RICE ENTERPRISE DEVELOPMENT PROJECT CONCEPT NOTE
SECTION 1: PROJECT PROFILE
Project Name: Rice Enterprise Development Project
Project Reference Number:
Ministry /County Department: Ministry of Agriculture and Livestock Development
Implementing Agency (MDA/CDA): Commodities Fund
Initiating Department /Division / Section\
Unit Commodities Fund
Budget Vote (where applicable):
Estimated Project Cost:
Kshs. 3,000,000,000.00
MTEF Sector:
Agriculture, Rural and Urban Development
Accounting Officer:
Managing Trustee
Official Contact Details (Provide email, Utalii House, 11th floor, Utalii Lane off Uhuru Hwy, Nairobi
telephone number, postal and physical P.O Box 52714-00200, Nairobi
address): Cell: 0728 602 427/8| 0737 204 278/9
Email: info@codf.co.ke; and info@comfund.co.ke
Website: comfund.co.ke
Project Threshold Large
Project Geographic Location (Provide
GPS Coordinate here ): 14 Rice Growing Counties
County: Sub-County: Ward: Village:
The project will be implemented in Kirinyaga, Sub-counties in rice- Wards in rice- Villages in rice-
Kisumu, Tana River, Busia, Siaya, Homa Bay, Taita growing counties growing growing counties
Taveta, Migori Muranga, Bungoma, Garissa, counties
Kakamega, Kilifi, and Meru Counties.
Planned Start Date: July 2025
Planned End Date: June 2030
Date of submission: July 2024
SECTION 2: PROJECT BACKGROUND
1. Situation Analysis
Rice is ranked as the 3 rd most important cereal after maize and wheat in Kenya. Approximately 80% of rice grown in
Kenya is from irrigation schemes, with the remaining 20% produced under rain-fed conditions. At the close of 2022/23,
the area under scheme rice cultivation was 38,939 Ha with a farmer population of 31,702 (Economic Survey, 2024). 22
counties are ecologically suitable for rice production, but only 14 counties are currently engaged in rice farming. The
leading producer counties are Kirinyaga (67.1 %), Kisumu (19.8%), Tana River (6.1%), Busia (4.1%), Migori (2.9%),
and Taita Taveta (2.61%) (Economic survey, 2024).
In 2023, Kenya produced 229,064 tonnes of rice against a total consumption of approximately 949,000 tonnes. The
deficit of 719,936 tonnes was met through imports at a cost of Kshs.34.1B. With an estimated 12% increase in
consumption and a projected annual population growth rate of 2.7%, the national annual demand is expected to go up to
1,290,000 tonnes by 2030 National Rice Development Strategy 2 (NRDS-2, 2019-2030). To address the widening gap
between production and consumption, and reduce reliance on imports, various efforts have been introduced by the
government and partners. These include the development and dissemination of improved production technologies,
introduction of high-yielding rice varieties, improved knowledge on harvest and post-harvest handling, marketing and
value addition.
In the Medium-Term Plan IV (MTP IV), Bottom-up Economic Transformation Agenda (BETA), and the Agriculture
Sector Transformation and Growth Strategy (ASTGS, 2019-2029), rice has been identified as one of the priority value
chains for food and nutrition security and overall livelihood improvement. As a BETA priority agricultural value chain,
it is envisaged that the sub-sector has the potential to impact the economy through job creation, import bill reduction and
food and nutrition security enhancement. This presents a great investment opportunity in the rice value chain financing
on the areas of production, processing, and value addition.
2. Problem Statement
The agriculture sector contributes 36% to Kenya’s GDP, accounts for 60% of employment both directly and indirectly
and 65% of exports yet it received only 3% of credit from both commercial and noncommercial lenders (World Bank,
2018; ASTGS 2019-2029). With the sector being the engine of the economic growth in Kenya with about 75% of the
population earning all or part of their income from the sector, the low level of financing is reflective of the lenders’
aversion due to the perceived credit risk and seasonal cash inflows associated with the sector.
The agriculture sector is dominated by small holder producers who account for 78% of the production. More than half
the farmers rely on borrowed funds to finance acquisition of farm inputs and labour services and leasing of farm
equipment (CBK Agriculture survey July 2023). CBK (2023) further posits that with commercial banks’ lending less
than 5% to the agriculture sector, 48.1% of farmers rely on credit from families and friends, digital lenders,
Microfinance institutions, and cooperative societies. While the country has experienced resurgence of mobile lending,
these facilities are accompanied by challenges of high interest rates, insufficient amounts and rigid modelling that is not
customizable to the seasonality of crop production (FIN Access report, 2021).
