Document of The World Bank

FOR OFFICIAL USE ONLY

Report No. 47625-KE

FOOD PRICE CRISIS RESPONSE TRUST FUND

EMERGENCY PROJECT PAPER

ON A PROPOSED GRANT

UNDER THE

GLOBAL FOOD CRISIS RESPONSE PROGRAM

IN THE AMOUNT OF US$5.0 MILLION

TO THE REPUBLIC OF KENYA

FOR AN

AGRICULTURAL INPUTS SUPPLY PROJECT

April 8,2009

Sustainable Development Department Agriculture and Rural Development Unit Eastern Africa Country Cluster 2 Africa Region

This document has a restricted distr ibution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without W o r l d Bank authorization.

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CURRENCY EQUIVALENTS

ACSU ADMARK AGRA AISP ALRMP APL A S A L CAN CAS CBO C I F A CPIA DA DAEO DAO DAP DSF EPP ESMF EU FA0 FM FPCR TF FPCRP GAP GDP GFRP GSBPB IAD IBRD IDA I D P IFAD IFR IRCBP Ksh KAPAP KAPP KENAO

Currency Unit = Kenya Shillings (Ksh) US$1 = Ksh79

FISCAL YEAR July 1 - June 30

ABBREVIATIONS AND ACRONYMS

Agriculture Sector Coordination Unit Agriculture Development and Marketing Corporation Alliance for the Green Revolution in Afr ica Agriculture Input Supply Program Arid Lands Resource Management Project Adaptable Program Loan Arid and Semi-Arid Lands Calcium Ammonium Nitrate Country Assistance Strategy Community Based organization Country Integrated Fiduciary Assessment County Policy and Institutional Assessment Designated Account Divisional Agriculture Extension Officer District Agricultural Officer Di -Ammonium Phosphate District Stakeholders Forum Emergency Project Paper Environment and Social Management Framework European Union Food and Agriculture Organization Financial Management Food Price Crisis Response Trust Fund Food Price Crisis Response Program Governance Act ion Plan Gross Domestic Product Global Food Crisis Response Program Governance Strategy for Building a Prosperous Kenya Internal Audit Department International Bank for Reconstruction and Development International Development Association Internally Displaced Person International Fund for Agricultural Development Inter im Financial Report Institutional Reform & Capacity Building Project Kenya Shilling Kenya Agricultural Productivity and Agribusiness Project Kenya Agriculture Productivity Project Kenya National Audit Office

FOR OFFICIAL USE ONLY KEPHIS

M&E MOA MT NAAIAP NGO PDG P M P PMU PS PSC SOE

K g Kenya Plant Health Inspection Service Ki logram Monitoring and Evaluation Ministry o f Agriculture Metric Tons National Accelerated Agricultural Inputs Access Program Non-Governmental Organization Program Des ign and Guidel ines Pest Management Plan Project Management Unit Permanent Secretary Project Steering Committee Statements o f Expenditure

Vice President: Obiageli Katryn Ezekwesili Country Director: Johannes Zutt Sector Manager: Karen McConnell Brooks Task Team Leader: Andrew Mwih ia Karanja

This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.

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KENYA KENYA: Agricultural Inputs Supply Project

CONTENTS Page

A . INTRODUCTION .................................................................................................................... 1

RATIONALE.. ................................................................................................................................. 1 B . EMERGENCY CHALLENGE, COUNTRY CONTEXT, RECOVERY STRATEGY AND

Country Context ............................................................................................................................ 1

Sector Context ............................................................................................................................... 2

Project Rationale ........................................................................................................................... 3 C . BANK RESPONSE . THE PROJECT .................................................................................... 5

Brief Description of Bank’s Strategy for Emergency Support ................................................. 5

Project Development Objectives .................................................................................................. 5

Summary of Project Components ............................................................................................... 5

Consistency with Country Strategy ............................................................................................. 7

Expected Outcomes ....................................................................................................................... 7 D . APPRAISAL OF PROJECT ACTIVITIES .............................................................................. 8

Economic ........................................................................................................................................ 8

Technical ........................................................................................................................................ 8

Social ............................................................................................................................................. 9

Fiduciary ........................................................................................................................................ 9

Environmental ............................................................................................................................. 10 E . IMPLEMENTATION ARRANGEMENTS AND FINANCING PLAN., ............................. 11

F . PROJECT RISKS AND MITIGATING FACTORS .............................................................. 12

G . TERMS AND CONDITIONS FOR PROJECT FINANCING .............................................. 13

Annex 1 : Results Framework and Monitoring .............................................................................. 14

Annex 4: Financial Management (FM) Report ............................................................................. 21 Annex 5: Procurement Arrangements ........................................................................................... 30 Annex 6: Implementation Arrangements ...................................................................................... 31

Annex 2: Detailed Description o f Project Components ................................................................ 16 Annex 3: Summary o f Estimated Project Cost ............................................................................. 20

Annex 7 : Project Preparation and Appraisal Team Members ...................................................... 33 Annex 8: Global Food Response Program and the Food Price .................................................... 34 Annex 9: L i s t o f Project File/Supporting Documents .................................................................. 35 Annex 10: Statement o f Loans and Credits .................................................................................. 36

Annex 12: Maps ............................................................................................................................ 41 Annex 1 1 : Country at a Glance ..................................................................................................... 38

KENYA

Agricultural Inputs Supply Project Africa Region

EMERGENCY OPERATION PROJECT PAPER DATA SHEET

Date: April 8,2009 Country Director: Johannes Zutt Sector ManagerDirector: Karen Brooks Lending instrument: Emergency operation

Team Leader: Andrew Karanja Sectors: Crops Themes: Global Food Crisis Response Environmental screening category: B

Project ID: P116064

Proposed terms: Grant

Expected effectiveness date: April 16,2009

Recipient: Republic o f Kenya

Total Amount: US$5 mill ion

Expected implementation period: one year

Expectedhevised closing date: June 30,201 0

Responsible agency: Ministry o f Agriculture

I

Source Recipient Total IBRD/IDA Trust Funds

I 3n75

Local Foreign Total 3.75 0.0 3.75 0.0 0.0 0.0 0.0 ’ 5.0 5.0

I 5.0

Total IBRD/IDA Trust Funds

I 8*75 1 2009 2010 2009 2010 201 1 2012

4.5 0.5

I Estimated disbursements (Bank FY/LTS$m.)

Does the emergency operation require any exceptions f rom Bank policies? Have these been approved by Bank management?

Are there any critical risks rated “substantial” or “high”?

Y e s [ ] N o [ X ] Y e s [ ] N o [ 1

Yes [X ] N o [ ]

What safeguard policies are triggered, if any?

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OP/BP/GP 4.01; OP 4.09

KENYA Agricultural Inputs Supply Project

Africa Region

A. INTRODUCTION

1. This project i s financed under the Global Food Crisis Response Program (GFRP), which was endorsed by the Board on May 29, 2008, and will be financed out of the Food Price Crisis Response Trust Fund (FPCR TF) in the amount of US$5.0 million for a proposed Agriculture Inputs Project. The proposed grant would help finance the costs associated with the provision o f seed and fertilizer to 50,000 small farmers, aimed at directly increasing their cereal production during the long rains planting season which started in late March 2009.

2. Kenya i s facing a maize shortage. As a consequence o f high input prices and the post- election crises in early 2008, only 75 percent o f usual farm area was planted with maize during the main growing season. The short rain season was poor in most o f Kenya, resulting in poor harvests. Kenya’s national maize production i s now estimated to be only 2.43 mi l l ion metric tons (MT), against an estimated national consumption o f 3.15 mi l l ion MT, and so the country wil l face a maize shortfall for about four months before i t s next big harvest begins in October 2009. In the recent past, the maize deficit has been closed by imports from the east Afr ica region (Tanzania and Uganda). However, the regional grain balance i s currently not favorable, with Tanzania also facing a grain deficit. Informal imports estimated at around 180,000 MT were received from Uganda in the early part o f 2009. The regional deficit has resulted in Kenya sourcing maize internationally, mainly from South Afr ica and the United States. The proposed Agricultural Inputs Supply operation seeks to reduce the gap between domestic production and consumption in 2009. This wil l not only enhance food availability and price stability in the country but wil l also ensure that maize farmers get higher incomes from sales.

3. This operation will supplement the efforts of others to address the problem. The use o f the FPCR-TF i s justified as the most appropriate source o f funding for the current planting season. The European Union (EU) i s expected to approve in April 2009 an additional grant totaling €20 mil l ion.from their Food Price Crisis Response Program, aimed at increasing cereals production in Kenya over the next two years. However, the EU funds wil l arrive too late to influence production for the upcoming long rain season. The EU grant wil l focus on seed bulking and multiplication and other activities this year in order for the GoK to prepare a comprehensive program for the next two planting seasons (September 2009 and March 2010). The Food and Agriculture Organization (FAO) wil l also support the National Accelerated Agricultural Inputs Access Program (NAAIAP) this season with funds that wil l allow 6,000 farmers to access farm inputs.

B. EMERGENCY CHALLENGE, COUNTRY CONTEXT, RECOVERY STRATEGY AND RATIONALE

Country Context

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4. The food and fuel price crises have had major economic and agricultural impacts. Kenya’s inflation has been high and increasing since the beginning o f 2008, mirroring developments in international food prices. The official overall inflation rate increased rapidly from 12 percent in December 2007 to 31.5 percent in May, 2009 before easing to 27.7 percent in December 2008. Rising food prices and the cost o f fuel and transportation have been the main drivers o f inflation. In Nairobi, the wholesale price o f maize, which i s Kenya’s staple food, started rising from about US$225/MT in January 2008 until M a y 2008, when i t reached a peak price o f US$380/MT. Prices eased a bit following inflows from neighboring countries, only to r ise again in October 2008. Wholesale prices have remained high since then, due to high maize prices in source markets. Consequently, the price o f maize flour shot to a high o f Ksh 120 (US$1.5) per 2kg bag in late November 2008, from about Ksh 48 (US$0.60) around the same period in 2007. Consequently, most o f the poor in both rural and urban centers could not afford to buy maize flour, prompting a Government intervention, introduced in December 2008, that aimed to reduce the price o f retail maize flour by providing subsidized maize to selected millers. W h i l e the price surge in Kenya was less steep than the overall global trend, Kenyan prices have remained high, even after global prices eased off, mainly due to constrained local supply.

