ANNEX A – CONCEPT PAPER FORM

Please use the following format to submit your concept paper.

Concept papers shall be submitted in English and may not be more than five (5) pages. The
Concept paper must be signed by a senior representative authorized to make commitments on
behalf of the Applicant.

This concept paper is in response to APS-KCDMSD-2018-001.

A. Applicant Information

1. Project Name Commercialization of the dairy value chain in

Vihiga county
2. Name of Organization Chofumbo agroventures
3. Address 60- 50310 Vihiga
4. County & Sub-county Vihiga County, Sabatia sub-county.
5. Telephone and email +254 723 115 314,
[email protected]
6. Key contact person(s) and title Samson Akifuma - Programmes manager
7. Length of proposed project (in months) 26 months
8. Cost share funds
9. Total funds requested from KCDMSD
10. Total cost of project

Background: Briefly describe your organization’s activities

Chofumbo Agro-ventures is a registered Limited Company operating in Vihiga county. Its
membership stands at 5000 dairy farmers. The group was originally formed with an aim of
enhancing access to effective breeding services, and dairy husbandry information for better
livelihoods of dairy farmers. The company has grown in scope to include efficient delivery of
inputs and animal health services among its portfolio of operations. The company has a
management team of 15 board of directors with a project management team of 7 members.
Currently Chofumbo Agro-ventures is involved in sensitization trainings amongst the dairy
farmers, conducting a subsidized effective efficient AI service provision with 4 main breeds to
upgrade local type of cattle in the region, established mother block fodder to provide farmers
with high quality propagation materials. We are also linked with farm inputs supplies for dairy
farmers and we intend to help farmers market their milk and add value to it. The company aims
at upscaling and out scaling dairy value chain by developing a model business hub in Vihiga
county in order to address the constraints facing the Vihiga Dairy Farmers. The dairy business
model hub is a cluster of dairy services around a milk chilling plant. The dairy hub will provide a
dairy chilling services secure market and bring services closer to the dairy farmers. This effort of
marketing will include having a milk cooling plant. Chofumbo company therefore kindly request
for support in this marketing venture

B. Project Description: Briefly describe the challenge your project will address.
Dairy farming in Vihiga is characterized by fragmented small holder dairy farmers
and unorganized farms mostly operating on non-commercial basis though some
commercial and corporate farms exist. According to the Livestock census held in
2006, majority of the farms (small farms) in Vihiga operated with small herd sizes.
Among the 123,437 reported dairying households, over 82 percent of the
households owned less than 4 animals. The small farmers (this may include
farmers with more than 4 animals that still do not belong to the commercial farmer
category) contributed 90% to the total milk supply in Vihiga.

As far as geographic distribution of milk production is concerned, approximately

80% of the milk is produced in rural areas. Peri-urban and urban areas account for
another 2 % and 5%, respectively. Only 3-5% of total production in the country is
marketed through formal channels. The remaining 97% is produced and marketed
in raw form by informal agents in the marketing chain.

Small Farms

The classification of farms is done on the basis of objectives of farm ownership.

These small farms are operated at subsistence or near subsistence level i.e. dairy is
not a major source of income for the small farm owners. They do not have true
dairy farming knowledge and formal links to market for a profitable dairy farming
business and are hence unable to get commercial benefit out of dairy farming. The
majority of the small farms have less than six animals though some small farms
may have animals exceeding this figure.

A key feature of subsistence dairying is that women are involved in dairy while
men concentrate on other tasks considered more important. The majority of the
small holders keep a large portion (almost 75%) of the milk produced for home
use. They use the milk sold to supplement their agriculture income. The primary
purpose of animals is agriculture.

Furthermore, the small farmers do not have sufficient land to cultivate their own
fodder. They cannot also afford costly feed for their animals. Hence more than half
of the feeding requirement for these animals is provided by grazing. Small herd
sizes also do not provide economies of scale and cost to retain them is usually
higher than the revenue generated from selling of milk provided by these animals.
Hence cost per liter is usually higher for small holders.