It is not unusual for Annual Percentage Rate (APR) to be in excess of 30% resulting in smallholder farmers who suffer
from affordability barriers that limits their access to requisite farm inputs and other factors of production. Currently the
average APR for unsecured loans exclusive of third-party payments for MFIs and Commercial banks in Kenya is 32%
and 22% respectively (costofcredit.co.ke). At this cost, to cultivate an acre of rice on borrowed capital, a scheme farmer
has to surrender 29% of their profits to MFI lender and 20% to a commercial bank to satisfy the requisite cost of the
funds.
In extending affordable credit facilities, Commodities Fund will offer tangible solutions along the value chain by
financing farm improvement, quality farm inputs, farming operations, and value addition. The project will offer
customized credit solutions with crop cycle adapted-moratoriums and a reduced APR of 9% per annum thereby
increasing farmers returns.
3. Relevance of the Project Idea
The proposed project supports the BETA thematic areas of agriculture transformation and inclusive growth. Rice has
been identified as one of the key value chains prioritized for development due to its impact on the economy in terms of
job creation, import reduction, and food and nutrition security. The proposed project focuses on up-scaling rice
production and value addition. This is well aligned with the Agricultural Sector Transformation and Growth Strategy
(ASTGS 2019-2029) goal of increasing household incomes and rural economies.
In addition, the project will be complementing the government’s aim to transform poor farmers from food deficit to
surplus producers through value chain financing and will further complement the efforts geared towards rice sub-sector
development in the targeted County Government as stipulated in their respective County Integrated Development Plans
(CIDPs).
By contributing innovatively to commercially oriented and modern rice farming, we aim to finance the production node
of the rice value chain through affordable and sustainable credit facilitation of quality inputs, farm machinery, farm
operations, post-harvest handling, and milling. This will lead to increased output and a significant increase in acreage to
satisfy the rising demand that is not currently being met in the country.
SECTION 3: ALTERNATIVE SOLUTION/ OPTION ANALYSIS
ASSESSMENT OF ALL POTENTIAL ALTERNATIVE OPTIONS
i. Public-Private Partnerships (PPPs) in Agriculture
a. Description
Public-Private Partnerships (PPPs) involve collaboration between government agencies and
private sector companies to enhance agricultural productivity. This method can facilitate
investments in infrastructure, technology, and training to improve rice production efficiency.
The government can provide land access, regulatory support, and research funding, while
private partners can bring in investment, expertise, and innovative technologies.
b. Assessment Method
1. Stakeholder Analysis: Identify potential public and private partners, their roles, and
contributions.
2. Cost-Benefit Analysis: Evaluate the financial implications, including investment
costs, potential returns, and risk assessments.
3. Pilot Projects: Implement small-scale pilot projects to test the PPP model in specific
regions before a full-scale rollout.
c. Results
Increased Investment: Enhanced funding for rice production infrastructure and
technology.
Improved Productivity: Adoption of modern agricultural practices leading to higher
yields.
Knowledge Transfer: Increased capacity and skill development among farmers
through training programs.
Sustainability: Long-term sustainability of rice production due to better resource
management and technology use.
ii. Cooperative Farming Models
a. Description
Cooperative farming involves farmers coming together to form cooperatives that can
collectively purchase inputs, share resources, and market their produce. This model allows
for better bargaining power, access to quality inputs, and shared knowledge. Cooperatives
can also facilitate group financing and access to larger markets.
b. Assessment Method
1. Survey and Feedback: Conduct surveys among local farmers to gauge interest and
identify barriers to joining cooperatives.
2. Feasibility Study: Analyze the potential for cooperatives in different regions based
on demographics, existing infrastructure, and market access.
3. Performance Metrics: Establish metrics for measuring cooperative success,
including yield improvements, cost reductions, and market access.
c. Results
Potential Alternative Option Pre-Feasibility Score (1-10) Assessment Method
1. Public-Private Partnerships (PPPs) 8 Stakeholder Analysis and Risk Assessment
2. Cooperative Farming Models 7 SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)
d. Risks
Potential
Risk Risk Actions Required to Mitigate
Alternative Risk Description
Likelihood Impact Risks
Option
Establish clear agreements and
Public-Private Misalignment of
regular communication to
Partnerships goals between public Medium High
align objectives. Conduct joint
(PPPs) and private partners
planning sessions.
Create attractive incentives
and demonstrate potential
Lack of investment
Medium High returns on investment.
from private partners
Develop a robust business
case.
