Kenya

Project overview

The project responds to rising pressure on Kenya’s dairy food systems, driven by population growth, urbanization, and increasing demand for milk and dairy products, which are intensifying environmental challenges across the value chain. At the same time, climate and natural resources receive the lowest share of government food system financing (9 per cent) and one of the lowest shares of Overseas Development Assistance (12.4 per cent), according to the 3FS Initiative. The International Fund for Agricultural Development (IFAD), as a leading multilateral donor to Kenya’s food systems, is well-positioned to address this gap, with support from the Global Environment Facility (GEF) through co-financing.

Building on IFAD’s strong focus on agricultural development and value chain financing, complemented by GEF’s expertise in climate change and natural resource management, the project will transform the dairy value chain through climate-smart agriculture, sustainable land and water management, and improved practices that reduce emissions, limit environmental impacts, and increase productivity, alongside reforestation and wetland restoration.

To overcome financial barriers to sustainable practices, the project will establish a Water Fund and promote green financing solutions, including incentives for private-sector investment in innovations such as biogas digesters, solar-powered milk collection centres, and improved storage infrastructure. These efforts will reduce waste and emissions, create income opportunities—especially for women and youth—and strengthen institutions, cooperatives, and farmer capacities to ensure long-term sustainability and knowledge sharing.

Our Approach

The project offers sustainable mechanism for financing biodiversity conservation and restoration in the watershed by setting up the Water Fund, which will provide continuing economic and conservation benefits in the form of payments-for-ecosystem services. Payments from downstream water users will be collected in the Fund and disbursed to the farmers in the form of goods and services, including renewable energy (biogas/solar), waste management and inputs for livestock-crop integration in production. This includes higher value fodder critical to soil stability and ecosystem functions (e.g., high nitrogen content grasses like Super Napier (Pakchong grass), nitrogen fixing fodder trees like calliandra calothyrsus and Leucaena leucocephala, and Tree lucerne), hay processing and storage, soil health services (matching crop/forage to soils/ inputs, etc.). In the geographic areas where they overlap, IFAD INREMP’s investments will rely on this payment-for-ecosystem-services (PES) mechanism to sustain its impacts.

To overcome financial and technological barriers to sustainable livestock production, the project will introduce innovative financing mechanisms, including a Water Fund, green loans, and risk-sharing models. The Fund will provide long-term funding for watershed conservation, while green loans will offer affordable financing for climate-smart technologies. Public-private partnerships will further reduce costs and expand access to sustainable practices, enabling smallholders to transition toward resilience-focused, higher productivity dairy production.

Project Sites

Project sites are located across different water towers in Kenya, to support the wider ecosystems upstream and downstream of the Yala Nyando Water Fund area (The Cherangany water tower counties of Elgeyo Marakwet, West Pokot, Trans Nzoia and Uasin Gishu) and one upstream county of the Mau West Catchment and three downstream counties of the Lake Victoria basin of Kericho, Kisumu, Homa Bay and Migori.