Value Addition and Performance of Informal Dairy Enterprises in Kenya: A Product Diversification Perspective

Abstract

Abstract: The informal dairy sector in Kenya has undergone a tremendous transformation from being an illegal enterprise to its legalization and adoption of “formal” status as from 2007. Questions have been raised on whether a smallholder dominated economy can diversify and whether smallholders participate significantly in product diversification towards high value products. Results of the study showed that small scale milk vendors (SSMVs) have the ability to diversify into high value dairy products which attract higher profits compared to raw fresh milk. There were more women than men engaged in SSMV business in the study group and well educated people who had not been absorbed into formal employment had joined the informal dairy sector. Product diversification into value added dairy products can therefore help to improve food security and increase incomes of SSMVs hence reduce poverty. The study adds to the available limited evidence on the contribution of the informal sector in the growth and development of developing countries. Key Words: Dairy, Informal, Performance, Product Diversification, Value Addition