV/AIDS, and other disadvantaged members of the communities. Similarly, the IPMP provides guidelines for screening, safe handling, and disposal of pesticides to be followed by beneficiaries; and promotes the use of biological pests control methods.
|Safeguard Policies Triggered by the Project |Yes |No |
|Environmental Assessment (OP/BP/GP 4.01) |[X] |[] |
|Natural Habitats (OP/BP 4.04) |[] |[X] |
|Pest Management (OP 4.09) |[X] |[] |
|Cultural Property ( OP 4.11) |[] |[X] |
|Involuntary Resettlement (OP/BP 4.12) |[] |[X] |
|Indigenous Peoples (OP 4.10) |[] |[X] |
|Forests (OP/BP 4.36) |[] |[X] |
|Safety of Dams (OP/BP 4.37) |[] |[X] |
|Projects in Disputed Areas (OP/BP/GP 7.60)* |[] |[X] |
|Projects on International Waterways (OP/BP/GP 7.50) |[] |[X] |
This Project does not involve any exceptions to Bank policies.
IMPLEMENTATION ARRANGEMENTS AND FINANCING PLAN
Beneficiaries will be chosen through a participative community process. District Agriculture staff will determine, on the basis of landholdings and population, how many farmers per location will be able to participate. The Project will target the productive poor, with preference to women and the vulnerable. Front line extension staff will then facilitate the selection process, to be led by Community Committees. These committees comprise the local chief, front line extension staff, civil society organization leaders and other local leaders.
The Bank will intensify its supervision of the Project during the planting season to verify that the systems are working. The Project will be subject to periodic supervision missions (at least twice per year). Supervision activities will include review of quarterly progress and FM reports as well as timely follow-up of issues. The Project will support dissemination of information about the Project and Project activities to the target beneficiaries and the public at large through an information and communications strategy, implementation of which will be a component of Project management and administration.
Alternative approaches were considered but rejected. Bank execution was considered but rejected due to implementation capacity limitations. GoK execution is preferred, as the GoK has ongoing programs that can be scaled-up. In addition, the alternative of directly procuring and distributing inputs to farmers was considered and rejected. Direct procurement of inputs is not only cumbersome but also may be prone to corruption. Direct procurement and distribution would also undermine the role of private sector and particularly agro-dealers. The preferred voucher system not only minimizes corruption risks but also promotes the role of agro-dealers and key market players in rural input markets. Detailed implementation arrangements can be found in Annex 6.
PROJECT RISKS AND MITIGATING FACTORS
Project level risks have been identified and mitigation measures have been put in place. As the Project is building on an existing GoK program, the Bank has identified existing risks and designed mitigating factors to address these. The overall risk rating of the operation is substantial. Fiduciary risks are identified and their mitigation measures are further elaborated in Annex 4. The overall risks identified include:
• Extension and community capacity might be low and affect the administration of the voucher system. To address this risk, capacity building activities will be supported in each of the identified Project areas. In the newly created districts where GoK capacity is low, the Project activities will be supported by drawing the capacity of the older districts.
• Social accountability mechanisms could be curtailed due to administrative procedures, increasing the risk of elite capture and funds not reaching the intended farmers. This risk is small, as the scheme was administered in 2008 and early 2009 and farmers know their role and are empowered.
• Potential misuse of funds through collusion of farmers, agro-dealers and GoK staff. To address this risk, the Project is involving the GoK's Internal Audit Department in monitoring, through conducting semi-annual risk-based audit reviews where any issues arising will be followed up by the Ministry's audit committee. Enhanced disclosure and public accountability measures recently put in place by Government would also be utilized. Nevertheless, the risk will be mitigated by social accountability mechanisms and careful monitoring to track actual beneficiaries. It was also agreed during negotiations that the MoA will undertake regular internal audit reviews and the project will fund where necessary the costs associated with these reviews.
• Weather based risks could also affect the impact of the Project as production system is mainly rain-fed. However, the forecast for coming seasons looks good. In case of crop failure, the default rate for loans under Kilimo Biashara could be high. As a mitigating measure, the financial institutions participating in the Kilimo Biashara program will be encouraged to incorporate weather indexed insurance covers for their clients in case of poor weather. The drought tolerant nature of most orphan crops will be a further coping mechanism in case of a poor weather.
TERMS AND CONDITIONS FOR PROJECT FINANCING
The Project financing is proposed as a Grant under the EU TF, whose agreement was signed between the World Bank and the EU in August 31, 2009. The overall aim of the EU TF program is to minimize the threat posed by high food prices and sharply rising agricultural production and marketing costs to the livelihoods of poor urban and rural residents in developing countries. The proposed EC supported-project will be implemented through the Joint Management Framework, (a) with the signature of an Administrative Agreement between the World Bank and the European Commission followed by, (b) the signature of a Grant Agreement between the Bank and the Government of Kenya. The latter agreement will frame the commitment of the Government to implement the Grant activities in an effective and efficient manner.
Disbursement condition for Kilimo Biashara and OCP components: MoA will develop Kilimo Biashara Manual/guidelines and enter into framework agreements with each of the participating financial institutions. MoA will also develop and adopt the Orphan Crop Program manual in form and substance satisfactory to IDA.
Annex 1: Detailed Description of Project Components
KENYA: Enhancing Agricultural Productivity Project
Background
Kenya’s agriculture is characterized by small-scale farming, accounting for 75 percent of the total agricultural output and 70 percent of marketed agricultural produce. Small-scale farmers produce over 70 percent of maize, 65 percent of coffee, 50 percent of tea, 80 percent of milk, 85 percent of fish and 70 percent of beef and related produce. Production is carried out on farms averaging 0.5 and 7.5 acres, mostly on a commercial basis. Currently, the sub-sector’s use of improved inputs such as hybrid seed, concentrate feeds, fertilizers and pesticides or machinery is relatively low. Increase in productivity, therefore, will need to take place in the smallholder sub-sector and will involve enhanced efforts to encourage farmers to adopt modern farming practices. This is the core focus of this operation.
In recognition of the need for increased production and the inability of many small farmers to afford the increased cost of inputs, the Government is up-scaling the existing input (seeds and fertilizers) voucher scheme (Kilimo Plus) under the NAAIAP. The NAAIAP seeks to address the problem of food security and poverty by focusing on resource poor farmers. The short-term objective of NAAIAP is to improve access and affordability of the key production inputs for smallholders, particularly those living below the poverty line. This improved access will lead to higher yields, household food self-sufficiency and the generation of surpluses for sale. The medium-term objective is to encourage a shift to commercial farming and greater use of production credit in place of input grants.
This Project will focus on enhancing smallholder farmers’ access to farm inputs. The support will leverage additional resources to upscale two ongoing Government programs (NAAIAP and OCP) for increasing access to farm inputs. The NAAIAP has two components which will be supported under this operation: Kilimo Plus and Kilimo Biashara. Kilimo Plus enables provision of inputs grants to the poorest farmers through a voucher program. Kilimo Biashara is a low-interest credit package for better endowed enterprise-oriented farmers who are constrained by capital. The OCP program is focused on multiplication and distribution of orphan crop planting materials to smallholder farmers in semi arid areas.
There are four Components under the Project, namely:
1) Up-scaling to the Agricultural Credit Program (Kilimo Biashara);
2) Up-scaling the Agricultural Input Voucher Scheme (Kilimo Plus);
3) Up-scaling the Orphan Crops Program; and
4) Support to Project Administration.
Component One: Enhancing Agricultural Credit Program (Kilimo Biashara)
The Project will upscale and broaden the Kilimo Biashara Program with an objective of enhancing its outreach and specifically targeting women farmers. The Kilimo Biashara was initiated in May 2008 as a partnership with IFAD, Alliance for the Green Revolution in Africa (AGRA), MoA and Equity Bank Limited. The objective of the Program is to enhance targeted access of affordable financial services and capacity to agricultural sector value chain players. Both IFAD and AGRA contributed US$2.5 million each as guarantee funds for this facility. With the guarantee, Equity Bank has earmarked US$50 million for small-holder farmers and agro-dealers to enable them to purchase fertilizer and other inputs. Since its inception until mid-November, 2009, the Equity Bank credit facility has made loans totaling KSh 690 million (US$9.2 million) to over 25,900 smallholder farmers, and KSh 175 million (US$2.3 million) to 526 commercial farmers. In addition, KSh 59 million (US$0.78 million) has been lent to 199 agro-dealers during the same period. The uptake has been slower than expected among farmers mainly due to the fact that this was the initial year of the program and the drought situation which prevailed for most part of 2008/09. The slow loan uptake among agro-dealers has been attributed to the requirement that they must participate in the training and accreditation program. The expectations are that the program will gain momentum in coming seasons as more beneficiaries become aware of it. The good weather forecast and expanded outreach are also key factors that are in favor of quick expansion. The repayment rate has been good averaging over 95 percent. Initial assessment done by AGRA indicates that the perceived risk for lending to farmers and other players has been higher than actual risk which has averaged around 5 percent in the last one year. The inclusion of weather-indexed insurance in the package has further reduced the risk exposure.
Through Kilimo Biashara resource, poor farmers are able to get access to credit and other financial services for investments in agricultural/livestock production and other related value chain activities. This will translate into increased agricultural productivity and income for the farmers as well as increased business volume for the value chain players. This strategic partnership promotes creation of synergy for the common vision shared by all four institutions and their partners. The goal of the partnership is to support the government’s efforts in increasing the agricultural productivity in Kenya leading to commercialization of the sector. The objectives of the partnership are:
• To facilitate the access of affordable financial services for the agricultural sector players for the whole value chain ranging from input suppliers and processors to producer traders.
• To increase efficiency of agricultural value chain players through building business capacity for various sector players, and development of efficient service delivery partnerships targeting all the players using ICT infrastructure.
• Enhancement of partnership for different players in the agriculture sector through developing a working consortium from different sector players aimed at delivering the required synergy to achieve the objectives.
The immediate beneficiaries of the Program are: (i) Smallholder farmers who are unable to buy the full package of inputs due to limitation on funding and are willing to upscale and/or commercialize production. These include both beneficiaries of Kilimo Plus grants and non beneficiaries who comply with the set terms and conditions of the participating financial service institution; (ii) Agro-dealers and agro-processors; (iii) Inputs importers and manufacturers; and (iv) Produce traders/marketers. The beneficiaries of enhanced Kilimo Biashara are required to have the following:
• Business plans and willing to work with participating financial institutions.
• For smallholders, they should have received training (or willing to be trained) on relevant technical issues including crop husbandry, inputs use, simple financial management, etc.
• In case of agro-dealers, they must agree to undergo business management skills training by AGMARK, be issued with certificates by Kenya Plant Health Inspectorate Service (KEPHIS) and Pest Control and Pesticide Board (PCPB), and have authority of suppliers to their inputs.
Although the experiences so far gained from the Equity Bank’s Kilimo Biashara program will be used, the facility will be opened to other financial institutions that will be selected on set criteria. This will ensure that outreach is expanded while promoting rural financial intermediation in the next two years. Sixty percent of the funds (around €3 million) under this component will be used to expand quickly the Equity Bank’s facility while the rest of the funds will be used to establish similar facilities in three other financial institutions (one of which will be geared towards women farmers). Some of the funds will be earmarked for the women’s program under Kenya Women Finance Trust (KWFT) to support women in farming, agro-processing and trade. The implementation of the Equity Bank and KWFT programs will start in the first three months of the Project. In the second phase, MoA will invite bids from financial institutions and select at least two of them to roll credit lines and services by the second half of 2010. The proposed sharing is 90 percent by participating financial institutions and 10 percent by the guarantee fund. The GoK through MoA will enter into Credit Guarantee Agreement (CGA) with the financial institutions participating in the program. Such agreements shall be subject to review and approval by the Bank.
The participating financial institutions will be responsible for processing loans, disbursements, recoveries and determining when a loan is no longer recoverable, and therefore, call in the guarantee. However, prudence must be ensured during appraisals and evaluation of potential borrowers. During sensitization, it must be emphasized to target beneficiaries that all monies disbursed must be repaid back. Neither the loan officers nor the recipients of credit will be aware of the guaranteed nature of loans to ensure best practices and timely payments especially by smallholder farmers, who may otherwise assume that disbursed funds is government money that can be waived. Monitoring and evaluation will be done to track the performance of loan portfolio and detect risks to loan repayments in time to ensure timely measures are taken to safeguard against default.