5. The full impact of the global increase in oil and fertilizer prices i s already being felt in the country, with fertilizer prices increasing by more than 200 percent between January and April 2008. As a consequence o f high input prices and the post-election crises in early 2008, only 75 percent o f total farm area was planted with maize during the main growing season, which started in April 2008. The October to December short rain season was poor in most parts o f the country, including the highlands. In the marginal agricultural areas east o f Nairobi, there has been total crop failure. With the long rains harvesting from Kenya’s grain basket o f the North-Rift complete, production i s estimated at 2.25 mi l l ion MT, which i s 20 percent lower than in 2007/08. Kenya’s national maize production i s estimated to be only 2.43 mi l l ion M T against an estimated national consumption o f 3.15 mi l l ion MT. From the statistics available, i t is evident that the country wi l l face a maize shortfall for about four months before i t s next big harvest, which starts in October 2009. The President o f Kenya recently declared the food shortage a national disaster and appealed for international support to help deal with the disaster.

6. The food crisis has a significant impact on the GoK’s budget. The GoK’s maize flour subsidy program (see paragraph 4) has an estimated cost o f K s h 7 bi l l ion (US$89 million). The G o K waived import duty on maize imports and a US Government guarantee o f US$83 mi l l ion to import American maize i s being considered. A total o f 670,000 MT o f maize are planned to be imported by the G o K and the private sector to close the consumption gap. W h i l e most o f these interventions are geared towards easing the current food shortage, there i s need to boost production in the coming season, thereby ensuring adequate supply in the coming year. Input markets are well developed, but many poor and vulnerable smallholders cannot afford the seeds and fertilizer to guarantee good yields to boost next year’s production.

Sector Context

7. The performance of agriculture greatly affects the poor in Kenya, as 67 percent of the population and 80 percent of the poor live in rural areas and depend on agricultural activities for their livelihood. The sector directly contributes 24 percent o f GDP. Annual

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agricultural growth averaged 3.5 percent in the 1980s, but declined to 1.3 percent in the 1990s. In this decade, GoK efforts focused on reversing agriculture’s poor performance have started to bear fruit, with the compound average sector growth rate increasing by five percent between 2001 and 2007. This improved performance suffered a setback in 2008, due to disruptions in production associated with the unrest after the elections, poor rains in some localities, and uncertainty about the GoK’s pol icy on agricultural pricing and marketing, with production suffering a 20 percent reduction from the previous year.

8. Kenya has a well established fertilizer market which i s fully liberalized. Fertilizer used in the country i s imported in bulk by the private sector, except for fertilizer used in tea production, which i s imported by Kenya Tea Development Agency (KTDA). Private sector importers have established their distribution network o f about 300 wholesalers and 5,000 agro- dealers situated in major towns and market centers country-wide. In 2008, the fertilizer demand was estimated at around 450,000 MT. A multiyear Japanese loan program facilitated the importation o f 3,000 tons this year. In the last six months the GoK, through various agencies, has intervened in the market by importing around 150,000 MT o f fertilizers, o f which some will be financed by an Afr ican Development Bank credit. This intervention i s seen as temporary, and i s aimed at stabilizing the market after the high fertilizer prices witnessed after the fue l crisis.

Project Rationale

9. The GoK has taken a number of actions to contain the rising domestic food prices. These actions have mainly focused on stabilizing maize prices and assuring a supply response o f cereal growers. The G o K increased i t s purchase price for maize for the publicly held reserve by 30 percent, with a view toward drawing out any speculative stocks held and attracting imports from the neighboring countries. The GoK has announced i t s intention to double the strategic gain reserve, largely through imports. On the production side, the G o K has temporally entered fertilizer markets. On M a y 6, 2008, President Kibaki officially launched the K i l imo Biashara Partnership between the GoK, Alliance for the Green Revolution in Afr ica (AGRA), Equity Bank and the International Fund for Agricultural Development (IFAD). Both IFAD and AGRA contributed US2.5 mi l l ion each as guarantee funds for this facility. With the guarantee, Equity Bank earmarked U S 5 0 mi l l ion for on-lending to small-holder farrners and agro-dealers to enable them to purchase fertilizer and other inputs. However, due to the high fiscal implications, market distortions, implementation and targeting concerns caused by some o f the programs (especially a subsidy to millers), the GoK announced in late February, 2009 that the programs wil l be scaled down in favor o f a targeted subsidy program, famine rel ief and market based interventions. Other measures such as the U S Government-guaranteed loan for maize imports from the U S to bridge the maize supply deficit until the next harvest in September, 2009 are underway.

10. Scaling-up the existing input voucher scheme. This rapid response proposal, which focuses on increasing production in the higher potential areas o f Kenya, will scale-up an existing GoK seed and fertilizer voucher scheme, viz. the National Accelerated Agricultural Inputs Access Program (NAAIAP). This scheme was designed and implemented in recognition o f the need for increased production, and the inability o f many small farmers to afford the full cost o f inputs. I t thus targets vulnerable farmers who cannot access credit for various reasons. The

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proposed FPCR TF project wil l be used to scale-up this existing input voucher scheme in the critical maize production zone for the March-April, 2009 planting season. The overall program seeks to narrow the gap between domestic production and consumption o f grain in 2009.

11. The scheme has produced good results in the first two seasons of operation. Evaluations show that, the combination o f kick-starting poor farmers with extension advice along with sufficient farm inputs has allowed farmers in higher-potential districts to reach expected yields o f over ten bags o f maize per acre. Groups have also formed grain banks and are marketing their produce together to achieve higher market prices. Food security has improved. 39,000 farmers benefited in 39 districts in the two 2007/2008 seasons. However, as the weather was not favorable in al l districts, the number o f districts targeted was reduced this season to focus on areas with better rainfall potential.

12. The proposed project will focus on increasing maize production of smallholder farmers in the high potential zones in the Rift Valley (Trans Nzoia and Uasin Gishu districts). These zones are commonly referred to as Kenya’s ‘grain basket zone’ as they contribute around 50 percent o f national output. Subsequently, production outcomes in these districts determine, to a large extent, the domestic maize availability and prices. The rain in this long rains season falls primarily in the western hal f o f Kenya, and these districts produce on average 80% o f the region’s output. Given the relatively small size o f the grant, World Bank funds wil l focus on these six districts, while other districts which benefit from the long rains season wil l be supported by GoK and FA0 funding. (See the table in Annex 2 for the l i s t o f the 28 districts being covered nationwide by the NAAIAP program.)

13. The scope of the NAAIAP program will be scaled-up and targeted based on lessons learned from earlier planting seasons. The estimated cost per participant i s US$92 to cover the cost o f 10 kg o f improved seed and 100 kg o f fertilizer. The target for this season, according to technical estimates o f the Ministry o f Agriculture (MOA), is 100,000 participants. W h i l e the funds available from the GoK’s budget and from other support will cover approximately 37,000 participants, the requested US$5 mi l l ion would allow an additional 50,000 participants, for a total coverage o f 87,000, reaching near to the projected target. The scaling-up o f the program would be in areas with good potential for increased production, in order to provide the greatest increment to domestic supply. Existing community committees would identify farmers, based on agreed criteria as described in Annex 6. Beneficiary farmers would then access inputs through accredited private agro-dealers. Women and other vulnerable groups wil l be given preferential consideration. Although the six districts had a large number o f Internally Displaced People (IDPs) due to the post-election crises, this Project will not particularly target them for support as several other programs are already providing them targeted support. However, i t i s hoped that the IDPs who are re-settled in their farms will be considered if they do meet the selection criteria. M O A has adequate district teams that wil l supervise, monitor and provide quality control.

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C. BANK RESPONSE - THE PROJECT

Brief Description of Bank’s Strategy for Emergency Support

14. The Bank’s strategy for emergency support will be focused on improving the immediate- to medium-term supply of food produced and available in the country. While the GoK and other humanitarian agencies are focusing on ensuring that rel ief food i s available and distributed to the needy households, i t i s also critical to focus on increasing domestic food supply in the country in the coming year. This can only be done by helping food producers, and especially smallholder farmers, to access inputs, services and technologies.

15. Other programs are addressing the needs of the arid and semi-arid areas of Kenya. The Arid Lands Resource Management Project (ALRMP), co-financed by the World Bank and the EU, focuses on drought preparedness and mitigation in the 28 Arid and Semi-arid Lands (ASAL) districts. This project is providing resources to deal with drought-related food insecurity. While the situation in the A S A L districts i s not serious, the eastern marginal agriculture zone, known as Ukambani, is under severe stress. The ALRMP Project i s providing needed resources for water supply, support to human and animal health, and, along with the EU, the provision o f inputs for marginal farmers for their next planting season, the short rains season o f 2009.

16. The World Bank i s intensifying its long term support to agricultural productivity. In the medium- to long-term, the Bank i s helping the GoK to increase agricultural productivity by supporting sector reform as wel l as the generation and dissemination o f agricultural technologies and services. In this regard, a Bank-supported Project, the Kenya Agricultural Productivity and Agribusiness Project (KAPAP), is under preparation and expected to be discussed by the Board in June 2009. Since the first phase o f this APL is fully disbursed and closed, and this second phase i s s t i l l under preparation, the use o f IDA resources from this planned project for this purpose would be too late to respond effectively to the GoK’s request for assistance for the current planting season.

Project Development Objectives

17. The objective of the Project i s to assist the Recipient to increase acess to agricultural inputs and technologies among targeted smallholders farmers in the six main producing districts: Eldoret East, Eldoret West, Wareng, Trans Nzoia East, Trans Nzoia West, and Kwanza Districts. This improved farmer access is expected to contribute to higher yields, household food self-sufficiency and the generation o f surpluses for sale, as well as reduced gap between domestic production and consumption in 2009.

Summary of Project Components

18. The Project will have one component, which will support the scaling-up of the NAAIAP input voucher scheme to 50,000 smallholder farmers in the main maize producing districts of Kenya, Eldoret East, Eldoret West, Wareng, Trans Nzoia East, Trans Nzoia

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West, and Kwanza ’. The Project consists o f the following activities: (i) Providing Agricultural Inputs Vouchers to poor, small and vulnerable farmers in Eldoret East, Eldoret West, Wareng, Trans Nzoia East, Trans Nzoia West, and Kwanza Districts to purchase seeds and fertilizers; (ii) Capacity building of farmers, Community Committees and Accredited Agro-dealers on input use, crop husbandry and other farming technologies, screening and monitoring; and (iii) Financing o f costs for project management, monitoring and evaluation and Operating Costs related to food price crisis response activities. See Annex 3 for additional details. This activity is eligible for financing under the Global Food Crisis Response Program (GFRP), and due to the urgent nature o f the problem, is eligible for financing under OP/BP 8.0. The program i s designed as a voucher scheme to enable smallholder farmers to access 10 kg o f hybrid seed, 50 kg o f basal fertilizer and 50 kg o f top-dressing fertilizer. These inputs are sufficient for approximately one acre o f maize. Each beneficiary under the program wil l receive a voucher with a total face value o f Ksh 7,300 (approximately US$92), with the value o f each o f the three inputs clearly specified. The face values for al l three inputs have been determined by the G o K and verified by the World Bank team, based on prevailing market prices for this planting season. The project i s allowing for 20 percent o f the grant to be eligible for retroactive financing, to cover the costs o f farmer and agro-dealer mobilization and training being incurred by the G o K from February 1,2009.

