Unlocking Kenya's Future through Inclusive Agroecological Business Models and Financing: Case of Fruit and Vegetable Value Chains

Authors: Aurillia Manjella Ndiwa¹, Kevin Onyango², Peter Bolo², Rosina Wanyama², Christine Kiria Chege²

¹ International Institute for Tropical Agriculture (IITA), East Africa Hub, Nairobi, Kenya
²Alliance of Bioversity International and CIAT, Africa Hub, Nairobi, Kenya.

Agroecology is a holistic, sustainable and integrated approach to food system transformation in the context of climate change and variability. In Kenya, under the CGIAR Agroecology Initiative (AE-I), the Work Package 3 (WP3) works on inclusive business models and financing strategies under the mango and vegetables value chains to support agroecological transition not only for the two value chains but also for the food systems within the Initiative's Agroecological Living Landscapes (ALLs). The activities are implemented in arid and semi-arid areas of Kiambu and Makueni counties.

The mango and green leafy vegetable value chains (VCs) were selected in Makueni and Kiambu Counties respectively, through VC prioritization workshops with stakeholders in the two locations. Mango VC was selected in Makueni as it is the county's priority crop and a key source of income and livelihood for many small-scale farmers. Green leafy vegetable was selected in Kiambu because it is one of the most important cash crops for nearly all farming households in the County. In the two Counties, an agroecological VC analysis was conducted to map the actors and identify the existing business models. The identified business models within the mango VCand green leafy vegetable VC were then separately assessed using four key tools namely Business model canvas (BMC), Business Agroecology Criteria Tool (B_ACT), Cost and Benefit Analysis (CBA) and Strengths Weaknesses Opportunities and Threats (SWOT) to identify models with potential for agroecological transition. The improved business models were then co-designed with various actors and Cost benefit analysis (CBA), and Investment cases (IC) were used to assess and design the transition and upscaling. These methods and tools are shown in figure 1 and discussed below:

Figure 1: Summary of the methods and tools used in WP3.

Business model canvas (BMC)

Figure 2: Business model canvas.

BMC is one of the tools under Link methodologyused to evaluate the functioning of the key business within the value chain using nine components as shown in Figure 2. This tool was used in WP3 to understand the business structure between the different actors within each business model including both the demand and supply sides in the mango and green leafy vegetable value chains. By focusing on a specific link, it helped to reveal the unique business models of different actors and their operations to better understand who they relate with, what value prepositions they get or give, ways of communication, etc. The tool also provided insights on the gaps and what was needed to improve the business models and make them agroecologically sound.

Strength, Weaknesses Opportunities and Threats (SWOT)

Figure 3: SWOT Analysis.

This is an analysis tool used to assess the internal and external factors that can affect business enterprise. WP3 used SWOT to help in analyzing the strengths, weaknesses, threats and opportunities in the business models identified in the Mango and green leafy vegetable value chains. This helped in understanding the challenges and barriers that hinder the agroecological improvement of the business models to achieve their maximum potential and efficiency. The tool also helped in the identification of areas for improvement and potential growth, and these were all considered during the business model upgrading discussions.

Business Agroecology Criteria Tool (B-ACT)

B-ACT is developed by Biovision, and used to assess the alignment of food system enterprises with the 13 agroecological principles as well as the level at which an enterprise has adopted agroecological practices. It involves a detailed assessment of the activities carried out by actors, both directly and indirectly, within the business model, utilizing structured questions addressing each of the 13 principles. The analysis highlights the principles covered and the extent to which they are integrated by the enterprise. It also identifies principles that are not adopted but have the potential for interventions to facilitate the transition toward an improved agroecological business. In WP3, B-ACT tool was employed to evaluate the extent to which selected enterprises are adopting agroecological practices. It also identified gaps and potential areas for intervention, aiding in the co-design of the improved business models.

Based on the assessment results for the above three tools, the improved agroecological business models were co-designed with the various actors and interventions that would be important in supporting enterprises in transitioning towards being more agroecological, were identified. The identified interventions on the mango business model include intercropping, use of organic inputs, reduced post harvesting losses activities and expansion through enterprise diversification. In the green leafy vegetables, the interventions consisted of organic Participatory guaranteed system (PGS), out grower scheme and use of organic inputs.

Figure 4: Analysis of agroecology adoption by enterprises using B-ACT.

Cost and benefit analysis

Following the co-design of the agroecological improved business models and the identification of interventions for agroecological transition, a Cost-Benefit Analysis (CBA) was carried out to estimate the costs and benefits associated with the agroecological transition within the business models, both in the mango and green leafy vegetable VCs. This analysis compared the Business-As-Usual (BAU) scenarios with the co-designed agroecological improved business models. This CBA stands out for its focus on the agroecological transition across the entire business model, in contrast to conventional CBAs that often target specific segments of the value chain, such as producers or buyers. Key stakeholders involved in the respective business models such as producers, buyers, and processors were interviewed to inform the analysis. The assessment encompassed various aspects including cost structures, and economic, social, and environmental benefits. Economic CBA used four key indicators: Net Present Value (NPV), Internal Rate of Return (IRR), payback period, and Benefit-Cost Ratio. Content analysis method was employed to capture the social, environmental, and health benefits associated with the agroecological transition. Variables considered in the analysis included input and output prices, labor costs, service expenses, machinery and equipment expenditures, operational costs, discount rates, exchange rates, and the business lifecycle

Investment case analysis

Investment cases involve analysing businesses to highlight their operations, scale, opportunities, and challenges related to upscaling. Investment cases for the upgraded agroecological business models in the Mango and Green Leafy Vegetable value chains in Makueni and Kiambu, respectively, were developed collaboratively with stakeholders. These cases aimed to identify areas and opportunities for funding that support their expansion. The investment cases comprised detailed assessments of the enterprises, including business operations, organizational structure and business assessment results with an agroecological lens from the Business Model Canvas (BMC), SWOT analysis, and the B-ACT, along with scalability in terms of desired growth projections and investment needs for scaling. The purpose of the investment cases is to attract investment by demonstrating the potential for growth and the benefits of scaling up agroecological enterprises.

Financing mechanism

A financing mechanism for agroecology refers to the various methods, instruments, and systems put in place to facilitate the allocation of financial resources towards agroecological enterprises. After developing the investment cases, a financial mechanism will be identified for agroecological enterprises by evaluating the existing financial service providers, investors such as impact, angel and venture capital inventors, and institutions such banks, microfinances, NGOs and cooperatives in Kenya. The aim is to identify the existing mode of operation and opportunities for financing agroecological enterprises to support agroecological transition. These mechanisms are expected to support the transition and upscaling of agroecology enterprises and business models by providing funding, investment, or incentives to farmers, businesses, and organizations involved in agroecology.

The results from the tools and methods can be found on the subsequent blog in the blog series.

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