Criteria for Selecting Financial Service Providers: Participating financial service providers are expected to lend their own finances and carry 90 percent of the credit risk. The financial service providers to implement the enhanced Kilimo Biashara will be required to fulfill the following criteria:
• Must have their ‘own’, adequate financial resource base to meet the needs of potential borrowers (farmers and other value chain players).
• Ease of accessing the financial service providers to the borrowers, i.e. the locality of the institution and branch network within reasonable distance to the clientele.
• Previous experience and willingness to work with smallholder farmers including the size of the institutions loan portfolio directed to the agricultural sector.
• Terms and conditions that are friendly to smallholder farmers, small scale and medium sized agro-dealers and traders/marketers whom NAAIAP intends to develop. These include: Minimum loan amounts, loan duration, flexible repayment terms, concessionary interest rates for small scale farmers, and simple and documented procedures for application and disbursements.
• Must provide other important services to the borrowers which include: Capacity building (hands-on), Savings mobilization, Safety of the savings/deposits, Acceptance of warehouse receipts as collateral, Insurance for crop failure/damage and other risks.
• Must be willing to collaborate with Government staff as partners in the implementation of Kilimo Biashara in all aspects.
• Transparency and quarterly reporting on progress, especially, providing timely information on loans disbursed (i.e. total disbursed amount per district), number of borrowers (disaggregated in the various categories i.e. small and large scale farmers, agro-dealers, agro-processors, etc).
• Participating financial service providers will be responsible to the program’s National Coordinating Committee.
The core implementation activities of this Project will take place within the framework of NAAIAP. The Project will collaborate with MoA, AGRA, IFAD, Equity Bank, KWFT and the other selected financial institutions in the implementation of the Kilimo Biashara. To guide the overall implementation of the credit guarantee scheme, the MoA will develop a Kilimo Biashara manual/guidelines stipulating the roles, functions and responsibilities of all the parties and procedures to be followed in situations where the guarantee is to be called. MoA and each of the participating financial institutions will be required to enter into a framework agreement that will stipulate the credit guarantee framework including, among others, the following;
a) The operating principles of the guarantee scheme –these shall include, among others, the requirements that a special credit guarantee account in the name of GOK/MoA shall be opened and standard interest paid on the account balance; each credit facility shall be for a term of one year; and the concessionary interest rate shall not exceed 12 percent per annum.
b) The lending policies and procedures including compliance with the anti-corruption guidelines.
c) Duties and responsibilities of GoK and the participating financial institutions, and
d) Credit guarantees termination provisions.
The development of the Kilimo Biashara manual/guidelines and the credit guarantee framework shall be a disbursement conditions under this component. In case there will be unutilized balances under the credit guarantee fund, the Bank and MoA will review and agree, on or before 30th June 2011, on how such a balance will be utilized after the project closing.
The Roles and responsibilities of partners in Kilimo Biashara:
i) Partnership beneficiaries (farmers, agro-dealers, processors, manufacturers, importers)
• The beneficiaries will be required to open accounts in the nearest Equity Bank, and other participating financial institutions. The beneficiaries will be required to spearhead the passing of the partnership knowledge to their clients as a way of creating awareness, e.g. the agro-dealers will be required to explain to farmers the availability of input loans from Equity Bank and other financial institutions. This will improve their clients’ purchasing power and subsequently boost agro-dealers sales volumes.
• The beneficiaries of credit facility from the financial institutions will be required to repay back the loan as per the agreement.
ii) Equity Bank Limited, KWFT and other financial institutions
• Each financial institution will enter into a framework agreement with GoK.
• The financial institutions will offer total cumulative loan facility of about US$100 million towards the value chain players subject to a 10 percent loan credit guarantee. This loan facility product will however be subject to each financial institution’s policies and procedures on credit facilities as well as the ability of a beneficiary to repay the loan and provide the requisite security if any.
• Increase/decrease the amount of credit based on the success rate of the pilot experience.
• Access with other partners the credit worthiness for particular credit facility beneficiaries.
• Offer platform for loan recoveries and collection.
• Offer platform to facilitate redemption of authentic vouchers by crediting agro-dealers and debiting NAAIAP accounts by each financial institution but subject to receiving appropriate mandate from MoA/NAAIAP.
• Offer other banking facilities to the value chain players.
iii) EU and the World Bank (building on IFAD and AGRA)
• Deposit an initial credit cash guarantee facility of Euros 5 million/10 percent cash guarantee for loans issued by Equity Bank, KWFT and the selected financial institutions to the identified value chain players.
• Advise the financial institutions and the potential beneficiaries in the context of implementation support.
• Mobilize more resources to scale up the partnerships pending evaluation of demand and performance.
• Offer facilitative role to bring together partners in the context of implementation support.
iv) Ministry of Agriculture
• Prepare a Kilimo Biashara Manual/guidelines and enter into a framework agreement with each of the participating financial institutions.
• Deposit money for the credit guarantee and any other funds in a special interest earning account in Equity Bank, KWFT and the selected financial institutions.
• Mobilise and train farmers and other value chain players.
• Identify Project beneficiaries in conjunction with other partners.
• Offer extension services to farmers and other value chain players.
• Offer advisory services to align the partnership to the Government partnership of revitalizing agriculture.
• Offer leadership in matters concerning the Government policies as regards the partnership implementation.
Component Two: Agricultural inputs Vorcher Scheme (Kilimo Plus). The Kilimo Plus approach targets the poorest smallholders operating on 1 ha and less. For maize, which is the focus of this proposal, the Kilimo Plus program is designed as a voucher scheme to enable smallholder farmers to access 10 kg hybrid seed, 50 kg basal fertilizer and 50 kg top-dressing fertilizer. These inputs are sufficient for approximately 1 acre (0.4 ha) of maize. Each beneficiary under the Kilimo Plus program will receive a voucher with a total face value of KSh 6,100[10] (approximately €56) with these three distinct but integrated components clearly specified. Apart from supporting the input distribution to farmers through the input vouchers, this component will also support the training and accreditation of agro-dealers especially in new districts. The agro-dealers and their capacity are critical to the success of the input voucher system as they play a critical role of supplying the actual inputs to the beneficiaries.
The scope of the NAAIAP program will be scaled-up and targeted based on lessons learned from earlier planting seasons. During the 2009/10 short rains and long rains season GoK has set aside KSh 250 million (Euros 2.27 million) to cover 35,000 farmers. The Project will support an additional 150,000 farmers in the next two years. During the short rains season starting in October 2009, the GoK and the Project funds will be used to cover 80,000 farmers and another 87,000 farmers will be covered in the long rains season starting in March 2010. The final batch of 18,000 farmers will be supported in the short rains season of October 2010, bringing the total support under the Project to 150,000 farmers. The scaling-up of the program will be in areas with good potential for increased production, in order to provide the greatest increment to domestic supply. The 85 districts where Project support will be given have been identified based on poverty index (poverty index of 30 percent or more) and potential for maize production. The selected districts are spread across the country. The following table indicates the districts that NAAIAP will cover in the short rains 2009 and long rains 2010 seasons.
SELECTED DISTRICTS [11]FOR NAAIAP GoK/EU/WORLD BANK
SUPPORT – SHORT RAINS 2009
|No |Province/District |Poverty index |No. of Farmers |Implementation Season |Source of funds |Remarks |
| | |(Percent) | | | | |
|I. Coast Province |
|1 |Galole |82.5 |1,200 |Short rains 2009 |GoK |Under irrigation |
|2 |Bura |60.6 |1,200 |Short rains 2009 |GoK |Under irrigation |
|3 |Taveta |51.3 |1,200 |Short rains 2009 |GoK |Under irrigation |
|4. |Taita |58.8 |2,000 |Short rains 2009 |GoK/WB |Rainfed |
|Total number of farmers covered, Coast Province - 5,600 |
|II. Eastern Province |
|1 |Igembe South |33.2 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|2 |Tigania West |36.4 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|3 |Imenti North |30 |2,000 |Short rains 2009 |GoK/WB |Rainfed |
|4 |South Imenti |30 |2,000 |Short rains 2009 |GoK/WB |Rainfed |
|5 |Central Imenti |30 |2,000 |Short rains 2009 |GoK/WB |Rainfed |
|6 |Meru South |31.2 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|7 |Maara |31.2 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|8 |Embu East |37.2 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|9 |Embu West |33.8 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|10 |Kitui West |60.8 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|11 |Kathiani |54.8 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|12 |Mwala |61.5 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|13 |Kangundo |56.8 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|14 |Kilungu |66.7 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|15 |Mukaa |63.2 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|16 |Nzaui |55.8 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|17 |Makueni |67.4 |2,000 |Short rains 2009 |GoK/WB |Rainfed |
|Total number of farmers covered, Eastern Province – 54,670 |
|III. Central Province |
|1 |Nyeri South |30 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|2 |Mukurweini |34.1 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|3 |Kirinyaga East |30.1 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|4 |Kirinyaga South |30.1 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|5 |Murang’a East |30 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|6 |Murang’a West |30.1 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|7 |Kandara |34.2 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|8 |Kigumo |30 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|Total number of farmers covered, Central Province - 28,720 |
|IV. Rift Valley province |
|1 |Loitoktok |13.9 |1,400 |Short rains 2009 |GoK/WB |District a major maize |
| | | | | | |producer, to support food |
| | | | | | |security - Rainfed |
|2 |Transmara East |50.4 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|3 |Transmara West |50.4 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|4 |Chepalungu |62.8 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|5 |Sotik |53.9 |3,590 |Short rains 2009 |GoK/WB |Rainfed |
|Total number of farmers covered, Rift Valley Province – 15,760 |
Summary of farmers’ supported through NAAIAP during short rains 2009
|Province |Number of Districts |Number of Farmers |
|Coast |4 |5,600 |
|Eastern |17 |54,670 |
|Central |8 |28,720 |
|Rift valley |5 |15,760 |
|Total |34 |104,750 |
SELECTED DISTRICTS FOR NAAIAP IMPLEMENTATION - LONG RAINS 2010
|No. |Province/District |Poverty Index |No. of Farmers |Implementation Season |Source of funds |Remarks |
| | |(Percent) | | | | |
|I. Coast Province |
|1 |Msambweni |69.7 |1,200 |Long rains 2010 |EU/WB |- |
|2 |Matuga |60.6 |1,200 |Long rains 2010 |EU/WB |- |
|3 |Bahari |57.8 |1,200 |Long rains 2010 |EU/WB |- |
|4 |Lamu West |32.5 |1,200 |Long rains 2010 |EU/WB |- |
|Total number of farmers covered, Coast Province = 4,800 |
|II. Rift Valley |
|1 |Marakwet East |74.1 |1,500 |Long rains 2010 |EU/WB |- |
|2 |Marakwet West |60.5 |1,500 |Long rains 2010 |EU/WB |- |
|3 |West Pokot |69.7 |1,200 |Long rains 2010 |EU/WB |- |
|4 |Keiyo North |46.9 |1,200 |Long rains 2010 |EU/WB |- |
|5 |Keiyo South |43.9 |1,200 |Long rains 2010 |EU/WB |- |
|6 |Nandi Central |43.6 |1,200 |Long rains 2010 |EU/WB |- |
|7 |Tinderet |54.4 |1,200 |Long rains 2010 |EU/WB |- |
|8 |Nandi South |46.4 |1,300 |Long rains 2010 |EU/WB |- |
|9 |Nakuru North |34.2 |1,300 |Long rains 2010 |EU/WB |- |
|10 |Kericho |37.1 |1,200 |Long rains 2010 |EU/WB |- |
|11 |Kipkelion |41.1 |1,200 |Long rains 2010 |EU/WB | |
|12 |Belgut |48.6 |1,200 |Long rains 2010 |EU/WB |- |
|Total number of farmers covered, Rift Valley = 15,200 |
|III. Western Province |
|1 |Kakamega Central |52.6 |1,700 |Long rains 2010 |EU/WB |- |
|2 |Kakamega South |61.7 |1,200 |Long rains 2010 |EU/WB |- |
|3 |Kakamega East |57.6 |1,200 |Long rains 2010 |EU/WB |- |
|4 |Matungu |49.8 |1,200 |Long rains 2010 |EU/WB |- |
|5 |Butere |53.2 |1,100 |Long rains 2010 |EU/WB |- |
|6 |Khwisero |53.7 |1,200 |Long rains 2010 |EU/WB |- |
|7 |Lugari |48 |1,300 |Long rains 2010 |EU/WB |- |
|8 |Vihiga |39.7 |1,200 |Long rains 2010 |EU/WB | |
|9 |Sabatia |41.6 |1,200 |Long rains 2010 |EU/WB |- |
|10 |Emuhaya |42 |1,200 |Long rains 2010 |EU/WB | |
|11 |Hamisi |41.2 |1,300 |Long rains 2010 |EU/WB |- |
|12 |Bungoma North |52.5 |1,200 |Long rains 2010 |EU/WB |- |
|13 |Bungoma South |65.9 |1,000 |Long rains 2010 |EU/WB |- |
|14 |Bungoma West |50.9 |1,200 |Long rains 2010 |EU/WB |- |
|15 |Bungoma East |51.7 |1,200 |Long rains 2010 |EU/WB |- |
|16 |Bungoma Central |50.9 |1,200 |Long rains 2010 |EU/WB |- |
|17 |Kimilili |52.5 |1,200 |Long rains 2010 |EU/WB |- |
|18 |Butura |70.1 |1,400 |Long rains 2010 |EU/WB |- |
|Total number of farmers covered Western Province = 22,200 |
|IV. Nyanza Province |
|1 |Ugenya |37.4 |1,200 |Long rains 2010 |EU/WB | |
|2 |Rarieda |26.1 |1,300 |Long rains 2010 |EU/WB | |
|3 |Kisumu West |45.5 |1,200 |Long rains 2010 |EU/WB |- |
|4 |Muhoroni |44.2 |1,200 |Long rains 2010 |EU/WB |- |
|5 |Rachuonyo South |40.2 |1,200 |Long rains 2010 |EU/WB |- |
|6 |Uriri |43.4 |1,300 |Long rains 2010 |EU/WB | |
|7 |Homa Bay |41.9 |1,200 |Long rains 2010 |EU/WB | |
|8 |Kisumu East |45.5 |1,000 |Long rains 2010 |EU/WB | |
|9 |Rongo |38.8 |1,200 |Long rains 2010 |EU/WB |- |
|10 |Kisii Central |48.2 |1,300 |Long rains 2010 |EU/WB |- |
|11 |Marani |53.4 |1,200 |Long rains 2010 |EU/WB |- |
|12 |Masaba South |48.8 |1,200 |Long rains 2010 |EU/WB |- |
|13 |Masaba North |48.8 |1,200 |Long rains 2010 |EU/WB |- |
|14 |Nyamache |67.6 |1,200 |Long rains 2010 |EU/WB |- |
|15 |Kenyenya |67.6 |1,200 |Long rains 2010 |EU/WB |- |
|16 |South Gucha |66 |1,200 |Long rains 2010 |EU/WB |- |
|17 |Manga |46.4 |1,200 |Long rains 2010 |EU/WB |- |
|Total number of farmers covered, Nyanza Province = 20,500 |
|Total number of farmers to be covered, Long Rains 2010 = 62,700 |
Total number of districts - 51
Long Rains 2010
|Province |Number of districts |Number of farmers |
|Coast |4 |4,800 |
|Rift Valley |12 |15,200 |
|Western |18 |22,200 |
|Nyanza |17 |20,500 |
|Total |51 |62,700 |
Grand Total - Long rains + Short rains = 104,750 + 62,700 = 167,450 Farmers in 85 districts.