19. Beneficiaries are selected by community committees composed o f various stakeholders (local administration, agriculture and social services officers, church leaders, community leaders, village development committee, Community Based Organizations (CBOs) and Non-Governmental Organizations (NGOs) operating in the area). The farmer identification process i s elaborate, involving holding o f open air meeting “barazas” at location and sub- location (village) levels. Criteria for beneficiary selection include: (a) l o w income and limited farm size; (b) ability and intention to produce maize on at least one acre; (c) membership o f farmer groups for ease o f training and logistical support; (d) willingness to j o i n cereal banks and participate in warehouse receipting for efficient marketing o f surpluses; (e) land preparation completed before receipt o f inputs; and (0 priority to women and child-headed households. The program areas (divisions, locations and villages) are identified based on a number o f criteria (crop suitability, land availability, farmer groups, and so on.). The final list o f beneficiaries i s compiled by the divisional extension team and submitted to the district. The vouchers are then released to the beneficiaries, who must present identification, and who are expected to redeem the vouchers with accredited agro-dealers in their locality. The agro-dealers issue the inputs against the vouchers, farmers’ identifications and fanners’ signatures, and after recording the price and quantities supplied. The agro-dealer then raises an invoice attaching the l i s t o f the farmers supplied plus the signed voucher to the District Agriculture Officer (DAO). After verification, a check i s issued to the dealer as payment.

20. Extension workers and accredited agro-dealers have been trained to help farmers make sound decisions in choosing varieties and fertilizer types. The project wil l reimburse the GoK for the associated training, which for most part has already been carried out, as wel l as for logistical costs associated with the implementation, monitoring and evaluation o f the

’ The districts o f Trans Nzoia and Uasin Gishu have recently been subdivided into six districts, namely Eldoret East, Eldoret West, Wareng, Trans Nzoia East, Trans Nzoia West and Kwanza.

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program. A detailed Project description and costing can be found in Annexes 2 and 3, and implementation arrangements in Annex 6.

Consistency with Country Strategy

21. The Kenya Country Assistance Strategy (CAS) i s under preparation. The former CAS and a 2007 CAS Progress Report, which extended the CAS period, expired in June 2008. Nevertheless, most o f the main pillars o f the lapsed CAS and i t s update are s t i l l relevant. This emergency operation, linked with the Adaptable Program Loan (APL) series for agricultural productivity, remains in l ine with the earlier CAS and the likely strategic priorities o f the new CAS now under preparation. The 2007 CAS Progress Report (Report No. 38055-KE) cited the contributions that the World Bank has made to the sector, most notably increasing the focus on equity and more directly targeting the poor.

Expected Outcomes

22. The Project i s expected to result in 50,000 smallholder farmers in high-potential farming areas o f Kenya having access to an appropriate package o f seed and fertilizer. See Annex 1 for the results framework for the project.

Overall impact indicators include:

. Incremental production o f 45,000 MT o f maize in the long rains 2009 season; Maize yields in targeted areas increased from 6 bags' per acre to 15 bags per acre; and The overall farm incomes and food security o f participating households improved.

Project outcome indicators include: Number o f farmers receiving fertilizer and improved seed; Proportion o f farmers satisfied with inputs and advice received from agro-dealers.

Intermediate Results include: Number o f agro-dealers trained;

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. Number o f farmers receiving vouchers; Number o f farmers receiving agricultural advisory services; Vouchers reimbursed within four weeks by MOA (%); Fertilizer and seed distributed to farmers (tons); Implementation progress reports and financial monitoring reports available monthly; and Up-to-date M&E information available quarterly. 1

' A bag o f maize i s 90 kilograms, and is the most commonly used measure o f maize production in Kenya.

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D. APPRAISAL OF PROJECT ACTIVITIES

Economic

23. The Project will have a significant positive economic impact. The Project expects to reach 50,000 farmers with inputs sufficient to produce maize on one acre. This i s expected to result in gross production o f 72,000 MT o f maize. In the North Rift eco-zone, using the recommended input package, each farmer i s expected to conservatively produce 15 bags o f maize per acre. The value o f this production i s estimated at K ~ h . 3 2 ~ 0 0 0 per farmer (US$400) and Ksh. 2,000 per bag, for a gross benefit to the Project o f US$19.6 million. We are assuming that, in a counterfactual without-Project situation and given the high cost o f inputs, each farmer would have a yield o f only six bags per acre. This would result in an incremental benefit o f 45,000 MT o f maize valued at US$12.5 million.

24. I t i s not envisaged that this scheme will become a permanent feature of the GoK’s support to the agriculture sector. Farmers are expected to graduate to K i l imo Biashara, and access credit for inputs as needed through commercial means. The K i l imo Biashara input credit facility set out at Equity Bank i s expected to assist the farmers to access fertilizers through commercial means. The GoK has committed relatively substantial funding this year to kick-start the voucher scheme, and holds i t as a high priority. The scheme assumes that farmers wil l be able to access credit after one or two seasons o f good production.

Technical

25. The technical aspects o f the Project has been appraised and found to be sound. The proposed program wil l focus on increasing the production o f smallholder farmers in the high potential cereal and dairy livelihood zone o f the Rift Valley. The livelihood zone i s commonly referred to as Kenya’s ‘grain basket zone’. Total annual rainfall ranges between 1,200-1,500 mm. More than 50 percent o f total national maize output (and 60 percent o f long-rains output) i s derived from just seven ‘grain-basket’ districts, namely: Uasin Gishu, Trans Nzoia, Nandi, Kericho, Bungoma, Nakuru and Bomet. Subsequently, production outcomes in these districts determine to a large extent domestic maize availability and prices. Maize is the predominant crop grown in land holdings that average between five and 37 acres, while high-yielding improved milking herds are the main livestock population.

26. Given the short time period available, it was decided to focus this intervention on six the five districts in the grain basket, Le. Eldoret East, Eldoret West, Wareng, Trans Nzoia East, Trans Nzoia West, and Kwanza. This area has a population o f 1.5 mi l l ion people and a poverty level o f 46 percent. I t is estimated that 25 percent o f smallholder farming households in the catchment area would receive input vouchers. Although the 50,000 farmers represent a small proportion (5-7 percent) o f farm households growing maize in Kenya, they are key players in the maize sector as they constitute a significant proportion o f the farmers that sell maize’.

’ Only around 30-40 percent o f a l l maize growing households sell maize to the market and in particular to the national reserves and commercial stocks.

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Social

27. The Project mainstreams nutrition and gender concerns as a part of its integrated technical and economic approach. The Project’s activity directed at improving agricultural and food production capacity promotes inclusion o f women and income targets that wil l ensure that they gain financially. Further, as part o f the support to nutrition, farm inputs wil l be targeted at women through the establishment o f kitchen gardens. The Project wil l fol low a participatory and inclusive process o f direct and systematic engagement with beneficiary communities in the selection, implementation, and monitoring o f the activities supported by the Project. Through these and other interventions i t i s clear that important explicit outcomes o f the Project wi l l result in positive social impacts.

Fiduciary

28. The Project will be implemented through existing capacities within the MOA, supported by the Agriculture Sector Coordination Unit (ACSU) and the Kenya Agriculture Productivity Project (KAPP) Secretariat. The World Bank conducted a Financial Management (FM) Assessment o f MOA’S NAAIAP on February 26,2009. The objective o f the assessment was to determine whether: (a) the entity has adequate financial management arrangements to ensure Project funds wil l be used for the purposes intended in an efficient and economical way; (b) Project financial reports wil l be prepared in an accurate, reliable and timely manner; and (c) the entity’s assets wil l be safely guarded. The financial management (FM) assessment was carried out in accordance with the World Bank’s Financial Management Practices Manual issued by the Financial Management Sector Board on November 3,2005.

29. The Assessment revealed that NAAIAP has adequate FM capacity to implement the Project. The Programme structures, including the Project Steering Committee (PSC) and Project Management Unit (PMU), are operational. The PMU has been set up and i s already in the process o f implementing Program activities using GoK funds. As part o f the capacity building measures, the Permanent Secretary (PS) MOA has designated a Programme Accountant to handle the financial management aspects o f the Grant from effectiveness. The Accountant has appropriate qualification at the technician level and has over three years experience in project management within the Ministry. The Ministry’s internal controls over NAAIAP are deemed adequate and the Ministry’s internal audit section i s adequately staffed and their scope covers the activities o f NAAIAP. The funds f low procedures are also satisfactory. M O A has developed a NAAIAP Programme Design and Guidelines setting out the structure o f the Programme, including fiduciary arrangements, which have deemed to be adequate.

30. There are also additional internal controls. Kenya at the moment is conducting reforms that wil l help in monitoring the voucher system. The most significant i s the involvement o f the GoK’s Internal Audit Department (IAD) in monitoring Wor ld Bank projects through conducting semi-annual risk-based audit reviews where any issues arising will be followed up by the Ministry’s audit committee. There are built-in mitigation measures in the FM assessment report to ensure that the voucher system works. These are: (i) building in transparency arrangements in the flow-of-funds mechanism such that farmers can know when vouchers have been sent to the districts, and farm input distributors can know when the districts have received

9

funding to pay them; (ii) compliant-handling mechanisms for the farmers and distributors ensuring that there i s a tracking report to monitor the voucher system and to flag any emerging issues; and (iii) during project implementation, joint supervision missions wil l be conducted by the Bank and the GoK, which wil l involve visiting a significant number o f farmers/distributors (based on a risk-based approach) to ascertain that the voucher system i s working and that finds are being utilized for the purposes intended.

31. In view o f the robust FM arrangements already in place in .MOA and the KAPP Secretariat, the overall risk rating o f the implementing entity has been assessed as Moderate. There are no FM Conditions for this Project. The FM arrangements will continue to be monitored throughout Project implementation.

