ANALYSIS OF FARMERS’ PREFERENCES FOR BIOFUEL INVESTMENTS FOR LIVELIHOOD DIVERSIFICATION IN KENYA: THE CASE OF

WESTERN KENYA

Isabel Joy A.Supervisors:

Dr. David Otieno JakindaProf. Willis Oluoch- Kosura

University of Nairobi

CMAAE THESES DISSEMINATION WORKSHOP 24TH – 25TH JUNE, 2014

EGERTON UNIVERSITY, KENYA

OUTLINE

Introduction Problem statement Objectives Results

INTRODUCTION

Poverty continues to be a problem in many countries around the world Approximately 1.2 billion people live in extreme poverty

(UN, 2012 )

Severe among small- scale farmers (IFAD, 2011)

Livelihood diversification could be a possible solution (Rahut and Scharf, 2012)

INTRODUCTION CONT’D Kenyan context-challenges such as high population, land pressure,

low agric productivity, failed markets,

Various forms of off farm diversification have emerged(rural urban migration)

Limited resources to cater for growing population in urban areas (Unwin et al., 2010)

Therefore, other forms of diversification have emerged not requiring rural dwellers to migrate to urban areas

For example, biofuel investments are emerging as an alternative livelihood strategy-promote rural development, alternative market for crops, job creation (Darkwah et al.,2007)

INTRODUCTION CONT’D

Biofuel investments –lease of land, sale of land, providing labor, growing biofuel crops

Kenya is exploring investments of bio fuel production. According to Sessional paper No.4 of 2004, The energy

act,No.12 of 2006 and Biodiesel strategy.

Recent investments towards a proposed biofuel complex aimed at producing fuel ethanol from tropical sugar beet in Western Kenya among other investments.

INTRODUCTION CONT’D

Biofuel investments –lease of land, sale of land, providing labor, growing biofuel crops

However, farmers are not familiar with lease of land for biofuel which could come with a lot of restrictions in terms of land use and access rights that may disrupt rural livelihood patterns

PROBLEM STATEMENT

Persistent poverty in Western Kenya (31.5% hardcore poor)

Biofuel investments are being explored by private companies and government in this region- could serve as a possible alternative livelihood strategy

Lack of empirical insights on whether the investments would fit in the context of the enterprise mix of the farmers in terms of their preferences

PURPOSE AND OBJECTIVES

The purpose of this study was to analyse smallholder farmers’ livelihood strategies and preferences for biofuel investments in Kenya.

The specific objectives were: To characterise farmers’ sources of livelihoods. To analyse farmers’ preferences for biofuel

investments as an alternative livelihood strategy

DATA

Primary data was collected through face to face interviewsCE cards collected data on preferences for

biofuel investments

Sampling procedureMultistage sampling in Bungoma and Kakamega

regions, appliedSelection of the two counties was purposive.

Smaller administrative units was randomly selected.

Respondents were interviewed at household level.

Sample size; 180 respondents in Bungoma and 162 respondents in Kakamega; Total of 342

DATA ANALYSIS Characterization of farmers livelihood

activities Descriptive statistics was done in SPSS (mean, percentages

and standard deviation)

Analysis of preferences for biofuel investments CE was applied through a RPL

DESCRIPTIVE RESULTSVariable Bungoma Kakameg

aPooled

Average land size (acres) 3.12 2.62 2.70

Enterprise mix(%)•Crop farming only(maize and sugarcane) •Crop and livestock farming•Off farm activities

20.649.430

35.240.724.1

27.545.327.1

Challenges(%)•Lack of markets•Low payments•Delayed payments

75.673.672.2

12.350.649.4

45.662.661.4

Average age of household head(years)