 Specific challenge that needs to be addressed and how the proposed innovation
impacts on the beneficiary
  Out-reach (no of smallholder farmers/businesses benefitting)
 Geographic scale (Counties) if relevant
 If the proposed project will scale up an existing activity or approach, please provide
results and learning from previous work

As a business oriented based organization with a shared economic problem or social community
members by working jointly in a collection spirit. The overreaching objectives are to enhance
agricultural productivity and market access to our members. In so doing, the business will
stimulate daily related business economic opportunities that will eventually spar rural based
business hub. Whereby an economically active producer organization will set up business
relationship and linkages with other public and private agribusiness. Partners that provide dairy
related inputs, milk markets outlets and other services such as extension service provision to
farmers, advisory services and financing services.
This will form a class of services of which farmers will be able to get inputs and services
including marketing their milk inputs and other services. We find it profitable to offer the service
through the hubs since it will operate an in-house business development services by operating an
agro vet shop, a fully flagged farmer extension service program with check off system and a
SACCO.
The hub analysis conducted by the company shows that ideal environment for hub
implementation has necessitated by;
 Farmers capacity and willingness to self-organize and take collective actions will form
ideal environment for implementation.
 Availability of surplus milk at household level,
 market condition to price milk influenced by supply and demand,
 Policy environment-weather control controlled or mainly regulated and quality standards,
 Having requisites public health support and animal health services.
 Having the right place with right environment and the eminent that will yield best returns.
 Amount of rainfall attitude for availability probability of livestock and the general
economic activities. Cattle population breed and milk yield. Current milk productivity
and differences from the potential “yield gap”.

The higher the difference, the higher the motivation to farmers to invest in productivity
enhancing technologies. The lower the organization get, the higher the farmers motivation to
work together the higher the possibility of the organization milk price through the hub hence
enhancing collective action by community to work together.
Project details
The proposed business hub for Vihiga will have the following components;
  A centralized chilling facility where milk will be aggregated. Aggregated milk will either
be marketed to various entities after pasteurization while some of the milk will be
processed into other dairy products such as yoghurt and mala.
 25 collection center in close proximity of various farmers across Vihiga County from
where milk delivered by farmers will be transported to the chilling facility, each
collection center will be managed with a personnel trained in milk handling and hygiene.
 Satellite inputs outlets attached to each collection center and manned by a trained Animal
Health Assistant (AHA) who is employed by DBH. The satellite input outlet will be
linked to a centralized mega inputs store located at the hub. The mega store will be in
charge of centralized bulk procurement of inputs and distribution to its subsidiaries
attached to the collection centers.
 The AHA will also be in charge of providing clinical and AI services to farmers who are
supplying milk to the collection centers. Moreover, at least 3 crush pens will be built in
the vicinity of each collection center where farmers will present their animals for
accelerated breeding and community tick control; (spraying).each crush pen will be
managed by a youth who will be trained and equipped with spraying kits to offer tick
control services at a fee of ksh 50 per cow.

NOTE: The dairy business hub initiative is in tandem with chofumbo’s strategic objective of
effective delivery of services to small holder households. The dairy hub innovation will also help
in the realization of enhanced access to inputs and services by small holder dairy farmers leading
to enhanced technology adoption, improved productivity and dairy income.
The business will work with the following groups;
 Financial institution
 Farmers group head farmers
 Community leaders
 Opinion leaders
 Local authority
 Government ministry
 Private sector
 Investors
 Milk traders
 Input supply