32. Procurement under this emergency operation. It i s anticipated that there will be no large-value contracts for goods and no works or consulting services for the proposed Grant. GoK staff wi l l carry out the training workshops under the capacity-building activity. No consultants wi l l be hired with Bank financing under the Grant. Small contracts o f goods and non-consulting services for conducting the training workshops under the capacity-building activity will be awarded following Shopping procedures in accordance with article 3.2 o f the Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” published by the Bank in M a y 2004 and revised in October 2006 and the “Guidelines: Selection and Employment o f Consultants by World Bank Borrowers,” dated M a y 2004 and revised October 2006, wil l be the versions governing this project and the accompanying standard bidding documents for any new procurement. All such contracts wil l be subject to post review by the Bank. In addition, this Grant wil l be subject to the Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, dated October 15,2006

33. Disbursements under the Project will be managed by MOA, and will follow the ongoing KAPP disbursement arrangements. A Designated Account (DA) wil l be opened by M O A in a commercial bank. Replenishment o f the DA will be made based on statement o f expenditures (SOEs) with appropriate supporting documentation.

Environmental

34. This Project has minimal if any potential adverse impacts on human populations or environmentally-important areas, such as wetlands, forests, grasslands, or other natural habitats; the impacts are site specific; few if any are irreversible and specific mitigation measures can normally be designed; hence this Project has been assigned environmental Category B. The proposed intervention, in the form o f hybrid seeds and fertilizers, are normal farming inputs that wil l be applied as per agronomic specification within farms o f the identified beneficiaries.

35. Nonetheless, it has been determined that the Project should trigger Environment Assessment (OP/BP/GP 4.01) and Pest Management (OP 4.09). A partial environmental assessment in the form o f an Environmental and Social Management Framework (ESMF) and. a Pest Management Plan (PMP), which are being developed for the KAPAP, will be used. The draft instruments were disclosed on April 1 , 2009.

10

Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP/GP 4.01) [XI 11 Natural Habitats (OPIBP 4.04) [I [XI Pest Management (OP 4.09) [XI [I Cultural Property ( OP 4.1 1) [I [XI Involuntary Resettlement (OP/BP 4.12) [I [XI Indigenous Peoples (OP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety o f Dams (OP/BP 4.37) [I [XI Projects in Disputed Areas (OPIBPIGP 7.60)* [I [XI Projects on International Waterways (OP/BP/GP 7.50) [I [XI

36. This Project does not involve any exceptions to Bank policies.

E. IMPLEMENTATION ARRANGEMENTS AND FINANCING PLAN

37. Beneficiaries will be chosen through a participative community process. District Agriculture staff wil l determine, on the basis o f landholdings and population, how many farmers per location wil l be able to participate. Roughly 25 percent o f eligible farmers would be selected. The Project wil l target the productive poor, with preference to women and the vulnerable. Front l ine extension staff wil l then facilitate the selection process, to be led by community committees. These committees comprise the local chief, front line extension staff, c iv i l society organization leaders and other local leaders.

38. Selected farmers will need to prepare their land before receiving their voucher. Front-line extension staff wil l verify the readiness o f selected farmers, and distribute the vouchers. Other criteria for the receipt o f vouchers include the willingness to work in a group for marketing o f surplus maize. Training sessions wil l be held which will focus on ensuring maximum returns to the use o f the inputs as wel l as post-harvest storage and marketing.

39. Supply of agro-dealers and of inputs has been assessed as adequate. There i s a high presence o f qualified private-sector agro-dealers in this area. They must, however, be qualified to participate in the scheme. They must be registered by the Kenya Plant Health Inspection Service (KEPHIS). Their stocks will be tested randomly to ensure quality. Supplies were assessed, and i t has been determined that there are sufficient stocks o f seed and fertilizer, Di- Ammonium Phosphate (DAP) and Calcium Ammonium Nitrate (CAN) in the six districts to fulfill the increased demand that wil l be generated from vouchers for the participating farmers. Selected agro-dealers wil l receive training before the vouchers are distributed to farmers.

40. Prompt reimbursement of vouchers by the District Treasury will be critical to ensure agro-dealers have the working capital to provide needed inputs to all farmers. Vouchers, once redeemed, wil l be presented to M O A for verification and reimbursement. Once

* By supporting the proposedproject, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas.

11

MOA verifies the validity o f the voucher by cross-checking national identification numbers and land register numbers, agro-dealers wil l be issued a check once a month.

41. Once the vouchers are redeemed and the planting season i s complete, expenditures will be tallied, and a detailed financial report will be provided to MOA headquarters for onward transmission to the World Bank. It i s expected that M O A wil l pre-finance the farmers’ identification and voucher distribution process, ahead o f availability o f the grant. The Grant i s expected to be effective by the time vouchers are ready for G o K reimbursement. Baseline information on the six districts is available; additional information on beneficiary farmers will be collected by front-line extension staff to assist in the impact assessment process.

42. The Bank will visit the Project districts during the voucher redemption period to verify that the system i s working. It i s expected that the process wil l be completed by the end o f April 2009. The Bank wil l also visit the area every two months to assess the progress o f the maize crop as well as the training and support that participating farmers receive.

43. The Project will remain open over a one year period, to allow the GoK to assess its impact. In addition, training o f participating farmer groups on the storage and marketing o f maize surpluses wil l be held throughout the year.

44. Alternative approaches were considered but rejected. Bank execution was considered but rejected due to implementation capacity limitations. GoK execution i s preferred, as the G o K has an ongoing program that can be scaled-up. The ongoing program has been assessed and it i s considered that the GoK has qualified staff and a wide network at the district level to identify and provide technical support to beneficiary farmers. In addition, the alternative o f directly procuring and distributing inputs to farmers was considered and rejected. Direct procurement o f inputs i s not only cumbersome but also may be prone to corruption. Direct procurement and distribution would also undermine the role o f private sector and particularly agro-dealers. The preferred voucher system not only minimizes corruption risks but also promotes the role o f agro- dealers and key market players in rural input markets. Detailed implementation arrangements can be found in Annex 6.

F. PROJECT R I S K S AND MITIGATING FACTORS

45. Project level risks have been identified and mitigation measures have been put in place. A s the project i s building o n an existing G o K program, the Bank has identified existing r isks and designed mitigating factors to address these. The overall risk rating o f the operation i s substantial. Fiduciary r isks are identified and their mitigation measures are hrther elaborated in Annex 4. The overall r isks identified include:

o Extension and community capacity might be low and affect the administration o f the voucher system. To address this risk, the Project wil l scale-up an on-going activity being supported by the GoK, and limit the activities to six districts. Capacity building activities wil l also be supported.

o Social accountability mechanisms could be curtailed due to administrative procedures, increasing the risk o f elite capture and funds not reaching the intended farmers. This risk

12

0

0

0

G.

46.

i s small, as the scheme was administered last year and farmers know their role and are empowered . Perception that World Bank funding is favoring one particular region or ethnic group. To counter this risk, information on how other funding sources are supporting other districts in the long rains catchment area wil l be disseminated. Potential misuse o f funds through collusion o f farmers, agro-dealers and G o K staff, To address this risk, the Project i s involving the GoK's Internal Audit Department in monitoring, through conducting semi-annual risk-based audit reviews where any issues arising will be followed up by the Ministry's audit committee. Flow-of-funds and complaints handling mechanisms may not be robust enough to handle the scale up o f the program. To address these risks, the Project includes built-in mitigation measures in the FM assessment report to ensure that the voucher system works, which are outlined in para. 30 above.

TERMS AND CONDITIONS FOR PROJECT FINANCING

The Project financing i s proposed as a grant under the FPCR TF, which was launched by the World Bank &May 2008. The overall aim o f the GFRP program i s to minimize the threat posed by high food prices and sharply rising agricultural production and marketing costs to the livelihoods o f poor urban and rural residents in developing countries. Grant funding, capped at US$10 mi l l ion for each country, is targeted to the most fragile, poor and heavily-impacted countries and territories with little access to immediate funding. Kenya qualifies for these funds and the current Project i s budgeted at US$5.0 mil l ion.

47. There are no project-specific conditions of effectiveness of the Financing Agreement.

13

Annex 1 : Results Framework and Monitoring KENYA: Agricultural Inputs Supply Project

Overall Impact:

To increase maize production for household food self- sufficiency and the generation o f surpluses cash income for participating farmers.

Psoject Development Objective Increase access to agricultural inputs and technologies among targeted smallholder farmers in two main maize producing districts; i.e. Trans Nzoia and Uasin Gishu. Intermediate Outcome indicator Upscaling the existing input voucher scheme (Ki l imo Bora)

Government Coordination, Communication and M&E

Indicators

0 Incremental maize production

0 Maize yields in targeted areas in targeted areas (tons)

(bags per acre)

% beneficiary households self sufficient in Maize

Farmers receiving improved seeds and fertilizers (number)

Farmers satisfied with inputs and advice received from agro- dealers (%)

Farmers receiving vouchers (number)

Farmers receiving agricultural advisory services (number)

Vouchers reimbursed within four weeks by MOA

Fertilizer and seed distributed to farmers (tons)

Ago-dealers trained (number) Implementation progress reports and financial monitoring reports available monthly

Up-to-date M&E information available Quarterly

Means of Verification

Production figures in targeted districts (MOA).

Survey

MOA and partner records.

Survey

District MOA records.

MOA reports

Assumptions

Sufficient rainfall; peace and stability.

Inputs distributed by agro-dealers on time.

14

d E

U 0 E

c x

IA 8 8 d

,x c W -

8 8 10

I- - I-

0 0 0 hl

0 h

Annex 2: Detailed Description of Project Components KENYA: Agricultural Inputs Supply Project

Background

1. Kenya’s agriculture i s characterized by small-scale farming, accounting for 75 percent o f the total agricultural output and 70 percent o f marketed agricultural produce. Small-scale farmers produce over 70 percent o f maize, 65 percent o f coffee, 50 percent o f tea, 80 percent o f milk, 85 percent o f fish and 70 percent o f beef and related produce. Production is carried out on farms averaging 0.5 and 7.5 acres, mostly on a commercial basis. Currently, the sub-sector’s use o f improved inputs such as hybrid seed, concentrate feeds, fertilizers and pesticides or machinery i s relatively low. Increase in productivity, therefore, wil l need to take place in the smallholder sub-sector and will involve enhanced efforts to encourage farmers to adopt modern farming practices.