Engage in continuous dialogue
Regulatory changes
with government officials.
affecting Medium Medium
Advocate for stable policies
partnerships
that support partnerships.
Provide training and
Technology
demonstrations to showcase
adoption resistance High Medium
benefits. Offer support during
among farmers
the transition period.
Invest in essential
Limited infrastructure (roads, storage)
infrastructure in Medium High as part of the partnership.
rural areas Identify and address critical
gaps early.
Potential
Risk Risk Actions Required to Mitigate
Alternative Risk Description
Likelihood Impact Risks
Option
Difficulty in Provide training on cooperative
Cooperative
establishing management and governance.
Farming Medium Medium
cooperative Engage experienced facilitators to
Models
governance guide the process.
Create clear bylaws outlining
Unequal contributions roles, contributions, and benefit
or benefits among High Medium distribution. Conduct regular
members audits and meetings for
transparency.
Conduct awareness campaigns
Resistance to joining
highlighting benefits of
from individual Medium Medium
cooperation. Address concerns
farmers
through community forums.
Potential
Risk Risk Actions Required to Mitigate
Alternative Risk Description
Likelihood Impact Risks
Option
Implement strong financial
Financial controls and regular reporting.
mismanagement Medium High Provide training on financial
within cooperatives management to cooperative
leaders.
Offer training in negotiation and
Market access marketing strategies. Develop
challenges due to lack Medium High partnerships with organizations to
of negotiation skills improve market access.
e. Issues
Issue Effect/Impact on Actions Required to
Issue Description
Potential Alternative the Project Resolve the Issue
Option
Develop a detailed
Complexity in framework for
Public-Private Delays in project initiation
forming effective partnership formation,
Partnerships (PPPs) and execution
partnerships including roles and
responsibilities.
Establish clear
expectations and
Varying levels of
Potential for uneven performance metrics
commitment from
progress and accountability for all partners.
partners
Conduct regular
evaluations.
Secure diversified
High initial Strain on available funding funding sources and
investment costs and resources grants to support
initial costs.
Communication Set up regular
barriers between Misunderstandings leading meetings and reporting
public and private to project setbacks channels to ensure
sectors clear communication.
Work closely with
Lack of clarity on
Risk of non-compliance legal advisors to
regulatory
and legal challenges ensure adherence to all
frameworks
regulations.
Potential
Issue Effect/Impact on Actions Required to
Alternative Issue Description
the Project Resolve the Issue
Option
Cooperative Difficulty in Potential conflicts and Facilitate mediation sessions
Farming reaching consensus disruptions in and training on conflict
Models among members operations resolution strategies.
Slower formation and Conduct team-building
Limited initial trust
acceptance of activities and workshops to
among farmers
cooperatives foster trust and collaboration.
Potential
Issue Effect/Impact on Actions Required to
Alternative Issue Description
the Project Resolve the Issue
Option
Provide comprehensive
Insufficient skills
Ineffective management training programs covering
and knowledge
and decision-making management, finance, and
among members
operations.
Market entry
Reduced Develop a collective brand
barriers due to lack
competitiveness and strategy and marketing plan
of branding or
sales opportunities to enhance visibility.
identity
Offer incentives and
Resistance to change Slower adoption of
showcase success stories to
from traditional cooperative practices
encourage participation in
farming methods and technologies
new methods.
f. Assumptions
1. Market Demand: It is assumed that there is a stable or increasing demand for rice in
both local and international markets, which will justify investment in production
enhancements.
2. Regulatory Environment: The assessment assumes a favorable regulatory
framework that supports PPPs and cooperatives, including policies that promote
agricultural investment and protect farmer rights.
3. Access to Resources: It is assumed that both farmers and private partners have access
to the necessary resources, such as land, labor, and technology, to successfully
implement these models.
4. Financial Viability: The financial projections assume that the returns on investment
from both PPPs and cooperatives will be sufficient to attract both public and private
funding.
5. Technological Integration: It is assumed that farmers will be willing and able to
adopt new technologies and practices introduced through these models.
6. Capacity for Collaboration: The assessment assumes that stakeholders (farmers,
government, private sector) are open to collaboration and have the capacity to engage
in partnerships or cooperative models effectively.
7. Training and Support: It is assumed that adequate training and support will be
provided to farmers involved in cooperatives, enhancing their skills and operational
efficiency.
8. Risk Sharing: It is assumed that risks associated with agricultural production (e.g.,
climate change, market fluctuations) can be effectively shared between public and
private partners, reducing individual exposure.