47.3 45.7 46.4

Gender of household head (% male) 50 53.1 51.5

Average level of education (years) 9.8 8.8 9.3

Average income(kenya shillings) 4500 4900 4700

Average household size (persons) 7 6 7

Aware of biofuel (%) 51.7 30.2 41.5

Aware of sugar beet(%) 23.3 6.8 15.5

BIOFUEL INVESTMENT ATTRIBUTESATTRIBUTE LEVELS

Contract length 2 years, 5 years, 10 years

Size of land 25%, 50%, 75%

Employment to household members

None, permanent, casual

Renewability of contract Yes, No

Price per acre Kshs 10,000, 15,000, 20,000

RPL MODEL The utility obtained by individual n from

alternative i in choice situation z was specified according (Revel and Train 1998):

Uinz = βn Xinz + εinz

The marginal willingness to accept (WTA), was estimated as (Hanemann, 1984):

WTA=1*(βk/βp)

CE CARDWhich one of the biofuel investments would you choose?

Biofuel Investment

alternative A

Biofuel Investment

alternative B

Neither

Lease contract length

10 years 2 years

Size of land 25% 75%

Employment casual noneRenewability of contract

yes no

Lease price per acre

10,000 20,000

Which biofuel investment would you prefer?

√

RPL ESTIMATESATTRIBUTE BUNGOMA KAKAMEGA POOLED SD

(POOLED)

Short 1.86** 1.68 1.47***

2.43***

Long -3.52***

-13.45** -3.5*** 4.41***

Quarter 4.66*** 13.17** 4.41***

2.99***

3 quarter 2.00 4.97 1.26* 0.27

Permanent 3.74*** 10.34*** 3.54***

3.47***

Casual 2.06*** 8.86** 2.19***

1.77**

Yes 0.95** 0.47 0.91***

1.75***

Price 0.04*** 0.06*** 0.04***

Likhd ratio -336.13 -711.90 -1502

Pseudo R2 0.57 0.59 0.56

WTA ESTIMATES (KSHS)ATTRIBUTE BUNGOMA KAKAMEGA POOLED

SHORT 5,077 2,906 3,869

LONG -9,574 23,272 -9,339

QUARTE 12,654 22,791 11,559

THREEQ 5,446 8,597 3,296

PERMAN 10,161 17,898 9,264

CASUAL 5,618 15,329 5,750

YES 2,587 805 2,390

PREFERENCE HETEROGENEITYATTRIBUTE POOLED SAMPLE SD

SHORT 1.33*** 0.25

LONG -3.62*** 4.57***

QUARTER 5.71** 3.65***

THREEQUA 5.76** 0.66

PERMANEN 4.07*** 1.95***

CASUAL 2.05*** 0.99

YES 0.97*** 2.52***

LONGCRED -4.18** 4.76**

CASLCRED 1.74** 0.96

PERMLAND 0.68** 0.85***

PERMHZS 0.36** 0.13*

LL -752.46

PseudoR2 0.23

POLICY SCENARIOSFARMER CATEGORY ATTRIBUTES

> 75% of monthly income from crop farming only

Short, half, casual, yes

> 75% of monthly income from crop and livestock farming

Medium, quarter, none, yes

> 75% of monthly income from off farm activities

Long, threeqarter, permanent, yes

CS ESTIMATESFARMER CATEGORY BUNGOMA

(Kshs/month/acre)

KAKAMEGA(Kshs/month/acre)

POOLED SAMPLE(Kshs/month/acre)

> 75% of monthly income from crop farming only(short, half, casual, yes)

13,281.7 19,040.6 12,009.8

> 75% of monthly income from crop and livestock farming (medium, quarter, none, yes)

20,858.9 38,925.9 19,699.5

> 75% of monthly income from off farm activities (long, three-quarter, permanent, yes)

6,031.9 3,223.0 3,221.6

POLICY IMPLICATIONS Study focuses on how biofuel investments

companies can target different categories of farmers based on their enterprise mix.

Short contract length, employment to household members and renewable contracts improve farmers’ preferences for biofuel investments

ACKNOWLEDGEMENTS

AERC and GOK

AFRINT III PROJECT

Supervisors : Dr. David Jakinda and Prof. Willis Kosura

Stakeholders

THANK YOU