2. In recognition o f the need for increased production this year (2009) and the inability o f many small farmers to afford the increased cost o f inputs, the Government is upscaling the existing input (seeds and fertilizers) voucher scheme (Ki l imo Plus) under the NAAIAP. The N A A I A P seeks to address the problem o f food security and poverty by focusing on resource poor farmers. The short-term objective o f NAAIAP i s to improve access and affordability o f the key production inputs for smallholders, particularly those living below the poverty line. This improved access will lead to higher yields, household food self-sufficiency and the generation o f surpluses for sale. The medium-tern objective is to encourage a shift to commercial farming and greater use o f production credit in place o f input grants.

’

3. The NAAIAP has two components: K i l imo Plus and K i l imo Biashara. K i l imo Plus enables provision o f inputs grants to the poorest farmers though a voucher program. Ki l imo Biashara is a low-interest credit package for better endowed enterprise-oriented farmers who are constrained by capital.

4. The K i l imo Plus approach targets the poorest smallholders operating o n 1 ha and less. For maize, which is the focus o f this proposal, the K i l imo Plus program i s designed as a voucher scheme to enable smallholder farmers to access 10 kg hybrid seed, 50 kg basal fertilizer and 50 kg top-dressing fertilizer. These inputs are sufficient for approximately 1 acre (0.4 ha) o f maize. Each beneficiary under the K i l imo Plus program receives a voucher with a total face value o f KSh 7,300 (approximately US$92) with these three distinct but integrated components clearly specified.

5. K i l imo Plus recipients wi l l take their vouchers to accredited private agro-dealers. Vouchers are exchanged for production inputs. The face values for the three components have been determined using the best available information on input prices during the forthcoming long-rains season. Recipients may need to top-up the value o f the voucher if the price o f an input i s higher than the corresponding face value.’ Recipients are free to shop around for the best available price thereby encouraging competition among the agro-dealers. Extension workers and ago-dealers wil l be trained to help farmers make sound decisions in choosing varieties and fertilizer types.

16

6. package including the following:

The MOA has developed criteria for selection o f farmers as recipients o f the Ki l imo Plus

0

0

0

L o w income and limited farm size; Ability and intention to produce maize on at least one acre; Membership to farmer groups for ease o f training and logistical support; Willingness to j o i n cereal banks and participate in warehouse receipting for efficient marketing o f surpluses; Land preparation i s completed before receipt o f inputs; and Priority to women and child-headed households. 0

7. The Identification of farmers i s usually preceded by capacity building activities involving MOA staff, agro-dealers and potential beneficiaries. The program areas (divisions, locations and villages) are identified based on criteria (crop suitability, land availability, farmer groups, etc.). This i s followed by identification o f beneficiaries which i s done by community committees composed o f various stakeholders (local administration, agriculture and social services officers, church leaders, community leaders, village development committee, CBOs, and NGOs operating in the area). The farmer identification process i s elaborated involving holding o f open air meetings “barazas” at Location and Sub-location (village) levels. The l i s t o f identified and selected farmers i s subjected to community/stakeholder committee/fora for verification and approval. The final list i s complied by the divisional extension team and submitted to the district. The vouchers are then released to the beneficiaries (against their ID) who are expected to redeem them with accredited agro-dealers in their locality. The agro-dealers issue the inputs against the vouchers and farmers ID noting the price and quantifies supplied with the farmer signing. The agro-dealer then raises an invoice attaching the l i s t o f the farmers supplied plus the signed voucher to the district agriculture officer (DAO). After verification, a check i s issued to the dealer as payment.

8. The above system has been successfully piloted in 35 districts (35,000 recipients) over the past two seasons. The M O A proposed in i t s national budget submission to increase coverage to 100,000 farmers during the long rains season (commencing March 2009). However, insufficient f inds in the budget required that the program be scaled back to 35,000 recipients coming from 45 districts. The impact in terms o f surplus production i s estimated at 1.0 tod0.4 ha, based on an expected yield o f 5 tonha. This amount would be released onto the market reducing local maize prices and benefiting low-income maize consumers in both rural and urban areas. The proposed Project wil l be used to scale up K i l imo Plus to reach an additional 50,000 smallholder in two o f the main maize producing districts in Rift Valley province, greater Uasin Gishu and Trans Nzoia (both o f which have been recently subdivided into six districts. The following table indicates the districts that NAAIAP will cover in the short rains 2008 and long rains 2009 seasons. Note that Eastern and Coast provinces were covered during the short rains season and Nyanza, Central, Rift and Western Provinces wil l be covered during this current long rains 2009 season.

17

Table 3. 2008/2009 NAAIAP Districts

Kuria West

Central Province Kisii Central

Thika ’

Muranga South Kirinyaga

40-74(57) Kakamega Central 44-73(58) 39-72 (56) Bungoma East 61-90 (76)

30-44( 3 7) 5 8-86(72)

9. During 2008 pi lot phase over 1,500 farmers benefited from the scheme in the project area, out o f 8,000 farmers who benefited in entire Rift Valley province. Eight accredited agro- dealers participated in the program last year. More were trained but were not able to supply inputs due their financial capacity limitations. This season, due to the scale up o f the program, over 50 agro-dealers have come forward to be trained, and are in the process o f being accredited.

18

I

Experiences from Input Voucher Scheme, Turbo Division Long rains 2008

Kamagut Farmers Group, Kamagut Location Sixty farmers benefited from last season’s voucher scheme. Beneficiaries were selected at locational level. Poor farmers with sufficient land for one acre o f maize were selected. Group members reported 12- 15 bags o f maize per acre, with an application o f 50 kg’s o f DAP per acre(a lower than recommended amount for one acre). Members have formed a grain bank and are selling their maize to the market as a group.

Kaptebee Location Two beneficiaries were met. A widow with four children and a resident mother in law, produced 14 bags o f maize last season. She i s selling o f f her maize slowly, a bit to pay o f f a debt on her property and secure her tit le deed, and keeping the rest for food security. Another group member, Elizabeth, has saved all her maize from last season (15 bags) on farm, and i s planning to sel l two bags to buy her inputs for next season. She i s hoping prices w i l l increase.

Project Components

10. The Project wi l l have one component that wil l support the up-scaling o f input vouchers to smallholder farmers in the maize producing area o f Eldoret East, Eldoret West, Wareng, Trans Nzoia East, Trans Nzoia West, and Kwanza Districts in Rift Valley Province. The Project wil l specifically target smallholder maize farmers.

11. As part o f this component, the project will support capacity building o f government extension staff, farmers and agro-dealers benefiting from the program. The farmers wil l be trained on good crop husbandry practices and on fertilizer use. Already this exercise has been going on in the Project area but will be intensified prior to farmers receiving their input vouchers. Each farmer wil l receive a voucher worth Ksh 7,300 to cover 10 kg hybrid seed, 50 kg basal fertilizer and 50 kg top-dressing fertilizer.

12. The farmers wil l redeem the input vouchers from accredited agro-dealers, who have come forward and have been trained by MOA staff and by the Agricultural Market Development Trust (ADMARK). There are sufficient a g o dealers in the two target districts with enough stocks to supply the 50,000 beneficiary farmers.

19

Annex 3: Summary of Estimated Project Cost KENYA: Agricultural Inputs Supply Project

Activity Provision o f agricultural input vouchers to poor and vulnerable farmers

Capacity building for farmers, community committees and agro- dealers Government Overhead costs

Project Cost by Activity

Description Estimated Cost (US$) An additional 50,000 4,601,000 farmers participating, at estimated cost o f US$92 per farmer Capacity building on input 249,000 use and other farming technologies, screening and monitoring Printing o f vouchers, 150,000 oDerationa1 costs. M&E

Total 5,000,000

Category

(1) Agricultural Inputs Vouchers

(2) Operating Costs

TOTAL AMOUNT

20

Amount of the Percentage of Grant allocated expenditures to be

(inclusive of Taxes) (expressed in US$) financed

4,601,000 100%

399,000 100%

5,000,000

Annex 4: Financial Management (FM) Report KENYA: Agricultural Inputs Supply Project

I. Country Financial Management Issues

1. The most recent piece o f diagnostic work that provides up-to-date information on the country’s public financial management (PFM) system i s the Country Integrated Fiduciary Assessment (CIFA, September 2006). The assessment, together with the Country Assistance Strategy (CAS) that was completed in M a y 2004, review the GoK’s performance since the last Country Financial Accountability Assessment (in 2001) and CAS (in 1998). The C IFA adopted the PEFA performance measure framework as a guiding reference to diagnose the key challenges facing policymakers, report on recent progress, and outline priority areas for attention.

2. The CIFA highlighted that the GoK has been putting in place a new set o f laws and regulations to strengthen the PFM system. The GoK enacted in 2005 the Public Procurement and Disposal Act, which provides for an independent public procurement oversight authority. Parliament also passed legislation establishing an independent Auditor General’s office and was expected to debate new legislation which wil l give the body a stronger role in the preparation o f the budget. Capacity o f the G o K to manage public finances has also been strengthened. Over the past two years, the budget preparation process has been substantially reformed. This has led to a reorientation o f budgetary allocations towards investment in infrastructure and delivery o f services to the poor. I t has also led to the more direct participation o f stakeholders in reviewing pol icy choices prior to finalization o f the budget. Budget reporting has also improved both through technical changes in the way the budget i s presented and through a dramatic reduction in the audit backlog for central government operations. I t i s expected that these reforms will enable Parliament’s public accounts committee to play a more effective role in reviewing government expenditures and the concerns raised by these audits, thereby increasing the strength o f parliamentary oversight.

3. Substantial areas o f G o K spending are not properly scrutinized. A number o f ministries returned funds to the treasury, underscoring weaknesses in budget implementation and procurement in the public sector. While progress has been made in addressing the backlog o f audits o f central G o K operations, local authorities have yet to produce audited accounts, raising concerns that corruption at this level remains unchecked.

Even so, significant challenges remain.

4. Through its Public Financial Management Reform Strategy, the G o K remains committed to strengthening fiduciary safeguards with a view to achieving economy, efficiency and effectiveness in the use o f public funds. With the support o f a number o f development partner- assisted initiatives, including the IDA-funded Institutional Reform and Capacity Building Project (IRCBP), the G o K is seeking rapidly to enhance the financial accountability framework, particularly through strengthening legislation related to public financial accounting and audit.

5. Other country-level FM risks arise from Kenya’s overall governance environment, a weak judiciary and corruption concerns. The G o K has prepared a governance action plan that has been implemented and i s being monitored. The GoK has also mandated setting up independent oversight committees, including audit and finance sub-committees for public bodies.

