Concept of resource mobilization income by Rural SACCOs
Financial resource mobilization relates to how to obtain sufficient funding to meet a desired goal.
The Road Map towards the implementation of the UN Millennium Development Goals, clearly
points out that the mobilization of domestic resources is the foundation for self-sustaining
economic development. Domestic resources finance domestic investment and social programmes
which are essential for economic growth and for eradicating poverty. It is necessary to
recommend steps that can be taken to supplement the flow of resources to small scale dairy
farmers and to ensure that they receive the financial resources they need to adequately finance
their investments, (Mbugua, 2009). What policies must they adopt? What kind of help from the
industrialized world will be most useful to them? Does the country have the right institutions?
And if so, how can it ensure that they play their proper role? By looking at the resources for
development available from all sources we can zero in on what really matters and what really
works. The approach to development and better income for small scale dairy farmers must reflect
today’s countries’ financial economics realities, (De Soto, 2009). On the other hand, small scale
dairy farmers that have not adapted and enhanced the role of financial mobilization in their
economies, on average, have seen declining growth and decreased income. It is important for
these dairy farmers that have had successful development experiences to contribute to improved
policy formulation in developing countries and demonstrate that it can be done, (De Soto, 2009).
Hard-working small scale farmers in developing countries produce goods and services valued at
between $6-18 trillion annually, and last year their domestic savings amounted to almost $2
trillion. Unfortunately, domestic economic resources and capital have too often been squandered,
sometimes by conflict, but also by economic and legal systems that do not give families and
firms the incentive to save and invest in the future. For example, small farmers who want to
improve their dairy animals, and entrepreneurs who want to start a business. (De Soto, 2009)
The generation of domestic resources to save and invest productively is the essential foundation
of sustained development. A very low domestic savings rate is one of the main structural
weaknesses to be overcome by most small scale farmers. There is neither enough domestic
savings, nor enough high quality national investment, without macroeconomic discipline.
Economic policy must be designed to make inflation and the current account balance consistent
with sustained growth.
Fiscal discipline, too, is required at all times, so as to keep deficit financing small enough to
avoid causing inflation, avoid excessive accumulation of debts and ensure that government
borrowing does not crowd out the private sector from domestic credit markets. The most potent
way to empower small scale farmers is to integrate them into the market economy, and hence to
contribute to and benefit from growth is to make investments in broadly accessible programmes,
and in the rural sector, where large proportions of small scale farmers typically live. These
programmes need to have the first call on government resources should not be treated as
marginal programmes whose budgets can be slashed when times are difficult, (Holmes, 2001).
Due to inability of domestic resource to meet the financing requirements, these small scale
farmers have resorted to external sources to finance development projects and social programs.
However, domestic resource mobilization can be managed more innovatively for greater
effectiveness. In this context, a sound fiscal policy, responsible social spending and a well
functioning and competitive financial system are the crucial elements for their economic and
social development, (Holmes, 2001).
The small-scale farmers can be seen as those farmers with limited resources, that have difficulty
obtaining sufficient inputs to allow them to adequately use the available technology (Shanner,
2012); and that have less than one hectare of land for agricultural production (FAO, 2010). The
small-scale farmers are located worldwide, in Asia, Africa, Latin America and the Caribbean.
Though approximately 75-80% of the world's farmers are small-scale farmers, they have not
been the primary focus of agricultural development (FAO, 2010).
In Kenya, Agricultural extension has characteristically searched for and provided extension
services for the innovative, progressive, wealthy, educated, commercial farmers. Agricultural
research has sought out and generated technologies which were especially designed for the
innovative, progressive, wealthy, and educated farmer and/or agriculturally favorable regions.
Chambers, (2003) has stated that, much better recognized than a decade ago, decisions taken in
agricultural research affect those benefits. Larger and more prosperous farmers can afford to
obtain fertilizers, pesticides, irrigation water, and hybrid seeds. To many smaller and poorer
farmers these are out of reach. Agricultural scientist has often regarded production as an end in
itself, but they increasingly recognize that those who produce are at least as important as how
much and with what risks, and thus the food supplies and incomes of millions of poor people. (p.
186)
Sustainability in Agricultural Development addresses world food production and the world
environmental concerns. International agricultural research and extension are beginning to focus
on the sustainable development of the small-scale farmer. A sustainable development is one that
enhances quality of life, while improving productivity, encourages conservation of natural
resources while presenting economically improved solutions, and must be maintained by the
farmers’ community, KARI, (2011). Agricultural development organizations must therefore
focus on and involve some of the poorest farmers in the world. Sustainable small scale dairy
farmers predominates agricultural sector in Kenya, smallholder dairy production could be a
powerful tool for reducing poverty, raising nutrition levels and improving the livelihoods of rural
people in Kenya, small-scale milk producers compete with large-scale, capital-intensive, dairy
farming systems. With very few exceptions, smallholders achieve relatively high incomes per
litre of milk. They are also comparatively resilient to rising feed prices as they usually only use
small amounts of purchased feed. Growing consumer demand for dairy products in developing
countries, driven by population growth and rising incomes, offers important market opportunities
for smallholders. The latter could also benefit from expected higher world market prices for
dairy products (Mbugua, 2009).
