SDM Case Report: Mwea Rice Growers Multipurpose, Kenya
Mwea Rice Growers Multipurpose Co-operative Society (MRGM) was first established in 1964 under the name Mwea Irrigation Scheme Licensee Thrift Co-operative Society Ltd. The Society drew its membership from rice growers who were licensees (tenants) of the National Irrigation Board in Mwea irrigation settlement. In 1966, the Government of Kenya built the Mwea Rice Mills and allowed Society members to buy shares. As the existing bylaws could not allow members to invest in the shares, another Society, Mwea Farmers Co-operative Society ltd, was formed in 1967. The Societies were amalgamated under the name Mwea Amalgamated Rice Growers Co-operative in 1983 but later split into the current Mwea Rice Growers Multipurpose Co-operative and Mwea Rice Farmers Sacco in 1993.
MRGM is a vertically integrated business that is involved in the entire rice value chain from crop production to processing and marketing. Its business model involves supporting members to grow rice with an expectation that the members deliver the produce to MRGM mills for processing and marketing. MRGM members are provided with inputs and farm services (land preparation, agro-inputs, certified seeds and transport) on credit to support activities necessary during the entire crop season and in return supply MRGM with the rice paddy. Currently, MRGM has a membership of c.6,250 rice farmers. However, only 42% of these are currently active. MRGM’s aim is to increase the membership to 9,000 members by 2025 with 5,000 members (56%) remaining active.
Over the recent years, MRGM has been finding it a challenge to grow their active farmer base, increase farmer loyalty and reach their target market share of 30% of Mwea paddy trade. In order to achieve their market share target in a sustainable and cost-efficient way, they must address critical bottlenecks of delayed payments for paddy purchase to farmers and inadequate capacity to meet field services demand.
This study demonstrates that MRGM can meet their stated objective by:
- Improving farmer loyalty - Farmer loyalty can be significantly improved by increasing impact at farm-level. Impact at farm can be increased by:
- Making cash payment for paddy purchased from farmers
- Targeted fertilizer blends and practicing crop rotation will result in higher farm productivity
- Building a network of lead farmers can bring in more active farmers
- Providing post- harvest services can ameliorate poor infrastructure
- Moving up the rice value chain by investing in premium brands - Stable demand can be secured by moving up the value chain. To effect this, we suggest the following actions:
- Leverage government buying in 2020 to gain market share
- Strengthen retail channel by investing in premium brands
- Strategically diversifying and streamlining operations - Strategically diversify and streamline operations to bolster MRGM’s financial sustainability. The following options are explored:
- Enable farmers to bank with finance institutions which can ease the pressure on MRGM balance sheet
- Diversify operations into crops synergistic to paddy
- Streamline non-core support businesses to prioritize capital availability for core operations