Kilimo Plus recipients will take their vouchers to accredited private agro-dealers. Vouchers are exchanged for inputs. The face values for the three components have been determined using the best available information on input prices during the forthcoming long-rains season. Recipients may need to top-up the value of the voucher if the price of an input is higher than the corresponding face value. Recipients are free to shop around for the best available price thereby encouraging competition among the agro-dealers. Extension workers and agro-dealers will be trained to help farmers make sound decisions in choosing varieties and fertilizer types.
The MoA has developed criteria for selection of farmers as recipients of the Kilimo Plus package including the following:
Low income and limited farm size;
Ability and intention to produce maize on at least one acre;
Membership to farmer groups for ease of training and logistical support;
Willingness to join cereal banks and participate in warehouse receipting for efficient marketing of surpluses;
Land preparation is completed before receipt of inputs; and
Priority to women and child-headed households.
The identification of farmers is usually preceded by capacity building activities involving MoA staff, agro-dealers and potential beneficiaries. The Program areas (divisions, locations and villages) are identified based on criteria (crop suitability, land availability, farmer groups, etc.). This is followed by identification of beneficiaries which is done by community committees composed of various stakeholders (local administration, agriculture and social services officers, church leaders, community leaders, village development committee, Community Based Organizations (CBOs), and Non-governmental Organizations (NGOs) operating in the area). The farmer identification process is elaborated involving holding of farmers’ public meetings “barazas” at Location and Sub-location (village) levels. The list of identified and selected farmers is subjected to community/stakeholder committee/fora for verification and approval. The final list is compiled by the divisional extension team and submitted to the district. The vouchers are then released to the beneficiaries (against their ID) who are expected to redeem them with accredited agro-dealers in their locality. The agro-dealers issue the inputs against the vouchers and farmers ID noting the price and quantities supplied with the farmer signing. The agro-dealer then raises an invoice attaching the list of the farmers supplied plus the signed voucher to the District Agriculture Officer (DAO). After verification, a check is issued to the dealer as payment.
The above system has been successfully piloted in 35 districts (87,000 recipients) over the past two seasons. The MoA proposed in its national budget submission to increase coverage to 100,000 farmers during the long rains season (commencing March 2009). However, insufficient funds in the budget required that the program be scaled back to 35,000 recipients coming from 45 districts. The impact in terms of surplus production is estimated at 1.0 tonne/0.4 ha, based on an expected yield of 5 tonnes/ha. This amount would be released onto the market reducing local maize prices and benefiting low-income maize consumers in both rural and urban areas. The existing US$5 million FCR TF is being used during the current season to scale up Kilimo Plus to reach an additional 50,000 smallholder in two of the main maize producing districts in Rift Valley province, greater Uasin Gishu and Trans Nzoia (both of which have been recently subdivided into six districts).
The Project would finance capacity building for agro-dealers. The Project would support AGRA’s ongoing efforts to expand and strengthen networks of “agro-dealers”, or small farm retailers, most of whom are women through provision of training, capital and credit to establish certified agro-dealers. Most retailers are themselves farmers and are in an ideal position to advise their customers about which types and amounts of seeds or soil nutrients will work best in local climates and soil conditions. Already 1,495 agro-dealers have received training and credit through the Agricultural Market Development Trust (AGMARK). In some places, the new businesses have reduced the distance farmers must travel to get farm inputs from 15 to 3 kilometers. AGMARK is set to expand to 60 districts in Kenya. The number of agro-dealers to be trained and accredited in each district is as shown in the table below. The districts are aligned with the Kilimo Plus districts. MoA will contract AGMARK to do the training and accreditation of agro-dealers.
NUMBER OF AGRO-DEALERS TO BE TRAINED PER DISTRICT[12]
|District |Agro-dealers to be Trained |District |Agro-dealers to be Trained |
|Galole |5 |Marakwet East |15 |
|Bura |5 |West Pokot |5 |
|Taveta |5 |Keiyo North |10 |
|Taita |5 |Keiyo South |10 |
|Igembe South |30 |Nandi Central |60 |
|Tigana West |30 |Tinderet |50 |
|Iment North |25 |Nandi South |60 |
|South Imenti |25 |Nakuru North |60 |
|Central Imenti |25 |Kericho |40 |
|Meru South |30 |Kipkelion |40 |
|Maara |30 |Belgut |40 |
|Embu East |20 |Kakamega Central |10 |
|Embu West |20 |Kakamega South |10 |
|Kitui West |15 |Kakamega East |10 |
|Kathiani |15 |Matungu |10 |
|Mwala |15 |Butere |10 |
|Kangundo |25 |Khwisero |10 |
|Kilungu |20 |Lugari |10 |
|Mukaa |15 |Vihiga |10 |
|Nzaui |15 |Sabatia |10 |
|Makueni |15 |Emuhaya |10 |
|Nyeri South |50 |Hamisi |10 |
|Mukurweini |50 |Bungoma North |15 |
|Kirinyaga East |50 |Bungoma South |15 |
|Kirinyaga South |50 |Bungoma West |15 |
|Murang’a East |30 |Bungoma East |15 |
|Murang’a West (Kangema) |40 |Bungoma Central |15 |
|Kandara |40 |Kimilili |20 |
|Kigumo |50 |Butura |30 |
|Loitoktok |20 |Ugenya |5 |
|Transmara East |40 |Rarieda |5 |
|Transmara West |40 |Kisumu West |10 |
|Chepalungu |50 |Muhoroni |10 |
|Sotik |50 |Rachuonyo South |15 |
|Msambweni |10 |Uriri |10 |
|Matuga |10 |Homa Bay |20 |
|Bahari |10 |Kisumu East |10 |
|Lamu West |5 |Rongo |15 |
|Kisii Central |40 |Marani |40 |
|Kenyanya |30 |Masaba South |40 |
|South Gucha |30 |Masaba North |40 |
|Manga |30 |Nyamache |40 |
|TOTAL |2,000 |
Component Three: Support for Orphan Crop Program
One way to increase yields and create impact in the ASALs is to avail to farmers, quality drought tolerant planting materials and seeds. The MoA and the KARI started a Program to produce and distribute ‘orphan’ crop[13] seeds. The initiative was spearheaded by the Directorate of Lands and Crops Management of the MoA and the KARI Seed Unit (KSU). Stakeholders include small-scale seed growers, non-governmental and community based organizations. The Project will support the scaling up of this orphan crop program while addressing the constraints that inhibit productivity and access to input markets in the ASALs. The capacity of KARI to produce the necessary breeder seeds will be enhanced through provision of irrigation. The orphan crop scale-up will be implemented mainly through MoA, existing successful NGO programs in conjunction with KARI. The program will be implemented in accordance with the orphan crops programs manual to be developed by the Recipient.
Promoting farmer involvement in seed bulking and multiplication of orphan and other crops. This will include crops such as sorghum, cassava and millet which could be important in providing alternative to maize and serve as ingredients in animal feed production. Constraints on good agricultural land have made people migrate to sparsely populated arid and semi arid lands (ASALS), bringing with them inappropriate farming practices practiced in the high potential areas. Majority of the poor live in the ASALS and plant poor quality seed and vegetatively propagated materials. These practices lead to low yields, causing persistent food insecurity, poor nutrition and low household incomes among more than 15 million Kenyans. One way to increase yields and create impact in the ASALS is to avail to farmers, quality drought tolerant planting materials and seeds. KARI will contract farmers to produce certified seed alongside that produced by KSU for distribution to farmers in the country through District Agricultural Officers.
KARI research has developed many crop varieties. Especially with drought tolerance for all agro-ecological zones, which are in high demand as the primary inputs for food production the demand for KARI seed varieties far exceeds the current production capacity. The 40 or so registered seed companies currently operating in Kenya are unable to cope with the pace of commercializing the many good crop varieties being generated by KARI research and consequently farmers are not benefiting from the best seed technologies available, especially for the dry lands. There is need to develop the capacity for seed multiplication under the KSU as a means of catalyzing technology transfer, insuring food security and also enhancing the sustainability of KARI research system from the revenue generation. The biggest challenge to seed production is the unpredictable weather and frequent droughts in Kenya. Irrigation is therefore necessary and mandatory for a successful seed production system especially in the normally rainfall deficient areas of ASALs. The Project will enhance the capacity of KARI to produce approximately 400 tonnes of various dry land crop seeds under irrigation at KARI Katumani, Marimanti, Mtwapa and Kakamega.
