Got Milk?

Kenya’s got milk alright, and it’s a good thing, because just like good ol’ USA and Starbucks, I’m not sure what people here would do without their twice daily milk tea! Milk is big business; an integral part of Kenya’s expanding agricultural sector.

I just returned from Eldoret and the Kerio Valley and while there, I shot video footage for a new cooling plant loan product at my MFI, Juhudi Kilimo, who specializes in dairy loans. Here’s how milk cooling plants are set up in Kenya:

Many small scale farmers across the country have received a micro-loan from Juhudi to buy a cow, which they then typically milk twice a day. After the morning milking (evening milk often going to the family), milk is transferred from pail to transport vessel, which is then carried by hand, bicycle, donkey, motorcycle and truck to the nearest ‘cooling plant’, which buys the milk. Each area’s aggregated and quality-tested milk is then resold to central processing and distribution plants across the country, and now most Kenyans can easily buy milk at stores.

In this manner the industry was born, one which is now somewhat mature but still growing rapidly, and stable enough to allow Juhudi to try something new. In addition to their standard ~$750 loan for a cow, Juhudi also wants to extend loans for cooling plant tanks for ~$5000. These 2 loan products are perfect complements, and everyone I talked to said the price of milk per liter has been steadily increasing, indicating excess demand at the macro level. Kenyans want more milk, and I think both farmers and the cooling plants are good investments.

Before cooling plants, local markets had excess supply and much of the farmers’ milk spoiled. With this loan product Juhudi’s cow borrowers in the area benefit from non-spoilage: some farmers even exclusively sell their milk to a plant, demonstrating the symbiotic partnership. There is plenty of local supply to support plants’ expansion, so now Juhudi has a chance to become further integrated into the value chain. The borrower has a reliable place to sell all their milk, the plant can rely on enough volume to contract with the big companies and Juhudi has a reliable loan product.

I personally found the methods of transportation the most interesting. My father proposed hot air balloons and even remote controlled ‘milk-bot’ vehicles for the next generation of pick up and transport. Don’t think these aren’t possible – Kenyans are resourceful and innovative, and micro-finance knows no bounds! Either way you can be sure, when we get there the loans will be posted on Kiva.

Another benefit of the growth of this industry is job creation. In addition to all of the farmers, pick-up artists and transport workers are the quality assurance analysts, plant clerks and managers. Everyone I talked to cited cooling plants as the hub that is making this industry thrive.

Juhudi Kilimo has a strong history with Kiva, where Kiva’s sustained provision of liquidity and default protection is now allowing Juhudi to look at larger loans. But with larger loans comes more risk, so once again Kiva would like to partner and see this cooling plant loan posted to the site. Also, as loan amounts increase, MFI’s must compete with banks, forcing lower rates and lower margins. Kiva’s 0% interest platform is a huge potential boost here. Once edited, my video footage will provide information that potential Kiva lenders can watch in order to learn about the loan and the industry, and then hopefully fund! Look for it on Kiva later this year…

Varick Schwartz is a Kiva Fellow serving in Nairobi, Kenya and working with Juhudi Kilimo. You can view Juhudi’s loans on Kiva here.