The dairy hub community dairy development consists of 25 villages located within 15-20 (those
villages will form a hub) with 300 farmers/household per village milk collection Centre under
which the small holder dairy farmers will be organized and developed. It is anticipated that each
farmer will be able to deliver 4 litres of milk per day per household. The milk from small farmers
who belong to the dairy hub is collected by the dairy collection center that operates in their area.
The main idea of the dairy hub is to increase productivity of milk in rural areas by small scale
capacity building and to measure success of animal’s productivity at the same time. By treating
the cows owned by a group of small holder farmers as one herd under the dairy hub program. An
input supply store worthy 800,000 ksh per village collection centre will be set alongside. Animal
health routine management practices will be done at the milk collection centre whereby two
youth will be trained equipped and attached at the collection centre as spray teams. They will be
equipped with respective acaricides, protective gear and spray pumps. A reliable breeding
program will form part of the entities at the collection centre and charges of 50 ksh will be
charged to the affiliate member. The main hub aim is to improve quality and quantities of milk
supplied by the farmers. The milk will be collected by the organization for processing (hence
small farmers will not have to sell their milk to unregulated milk traders under the dairy business
hub established. The community dairy development solution will integrate, localize and develop
a number of different dairy solutions which will improve the quality and quantity of milk
produced.
Its expected as the dairy hub solution alongside other backward integration initiatives such as
creation of commercial dairy farms and elements of veterinary clinics, dairy trainings program
will be provided to this dairy community such that the daily milk yields hence increase
profitability increase. This approach will allow making it safe for milk hygienic and easily
accessible for human consumption; while promoting growth in milk production to meet
increasing demand. The basic benefit of the dairy hub of the organization will sustain
development of the dairy industry. Its expected that better quality of milk supply will lead to
higher quality of processing and packaging technology of product. With the dairy hub program
substantial growth for packaging milk is envisaged.
The dairy hub will consist of a central building with instant cooling, milk testing equipment,
quality control, data recording from all registered producers, veterinarian and training facilities.
Furthermore, community veterinarian clinics will be established along with mobile clinics and
veterinarian camps. Trainings will be the key component of dairy hub program. The following
training will be conducted under the hub umbrella. Some of trainings such as trainers and dairy
hub staff training program.
This will enhance improve productivity and efficiency. As per the plan, other training includes:
 Dairy hub soft ware
 Training for measuring
 Monitoring and evaluating milk development
 Economic keeping for checking profitability of dairy farms
 Breed improvement
 Artificial insemination
 Nutrition improvement

As per the plan, small holders training and published material is developed in collaboration with
stakeholders. Due to low literacy level of the rural populations, the course consists of visual aid
to be fixed to a branded board on the farmers shed well after field trainings.
Dairy hub operation
According to dairy hub plan of the organization, each collection centre would operates from a
central building which will be located such that it is easily accessible by all producers. There will
be milk collection center for each village within the dairy hub. Each village milk collection
center will have a producer group of over 350 members small holders with an average of 5
milking cows. To avoid spoilage of milk during transport the centers will be located such that the
producers group supplying milk to village milk centers (vmc), remain close to the producer. The
VMC points will remain open from 6:00am to 8:00 pm.
A milk collection agent will be appointed at the milk collection centre to collect milk from the
producer after applying necessary quality test using a lacto scan which test fats density, protein,
lactose, water adulteration, temperature, freezing points, conductivity and Ph on the milk being
purchased from the small holder farmers. Additionally, random alcohol test to measure total
bacteria count will also be conducted. After application of regular quality test milk will be
poured in a cooler where it will be cooled to approximately 150c.each. The VMC will at least
have one agent. In addition, the village milk collection centers would have its own field services
executive. The field service would offer constant training and support to registered producers in
the field through frequent farm visit.
The field service executive will support farmers in implementing good animal and hygienic
practices which will be taught during trainings. The purpose of this village milk collection
centers is to ensure quality milk as large quantity produced are possible. The milk collected at
VMC will be transported to the central dairy hub building in prescribed containers on a daily
basis. A mobile milk tester will travel with the milk from VMC and milk collection centers,
mainly operated by our staffs. The staffs will be responsible for milk volume accuracy, quality
control and analysis. Milk will also be tested at the central building for quality before being
accepted. The milk will be cooled instantly to 3-4oc for storage in prescribed containers before
being taken to the plant where it will be tested again before being accepted for processing. The
total chain of events from cow to instant cooling at the dairy hub takers maximum of 8 hrs. Other
than receiving testing, cooling of milk the central dairy hub office will perform several additional
functions. To ensure proper trainings of farmers in animal husbandry and nutrition, availability
of veterinary medical facilities, enrichment and preservation of animal fodder, improvement of
breed through artificial insemination, supply of clean water 24hrs a day., a mechanized milking
(milking machines) are provided, yield per animal development and profitability enhancement of
small holders dairy farmers. The dairy hub building also will offer a one stop shop with farm
supplies for animal welfare and feeds.
In orders to ensure smooth operations’ the dairy hub office will employ a dairy hub manager
supported by a veterinarian, one quality controller and one financial or administrative controller.
Over a period of time, the no. of agro-services executive will be increased as the numbers of
small holder’s increases. The veterinarians will support small holders through Artificial
Insemination services, animal husbandry, record keeping and competence development. All
dairy hub and village milk collection point staffs will be from the local community.
D. Project Goal & Approach: Explain the general goal of proposed project, describing
proposed activities and how they will foster solutions for sustainability and desired change.