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6. On the Bank-financed portfolio, project implementation has generally been slowed by constraints in the f low o f resources and l imited absorptive capacity arising from bureaucratic processes. The GoK i s committed to improving portfolio performance. In the last few years, agreements have been reached on several key issues in the context o f Country Portfolio Performance Reviews (CPPR) and other discussions. These include actions to improve audit compliance, closer monitoring o f project performance by the Ministry o f Finance, and improvements in the f low o f project resources, although significant improvements are s t i l l needed.

7. The findings o f forensic audits o f GoK-commissioned audits o f selected projects in the country portfolio (November 2004 and June 2005) include the following financial management related issues: (a) projects were generally not controlled using a balancing general ledger system that was fully integrated and regularly reconciled with the rest o f the government’s central accounting system; (b) project designs did not identify fraud risks and fraud risk management was not an integral part o f each project; (c) senior government oversight o f the projects was weak; (d) management accounts and project quarterly reports reflect levels o f activity but do not necessarily identify major issues so that they can be actioned; and (e) lessons learned and best practices are not shared among similar projects or passed into the wider government structure. Discussions are on-going between the Bank and G o K to address these issues at portfolio level.

11. Project Financial Management Arrangements

Budgeting

8. Budgeting for the Project will be undertaken by the M O A and MOF as per the existing GoK Regulations. Detailed cost tables wi l l be prepared and approved for the Project. The budgeting for the IDA funds wil l be done as part o f MOA’S annual budgeting process. MOA’S budgetary process is deemed adequate.

Accounting

9. The PS MOA has designated an appropriately qualified and experienced Program Accountant to be in charge o f the accounting issues for the Grant from effectiveness. M O A has also issued a letter to the Bank designating this person and indicating that the Ministry’s Internal Audit Department wil l be responsible for conducting regular internal audit reviews over the Program.

10. The accounting systems are deemed adequate. MOA has developed a comprehensive Program Design and Guidelines (PDG) Manual, which i s deemed satisfactory. Separate book o f accounts are maintained for NAAIAP. The accounting system i s done manually, using hard copy cashbooks and ledgers. Nevertheless, given the small size o f the Grant, the accounting system i s considered adequate.

Internal Controls

11. Project Financial Management and Grant Manuals: MOA has developed and implemented the P D G Manual for the Project, which is deemed to be adequate. There i s an

22

effective internal audit function in the Ministry, with four qualified internal auditors (Certified Public Accountant) with over five years experience who report to the Audit Committee and are deemed to be independent. The approval and authorization controls over payments are deemed sufficient. A fixed assets register i s maintained and regularly updated. The fixed assets are adequately insured. There i s adequate segregation o f duties in the accounts section.

12. Audit Committee: The Audit Committee i s properly constituted in line with Treasury Circular No.16 o f 2005 (on setting up o f oversight committees), meets regularly at least every three months, and is deemed to be effective.

13. Additional Internal Controls. Kenya at the moment is conducting reforms that wil l help in monitoring the voucher system. The most significant i s the involvement o f the GoK’s Internal Audit Department in monitoring World Bank projects through conducting semi-annual risk-based audit reviews where any issues asising wil l be followed up by the appropriate ministry’s audit committee. There are built-in mitigation measures in the FM assessment report to ensure that the voucher system works. These are: (i) building in transparency arrangements in the flow-of-funds mechanism, such that farmers can know when vouchers have been sent to the districts and farm input distributors when the districts have received funding to pay them; (ii) compliant handling mechanisms for the farmers and distributors ensuring that there i s a tracking report to monitor the voucher system and to flag any emerging issues; and (iii) during project implementation, joint supervision missions wil l be conducted by the Bank and the GoK (IAD), which wil l involve visiting a significant number o f farmers/distributors (based on a risk-based approach) to ascertain that the voucher system is working and that funds are being utilized for the purposes intended.

Financial Reporting

14. Interim Unaudited Financial Reports (IFR): MOA’S accounting system would be used to generate quarterly un-audited Interim Financial Reports (IFR) in form and content satisfactory to the Bank, which will be submitted to the Bank within 45 days after the end o f the quarter to which they relate. However, disbursement o f funds to the Project wil l be done on the basis o f SOE returns.

15. Contents of the IFR: The IFRs will capture only those funds disbursed through existing country FM system. The IFR will consist o f a statement o f sources and uses o f funds (by main expenditure classifications), opening and closing balances o f the funds from the Bank; and actual and budgeted expenditures by component and/or activity within component and explanations o f any variances, for the quarter and cumulatively for the project. The format o f the IFR has been agreed between MOA and the Bank.

Audit Arrangements 16. Annual Audited Financial Statements: The annual audit will be conducted by the Kenya National Audit Office (KENAO), which i s considered to be sufficiently independent and acceptable to the Bank. The Grant is for a period o f less than 12 months; hence M O A wil l have one audit conducted, covering the whole period o f the Grant. The audit report and management letter wil l be submitted to the Bank within six months after the closing date o f the Grant.

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Flow of Funds and Disbursement Arrangements

17. Disbursement Method: The Project shall use the traditional SOE method o f disbursement to access Bank funds.

18. Funds Flow Arrangements: IDA funds wil l be deposited in a dollar-denominated Designated Account, opened by the recipient in a local commercial bank acceptable to IDA, and wil l subsequently be transferred to a local currency-denominated account in a local commercial bank acceptable to IDA under MOA. These accounts shall be maintained in accordance with government procedures as well as World Bank disbursement procedures and policies. The Project Account shall be used by the PMU to make payments under the Project. Both the Designated Account and the Project Account wil l be opened by the Borrower within one month after Project Effectiveness. The funds f low process can be depicted diagrammatically as follows:

4

24

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I I I I I I I I I I I I I I I I

I I I I I I I I I I I I I I I I

19. Bank Signatories. The Designated Account, the Project Account will be operated under the existing Government Financial Procedures and Regulations issued by Treasury, which provides for two mandatory signatories. The categories o f signatories as follows:

Category 1: Accounting Officer The National Program Coordinator, Director Agro-business, or Director Crops; and

Category 2: Accounts Department Staff a. The MOA Principal Accounts Controller (PAC), or b. Any one o f the four designated accountants in the Ministry.

Any two signatories can sign a cheque for making payments for the Project.

20. Remedies for non-compliance: If ineligible expenditures are found to have been made from the Project Account, the borrower wil l be obligated to refund the same. If the Project Account remains inactive for more than six months, IDA may reduce the amount advanced. IDA will have the right, to be reflected in the terms o f funding agreement, to suspend disbursement o f the funds if significant conditions, including financial management reporting requirements, are not complied with.

111. Conditionality and Financial Covenants

21. FM Conditions for this Project.

FM Conditions: In view o f the robust FM arrangements by MOA and KS, there are no

22. Other FM related conditions:

a) Financial Management Arrangements: The Ministry i s required to ensure the continuing adequacy o f financial management arrangements over al l aspects o f the project until the project i s completed. In this regard, the National Program Coordinator (NPC) shall ensure that a financial management system i s maintained in accordance with the provisions o f Section 2.07 o f the Standard Conditions.

b) Interim Financial Reports (IFR): The NPC shall ensure that quarterly un-audited Interim Financial Reports (IFR) are prepared and submitted to the Bank as stipulated.

c) Financial Statements and Audit Report: The Ministry shall prepare Financial Statements for the project for every financial year as herein stipulated, in form and substance acceptable to the World Bank.

26

IV. Implementation Support Plan

23. implementation support plan i s proposed:

Based on the outcome o f the financial management risk assessment, the following

FM Activity

Desk reviews Interim financial reports review Audit report review o f the program Review o f other relevant information such as interim internal control systems reports. On site visits Review o f overall operation o f the FM system

Monitoring o f actions taken on issues highlighted in audit reports, auditors’ management letters, internal audit and other reports Transaction reviews (if needed) Capacity building support FM training sessions

Frequency

Quarterly Annually Continuous as they become available

Once (Implementation Support Mission) As needed

As needed

Before project start and thereafter as needed

24. systems are maintained for the project throughout i t s life.

The objectives will include that o f ensuring that satisfactory financial management

27

Table 1: Summary of Financial Management Risk Analysis

Clearly defined activities and funds flow mechanisms in the PDG.

Type of Risk

INHERENT RISKS Country Level

Entity Level

N o Project Level

OVERALL INHERENT RISK CONTROL RISKS Budgeting Detailed project budgets

and cost tables to be prepared and agreed. Regular reporting including variance analysis. Accounting arrangements deemed adequate.

Current MOA internal auditors to be assigned to the Project by letter from PS

Accounting

Internal Controls

No

No

No

Funds Flow Clearly defined activities and funds flow mechanisms.

Risk Rating

N o

S

M

M

S

L

M

M

M

Brief Explanation

Takes into account overall country governance environment, weak judiciary and corruption concerns and current political crisis arising from the general election in December 2007

MOA has adequate experience in managing projects and NAAIAP has been well established structures Project design relatively simple. However, possible coordination challenges at the district and community levels

Budget system deemed adequate for purposes of the Project

MOA accounts office well staffed, PDG Manual developed and implemented. MOA has designated an experienced Programme Accountant to commence work at Grant effectiveness Internal audit section adequately staffed and internal controls in NAAIAP assessed as adequate. Audit Committee properly constituted and deemed effective Funds flow process relatively simple with funds being managed by NAAIAP. However, possible coordination challenges community level

Risk mitigating measures incorporated

into project design

Issues are being addressed at the country level through the country’s governance action plan, strengthening o f the public financial management system (supported by the Bank through the Institutional Reform and Capacity Building Project).

Condition of Effectiveness

(Y/N)?

No

No

I

Residual Risk

Rating

S

M

M

28

Rating Risk mitigating

measures incorporated into project design

Format o f IFR agreed between Bank and MOA.