In the year 2006/07 financial year, KARI distributed 439 tonnes of orphan crop seeds (cereals and legumes), 1.9 million cassava cuttings and 1.6 million sweet potato vines. These seeds and planting materials were worth KSh 58.7 million. In the year 2007/08, a further 529 tonnes of orphan crop seeds (cereals and legumes), 1.9 million cassava cuttings and 2.5 million sweet potato vines worth KSh 70.3 million were distributed. These seeds were distributed to all Kenyan provinces except Nairobi. Under the Project, MoA will contract KARI, CBOs/NGOs and individual farmers to produce a variety of seeds as indicated in the table below. For crops that are vegetatively propagated, the planting materials shall be accessed from Research Centres and multiplied at selected ATC’s and interested farmers or farmers’ groups. Kenya Plant Health Inspection Service (KEPHIS) will inspect the seed multiplication sites to ascertain that seed produced meets quality standards. In three of the districts in Eastern Province of Kenya (in Embu, Tharaka and Makueni districts), farmers will be supported to produce the variety of sorghum that can be used for brewing.
| |Description |
|1 |Breeder seed production and variety maintenance |
|2 |20 MT of Dolichos lablab: 5MT variety DL002 and 15 MT of variety DL 1009 @ KSh 150,000 |
|3 |210 MT of beans: 50MT variety Kat/B1, 20 MT of beans variety kat/B9, 40 MT beans variety Katx56 and 30 MT of beans |
| |Kat/B9 40MT beans variety Katx56 and 30 MT of beans Katx69 @ KSh 145,000 |
|4 |80 MT of pigeon peas: 50 MT variety 60/8, 30 MT of pigeon peas variety Mbaazi-2 @ KSh 150,000 |
|5 |100 MT of cowpeas: 40MT variety M66, 40 MT of cowpeas variety K80 and 20 MT of cowpeas variety KV27-1 @ KSh 125,00 |
|6 |85MT of Grams: 84 MT of Grams variety N26 and 1MT of grams variety N22 @ KSh 145,000 |
|7 |195 MT of sorghum: 180MT variety Gadam, 2MT E1291, 5MT Serena, 13MT Seredo @ KSh 125,000 |
|8 |120 MT of peal millet: 30 variety Kat/PM-1 30 MT of pearl millet variety Kat/PM-2 and 60 MT of peal millet variety |
| |Kat/pm-3 @ KSh 115,000 |
|9 |5 MT of finger millet: 2MT variety Kat/FM-1, 3MT P224 @ KSh 125,000 |
|10 |150MT of OPV maize: 60MT OPV/Katumani; 30MT Makueni; 40MT Coast Comp. 30MT striga KSTP @ KSh 145,000 |
|11 |400,000 vines of sweet potato variety KSP20 @ KSh 2.50 |
|12 |2,000,000 vines of sweet potato variety KEMB 10 @ KSh 2.50 |
|13 |2,500,000 of sweet potato variety KSP004/013 @ KSh 2.50 |
|14 |40 MT of Irish potato basic seed variety Asante and 50 MT of Irish potato pre-basic seed variety Tigoni @ KSh |
| |55,000 |
|15 |3,000,000 cassava cuttings of assorted clones (12” each) @ KSh 10 |
Seed Distribution: Seed will be delivered to the DAOs in the 100 selected districts who will share it out among the divisions in each district. Out of the 100 districts to be targeted, 50 percent of them will be in the Eastern lowlands and in the Coast, while the rest will be spread in Nyanza, and parts of Rift Valley and Central provinces. The DAOs and Divisional Agricultural Extension Officers (DAEOs) shall identify farmers who will benefit from the seed. These farmers will grow the seeds and return at the end of season an equivalent amount of seed received to the DAEOs to benefit other farmers. This kind of revolving process will continue till the seeds are readily available to most farmers.
Component Four: Support for Project Administration
The GoK will be supported under the Project for its coordination and operating costs, mainly covering: (i) printing of input vouchers; (ii) purchase of three vehicles for supervision of the Project; (iii) training costs for farmers and extension staff; (iv) transport, subsistence, office costs and seed distribution costs; (v) M&E and impact assessment costs; (vi) visibility and communications costs; and (vii) audit costs.
The table below indicates the types and estimated number of trainees to be supported under the Project.
CATEGORIES OF TRAINING AND ESTIMATED NUMBER OF TRAINEES
|Category to be trained |Course/modules |Location |Estimated Number |
|Smallholder farmers |Agro-input use and their safe use. |85 districts at GoK farmer |150,000 |
| |Farming as a business. |centres at the local level. To | |
| |How to apply for Kilimo Biashara. |be conducted by MoA staff at | |
| |The operations of cereal Banks. |district and lower levels. | |
| |Farm practices for seed production (to cover farmers | | |
| |contracted to grow orphan crops). | | |
| |Sorghum production and marketing. | | |
| |Identification of farmers and the procedures to be | | |
| |followed. | |200,000 |
| | | | |
| | | | |
| | | | |
| | |Local level by MoA and KARI | |
| | |staff. | |
|Local level Committees | | |2,000 |
|Extension Workers |Farmer/stakeholder mobilization. |85 districts and the respective | |
| |NAAIAP Program operations. |locations at GoK training |About 1,000 |
| |Quality control and M&E. |centres. To be conducted by GoK | |
| |Kilimo Biashara operations. |national and district staff | |
| | |already trained. | |
|Agro-dealers |Proper input use for each zone. |By MoA staff at district level, | 2,000 |
| |NAAIAP procedures and voucher management system. |and AGMAK. Local facilities are | |
| |Elementary business management skills. |used. | |
| |AGMAK accreditation module including KEPHIS certification, | | |
| |tax compliance and other business procedures. | | |
Annex 2: Results Framework and Monitoring
KENYA: Enhancing Agricultural Productivity Project
| |Indicators |Means of |Assumptions |
| | |Verification | |
|Overall Impact: |Incremental staple food production in |Production figures |Sufficient rainfall, peace and |
|To increase staple food |targeted areas (tonnes). |in targeted |stability. |
|production and productivity of | |districts (MoA). | |
|participating farmers. |Yields of maize in targeted areas (bags per | | |
| |acre). | | |
|Project Development Objective | | | |
|Increase access to agricultural |Farmers benefiting from the Project (number).|MoA and partner |Inputs distributed by |
|inputs and technologies among |[14] |records. |agro-dealers on time. |
|targeted smallholder farmers in | | | |
|selected districts. | |Survey | |
| |Farmers receiving improved seeds through | |Credit reaches farmers on time. |
| |input vouchers (number) | | |
| | | |Supply of inputs is sufficient |
| |Farmers receiving fertilizers through input | |to support beneficiary farmers. |
| |vouchers. (number) | | |
| | | | |
| |Area cultivated with hybrid maize seeds | | |
| |(hectares). | | |
| | | | |
| |Area cultivated with orphan crop seeds | | |
| |developed under the program (hectares). | | |
| | | | |
| |Farmers adopting at least one improved | | |
| |technology for food production[15] (number). | | |
|Intermediate Outcome indicator | | | |
|Up-scaling the existing input |Volume of fertilizer procured and distributed|District MoA | |
|voucher scheme (Kilimo Plus). |to farmers (tonnes). |records. | |
| | | | |
| |Volume of seeds procured and distributed to | | |
| |farmers (tonnes). | | |
| | | | |
| |Agro-dealers and stockist trained and | | |
| |accredited (number) | | |
|Up-scaling the existing |Active loans (disaggregated by farmers, |Bank records | |
|agricultural credit scheme |dealers). (number) | | |
|(Kilimo Biashara). | | | |
| |Total amount of credit loaned from | | |
| |participating financial institutions. (KSh) | | |
| | | | |
| |Portfolio at Risk (percentage of total amount| | |
| |loaned). | | |
|Up-scaling the orphan crop |Volume of seeds and other planting materials |MoA and NGO | |
|program |produced (tonnes) (disaggregated by type). |records. | |
| | | | |
| |Farmers receiving orphan seeds developed | | |
| |under the Project (number) (disaggregate by | | |
| |type and gender). | | |
|Efficient project monitoring |Implementation progress reports and financial| | |
| |monitoring reports available monthly (yes/no)| | |
The overall responsibility of M&E will be vested on MoA, coordinated by the Program Coordinator. The existing NAAIAP structures and capacity, which was utilized for the AISP, was assessed and found adequate and will be used at the national and lower levels. Sufficient resources have been provided in the Project to cover the cost of M&E activities. The Project will also promote and set-up social accountability mechanisms and systems that entrench beneficiary participation in Project activities and M&E. An independent impact evaluation of the Project will be conducted before the end of the Project by a contracted entity. Table 2 summarizes the M&E plan and sets the targets of the key indicators for the Project.
Table 2: Monitoring and Evaluation Plan
|Indicators |Data Collection and Reporting |
| |Baseline[16] |YR1 |YR2 |Frequency and |Data Collection |Responsibility for Data Collection |
| | | | |Reports |Instruments | |
|Maize yields in targeted areas (bags/acre). |6 |15 |15 | |Reports |MoA |
|Project Development Outcome | | | | | | |
|Farmers receiving improved seeds through input vouchers (number). |85,000 |217,000 |235,000 |Quarterly |Reports |MoA |
|Farmers receiving fertilizers through input vouchers (number). |85,000 |217,000 |235,000 |Quarterly |Reports |MoA |
| Area cultivated with hybrid maize seeds (hectares) |85,000 |217,000 |235,000 |Quarterly |Reports |MoA |
|Area cultivated with Orphan crops (ha) |100,000 |150,000 |230,000 |Quarterly |Reports |MoA |
|Farmers adopting at least one improved food production technology |100,000 |732,000 |1,215,000 |Quarterly |Reports |MoA |
|(number) | | | | | | |
|Intermediate Results |Data Collection and Reporting |
| |Baseline |YR1 |YR2 |Frequency and |Data Collection |Responsibility for Data Collection |
| | | | |Reports |Instruments | |
|Volume of seed procured and distributed to farmers (tonnes). |850 |2170 |2350 |Quarterly |Reports |MoA |
|Maize |529 |1529 |2029 | | | |
|Orphan crops | | | | | | |
|Active loans (farmers and dealers) from participating commercial banks |25,600 |31,600 |46,000 |Quarterly |Reports |Financial Institutions |
|(number) | | | | | | |
|Total amount of credit loaned from participating financial institutions |925m |1305m |1900m |Quarterly |Reports |Financial Institutions |
|(KSh) | | | | | | |
|Portfolio at risk (% of total amount loaned) |5% |5% |6% |Quarterly |Reports |Financial Institutions |
|Farmers receiving orphan seeds developed under the Project (by type and |300,000 |800,000 |1,800,000 |Quarterly |Reports |MoA& NGOs |
|gender) (number) | | | | | | |
|Agro-dealers and stockiest trained and accredited. (number) |1,495 |2,995 |3,495 |Quarterly |Reports |MoA and AGRA |
|Volume of seeds and other planting materials produced (tonnes) |439 |529 |600 |Annual |Reports |MoA |
|(disaggregated by type). | | | | | | |
|Implementation progress reports and financial monitoring reports |n/a |Yes |Yes |Monthly |Reports |MoA |
|available monthly (yes/no) | | | | | | |
Annex 3: Summary of Estimated Project Cost
KENYA: Enhancing Agricultural Productivity Project
Project Cost by Component
Euros
|Component |FY 2010 |FY 2011 |Total |
|1. Up-scaling Kilimo Biashara Agricultural Credit Program. | | | |
| |3,070,000 |2,000,000 |5,070,000 |
|2. Up-scaling Input Voucher Scheme (Kilimo Plus) | | | |
|Input Vouchers & Training and Accreditation of Agro-dealers. |5,300,000 |4,178,000 |9,478,000 |
|3. Support to Orphan Crop Program. |1,800,000 |1,282,000 |3,082,000 |
|4. Government Coordination and Operating costs |900,000 |600,000 |1,500,000 |
|(including visibility & communication). | | | |
|Total Recipient Executed Costs |11,070,000 |8,060,000 |19,130,000 |
Project Cost by Expenditure Category
|Category |Amount of financing allocated |Percentage of Expenditure to be financed (Exclusive |
| |Euros |of Taxes) |
|Goods |646,000 |100% |
|Agricultural Credit Guarantee Scheme under Part 1 of the |5,070,000 |100% of the amount of the Credit Loss disbursed |
|Project | | |
|Agricultural Input Vouchers Scheme under Part 2 of the |8,318,000 |100% |
|Project | | |
|Orphan Crops Program Under Part 3 of the Project |1,624,000 |100% |
|Consultancy Services |1,442,000 |100% |
|Training & Workshops |1,063,000 |100% |
| 7. Operating Costs |967,000 |100% |
|Total |19,130, 000 | |
Annex 4: Financial Management (FM) Report
KENYA: Enhancing Agricultural Productivity Project
I. Country Financial Management Issues
1. The most recent piece of diagnostic work that provides up-to-date information on the country’s Public Financial Management (PFM) system is the Country Integrated Fiduciary Assessment (CIFA, September 2006). The assessment, together with the Country Assistance Strategy (CAS) that was completed in May 2004, reviews the GoK’s performance since the last Country Financial Accountability Assessment (in 2001) and CAS (in 1998). The CIFA adopted the Public Expenditure and Financial Accountability (PEFA) performance measure framework as a guiding reference to diagnose the key challenges facing policymakers, report on recent progress, and outline priority areas for attention.