The Goal of the Project

To enhance smallholder farmer’s capacity to access and use productivity enhancing technologies,
inputs and services for increased milk production and household income.

Broad Objective
The broad object of the project is to establish a commercial dairy value chain for Vihiga County
that will enhance the small holder farmer’s capacity to access and use productivity enhancing
technologies, inputs and services for increased milk productions and household income,
employment and food security.

Specific Objective
 Commercialize dairy enterprises through functioning marketing groups by 2019.
 To improve living standard of the farmer through improved incomes to 25% in the next
five years.
 To capacity build and improve the management for the dairy enterprise on the farms by
2019.
 To establish a functional milk value addition and organize market for value dairy
enterprises by 2020.
 To promote production of high quality and quantities of milk by 2019.
 To increase the prices for marketed value for dairy inputs and output products for the
next three years.

Activities and expected outcomes

The proposed business hub for Vihiga will have the following components;
 A centralized chilling facility where milk will be aggregated. Aggregated milk will either
be marketed to various entities after pasteurization while some of the milk will be
processed into other dairy products such as yoghurt and mala.
 Establish 75 village milk collection centers in close proximity of various farmers across
Vihiga County from where milk delivered by farmers will be transported to the chilling
facility, each collection center will be managed with a personnel trained in milk handling
and hygiene and each having a 100 members affiliated to it.
 Satellite inputs outlets attached to each collection center and manned by a trained Animal
Health Assistant (AHA) who is employed by DBH. The satellite input outlet will be
linked to a centralized mega inputs store located at the hub. The mega store will be in
charge of centralized bulk procurement of inputs and distribution to its subsidiaries
attached to the collection centers.
  The AHA will also be in charge of providing clinical and AI services to farmers who are
supplying milk to the collection centers. Moreover, at least 3 crush pens will be built in
the vicinity of each collection center where farmers will present their animals for
accelerated breeding and community tick control; (spraying).each crush pen will be
managed by a youth who will be trained and equipped with spraying kits to offer tick
control services at a fee of ksh 50 per cow.

NOTE: The dairy business hub initiative is in tandem with chofumbo’s strategic objective of
effective delivery of services to small holder households. The dairy hub innovation will also help
in the realization of enhanced access to inputs and services by small holder dairy farmers leading
to enhanced technology adoption, improved productivity and dairy income.

Output 1: Commercialization of dairy enterprise through functional marketing groups by 2020

1.1 Capacity building to mobilize dairy farmers to join dairy groups and link the groups to
sustainable markets to enhance volume of milk marketed through groups by 2020.
1.2 Capacity building on marketing and agribusiness aspects in the dairy enterprise by 2019
1.3 Exposure tours to other successful farmers group and counties in the dairy enterprise by 2019
Output 2: Establish functional value addition milk processing plant for the dairy enterprise by
July 2019
2.1 Establishment of a new fully fledged processing plant for dairy farmers in Vihiga County by
2019.
2.2 Promote capacity building on value addition on dairy products by 2019.
Output 3: Improve milk quality and quantities to enhance access to premium payments based on
quality by July 2019.
3.1 Encourage farmers to adopt proper breeding techniques to produce high breeding animals.
3.2 Establish 75 functional village milk collection centers.
3.3 Capacity building on dairy farmers on knowledge information technology to increase milk
production.