KENAO audits all Government implemented Bank projects and its performance i s deemed satisfactory

OVERALL CONTROL

OVERALL

Condition of Residual Effectiveness Risk

(Y/N)? Rating No M

No M

Brief Explanation

MOA has adequate capacity for preparing and submitting IFR and audited financial statements on a timely basis to the Bank in form and content satisfactory to the Bank Audit reporting arrangements deemed adequate the by the Kenya National Audit Office (KENAO)

L

I L I

29

Annex 5: Procurement Arrangements KENYA: Agricultural Inputs Supply Project

1. It i s anticipated that there will be no large value contracts for goods. There are no works or consulting services anticipated for the proposed Grant. Government staff will carry out the training workshops under the Capacity Building activity. N o consultants will be hired with Bank financing under the Grant. Small contracts o f goods and non-consulting services for conducting the training workshops under the Capacity Building activity will be awarded following the Shopping procedures in accordance with article 3.2 of the Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” published by the Bank in May 2004 and revised in October 2006 and the “Guidelines: Selection and Employment o f Consultants by World Bank Borrowers,” dated May 2004 and revised October 2006, will be the versions governing this project and the accompanying standard bidding documents for any new procurement. All o f such contracts shall be subject to Post Review by the World Bank. In addition, this Grant will be subject to the Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, dated October 15,2006.

30

Annex 6: Implementation Arrangements KENYA: Agricultural Inputs Supply Project

1. The Project wil l be implemented by MOA under the ongoing G o K initiative, the NAAIAP. NAAIAP has a fbnctioning Project Steering Committee (PSC) and Project Management Unit (PMU). MOA has developed a comprehensive “Program Design and Guidelines” Manual setting the structure o f NAAIAP, including the oversight bodies as wel l as the eligibility and voucher redemption processes. This Manual has been appraised and i s deemed to be adequate as a basis for managing this grant. At the district level, there i s a District Coordinating Unit (DCU) chaired by the District Agricultural Officer (DAO) whose members include farmers representatives, major farm input distributors, agro-processors/marketers. At the community level, a community committee set up under the chairmanship o f the Divisional Agricultural Extension Officer (DAEO) wil l cany out beneficiary selection. An organigram i s attached below.

2. The Project wil l provide small-scale farmers in the greater Uasin Gishu and Trans Nzoia districts (which were recently subdivided into six) with farm inputs (maize seed, basal fertilizer and top dressing fertilizer) for an acre o f land, equivalent in value to not more than K ~ h . 7 ~ 3 0 0 under a voucher system. A key eligibility factor i s that the farmer must have at least one acre o f land already cultivated and ready for planting. Farm inputs distributors have been identified within each district and have been trained by the PMU. A record o f the particulars o f these distributors, including their location, business registration license, names, addresses and telephone numbers o f the registered owners, and their specimen signatures has been compiled by the PMU. A l i s t o f the eligible farmers has also been compiled by the divisions, and a copy given to the DAO, another to the P M U and third copy to al l the selected distributors in the relevant district . 3. The vouchers are prepared, in four copies, by the PMU and sent to the D A O for issuing to eligible farmers. The vouchers have appropriate security features such as seal o f P M U and rubber stamp by DAO. Specific serial numbers are issued to specific districts and the PMU keeps track o f these numbers as the vouchers are redeemed. Different colors are used for vouchers for each year. The D A O records the name and ID number o f each farmer on the voucher at the time o f issuing o f the voucher to the farmer. The issuing i s done in the presence o f the District Stakeholders Forum (DSF) members for the district. To redeem the voucher, the farmer goes to any o f the selected distributors in the district to get the specified farm input. Once a farmer receives the required farm inputs, he or she signs the voucher. The distributor also signs the voucher. The distributor raises an invoice and delivery note, which are both signed by the farmer. The farmer retains a copy o f the invoice and the delivery note. The four copies o f the redeemed and signed voucher are distributed as follows:

Original copy o f the voucher attached to the original invoice and delivery note are forwarded by the farmer to the PMU through the D A O for payments. Duplicate copy remains with distributor/agro-dealer for his records and follow up o f payment Triplicate retained by the farmer Last copy kept by D A O for follow up and reference.

0

0

0

31

4. Once the redeemed vouchers and supporting documents are verified, the P M U approves them for payments and releases equivalent finds from the Project Account to the DAO to pay the distributors through the District Accountant. Any distributors found to be engaged in any irregularities (including over charging farmers, selling under-weight inputs, etc.) are blacklisted and removed from the Program. The Bank has appraised these procedures and finds the arrangements to be satisfactory for the management o f this grant.

-

ORGANIZATIONAL CHART FOR NAAIAP

Program Officers

Inputs Promotlon Services

Farm Business Development officer

Agricultural Credit and Financing omcer

Marketing Officer

1 National Program Steering Committee I

National Program Coordinator

Technical Services Deputy Program Coordlnator

Logistics Unit Data Capture Officer M&E Officer Program Accountant Secretaty Messenger

L I Provincial Unit

I Dlstrlct Coordination Unit 1

Stakeholder Fora 5- Farmers

2007/2008 Annual Report for National Accelerated Agrlcuitural Inputs Access Program (NAAIAP)

32

Annex 7: Project Preparation and Appraisal Team Members KENYA: Agricultural Inputs Supply Project

Planned Actual Decision Meeting March 19,2009 March 19, 2009 Appraisal March 23,2009 March 23,2009 Negotiations March 25,2009 March 25, 2009 Board/RVP approval April 16,2009 Planned date o f effectiveness April 30,2009 Planned closing date June 30,2010

Name Almaz Teklesenbet Andrew Karanja Christine Cornelius Dahir Warsame Henry Amuguni Ladisy Chengula Monica Okwirry Nightingale Rukuba-Ngaiza Nyambura Githagui Tom Owiyo

Title Program Assistant Sr. Agricultural Economist Program Coordinator Sr. Procurement Specialist Financial Management Specialist Sr. Env. Specialist Program Assistant Senior Counsel Sr. Social Development Specialist Consultant M and E Specialist

Unit AFTAR AFTAR AFTAR AFTPS AFTFM AFTEN AFCE2 LEGAF AFTCS AFTAR

33

Annex 8: Global Food Response Program and the Food Price Crisis Response Trust Fund

KENYA: Agricultural Inputs Supply Project

1. International prices o f rice and wheat spiked in 2008, contributing to higher prices for staple foods in many developing country markets and causing severe consumer hardships. The price o f inputs such as fue l and fertilizers increased even more over the same period, aggravating the balance sheet o f smallholder producers who make up the vast majority o f developing country grain producers and o f the poor overall. Countries need to pay the extra cost up front without necessarily reaping commensurate output price benefits on their small amounts o f marketed surplus. There i s an urgent need for rapid action to alleviate the plight o f the poor in accessing food, to assist clients with food policies to meet new global conditions, and to facilitate a sustainable response o f developing country agriculture to the opportunity o f high prices in an inclusive manner.

2. This project i s financed under the Global Food Crisis Response Program (GFRP), which was endorsed by the Board on M a y 29, 2008, and will be financed out o f the Food Price Crisis Response Trust Fund (FPCR TF). This trust fund was established using resources from the net IBRD income to assist the most vulnerable countries. The objectives o f the FPCR-TF are thus to: (i) reduce the negative impact o f high food prices on the lives o f the poor in a timely way; (ii) support Governments in the design o f sustainable policies that mitigate the adverse impacts o f more volatile food prices on poverty; and (iii) provide a global financing mechanism for inclusive medium term growth in productivity and market participation in agriculture to ensure an adequate supply response for sustained improvement in food security.

3. The init ial approach i s to facilitate a rapid Bank response with al l available tools as soon as possible, while supporting the evolving coordination role o f the United Nations Task Force o n the Global Food Crisis established recently in Berne.

34

Annex 9: List of Project File/Supporting Documents KENYA: Agricultural Inputs Supply Project

1. Project Proposal - Rapid Scale up o f Investments to Boost Smallholder Food Production in Kenya through NAAIAP. February 2009

2. N A A I A P Annual Report 2007/2008 3. NAAIAP Program Design and Implementation Proposal M a y 2006 4. NAAIAP Program Document and Guidelines 2008/2009.

35

Y

m 1997

6 0.93

0.a 0 0 0 0 0 0 0

0 0. 93

a63 0

0 0 0 0 0 0

1997 m

1 25

0 0 0 0 0 0 0 0

1 25

0 0

0 0 0 0 0 0

1997 rn

0.32 0

0 0 0 0 5 0 0 0

0.32 0

0 1.75

0 0 0 0 0 0

07/WI!XQ 2x6

10 1.5

4.45 15 0 0 0 0 0 0

10 1.5

4.45 0

15 0 0 0 0 0

0 0 0.33 0 0 0 0 0. s 0 0 0

0 0 a06 0 0 0 0 0.E 0 0 0

0 1 W W

0 0

0.11 0 0 0 4.68 0 0 0

0 0

0.11 23

0 0 0 0 0 0

m 2x6 0

a0 1 -47

5

0 0 0 0 0 0 0 0 0 0 0 0

0 1.47

0

0 0 0

0 0 0 0 0 0 0 0 0

2x6 1WS6

0 1.54

0 0 36 0 0 0 0 0

0 1.54

0 0

0 1-68 0 0 0 0

m m 1972

567 22 0

0 1 0 0 0 10 0 0

0.04 22 0 0

507 0 0

0 0

0. 04

1 0 0 10 0 0

22 0 0

m07 549 549 0.83 0.52 0.88 856

37

Annex 11: Country at a Glance KENYA: Agricultural Inputs Supply Project

Kenya a t a glance 912 410 8

Key Develo~ment Indicators

(2007)

Popubtim, md-year (mllons) Surfacearea(thousandsq km)

Urban population (% dtotalpoprlatm)

GNI (Atlas method, US$ billons) GNI D W c w t a (Atlas method US$) GNlpercapta (PPP, nternatoral$)

GDPgmwth (Oh) GDP per capia gowth (Oh)

(most rwcent estimate, 2000-2007)

Poverlv headcount ratio at $1 2 5 a dav (PPP %) Poverty headcountratio at$200a day(PPP,%) Lfe expectancyat birth (years) Infant mrtalty(per1 000 live births) Child malnutntion (YO of dlibren under5)

Adult literacy, male (Oh of ages 15 and ober) Adult literacy, fernla (%of ages 15 and dder) Gross pnmaryenrdlmnt, male (% ofawgmup) Gross pnmaryenrdlmnt, female (% of age group)

Access toanimproved w te r source (% ofpoprbtion) Access toimproved santatim facillles (% ofpopubtim)

PopubtlmgmwvI (Oh)

Kenya

37.5 580 2.6 21

25.6 680

1,540

6.9 4.1

53 7 9 17

78 70

107 104

57 42

Sub- Saharan Low

Africa income

800 1,296 24,242 21,846

2.4 2.1 36 32

762 749 952 578

1.870 1,500

6.2 6.5 3.7 4.3

50 72 50 57 94 85 27 29

69 72 50 50 99 100 68 89

58 68 31 39

Net Aid Flows

(US$ rnllicns) Net OD4 anddfioal aid Top 3 donors (in 20%)