2. The CIFA highlighted that the GoK has been putting in place a new set of laws and regulations to strengthen the PFM system. The GoK enacted in 2005 the Public Procurement and Disposal Act, which provides for an independent Public Procurement Oversight Authority. Parliament also passed legislation establishing an independent Auditor General’s office and was expected to debate new legislation which will give the body a stronger role in the preparation of the budget. Capacity of the GoK to manage public finances has also been strengthened. Over the past two years, the budget preparation process has been substantially reformed. This has led to a reorientation of budgetary allocations towards investment in infrastructure and delivery of services to the poor. It has also led to the more direct participation of stakeholders in reviewing policy choices prior to finalization of the budget. Budget reporting has also improved both through technical changes in the way the budget is presented and through a dramatic reduction in the audit backlog for central government operations. It is expected that these reforms will enable Parliament’s Public Accounts Committee to play a more effective role in reviewing Government expenditures and the concerns raised by these audits, thereby increasing the strength of parliamentary oversight.
3. Even so, significant challenges remain. Substantial areas of GoK spending are not properly scrutinized. A number of ministries returned funds to the treasury, underscoring weaknesses in budget implementation and procurement in the public sector. While progress has been made in addressing the backlog of audits of central GoK operations, local authorities have yet to produce audited accounts, raising concerns that corruption at this level remains unchecked.
4. Through its Public Financial Management Reform Strategy, the GoK remains committed to strengthening fiduciary safeguards with a view to achieving economy, efficiency and effectiveness in the use of public funds. With the support of a number of development partner-assisted initiatives, including the IDA-funded Institutional Reform and Capacity Building Project (IRCBP), the GoK is seeking rapidly to enhance the financial accountability framework, particularly through strengthening legislation related to public financial accounting and audit.
5. Other country-level FM risks arise from Kenya’s overall governance environment, a weak judiciary and corruption concerns. The GoK has prepared a governance action plan that has been implemented and is being monitored. The GoK has also mandated setting up independent oversight committees, including audit and finance sub-committees for public bodies.
6. On the Bank-financed portfolio, Project implementation has generally been slowed by constraints in the flow of resources and limited absorptive capacity arising from bureaucratic processes. The GoK is committed to improving portfolio performance. In the last few years, agreements have been reached on several key issues in the context of Country Portfolio Performance Reviews (CPPR) and other discussions. These include actions to improve audit compliance, closer monitoring of Project performance by the Ministry of Finance, and improvements in the flow of Project resources, although significant improvements are still needed.
7. The findings of forensic audits of GoK-commissioned audits of selected projects in the country portfolio (November 2004 and June 2005) include the following financial management related issues: (a) projects were generally not controlled using a balancing general ledger system that was fully integrated and regularly reconciled with the rest of the government’s central accounting system; (b) project designs did not identify fraud risks and fraud risk management was not an integral part of each Project; (c) senior Government oversight of the projects was weak; (d) management accounts and Project quarterly reports reflect levels of activity but do not necessarily identify major issues so that they can be actioned; and (e) lessons learned and best practices are not shared among similar projects or passed into the wider Government structure. Discussions are on-going between the Bank and GoK to address these issues at portfolio level.
II. Project Financial Management Arrangements
Budgeting
8. Budgeting for the Project will be undertaken by the MoA and MoF as per the existing GoK Regulations. Detailed cost tables will be prepared and approved for the Project. The budgeting will be done as part of MoA’s annual budgeting process. MoA’s budgetary process is deemed adequate.
Accounting
9. The PS MoA has designated an appropriately qualified and experienced Program Accountant to be in charge of the accounting issues for the Grant from effectiveness. MoA has also issued a letter to the Bank designating this person and indicating that the Ministry’s Internal Audit Department will be responsible for conducting regular internal audit reviews over the Program. The Accountant will work closely with the District Accountants to pay the dealers. Payments will be made by the Project Accountant through the District Accountants after the District Agricultural Officer has received and verified the vouchers, invoices and delivery notes submitted by the farmers. The District Accountants will operate under the existing GoK Regulations.
10. The accounting systems are deemed adequate. MoA has developed a comprehensive Program Design and Guidelines (PDG) Manual, which is deemed satisfactory. Separate book of accounts are maintained for NAAIAP. The accounting system is done manually, using hard copy cashbooks and ledgers.
Internal Controls
11. Project FM and Grant Manuals: MoA has developed and implemented the PDG Manual for the Project, which is deemed to be adequate. There is an effective internal audit function in the Ministry, with four qualified internal auditors (Certified Public Accountant) with over five years experience who report to the Audit Committee and are deemed to be independent. The approval and authorization controls over payments are deemed sufficient. A fixed assets register is maintained and regularly updated. The fixed assets are adequately insured. There is adequate segregation of duties in the accounts section.
12. Audit Committee: The Audit Committee is properly constituted in line with Treasury Circular No.16 of 2005 (on setting up of oversight committees), meets regularly at least every three months, and is deemed to be effective.
13. Additional Internal Controls: Kenya at the moment is conducting reforms that will help in monitoring the voucher system. The most significant is the involvement of the GoK’s Internal Audit Department (IAD) in monitoring World Bank projects through conducting semi-annual risk-based audit reviews where any issues arising will be followed up by the appropriate ministry’s audit committee. There are built-in mitigation measures in the FM assessment report to ensure that the voucher system works. These are: (i) building in transparency arrangements in the flow-of-funds mechanism, such that farmers can know when vouchers have been sent to the districts and farm input distributors when the districts have received funding to pay them; (ii) compliant handling mechanisms for the farmers and distributors ensuring that there is a tracking report to monitor the voucher system and to flag any emerging issues; and (iii) during Project implementation, joint supervision missions will be conducted by the Bank and the GoK (IAD), which will involve visiting a significant number of farmers/distributors (based on a risk-based approach) to ascertain that the voucher system is working and that funds are being utilized for the purposes intended.
Financial Reporting
14. Interim Unaudited Financial Reports (IFR): MoA’s accounting system would be used to generate quarterly un-audited Interim Financial Reports (IFR) in form and content satisfactory to the Bank, which will be submitted to the Bank within 45 days after the end of the quarter to which they relate. However, disbursement of funds to the Project will be done on the basis of SOE returns.
15. Contents of the IFR: The IFRs will capture only those funds disbursed through existing country FM system. The IFR will consist of a statement of sources and uses of funds (by main expenditure classifications), opening and closing balances of the funds from the Bank; and actual and budgeted expenditures by component and/or activity. The statement and sources of funds will be supported by a detailed statement of uses of funds that will also show variances between actual and budgeted expenditure and provide explanations for significant variances for the quarter and cumulatively for the Project. The format of the IFR has been agreed between MoA and the Bank.
Audit Arrangements
16. Annual Audited Financial Statements: The annual audit will be conducted by the Kenya National Audit Office (KENAO), which is considered to be sufficiently independent and acceptable to the Bank. Funds have also been set aside in the Project budget to cater for any Audit support that KENAO, MoA and MoF will require. The Grant is for a period of less than 24 months; hence MoA will have two annual audits conducted, covering the whole period of the Grant. The audit reports and management letter will be submitted to the Bank within six months after the closing date of the Grant. KENAO will conduct the audit based on International Standards on Auditing. The Bank already had an acceptable audit TOR with KENAO for Bank-funded projects and will need to agree with KENAO on the scope of the audit to be undertaken. The Bank also encourages the audit report for this Project to be disclosed as a public document.
Flow of Funds and Disbursement Arrangements
17. Disbursement Method: The Project shall use the traditional SOE method of disbursement to access Bank funds.
18. Funds Flow Arrangements: IDA funds will be deposited in a Euro-denominated Designated Account, opened by the recipient in a local commercial bank acceptable to IDA, and will subsequently be transferred to a local currency-denominated account in a local commercial bank acceptable to IDA under MoA. These accounts shall be maintained in accordance with Government procedures as well as World Bank disbursement procedures and policies. The Project Account shall be used by the PMU to make payments under the Project. For payments made to the dealers redeeming the vouchers, this will be done after remitting funds to the district account from which the district accountant will process payments approved by the District Agricultural Officer after verifying that farmers have received the farm inputs. For Kilimo Biashara component, each participating financial institution will open a special account for the Guarantee Fund in the name of Republic of Kenya (Ministry of Agriculture). Money deposited in the account shall obtain the standard interest rate. The funds flow process can be depicted diagrammatically as follows:
[pic]
19. Bank Signatories: The Designated Account, the Project Account will be operated under the existing Government Financial Procedures and Regulations issued by Treasury, which provides for two mandatory signatories. The categories of signatories are as follows:
Category 1: Accounting Officer:
The National Program Coordinator, Director Agri-business, or Director Crops; and
Category 2: Accounts Department Staff:
a. The MoA Principal Accounts Controller (PAC), or
b. Any one of the four designated accountants in the Ministry.
Any two signatories can sign a cheque for making payments for the Project.
20. Remedies for non-compliance: If ineligible expenditures are found to have been made from the Project Account, the Borrower will be obligated to refund the same. If the Project Account remains inactive for more than six months, IDA may reduce the amount advanced. IDA will have the right, to be reflected in the terms of funding agreement, to suspend disbursement of the funds if significant conditions, including FM reporting requirements, are not complied with.
III. Conditionality and Financial Covenants
21. FM Conditions: In view of the robust FM arrangements by MoA, there are no FM Conditions for this Project.
22. Other FM related conditions:
a) FM Arrangements: The Ministry is required to ensure the continuing adequacy of FM arrangements over all aspects of the Project until the Project is completed. In this regard, the National Program Coordinator (NPC) shall ensure that a FM system is maintained in accordance with the provisions of Section 2.07 of the Standard Conditions.
b) Interim Financial Reports (IFR): The NPC shall ensure that quarterly un-audited Interim Financial Reports (IFR) are prepared and submitted to the Bank as stipulated.
c) Financial Statements and Audit Report: The Ministry shall prepare Financial Statements for the Project for every financial year as herein stipulated, in form and substance acceptable to the World Bank.
IV. Implementation Support Plan
23. Based on the outcome of the FM risk assessment, the following implementation support plan is proposed:
|FM Activity |Frequency |
|Desk reviews | |
|Interim financial reports review |Quarterly |
|Audit report review of the program |Annually |
|Review of other relevant information such as interim internal control systems |Continuous as they become available |
|reports. | |
|On site visits | |
|Review of overall operation of the FM system |Once (Implementation Support Mission) |
|Monitoring of actions taken on issues highlighted in audit reports, auditors’ |As needed |
|management letters, internal audit and other reports | |
|Transaction reviews (if needed) |As needed |
|Capacity building support | |
|FM training sessions |Before Project start and thereafter as needed|
24. The objectives will include that of ensuring that satisfactory FM systems are maintained for the Project throughout its life.
