CARE KENYA: Making Social Enterprise Sustainable

I. Synopsis

CARE is a non-political, non-religious, global network of humanitarian

organizations whose purpose is to end poverty. George Odo, the senior manager
in charge of CARE Kenya’s commercial sector development projects, was asked
on October 14, 2003 “what will happen to the farmers when CARE leaves?”.
George spent long hours and sleepless nights figuring out about how CARE’s
Involvement in REAP could be commercially viable. Considering that Kenya had
the largest economy in East Africa, 48.8% of the population lived below the
extreme poverty line on 1990 to 55.4% of the population on 2001. On the other
hand, the Kibwezi region was particularly poor and vulnerable to economic and
climate shifts. More than 70% of the region’s 900,000 residents did not have
secure access to food, compared to the national average of 56%.

More than 75% of the total Kenyan labor force worked in the informal
economy, outside the legal, regulatory and tax regimes. The Kenyan informal
economy was mostly agricultural, most of the rural poor in Kenya were
smallholder farmers, and rural poor rarely participated in the formal economy. In
1963, When Kenya gained freedom from Great Britain; the horticulture
represented 0.3% of the country’s total export value. However, the Kenyan
horticultural sector was facing considerable changes. First, the global trend
towards market liberalization had increased competition for trade and finance.
Second, the U.K supermarket was demanding large investments.

The CARE network included 12 lead members, including Canada and

country offices in more than 60 developing countries in 2005. CARE’s mission
was “to serve individuals and families in the poorest communities in the world,
promoting innovative solutions and lasting change by strengthening capability for
self-help, providing economic opportunity, delivering relief in mergence,
influencing policy decisions at all levels and addressing discrimination in all its
forms”. The CARE network employed more than 12,000 people, and managed
800 programs that assisted more than 45 million people every year.

In 1999, CARE started REAP – a market-driven horticultural project

targeting smallholders irrigation farmers living below the poverty line in Kibwezi,
Kenya. CARE took a multi-step approach by first establishing Central
Management Unit(CMU), CMU gave farmers credit to lease blocks of land of at
least 30 acres, then the CMU assigned groups of 20-30 farmers to parcels of
land, called Production Units(PU). In order to make REAP sustainable, George
Odo started analyzing REAP’s financial statements and projections. Most of the
PUs was profitable after their first year of operation
II. Statement of the Problem
How can CARE Kenya implement a business model in order for the
smallholder farmers to be able to participate in the formal economy?

III. Objective of the Study

- To be able to implement a business model that was economically
sustainable in order to prevent the farmers from falling back into poverty.
- To be able to provide the rural poor a participation in the formal economy.
- To be able to come up with alternatives in order to satisfy both CARE’s
involvement as well as the small holders.
- To be able to make the Social Enterprise Sustainable
- To be able maintain the position of CARE in Kenya.

IV. Areas of Consideration

Strength:
- CMU (Central Management Unit) that was created by REAP to help smallholder
farmers lease blocks of land of 30 acres.
- Large private sectors negotiated contract to smallholder farmers of REAP to
supply them the crops on which they are not able to produce like baby corn, okra,
etc.

Weaknesses

- PU’s are not supplying what they have been demanded from exporter contracts
and thus the loss of profit for the PU’s and for REAP.
- CMU was not financially stable and thus they can’t provide smallholders with
enough services, because they were only subsidized through donor funding.
- REAP failing to be commercially viable.

Opportunities
- Other sources of funding to keep the REAP program on going.
- Changing of marketing demands
- Alliance with other organizations

Threats
- Large private sectors that abuse their smallholder farmers by buying their goods
and negotiating them at the lowest prices.
- International Agricultural Standards are getting more and more intensified thus
smallholder farmers would have a hard time exporting their goods.

V. Alternative Courses of Action

1. Implement a business model that is a market-based approach to develop a
necessary agenda in order to manipulate the severe poverty problem in
Kenya’s rural areas.
Advantage: to determine the appraisal value of the asset, which the poverty-
eradication projects could be sustainable and could operate on
commercial principles.
Disadvantage: no access to credit, burdensome regulator environment and
negative market conditions.

2. Implement a CARE charitable campaign towards the poor areas in Kenya.

Advantage: improve funding for CARE in order to suffice the poor economy
with agricultural materials as well as sought structural problems.
Disadvantage: the tendency of the Charity or Donations is not enough to
seek help from these problems.

