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2. The Current State of Agricultural Co-operatives in Kenya

The history of co-operative development in Kenya is tied closely to the aims of the Government’s rural development policy. The promotional efforts of Government started soon after Independence in 1963 with an overall aim to use co-operatives as a tool to facilitate commercialisation of Kenya’s smallholder farm sector. Government was given wide-ranging powers in organising farmer co-operatives to deliver the necessary services. By the late 1990s, Government had largely achieved this end. Most of Kenya’s smallholders now own their farms and farmers produce a wide range of agricultural produce for the commercial market.

The current membership in farmer co-operatives in Kenya is approximately 600,000 active members, located in two main sectors: the co-operative coffee sector, with approximately 400,000 members and the co-operative dairy sector, with about 100,000 members. The following table gives the key statistics regarding the sectors.

Table 1: Key statistics on coffee and dairy co-operatives (1997)




No. of active members



No. of active co-ops



Turnover (K. shs million)



Share capital (K. shs million.)*



* data from 1993

Source: Ministry of Co-operative Development (1994 and 1997)

Until early 1990s, co-operatives in both sectors enjoyed a convenient monopoly status in the raw material supply markets and marketed their products in markets protected by the Government. Market liberalisation reforms were then introduced selectively by the Government. The coffee sector, which provides important foreign exchange to the country, has not yet been liberalised; therefore, price and profitability development in the coffee sector still largely depend on the fluctuating world market situation. Coffee production has stagnated in Kenya, and co-operatives represent approximately 70-80% of total production. The yield of cooperative coffee production has typically been only half that of private estates.

The situation within the dairy sector is somewhat different. Dairy co-operatives have traditionally had a monopoly to collect milk from producers, and KCC had a monopoly to process milk for the market. Co-operatives were allowed to sell unprocessed milk to customers and relied on KCC as a buyer of a last resort. Although all collected milk was sold either locally or through KCC, the marketing system suffered of KCC financial constraints. In 1992, the dairy market was liberalised and that has resulted in increased competition both in the raw material markets and the consumer markets with an emergence of milk hawkers and new private dairy plants. This has led to a substantial increase in producer prices. Cooperatives have realised that they cannot survive only by relying on their traditional operating methods, but need to invest in value-added production.

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