Other expected benefits

I. Economic of scale in purchasing farm supply.
II. Reliable record of animal data on health, vaccination, programs, feed, fertility, improved
quality, diseases control and traceability.

The dairy hub program promises to address arrange of other issues that will be faced. The
program will be expected to:
I. Give smallholders farmers access to market through supply agreement
II. Improve smallholder’s business through education and capacity building
III. Enable better milk quality as new technique will be involved

Benefit the milk processor through quick development of source of better quality and quantity of
milk by taking control of supply chain through cooling and other support. Support the
government with formalization of the industry through enhanced tax revenues, an ability to
monitor and control production and reduction in milk importing our county. The dairy sector will
be a significance impact as almost 58%lives in rural areas hence agricultural development is
vision 2030 in reducing poverty by half. The dairy sector will provide our opportunity for
poverty as less than 5% of milk is produced through informal channels which lacks knowledge,
equipment’s and infrastructure to enter formal milk supply channels. According to the
organization reports potentially 6000 farming families stand to benefit from the dairy hub
industry.

1. Beneficiaries
The beneficiaries for the project will be residents/dwellers of Vihiga County who are either
directly or indirectly involved in dairy farming. The farmers are organized into producer groups
and marketing groups which will form a basis for working and training. The groups will as well
target the vulnerable groups i.e. people living with HIV/AIDS, people living with disabilities,
women and youth. The groups will be empowered through capacity building on various aspects
of dairy cow breeding management.

Expected Beneficiaries
No Beneficiaries (VC Actors) Number
A Direct Beneficiaries
1 Dairy farmers 20,000
2 Dairy producer groups 130
3 Foundation marketing institution 14
4 Estimated waged jobs 20,200
Total no. of direct beneficiaries 40,344
B Indirect Beneficiaries
Estimated jobs in support services 2000
Grand total 42,344

E. Expected Results: Demonstrate return on investment within 3 years

Financial viability
Given the financial plan outlined in the business plan. The cooling plant is forecasted to become
profitable within the second year at spread(gross margin per litter) of Ksh 2.8 per liter. Critical
components of profit are the level of capacity utilization and interest service on the debit. The
dairy business plan is forecasted to become profitable at 2nd year at gross margin of 2.28 ksh.
Revenues and profit will directly impact if capacity utilization reaches 100% earlier (+ve) lesser
(-ve),than is assumed in the model.
This project will stimulate more interaction between smallholder farmers and service providers
within Vihiga County. The interaction will result into efficient and effective use of both internal
and external production inputs. More and better quality milk will be produced for local and
external markets. The increased household income will lead into wealth and employment
creation. Chofumbo agro-ventures will continually generate its revenue through contribution by
the Board of Directors, annual subscription from farmers, sale of genetic materials, feeds and
salts, vaccines and pesticides, resale of raw milk and other dairy processed products, revenue
generated from consultancy services by the dairy value chain actors. The community would
become more sensitized to demand for quality services and will be encouraged to keep high
value animals. After the project, the community will continue to be the focal points for farmer’s
trainings and will generate more farmer trainers. Past studies show that farmer trainers continued
to train about 20 farmers a month (Kiptot el al 2012). More business opportunities will be
created as mutual trust and confidence will be build among the farmers and service providers.