Table 1: Summary of Financial Management Risk Analysis
|Type of Risk |Risk Rating |Brief Explanation |Risk mitigating measures |Condition of |Residual Risk |
| | | |incorporated into Project |Effectiveness (Y/N)? |Rating |
| | | |design | | |
|INHERENT RISKS | | | | | |
|Country Level |S |Takes into account overall country governance |Issues are being addressed at |No |S |
| | |environment, weak judiciary and corruption |the country level through the | | |
| | |concerns and current political crisis arising |country’s governance action | | |
| | |from the general election in December 2007. |plan, strengthening of the | | |
| | | |public financial management | | |
| | | |system (supported by the Bank | | |
| | | |through the Institutional | | |
| | | |Reform and Capacity Building | | |
| | | |Project). | | |
|Entity Level |M |MoA has adequate experience in managing projects| |No |M |
| | |and NAAIAP has well established structures to | | | |
| | |run this Project. | | | |
|Project Level |S |Although the implementing unit has experience in|Clearly defined activities and|No |M |
| | |implementing this Project, it will be dealing |funds flow mechanisms in the | | |
| | |with multiple and dispersed spending units |PDG that will ensure that | | |
| | |(districts) with large numbers of small |farmers get their farm inputs | | |
| | |transactions which is challenging. |and the dealers are paid. | | |
|OVERALL INHERENT |S | | | |M |
|RISK | | | | | |
|CONTROL RISKS | | | | | |
|Budgeting |L |Budget system deemed adequate for purposes of |Detailed Project budgets and |No |L |
| | |the Project. |cost tables to be prepared and| | |
| | | |agreed. | | |
| | | |Regular reporting including | | |
| | | |variance analysis. | | |
|Accounting |M |MoA accounts office well staffed, PDG Manual |Accounting arrangements deemed|No |L |
| | |developed and implemented. MoA has designated an|adequate. | | |
| | |experienced Program Accountant to commence work | | | |
| | |at Grant effectiveness. The Program Accountant | | | |
| | |will work with District Accountants and District| | | |
| | |Agricultural Officer to pay the dealers in | | | |
| | |accordance with the PDG. | | | |
|Internal Controls |M |Internal audit section adequately staffed and |Current MoA internal auditors |No |L |
| | |internal controls in NAAIAP assessed as adequate|to be assigned to the Project | | |
| | |for this Project. Audit Committee properly |by letter from PS. | | |
| | |constituted and deemed effective. | | | |
|Funds Flow |S |Kenya portfolio faces challenges in slow funds |The Bank and the Ministry of |No |M |
| | |flow movement that the Bank is working with the |Finance are closely working | | |
| | |Ministry of Finance to address. There are also |together to address the funds | | |
| | |possible coordination challenges at community |flow challenges. Training | | |
| | |level that could delay the funds flow process |sessions conducted by the Bank| | |
| | |e.g. were farmers delay to submit the vouchers, |have been held with the | | |
| | |invoices and good received notes of the dealers |Ministry of Finance External | | |
| | |for payment at district, it will result in |Resource Department to improve| | |
| | |delays in paying the dealers. |on their efficiency of | | |
| | | |processing Project | | |
| | | |disbursements. Farmers will | | |
| | | |also be sensitized to promptly| | |
| | | |submit supporting | | |
| | | |documentation evidencing | | |
| | | |receipt of farm inputs to the | | |
| | | |districts such that dealers | | |
| | | |are paid in time. | | |
|Financial Reporting|M |MoA has adequate capacity for preparing and |Format of IFR agreed between |No |L |
| | |submitting IFR and audited financial statements |Bank and MoA. | | |
| | |on a timely basis to the Bank in form and | | | |
| | |content satisfactory to the Bank. | | | |
|Auditing |S |Audit reporting arrangements deemed adequate by |KENAO audits all Government |No |M |
| | |the Kenya National Audit Office (KENAO). A |implemented Bank projects and | | |
| | |budget has been provided for KENAO to hire |its performance is deemed | | |
| | |independent Auditors to ensure timely submission|satisfactory. | | |
| | |of audits. | | | |
|OVERALL CONTROL |S | | | |M |
|RISK | | | | | |
|OVERALL RISK |S | | | |M |
Annex 5: Procurement Arrangements
KENYA: Enhancing Agricultural Productivity Project
A. General
Procurement for the proposed Project would be carried out in accordance with the World Bank’s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004 revised October 2006; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004 revised October 2006, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity. The procurement entities as well as suppliers, services providers, and consultants (including NGOs) will observe the highest standard of ethics during procurement and execution of contracts financed under this Project. The Project will carry out implementation in accordance with the “Guidelines on preventing and combating Fraud and Corruption in projects financed by IBRD Loans and IDA Grants” dated October 15, 2006 (the Anti-Corruption Guidelines).
Procurement Environment: The public procurement system in Kenya covers all government entities which include the central government, local authorities, state corporations, education institutions and other government agencies that purchase goods, works and services using public resources in accordance with the provisions of the public procurement law; i.e. the Public Procurement and Disposal Act of 2005 (PPDA), which came into effect in January, 2007, replacing the Exchequer and Audit Act (Public Procurement), Regulations, 2001. Section 8 (1) of the Act established a central Public Procurement Oversight Authority (PPOA) in addition to the Public Procurement Department established under the Regulations (2001) in the Ministry of Finance. The PPOA was officially launched in June 2008. The Act sets out the rules, procedures and institutional arrangements that the public entities should follow in the management of public procurement. The Act also provides mechanisms for enforcement of the law. The PPOA provides oversight function in monitoring compliance with rules and procedures spelt out in the Act. However, the Law contains critical provisions that impede transparency and efficiency. Corruption in procurement is not yet controlled. Capacity building is underway, but compliance and enforcement of the Law to ensure value for money remains very weak. The provisions are listed in paragraph 4 of this Annex.
Procurement Implementation Arrangements: The implementation of the Project would be carried out by the Ministry of Agriculture (MoA). There are no major procurement activities envisaged under the Project. Component One entails up-scaling of the existing Kilimo Biashara Agricultural Credit Program to leverage Equity Bank’s resources through 10 percent guarantee fund. Equity Bank that is involved in a similar program under the ongoing Bank financed by Kenya Agriculture Productivity and Agribusiness Project (KAPAP) will up-scale its operations to cover 50 percent of the component’s allocation. Its performance under KAPAP has been considered satisfactory. In addition, the facility will be opened to additional financial institutions (about three), which will be selected based on the set of technical criteria to share the remaining 50 percent of the guarantee funds. These criteria are outlined in Annex 1 of this EPP and include, inter alia, financial capability (the financial institution must have adequate financial resource base to meet the needs of potential borrowers, i.e., farmers and other value chain players); diversification of agricultural financial products; geographical coverage; target groups; transparency and timely reporting of quarterly progress; previous experience and willingness to work with smallholder farmers; etc. Component Two comprises the up-scaling of the existing Kilimo Plus Program (Input Voucher Scheme) by providing agricultural input vouchers to poor and small vulnerable farmers in selected districts to acquire seeds and fertilizers for their farms. Component Three will support public-private partnerships on seed production through the Kenya Agricultural Research Institute (KARI), selected farmers and farmers’ groups to increase production of ‘orphan crops’ and support the distribution of seeds to beneficiary farmers. The component will also support capacity building of KARI and Agricultural Training Colleges under the MoA, training of farmers and agro-dealers and support the hosting of agro-input and seed fairs.
Use of National Procurement Procedures: All contracts other than those to be procured on the basis of International Competitive Bidding (ICB) and consulting services shall follow the procedures set out in the Public Procurement and Disposal Act of 2005. The Act has been reviewed by the Bank and found to be acceptable except for the following provisions that would not be applied under this Project: (i) bidding period for National Competitive Bidding (NCB) shall not be less than 30 days as opposed to 21/14 days provided in the law; (ii) government parastatals institutions shall be allowed to participate in procurement only if they are legally and financially autonomous, operate under commercial law, and are independent from the borrower and its purchasing/contracting authority; (iii) preference system shall not be allowed; (iv) merit point system shall not be used for bid evaluation; (v) price negotiations under NCB shall be allowed only where the bid price is substantially above market or budget levels and only then if negotiations are carried out to try to reach a satisfactory contract through reduction in scope and/or reallocation of risk and responsibility, which can be reflected in a reduction in contract price; (vi) shopping procedures shall be used instead of direct procurement for low value contracts; (vii) the “two envelope” bid opening procedure for procurement of goods shall not be permitted; and (viii) the Bank’s standard bidding documents for goods and works with appropriate modifications shall be used. A specified number of NCB contracts to be prior reviewed by the Bank will be identified in the Procurement Plan each year.
Scope of Procurement and Applicable Procurement Methods: The implementation of the Project entails procurement of various types that comprise: (a) goods (three motor vehicles, irrigation equipment, water storage goods and related facilities, input vouchers, etc.; (b) consulting services (NGOs to train agro-dealers and farmers, impact assessments, audits, etc.); and (c) training and workshops. MoA would be responsible for procurement and contract management.
Procurement of Goods: Goods procured under this Project will include three motor vehicles for Kilimo Plus, Orphan Crop Program and overall coordination activities, irrigation equipment for KARI, water storage facilities and related irrigation equipment for Agricultural Training Colleges, and printing of input vouchers for distribution to farmers under the Kilimo Plus Program, etc. No International Competitive Bidding or Limited International Bidding is envisaged under this Project. Goods estimated to cost less than US$500,000 equivalent per contract will be procured on the basis of National Competitive Bidding (NCB) procedures subject to the exceptions described in paragraph 4 above of this Annex. Goods estimated to cost less than US$70,000 equivalent per contract may be procured through shopping procedures. As a general rule, a qualified supplier who offers goods or materials that meet the specifications at the lowest price shall be recommended for award of the contract.
Direct contracting for goods: Direct contracting may be an appropriate method when it can be justified that a competitive bidding is not advantageous and meets the requirements of paragraph 3.6 of the procurement Guidelines after consultation with the Bank. In particular, Direct Contracting may be used under the following circumstances:
(a) Where an existing contract for goods, awarded in accordance with procedures acceptable to the Bank, may be extended for additional goods of a similar nature. The Bank shall be satisfied in such cases that no advantage could be obtained by further competition and that the prices on the extended contract are reasonable.
(b) Where there is need for standardization of equipment or spare parts, to be compatible with existing equipment, may justify additional purchases from the original supplier. For such purchases to be justified, the original equipment shall be suitable, the number of new items shall generally be less than the existing number, the price shall be reasonable, and the advantages of another make or source of equipment shall have been considered and rejected on grounds acceptable to the Bank.
(c) Where the required equipment is proprietary and obtainable only from one source.
(d) Where a contractor responsible for a process design requires the purchase of critical items from a particular supplier as a condition of a performance guarantee.
(e) In exceptional cases, such as in response to natural disaster.
Procurement of non-consulting services: Non-consulting services, which are services that are not of intellectual or advisory in nature will include, but not limited to (i) distribution of seeds from central-level procurement to the farmers, and (ii) organization of seed fairs. The procurement of non-consulting services shall follow the existing SBDs with appropriate modifications.
Selection of Consultants: Consulting services under the Project will include but not limited to: (i) Training of agro-dealers by Agriculture Market Development Trust (AGMARK) to be selected on a single source basis. The Trust has been spearheading the agro-dealer development since 2004 in Kenya and in the East and Central Africa Region with support from Rockefeller Foundation, DFID, and USAID and recently by Alliance for the Green Revolution in Africa. As a result, AGMARK has acquired sufficient experience of an exceptional worth in this area that can be useful for this Project. (ii) Promotion of sorghum production by Africa Harvest Biotech Foundation International (AHBFI) to be selected on a single source basis. AHBFI is currently contracted by East African Breweries Limited, a beer brewing company in Kenya; to promote the production and marketing of sorghum as an alternative input to barley in brewing, hence it has the requisite experience and working knowledge that is necessary for the promotion of the production of sorghum. The Recipient will however be required to submit with detailed justifications the request for single sourcing of the two firms listed in (i) and (ii) above to the Bank for its prior approval at the time of selection. (iii) Impact assessment, and (iv) Financial Audits, etc. All consulting services will be procured following the procedures set out in the Guidelines for the Selection and Employment of Consultants by World Bank Borrowers. Consulting contracts will as far as possible be awarded under Quality and Cost Based Selection (QCBS) procedures. Other methods of selection will be determined for each assignment depending on the type of assignment and the provisions of the Consultants Guidelines, and will be indicated in the procurement plan. Quality Based Selection (QBS) would be followed for assignments, which meet the requirements of paragraph 3.2 of the Consultants Guidelines. Assignments for standard and routine nature such as audits and other repetitive services would be selected through Least-Cost Selection (LCS) method in accordance with paragraph 3.6 of the Consultants Guidelines. Consulting services by firms used for assignments estimated to cost less than US$200,000 equivalent per contract and for which the cost of a full-fledged selection process would not be justified may be selected on the basis of Consultant Qualifications (CQS) in accordance with paragraphs 3.7 and 3.8 of the Consultants Guidelines. Fixed Budget (FBS) would be followed for assignments, which meet the requirements of paragraph 3.5 of the Consultants Guidelines. Single-Source Selection (SSS) would be followed for assignments, which meet the requirements of paragraph 3.9 – 3.12 of the Consultants Guidelines, and will be subject to the Bank’s prior review regardless of the amount. Specifically, SSS would be applied only in exceptional cases if it presents a clear advantage over competition when selection through a competitive process is not practicable or appropriate and would be made on the basis of strong justifications and upon Bank’s concurrence to the grounds supporting such justification: (a) for tasks that represent a natural continuation of previous work carried out by the firm; (b) in emergency cases, such as in response to disasters and for consulting services required during the period of time immediately following the emergency; (c) for very small assignments; or (d) when only one firm is qualified or has experience of exceptional worth for the assignment. Short List of consultants for services estimated to cost less than US$200,000 equivalent per contract may be comprised entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Individual Consultants (IC) will be selected on the basis of their qualifications by comparison of CVs of at least three candidates from those expressing interest in the assignment or those approached directly by the Implementing Agency in accordance with the provision of Section V of the Consultants Guidelines.