3. Seek more help from the government and multilateral organizations for the
funding of the poverty-reduction project.
Advantage: have more funds to help the project as well as on the commercial
viability of the project.
Disadvantage: The principal from funding will lead to insufficient self-
sustaining delivery models, which is endangering the bureaucratic
barriers.

VI. Recommendation
The recommendation is Alternative courses of action number one (1); the
implement a business model that is a market-based approach to develop a
necessary agenda in order to manipulate the severe poverty problem in Kenya’s
rural areas. Considering that the recent business model created a huge impact of
the economic sustainability in Kenya with the help of CARE Kenya as well with
Rural Enterprise and Agribusiness Promotion (REAP) project; to be able to
participate in the formal economy of smallholder farmers, this recommendation
will help with its implementation on sustainability, efficiency and effectiveness, as
well as ethical values that will comply with the code of conduct.

The advantage is to determine the appraisal value of the asset, which the
poverty-eradication projects could be sustainable and could operate on
commercial principles. Considering that CARE’s mission is to serve individuals
and families in the poorest communities in the world, promoting innovative
solutions and lasting change by strengthening capacity for self-help, providing
 economic opportunity, delivering relief in emergencies, influencing policy
decisions at all levels and addressing discrimination in all its forms; the Market-
based approach includes the implementation of business valuation method,
which calculates the value of property, the value of business ownership interest,
security, or regardless of which asset is being valued such as goodwill. This is to
make adjustments for the differences in size, quantity or quality. In other words,
the production of the agricultural produce in Kenya will have a reasonable
percentage on the products in order to pay back to the rural poor as well as the
urban poor communities. This goodwill is a beneficial outcome of awareness and
sustainability.

This will help the smallholders to have a sense of urgency as well as the
knowledge on the current economic standing and market prices; the necessary
agenda is to manipulate the severe poverty in Kenya’s rural areas. This will alter
the minds of the people internally and externally, which is the idealism of ethical
values and recognition on developing countries with the help to aid, and not
trade.

The disadvantage is that there is no access to credit, which that Kenya

lacks the technological advancements of receiving as well as collecting. The
burdensome regulator environment; the smallholders are not aware of the market
pricing of the community and relies on the brokers instead, which makes the
brokers abusive in pricing the smallholders’ produce. And the negative market
conditions; in Kenya, there are Arid part and semi-Arid parts, which makes it hard
for the smallholders to produce their agricultural products, and these conditions
are unsustainable, not only on the agricultural produce, but also to the farmers.

VII. Conclusion
In conclusion, the best possible advantage to solve the problem statement
is to implement a new business model which is a market-based approach to
develop a necessary agenda in order to manipulate the severe poverty problem
in Kenya’s rural areas. This alternative will best fix the problem because it gives
awareness to the smallholders of the price of the produce to not be again scam
and be fooled by large private sectors. This recommendation helps the Central
Management Unit of REAP to make them more like a business through self-fund
and also by donors funding. It helps the smallholders gain more knowledge of
their rights and proper information of the market prices, process and ways to run
a business as an enterprising smallholder farmer.
 VIII. Gantt Chart
Activities 1 year
Jan Feb Mar April May June July Aug Sept Oct Nov Dec
Orientation on
implementation
on a new
business model
which include
the market-
based
approach
Process on the
agreement of
the
implementation
on the market-
based
approach
business model
Orientation on
the
implementation
of the market-
based
approach
business model
Reposition and
Provide
sustainable
work for
smallholders as
well as
independence
on the
agricultural
produce
Implementation
on the price
adjustment of
the agricultural
produce; Aid,
not trade as a
campaign for
recognition.
Promotion and
market the new
prices of the
Agricultural
produce on the
poverty driven
Agricultural
farmers in
Kenya
(GOODWILL)
Monitoring
IX. Potential Problem Analysis

- Accumulation of Expense- Changing a business model is a costly move, because

it affects all aspects of an organization.

- Dissatisfaction of Large private sectors- Due to the changed to the business

model, the large private sectors will be dissatisfied due to the changes in the
prices of produce that they will buy from the smallholder farmers.

- Failure of the improved in business model- Chance of failure of the

implementation would take a big toll on the organization.