But smallholder dairy production will only be able to reach its full potential if some of the threats
and challenges the sector is currently facing are addressed. In many developing countries,
smallholders lack the skills to manage their farms as ‘enterprises'; have poor access to support
services like production and marketing advice; have little or no capital to reinvest with limited
access to credit; and are handicapped by small herd sizes, low milk yields and poor milk quality.
Massive policy interventions (price support, milk quotas, direct payments, investment support
programmes, and export subsidies) in developed countries create a competitive advantage for the
small scale dairy sector and penalize dairy farmers in developing countries, the report noted,
(Shanner,2012).
Smallholders are also affected by trade liberalization which increasingly exposes them to
competition from large-scale corporate dairy enterprises that are able to respond more rapidly to
changes in the market environment. Creating value in every part of the chain ultimately also
benefits consumers who are then able to obtain more dairy products for the same amount of
money or need to spend less for the dairy products they consume, (Shanner, 2012).
In addressing the problem of lack of capital by small scale dairy farmers, the government of
Kenya has been encouraging farmers to start Savings and Credit Cooperative Societies
(SACCOs), encouraging financial institutions offering micro-credits to farmers under less tough
conditions. The main aim of the small scale dairy farmers is poverty reduction. As in many other
parts in Kenya, limited information is available on the performance of these schemes in
improving household welfare of small scale dairy farmers in the study area, (Mbugua, 2009).
Previous studies in Uasin Gishu County as a whole concentrated on evaluatingFF operational
performance of the scheme as well as productive and reproductive performance of the animals.
Similar apply to most other parts of Kenya (Koech et al 2009). Finding external market for
excess milk produced in the area could reduce the problem of milk market. However, this would
require encouraging private individuals or farmers groups to establish small scale milk
processing plants for increasing shelf life of milk in which farmers could sell their milk there. In
turn, processed milk from these plants could be sold to external markets. High prices of drugs
and concentrates in the area have mainly been attributed to few veterinary shops in the area.
Again encouraging private individuals to initiate more veterinary shops could help in reducing
prices of these inputs, (Mbugua, 2009).
Income is the acquisition of money via a regular source, including money that you earn through
work, or any allowance that you might receive on a regular basis. (Holmes, 2001). It is the
consumption and savings opportunity gained by an entity within a specified timeframe, which is
generally expressed in monetary terms. However, for households and individual small scale dairy
farmers, income is the sum of all the profits, interests and payments earned from their sales and
other forms of earnings received in a given period of time, (Adedayo, 2005).
Small scale dairy farming is no doubt pivotal to the growth and development of any country.
Various strategies have been adopted by the Kenyan Government in promoting the in small scale
dairy farming the country to facilitate economic development process. Among them is the
introduction and support of farmers Savings and Credit Cooperative Societies (SACCOs),
(Adedayo, 2005).
The majority of the population in Kenya either depends entirely on small scale farming and
farming activities for survival and generation of income, or depends on these activities to
supplement their main sources of income. Small scale farmers and their farms collectively form
an important foundation on which the nation economy revolves. The significance of rural
farming can thus, not be over emphasized as they areas form the food basket of the nation, and a
major source of export materials.
The income of small scale farmers can be determined by a number of factors. The initial
distribution of income accruing to the small scale farmer stands out as the most accessible
determinant of the standard of living, since it is most quantifiable factor and the most reliable as
majority of the people are predominantly small scale farmers. The determinants of income
among the small scale farming population serve as social indicators of their standard of living.
Adedayo, (2005) suggested that the income levels of small scale dairy farmers may be attributed
to certain crucial factors, and understanding these factors may hold the keys to effective
development of the sector.
This in part led to the submission of Kupoluyi (2003), that a closer look at the determinants of
small scale dairy farmer’s income provides an in-depth knowledge into the factors that explain
low income yields and poverty in rural regions where these small scale farmers constitute about
90% of the total population. Rural development policy aimed at poverty alleviation should
concentrate on farming, which is the main occupation of the poor, who lack access to credit,
farm input and implements and are unable to save or own production infrastructure, (Kupoluyi
2003).
There is therefore the need to investigate more on those aspects that affect their incomes
positively to facilitate proper aid to the dairy farmers. The average income of a dairy farmer is
less than a dollar which means that the production level of the rural farmers is low and there the
population that depend on small scale dairy farming live in poverty. There are some notable
factors that can be isolated as determining the small scale dairy farmers’ productivity by are out
of the scope of this study, (Kupoluyi, 2003).
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