Training and Workshops: All consulting and non-consulting services identified under the training program will be procured using the appropriate methods described in this document. The Project would prepare an annual training plan and budget, which will be submitted to the Bank for review and approval. The annual training plan would include: (i) training envisaged; (ii) justifications for training; (iii) personnel or group of people to be trained; (iv) selection methods of institutions conducting training; (v) institutions which will conduct training; (vi) the duration; and (vii) estimated cost of training.
Operating Costs: Incremental operating costs include expenditures for maintaining equipment and vehicles, fuel, office supplies, utilities, consumables, travel per diems and allowable, travel and accommodation, workshop venues and materials (excluding salaries). These will be procured using the Borrower's administrative procedures, acceptable to the Bank.
Retroactive Financing: The Project will include a retroactive financing provision to allow for the training of extension staff and agro-dealers for training activities carried from April 2009. To be eligible for Bank financing, contracts shall be awarded in accordance with the Bank’s Procurement Guidelines and are only permitted if within the limitations specified in the Grant Agreement. All such contracts shall be subject to Bank’s review.
Bank’s Review Thresholds: The Borrower shall seek World Bank prior review in accordance with Appendix 1 of both Procurement and Consultant Guidelines for contracts above the thresholds as agreed in the Procurement Plan. For purposes of the Procurement Plan for the first 18 months of the Project implementation, the Borrower shall seek Bank prior review for: (i) goods estimated to cost US$500,000 equivalent per contract and above per contract; (ii) consulting services to be provided by consulting firms estimated to cost US$200,000 equivalent per contract and above; (iii) for individual consultants contracts estimated to cost the equivalent of US$100,000 equivalent per contract or more; (iv) all direct contracting and single source selection contracts regardless of their value; and (v) annual training plan. In addition, a specified number of contracts to be identified in the procurement plan for the procurement of goods below the ICB threshold will also be subject to prior review. These prior review thresholds may be reviewed annually and any revisions based on reassessment of the implementing agency’s capacity will be agreed with the Borrower and included in an updated Procurement Plan.
B. Assessment of the agency’s capacity to implement procurement
Procurement activities will be carried out by the MoA: The Ministry has a Procurement Unit, which in accordance with the Public Procurement and Disposal Act 2005, is responsible for all procurement activities under the Ministry. The Procurement Unit is currently headed by a Principal Procurement Officer, who is assisted by a Senior Procurement Officer, two Procurement Officers at Level 1, three Procurement Officers at Level 2, one Clerical Officer and one Storeman. Except the Senior Procurement Officer who has had some training on Bank procurement procedures, all the other staff have little or no experience in Bank funded procurement. It is also noted that the Chief Procurement Officer deployed to the Ministry was recently transferred to a parastatal under the MoA. The Officer is experienced in Bank procurement procedures having implemented several Bank funded projects under various government ministries. The officer should be recalled to strengthen the Procurement Unit of the Ministry for the effective implementation of the Project. The MoA, although currently undertaking two Bank-funded operations, KAPAP and EAAPP projects, have limited working knowledge and experience in Bank procurement procedures. In addition, and like in most central government ministries, procurement records are kept in general files with no filing system that is dedicated for procurement records.
The MoA will contract KARI, a semi autonomous government institution, to carry out the production and distribution of orphan crop seeds to farmers. KARI was established in 1987 through an Act of Parliament as a government-owned research institution, with the mandate of conducting research that is aimed at enhancing agricultural production and food security in the country. As the only research institution dealing with agricultural food production in Kenya, KARI has the comparative advantage in seed production and therefore uniquely placed to provide this service. The institution is legally autonomous and can enter into binding contractual agreements. In order to enhance KARI’s existing seed production capacity to meet the required orphan seed demand, support will be provided to expand the irrigated areas for breeder seed multiplication at its seed production centres in Katumani, Marimanti, Mtwapa and Kakamega through the provision of new irrigation equipment and rehabilitation of existing irrigation equipment and systems.
An assessment of the capacity of the MoA to implement procurement actions for the Project was carried out in October 2009. The assessment reviewed the organizational structures, institutional strengths and weaknesses, staff skills and experiences, and the operating procurement environment under which the Project will be implemented. The key issues and risks concerning procurement for implementation of the Project have been identified and mitigation measures proposed. It was observed that the MoA (although implementing two Bank funded projects that became effective in April and June 2009) has limited working knowledge and experience in Bank procurement procedures.
The overall procurement risk of the Project is therefore assessed as “high”. The proposed risk mitigation measures are summarized below:
|Risk |Action |Timeframe |Responsibility |
|Inadequate Procurement Capacity |Train procurement staff in specific areas: |Within three months after Credit |Borrower/IDA |
|at the MoA. |Procurement of goods and selection of |Effectiveness. | |
| |consultants. | | |
| |Recall the Chief Procurement Officer | | |
| |transferred to a parastatal within the | | |
| |Ministry to head the Procurement Unit. | | |
|Sustainability of Existing |MoF to retain the incumbent procurement |During implementation of the Project. |Borrower |
|Capacity. |officers seconded to the Ministry for the | | |
| |duration of the Project. | | |
|National Procurement Procedures. |GoK to issue a side letter with the exception |Done during negotiations. |Borrower |
| |provisions. | | |
|SBD for NCB Contracts. |Bank’s SBD to be used for NCB contracts. |During implementation of the Project. |Borrower |
|RFP documents for selection of |Bank’s RFP documents to be used. |During implementation of the Project. |Borrower |
|consultants. | | | |
|Procurement Planning. |Procurement Plans specific to the Project to |One year procurement plan submitted |Borrower |
| |be developed and updated regularly. |during negotiations, updates to be | |
| | |submitted every six months during | |
| | |project implementation period. | |
|Procurement Audit. |Public Procurement Oversight Authority (PPOA) |Throughout the Project implementation |Borrower |
| |to conduct procurement audits in addition to |period. | |
| |Bank’s PPRs. | | |
|Increased thresholds for ICB/NCB |Determine NCB contracts each year in the |During Project preparation and updating|Borrower / IDA |
|and prior review. |Procurement Plan to be prior reviewed. |of the Procurement Plan. | |
|Inadequate record keeping and |Hire a short term consultant to design, |Within six months of Project |Borrower |
|filing system. |implement, and conduct hands-on training on |implementation. | |
| |record keeping and filing system. | | |
C. Procurement Plan
The Borrower, at Appraisal, developed a Procurement Plan for Project implementation which provides the basis for the procurement methods. This Plan has been agreed between the Borrower and the Project Team during Negotiations and is available at MoA, Kilimo House, Nairobi. It will also be available in the Project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity.
D. Frequency of Procurement Supervision
In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agency has recommended supervision missions twice a year to visit the field to carry out post review of procurement actions.
E. Details of the Procurement Arrangements (Procurement Plan for the first 18 months of the Project)
1. Goods and Non Consulting Services
(a) List of contract packages to be procured under the Project comprises the following:
|1 |2 |3 |4 |5 |6 |7 |
| | | | | | | |
|Ref. No. |Description of |Estimated |Selection |Review |Expected |Comments |
| |Assignment |Cost in US$ |Method |by Bank |Proposals Submission | |
| | |Equivalent | |(Prior/Post) |Date | |
|1 |Training of |1,740,000 |SSS |Prior | | |
| |agro-dealers by an | | | | | |
| |NGO. | | | | | |
|2 |Training of farmers on|315,000 |SSS |Prior | | |
| |sorghum growing by an | | | | | |
| |NGO. | | | | | |
|3 |Program impact |67,500 |CQS |Post | | |
| |assessment. | | | | | |
|4 |Financial audit. |40,500 |LCS |Post | | |
(a) TOR for all contracts shall be cleared by the Bank.
(b) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.
3. Thresholds for Procurement Methods and Prior Review
|Expenditure Category |Contract Value Threshold (US$ |Procurement/Selection Method |Contracts Subject to Prior Review |
| |Equivalent) | | |
| | | | |
|Goods |Below 500,000 |NCB |To be specified in the PP |
| |Below 70,000 |Shopping |None |
| |All Values |Direct Contracting |All |
|Consulting Services (Firms) |Above 200,000 |QCBS/LCS |All |
| | |International Shortlist | |
| |Below 200,000 |QCBS/CQS/LCS |None (Post Review) |
| | |National Shortlist | |
| |All Values |SSS |All |
|Consulting Services (Individuals) |Above 100,000 |Individual Consultant’s |All |
| | |Qualification | |
| |Below 100,000 |Individual Consultant’s |None (Post Review) |
| | |Qualification | |
| |All Values |SSS |All |
Annex 6: Implementation Arrangements
KENYA: Enhancing Agricultural Productivity Project
Overall Project Coordination and Implementation
1. MoA shall have the overall responsibility of Project implementation. In line with the implementation arrangements for KAPAP which embrace the need to have sector-wide coordination of GoK and Donor funded programs, the Project coordination will be under the broad-based Agricultural Sector Programs Steering Committee (ASPSC). The ASPSC is responsible for coordinating all programs and projects in the agricultural sector, rather than having stand-alone steering committees for each project/program. The ASPSC will meet quarterly and be responsible for approving: (i) the annual work plans and budgets before recommending their endorsement by the ICC, and (ii) monitoring of the implementation progress and reporting. The ASPSC will co-opt representatives from the financial institutions participating in the Kilimo Biashara program, and other stakeholders such as AGMARK.
2. The MoA will designate a full time Project coordinator for the entire period of the Project. The coordinator shall be responsible for the day to day coordination of the Project components and will facilitate the NAAIAP and the orphan crop coordinators to implement their respective components. The coordinator shall be the secretary to the ASPSC regarding matters of the Project. The coordinator will be supported by the necessary support staff including an accountant and a procurement officer.
3. NAAIAP has a functioning National Program Steering Committee (NPSC) and Project Management Unit (PMU). The NPSC is comprised of: (1) The relevant heads of departments in MoA; (2) Principal and Chief Finance Officer, MoA; (3) ASCU Coordinator; (4) Representatives from association of microfinance institutions, Kenya National Federation of Agricultural Producers, Seed Trade Association, Fertilizer Trade Association, Equity Bank, AGRA and IFAD; (5) the Head, NAAIAP; and (6) the Project Coordinator who is an ex-official member and secretary to the PSC. The World Bank and EU would join and participate in the NPSC meetings when necessary. The NPSC will be expanded to include representatives from the other financial institutions participating in the Kilimo Biashara. The NPSC provides the overall leadership and governance of the components as well as being the custodian of the properties of the Project. Its functions will include defining the vision and setting the strategic direction; approving Project budgets; appointing and supervising the Project management; and receiving reports, reviewing performance and providing direction thereon. The NPSC will receive quarterly management reports and hold quarterly meetings to review progress and provide direction on the Kilimo Plus and Kilimo Biashara components. There is an existing NAAIAP Co-ordination Unit (PCU) of three professionals that is responsible for the day to day management of the program. The professional staff is a Project coordinator, a deputy coordinator and a technical staff. The Professional staff are MoA regular staff and are supported by other departments in MoA such as Accounts, Procurement and Audit. An organogram is attached below.
[pic]
Input Voucher Component
4. This component will be implemented by MoA under the ongoing GoK initiative, the NAAIAP. MoA has developed a comprehensive “Program Design and Guidelines” Manual setting the structure of NAAIAP, including the oversight bodies as well as the eligibility and voucher redemption processes. This Manual has been appraised and is deemed to be adequate as a basis for managing this Grant. At the district level, there is a District Coordinating Unit (DCU) chaired by the District Agricultural Officer (DAO) whose members include farmers representatives, major farm input distributors, agro-processors/marketers. At the community level, a community committee set up under the chairmanship of the Divisional Agricultural Extension Officer (DAEO) will carry out beneficiary selection.
