ANALYSIS OF FARMERS’ PREFERENCES FOR
BIOFUEL INVESTMENTS FOR LIVELIHOOD
DIVERSIFICATION IN KENYA: THE CASE OF
WESTERN KENYA
Isabel Joy A.
Supervisors:
Dr. David Otieno Jakinda
Prof. 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
interviews
 CE cards collected data on preferences for biofuel
investments
Sampling procedure
 Multistage sampling in Bungoma and Kakamega
regions, applied
 Selection 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 RESULTS
Variable
Bungoma
Kakamega Pooled
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
20.6
49.4
30
35.2
40.7
24.1
27.5
45.3
27.1
Challenges(%)
•Lack of markets
•Low payments
•Delayed payments
75.6
73.6
72.2
12.3
50.6
49.4
45.6
62.6
61.4
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 ATTRIBUTES
ATTRIBUTE
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 CARD
Which one of the biofuel investments would you choose?
Biofuel
Investment
alternative A
Biofuel
Investment
alternative B
10 years
2 years
Size of land
25%
75%
Employment
casual
none
Renewability of
contract
yes
no
Lease price per
acre
10,000
20,000
Lease contract
length
Which biofuel
investment
would you
prefer?
√
Neither
RPL ESTIMATES
ATTRIBUTE
BUNGOMA
KAKAMEGA
POOLED
SD
(POOLED)
Short
Long
Quarter
3 quarter
Permanent
Casual
Yes
Price
Likhd ratio
Pseudo R2
1.86**
-3.52***
4.66***
2.00
3.74***
2.06***
0.95**
0.04***
-336.13
0.57
1.68
-13.45**
13.17**
4.97
10.34***
8.86**
0.47
0.06***
-711.90
0.59
1.47***
-3.5***
4.41***
1.26*
3.54***
2.19***
0.91***
0.04***
-1502
0.56
2.43***
4.41***
2.99***
0.27
3.47***
1.77**
1.75***
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 HETEROGENEITY
ATTRIBUTE
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 SCENARIOS
FARMER 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 ESTIMATES
FARMER CATEGORY
BUNGOMA
(Kshs/month
/acre)
KAKAMEGA
POOLED
(Kshs/month/a SAMPLE
cre)
(Kshs/mont
h/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, threequarter, 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