F. Cost share: Applicants must provide a clear plan of the resources they propose to contribute
to the grant activity and demonstrate to the maximum extent possible that the cost share is
realistic. They must:
 Express the total value as a percentage of the overall budget.
 Explain how cost share was estimated, listing the proposed sources, activities and the
total amount.
2. Proposed budget estimates

No Activity description Activity Unit cost Total cost Who provides

frequency (ksh)
1 County wide baseline 1 95,000 95,000 Chofumbo -
survey Agroventures
2 Capacity building of ASSORTED ASSORTED 1,500,000 KCDMSD
farmers on livestock
upgrading services and
marketing
3. Sourcing and procuring 1,400,000 1,400,000 Chofumbo
of land for infrastructure
of Dairy processing
plant.
4. Development of plans 1,800,000 1,800,000 KCDMSD
and construction of the chofumbo.
milk processing plant.
5 Sourcing for milk 1trip 20,000 20,000 KCDMSD
processing plant
equipment’s and assorted
materials

6 Procurement of milk Assorted 15,300,000 15,300,000 KCDMSD

 processing plant & equipment
Milk Pay Dairy
Management software
7 Sourcing and 1 Single cub 3,200,000 3,200,000 KCDMSD
procurement of means of
transport
Procurement of materials Assorted 1,000,000 1,000,000 KCDMSD
and goods for stores for
resale
8 Registration with 1 30,000 30,000 Chofumbo
relevant bodies
9 Installation of the 1 30,000 30,000 KCDMSD
equipments and
commissioning
10 Participatory monitoring 10 8,000 80,000 KCDMSD
evaluation chofumbo

11 Procurement of Assorted 100,000 100,000 Chofumbo

stationary /printing of
promotional materials

Budget
a) Financial Summary

No Item Total KCDMSD Group Other Amount in

project contribution partners request
cost
1 Training and 1,595,000 1,500,000 95,000 0 1,500,000
capacity
development
2 Sourcing and 1,400,000 0 1,400,000 0 0
procuring of
land for
infrastructure
of Dairy
processing
plant
3 Development 1,800,000 1,750,000 50,000 0 1,750,000
of plans and
construction of
the milk
processing
plant
4 Sourcing and 15,020,000 15,020,000 0 0 15,020,000
procurement of
milk
processing
equipments and
materials

5 Procurement of 1,000,000 1,000,000 0 0 1,000,000

materials and
goods for
stores for resale
6 procurement of 129,546 129,546 0 0 129,546
addictive and
preservative
7 Registration 30,000 0 30,000 0 0
with relevant
bodies
8 Salaries and 2,145,000 0 2,145,000 0 0
remunerations
9 Stationery 100,000 0 100,000 0 0
supplies
Total 23,219,546 19,399,546 3,820,000 0 19,399,546

b).Purchase of equipment and materials

No Item units Quantity Unit cost Total
Batch pasteurizer 300ltrs 400,000 400,000
Cooler 1200ltrs 1000,000 1000000
Additive and Preservatives 129,546 129,546
Milk reception damp tank & 200ltrs 450,000 450,000
accessories
Digital electronic weighing 5pc 35,000 175,000
scale
Milk Pay Dairy Management 1 300,000 300,000
software (universal)
Alcohol guns 2pcs 25,000 50,000
Aluminum cans 200pcs 8,200 164,000
Sock pit 50,000 50,000
Poach packing 1500sachets per 1,000,000 1000000
hour
Lactometer 100pcs 30,000
Plastic polythene bags 200pcs 200 40,000
 Gumboots (white) 2pairs 1200 2400
Electrical installation fittings 400,000
4,190,946

G. Budget Estimate (KES)

KCDMSD Total cost of
Cost share
Budget line item request intervention
Personnel 2,145,000 2,145,000 2,145,000
Fringe Benefits
Travel 20,000 20,000 20,000
Equipment 15,020,000
Supplies 100,000
Other Direct Costs 100,000
Total Direct Charges 1,400,000 1,400,000
Indirect Charges
TOTAL ESTIMATED AMOUNT

By affixing my signature below, I certify that to the best of my knowledge, the information

provided in this application is accurate and correct:

Submitted by: (name): ____________________________________________________

(title): ____________________________________________________

Signature: _____________________________________ Date: __________________________