5. The component will provide small-scale farmers in participating districts with farm inputs (maize seed, basal fertilizer and top dressing fertilizer) for an acre of land, equivalent in value to not more than KSh 6,100 under a voucher system. A key eligibility factor is that the farmer must have at least one acre of land already cultivated and ready for planting. Farm inputs distributors have been identified within each district and have been trained by the PMU. A record of the particulars of these distributors, including their location, business registration license, names, addresses and telephone numbers of the registered owners, and their specimen signatures has been compiled by the PMU. A list of the eligible farmers has also been compiled by the divisions, and a copy given to the DAO, another to the PMU and third copy to all the selected distributors in the relevant district.
6. The vouchers are prepared, in four copies, by the PMU and sent to the DAO for issuing to eligible farmers. The vouchers have appropriate security features such as seal of PMU and rubber stamp by DAO. Specific serial numbers are issued to specific districts and the PMU keeps track of these numbers as the vouchers are redeemed. Different colors are used for vouchers for each year. The DAO records the name and ID number of each farmer on the voucher at the time of issuing of the voucher to the farmer. The issuing is done in the presence of the District Stakeholders Forum (DSF) members for the district. To redeem the voucher, the farmer goes to any of the selected distributors in the district to get the specified farm input. Once a farmer receives the required farm inputs, he or she signs the voucher. The distributor also signs the voucher. The distributor raises an invoice and delivery note, which are both signed by the farmer. The farmer retains a copy of the invoice and the delivery note. The four copies of the redeemed and signed voucher are distributed as follows:
• Original copy of the voucher attached to the original invoice and delivery note are forwarded by the farmer to the PMU through the DAO for payments.
• Duplicate copy remains with distributor/agro-dealer for his records and follow up of payment.
• Triplicate retained by the farmer.
• Last copy kept by DAO for follow up and reference.
7. Once the redeemed vouchers and supporting documents are verified, the PMU approves them for payments and releases equivalent funds from the Project Account to the DAO to pay the distributors through the District Accountant. Any distributors found to be engaged in any irregularities (including over charging farmers, selling under-weight inputs, etc.) are blacklisted and removed from the Program. The Bank has appraised these procedures and finds the arrangements to be satisfactory for the management of this Grant.
8. The capacity building of agro-dealers will be contracted out to Agricultural Market Development Trust (AGMARK). The Trust has been spearheading the agro-dealer development since 2004 in Kenya and in the East and Central Africa Region with support from Rockefeller Foundation, DFID, and USDA and recently by AGRA.
Kilimo Biashara Component
9. Building on the existing IFAD/AGRA/GoK/Equity Bank program, the core implementation activities of this component will take place within the framework of NAAIAP. Although the Equity Bank facility will be scaled up, other Banks and financial institutions will be invited to provide bids for 40 percent of the funds allocated to this facility under this program. This is hoped to expand the outreach of the program and to introduce competition that will lead to better services to farmers and other beneficiaries. The management of this component will provide coordination and facilitation of these activities and the inputs of other key partners and interested parties to achieve synergies and synchronization necessary to realize the objectives of accessing financial services to the farmers and other value chain actors in NAAIAP.
Orphan Crops Component
10. To undertake this exercise, the MoA, KARI, Agricultural Training Centers (ATCs), contracted CBOS, NGOs, KEPHIS and farmers shall be involved in seed bulking and distribution of planting materials. For crops that are vegetatively propagated, the planting materials shall be accessed from Research Centres and multiplied at selected ATC’s. Training on production technologies of these crops will be carried out alongside the promotion activities. The researchers will also avail technical materials on production and utilization to agricultural extension officers. KEPHIS will inspect the seed multiplication sites to ascertain that seed produced meets quality standards.
11. Seed will be delivered to DAO’s in the selected districts who will share it out among the divisions in each district. The DAO’s and Divisional Agricultural Extension Officers (DAEO’s) shall identify farmers who will benefit from the seed. These farmers will grow the seeds and return at the end of season an equivalent amount of seed received, to DAEO’s to benefit other farmers. This kind of revolving process will continue till the seeds are readily available to most farmers.
12. This component will be implemented by MoA under the Department of Crop Management. An officer will be designated to coordinate the activities. All accounting and procurement will however be undertaken centrally in the ministry and coordinated by the overall Project Coordinator. A technical committee whose membership shall include the relevant technical Departments of MoA, KARI, representatives of agro-dealers, AGMARK and other stakeholder shall be constituted. The EC and World Bank representatives will participate as members of the committee. The National EAPP coordinator, the NAAIAP coordinator and the orphan crop coordinator shall be ex-official members with the latter being the secretary and convener of the committee. The committee shall give guidance on technical issues and on the implementation of the component. In the promotion of sorghum for brewing, some activities involving capacity building and linking farmers to markets will be contracted to Africa Harvest Biotec Foundation International (AHBFI) which has been contracted by EABL to promote the crop in two districts.
13. The flow diagram below shows the general organization and implementation arrangements of the Project.
Inter-Ministerial Coordination Committee (ICC)
Agricultural Sector Programs Steering Committee (ASPSC)
National EAPP Coordinator
NAAIAP Steering Committee Orphan crops Technical Committee
National NAAIAP Coordinator Orphan Crops Coordinator
District and lower level structures under MoA and NAAIAP
DAO, Division and location heads
Farmers, Beneficiaries, other stakeholder
And
Other community based institutions
General Organizational/Implementation structure of EAPP
Annex 7: Project Preparation and Appraisal Team Members
KENYA: Enhancing Agricultural Productivity Project
| |Planned |Actual |
|Decision Meeting |October 27,2009 |October 27, 2009 |
|Appraisal |November 26, 2009 |December 10, 2009 |
|Negotiations |November 30, 2009 |December 16, 2009 |
|RVP approval |March 8, 2010 | |
|Planned date of effectiveness |March 15, 2010 | |
|Planned closing date |December 30, 2011 | |
|Name |Title |Unit |
|Andrew Karanja |Sr. Agricultural Economist (TTL) |AFTAR |
|Christine Cornelius |Program Coordinator |AFTAR |
|Dahir Warsame |Sr. Procurement Specialist |AFTPC |
|Henry Amuguni |Financial Management Specialist |AFTFM |
|Ladisy Chengula |Sr. Environmental Specialist |AFTEN |
|Monica Okwirry |Program Assistant |AFCE2 |
|Nightingale Rukuba-Ngaiza |Sr. Counsel |LEGAF |
|Stephen Mukaindo |Counsel |LEGAF |
|Nyambura Githagui |Sr. Social Development Specialist |AFTCS |
|Joel Buku Munyori |Procurement Specialist |AFTPC |
|Patrick Piker Umah Tete |Sr. Financial Management Specialist |AFTFM |
|Luis M. Schwarz |Sr. Finance Officer |CTRFC |
Annex 8: Global Food Response Program and the European Union Food
Price Crisis Rapid Response Facility
KENYA: Enhancing Agricultural Productivity Project
International prices of rice and wheat spiked in 2008, contributing to higher prices for staple foods in many developing country markets and causing severe consumer hardships. The price of inputs such as fuel and fertilizers increased even more over the same period, aggravating the balance sheet of smallholder producers who make up the vast majority of developing country grain producers and of the poor overall. Countries need to pay the extra cost up front without necessarily reaping commensurate output price benefits on their small amounts of marketed surplus. There is an urgent need for rapid action to alleviate the plight of the poor in accessing food, to assist clients with food policies to meet new global conditions, and to facilitate a sustainable response of developing country agriculture to the opportunity of high prices in an inclusive manner.
This Project is financed under the Global Food Crisis Response Program (GFRP), which was endorsed by the Board on May 29, 2008, and will be financed out of the European Union Food Price Crisis Rapid Response Facility. This Trust Fund was established on August 31, 2009.
The initial approach is to facilitate a rapid Bank response with all available tools as soon as possible, while supporting the evolving coordination role of the United Nations Task Force on the Global Food Crisis established recently in Berne.
Annex 9: List of Project File/Supporting Documents
KENYA: Enhancing Agricultural Productivity Project
1. Project Proposal - Rapid Scale up of Investments to Boost Smallholder Food Production in Kenya through NAAIAP, February 2009.
2. NAAIAP Annual Report 2007/08.
3. NAAIAP Program Design and Implementation Proposal May 2006.
4. NAAIAP Program Document and Guidelines 2008/09.
5. NAAIAP Program Design and Guidelines 2009/10, September 2009.
6. Innovative Financial Instruments for Agriculture, Strategy and Plan 2008-2010. May 2008, IFAD.
7. KARI report on development of irrigation infrastructure, rehabilitation of seed stores, cold rooms and capacity building, August 2009.
8. Administration Agreement for EC contributions, as represented by the Commission, to Trust Funds EU Food Crises Rapid Response Facility (TF071341): DCI-Food/2009/2170407, August 2009.
9. Enhanced Kilimo Biashara Concept Note, MoA, August 2009.
10. Proposal submitted to MoA by AGMARK, September 2009.
11. Seed production of improved traditional food crops for arid and semi-arid lands, MoA, September 2009.
12. Cost tables EU based categories.
Annex 10: Statement of Loans and Credits
KENYA: Enhancing Agricultural Productivity Project
|** Quasi Equity includes both loan and equity types. |
Annex 11: Country at a Glance
KENYA: Enhancing Agricultural Productivity Project
[pic]
[pic]
[pic]
Annex 12: Map
KENYA: Enhancing Agricultural Productivity Project
[pic]
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[1] “Orphan Crops” are crops categorized by the Ministry of Agriculture (MoA) in its technical documents as important traditional crops neglected by the farmers. Examples of such crops include: cassava, sweet potato, cowpeas, sorghum, and millet. These crops are mainly grown in semi-arid areas and are drought tolerant.
[2] The average prices of fertilizers increased by almost three times in 2008 but have since come down to about 40 percent above than their 2007 levels.
[3] In May 2008, the GoK launched “Vision 2030,” whose aim is to transform Kenya into “a newly-industrialized”, middle income country, providing a high quality of life to all its citizens in a clean and secure environment. This is the main development strategy of GoK. The Vision will be implemented through five-year rolling Medium-Term Plans (MTPs), starting with the first one which will cover the period 2008-2012.
[4] The Grant Agreement has a retroactive financing provision to cater for activities undertaken from April 1, 2009.
[5] Based on 2009 prices of KSh 3,000 for DAP/basal fertilizer, KSh 2,000 for CAN/top dressing fertilizer and KSh 1,100 for 10 kg of hybrid seed.
[6] 150,000 farmers to be targeted under the input voucher scheme and 500,000 under the OCP.
[7] The indictors will be disaggregated by gender, where applicable
[8] Improved food production technology means, hybrid maize production system, improved orphan crops varieties production system and use of organic fertilizers.
[9] River Kathita is a permanent stream that drains into the larger Tana River, and both rivers are not international rivers.
* By supporting the proposed Project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas.
[10] Based on 2009 prices of KSh 3,000 for DAP/basal fertilizer, KSh 2,000 for CAN/top dressing fertilizer and KSh 1,100 for 10 kg of hybrid seed.
[11] Criteria of district selection: (i) Critical poverty index of < 30 percent; (ii) Suitable maize growing zones; and (iii) Exclusion of areas/districts with similar programs such as MDG Village in Gem and Siaya; ADB IDP Program through the Ministry of Special Programs. These are in Molo, Njoro, Nakuru, Koibatek, Kipkelion and Uasin Gishu. North Rift is also excluded for already covered farmers during 2008/09 in the greater Trans Nzoia and Uasin Gishu.
[12] The number of agro-dealers to be trained and certified varies from district to district. There are some districts with very few agro-dealers and there are those in Western Kenya where AGMARK has already trained considerable numbers of agro-dealers to date.
[13] Some of these traditional crops include: sweet potatoes, cassava, pigeon peas, common beans, cowpeas, green grams, dolichos lablab, chick peas, sorghum, finger millet, and Irish potato among others.
[14] This indicator will be reported on in the ISR as the Core indicator “Direct Project Beneficiaries (number), (% female).
[15] Improved food production technology means, hybrid maize production system, improved orphan crops varieties production system and use of organic fertilizers.
[16] The baseline figures (where applicable) are mainly based on the AISP figures, most of the targets are cumulative over the baseline for the two years.
-----------------------
Financier
IDA
Government FM Systems
Designated Account- Ministry of Finance
Project Account- MoA
Distributors/farm input suppliers paid through funds remitted to the district account, contactors and others
Financial Reports/ Accountability
• Quarterly IFRs
• Interim internal audit reports
• Annual audit reports
• SOE returns
• Others (M&E reports, complaints etc)
Key
Flow of funds
Flow of accountability
Guarantee
Fund Account (s)
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