United States United Kinadom Japan

Aid (% ofGNI) Aid per capita (US$)

Long-Term Economic Trends

Consumer jxces (annual O h change) GDP imdict defbtcf (annual Oh dlanae)

Exchange rate (annual average. bcal perUS$) Termsoftradeindex(ZM)O= 100)

Popubtim. md-year (mllons) GDP (US$ mllons)

Ag iicultu re Industry

Sewices

Househob f i ~ l consumption WJendtUre General govY final consumptim expenditure Gross capital foimatim

Expats d goads and sewices lmpolts of goods and services Grosssaungs

Man ufa cturn g

1980

3%

39 39 27

5.6 24

13.9 9.6

7.4 86

16.3 7.265

32.6 20 .8 12.6 46.6

62.1 19.8 24 5

29.5 35.9 15.4

1990 2000

1,181 51 0

95 46 67 73 93 67

14.4 4.1 50 16

17.8 10.0 10.6 6.1

22.9 76.2 85 100

23.4 31.3 6,591 12,604

29.5 3 . 1 19.0 17.5 11.7 11 .6 51 .4 49.4

62.8 75.2 18.6 15.3 24.2 17.6

25.7 22.3 31 .3 39.5 18.6 15.2

(% of G W )

2007'

943

262 108 106

4.1 26

2.8 13.1

67.3 109

37.5 29,509

22.7 19.0 11.8 58.2

74.8 16.0 19.5

22.8 33.2 11.4

Pgedlsblbutlob 2007

Femle

I 7 5 7 9 1 me4

45-49

3054

1519

04 20 I O 0 10 20

percent

Under-5 morlallty rate (per 1,000)

I m .

Growlh of GDP and GDP per capita (%)

W P per -pi& +WP - 90 95 00

19-Bo 1990-2000 2000-07 (average annual growth %) 3.6 2.9 26 4.2 2.1 4.4

3.3 2.2 3.6 3.9 1.1 4.7 4.9 1.1 4.6 4.9 3.2 4.2

4.5 3.6 4.0 2.6 7.2 7.6 0.4 6.1 6.7

4.4 0.5 8 3 1.9 9.4 6.4

Note Figures in LaIcs are for yean other than those speofied 2007 data are prelimnary a Aid data arefor 2W6

Devebprnent E c m m r ~ , DevelopnentData Group @ECDG)

indicates data are not avalable

38

Kenya

EalZmCe or Payments ana Trade

(US$ miNions) Total merchandise exports (fob) Total merchandise imputs (a9 Net bade in goods a d services

Workes' remittances and compensation of employees(receipts)

Cumnt account balance asa %of GDP

Reserves, includng gsld

Central Government Finance

(% of GDP) Cumnt revenue (induding grants)

Cumnt eqendibre . Overall surpius'defidt

Highest marginrl tax rate(%)

Tax revenue

indiwduai Corporate

External Debt and Resource Flows

(US$ millions) Total debt outslandirg ard disbursed Total debt service Debtrelief (HIPC, MDRI)

Total debt (% of GDP) Total debt service (% of exports)

Fordgn drectinvesbnent (net inflows) Portfolio equity (ret inflows)

2000

1,773 3,306

-1,015

538

-284 -2 3

897

19.0 15.9 164

0.6

30 30

6,145 591 - 488 21.2

111 -6

2007

4,048 7,029 .3,735

1,300

-3,051 -10.3

3,015

20.9 17.2 24.4

-7.7

30 W

6,534 433 -

28.7 7.1

51 2

wnporl ionoftdal extcrnal debt, 2006

Private Sector Development

Time required to starta business (days) Cost to stat a busimss (% of Mi per capita) Time required to register property (days)

Ranked as a maja mnstrairt to business (%of managem surveyed who agreed)

Access Wcost of finanang Corruption

Stock maket capiblizatim (%of ODP) Bank cspitai to asset ratio ("/)

2000

10.2 129

2008

30 39.7

64

2007

72.5 72.5

45.4

Gowrnance indicators, 2000 and 2007

Vuce and accwntablity

Pdihcal stablity

Regulatory qvality

RJle oflaw

COntrd ofccirupUm

2007 Country's pmenblerank (&lCQ) ~p* lw V ~ I I B I imp& ten- m t m s o m

Source Ka!fmnnXraayMasrllrn. Wond Bank

Technology and Infrasbudure 2000 2007

P a v d roads (%of tctal) Fixed line and motile pbne

High techmlogy exputs subscribers (per 1,000 people)

(%of manufactured exports)

121 14.1

1 31

3.9 3.2

Environment

Agriculturrl land (% of land arm) 47 47 Fomst ama (YO of l a d aea) ' 8 3 6.2

Freshwater msoucesper capila (cu. meters) .. 581

NaSonaiiy protected areas (% of land area) .. 72.6

Freshwater vrithdrawal(% of internal resources)

C02 emissions per capita (mt) 0.33 0.31

7.6

GDP per unit ofenergyuse (BO5 FPP $ per kg of oil equivalent) 2 7 2.8

Energyuse per capita (b ofoil equivalent) 481 486

(US$ mllions)

iBRD Total dek outstanding and disbursed Disbunenents Principal repayments Interest payments

Total dek outstanding and disbursed Disbursenents Total dek service

IDA

IFC (fiscal year) Total disbursed and outstanding portfdio

Disbunmenb for IFC own account Portfolio sales, prqaymerts and

repayments f a iFC own acmunt

of which IFC own acmunt

MlGA Gloss exmure

47 0

40 7

2262 170 45

99 99 40

14

42

0 0 0 0

2,968 159 88

132 120 16

7

103 New glarantees 37 95

Note: Figures h italica are for years dherthan those specified. 2007 data a e pmiiminay. .. inbcates dab are not available. -indicates obsevalon is not gplicPie.

Development Economics, Developmmt Data Group (DECDG).

924108

39

Millennium Development Goals Kenya

With selected targets to achieve between 1990 and 2015 (esbmate dosast io date shown, +/- 2ymrsj

Goal 1: halve the rates for extreme poverty and malnutrltlon Poverty hmdccunt rabo at $1 25 a day(PPP, % of poprlatim) Poverty hmdccunt rabo at national poveiyline (% ofpopuiation) Shse cf incane or consumptim to the poorest qmitiie (%) Prevalence of malnutritim (% of children under 5)

I990

3.4

I995 2000 2007

52 0 5 1

20 1 17 5 165

Goal 2: ensure that children are able tocomplete primaryschoollng Primaryschool enroilment (ret, %) Primarycomplebon rate (% of relwantage group) Secondsy schml errollmmt (gross, %) Ycuth literacy rate (% ofpeople ages 15-24)

Goal 3: eliminate gender dlspatlty In education adempower w m e n Rabo ofgirls to b q s in pnmaryand seconday educabon (%) Women employed in Ihe nonagncultural sector (% of nonagricultural emplqment) Proporbon ofseats held bywomen in nabonai parliament (%)

Goal 4: reduce under.5 mortality by two-thirds Under-5 mortalityrate (psr 1 000) Infant mortdityrate (per 1,000 live births) Measles immization (proprtim ofone-year olds immized, %)

Goal 5: reduce maternal mortality by three-fourths Maternal ma-tality tatio (modeled estimata per 100 000 live births) Births attended by skilled health staff (% of total) Contraceptive prevalence (% of women ages 1549)

97 64 78

50 27

Goal 6: halt and begin b reverse the spread of HNIAIDS and other maJor dloeases Prevalence of HIV (% of poprlatim ages 1549) lnadence d tuterculcsis (per 100,030 people) Tuberculosis casesdetected mder DOTS (%)

116

Goal 7: halve the proportion of people wkhout sustalnable access to basic needs A m s s toan improved watersourm (%of ppulation) Access to imprmed sanitation facilities (%of population) Forest area (% of totd land area) Nationally potected areas (%of tom1 lard area) C02 emisions (metric tors per capim) GDP per unit of emrgy me (ccnstant 2035 PFP $per kg of oil equivalent)

41 39

6.5

0.2 2.7

Goal 8: develop a global partncrshlpfordewiopment Telephone mainlines (per 100 people) Mobile phme subscrbers (per 100 people) Internet users @er 100 people) Pewond complters (per 100 people)

0.7 0.0 0.0 0.0

iducatlon lndlcaors (%)

25 6 E 2wo 2w2 X)M 2om

-Pdmrynet enrdlml ratio

-U- Wtio of gkls lo boys n ptimly 8 secondaryeducalicm

leasles lmmunkallon (%of l year OMS)

loo 1

OKenya OSubSaharan Afdca

66 75 93

39 50 80

27 3

98 96

4 7

111 117 121 72 77 79 63 75 77

560 45 44 42 33 39 39

232 57

46 40

0.3 2.6

0.9 0.0 0.0 0.1

420 51

51 41

6.3

0.3 2.7

0.9 0.4 0.3 0.5

7.8 384

70

57 42 6.2

12.6 0.3 2.8

0.7 30.5 8.0 1.4

liCT lndlcators(per 1,000 people)

P1

2WO 2032 2 0 4 2W0

OFixej + nrtilesubscribers PJlnternetuserS

Note: Figures h italics are for years dher than those specified. .. indicates data are not available.

Development Economics. Developmmt Data Group (DECDG).

9/24/08

40

MAP SECTION

Yat ta P lateau

Ndoto M

tns.

Lot ik ipi P lain

Mau Escarpment

Cherangany Hi l l s

ChalbiChalbiDeser tDeser t

Ngangerabel i P lain

Bi lesha P lain

Daniss

a Hi l l

s

Mt. KenyaMt. Kenya(5,199 m)(5,199 m)

E A S T E R NE A S T E R N

R I F T VA L L E YR I F T VA L L E Y

C O A S TC O A S T

N O R T HN O R T HE A S T E R NE A S T E R N

N YA N Z AN YA N Z AKarunguKarungu

LodwarLodwar

LokicharLokichar

KangatetKangatet

KitaleKitale

EldoretEldoret

ButereButere NyahururuNyahururuFallsFalls

KerichoKericho

NarokNarokLolgorienLolgorien

MagadiMagadi

NamangaNamanga

KonzaKonzaMachakosMachakos

KibweziKibwezi

VolVol

TsavoTsavo

KwaleKwale

GarsenGarsen

BodheiBodhei

KolbioKolbioBuraBura

NguniNguni

IkuthaIkutha

KituiKitui

MackinnonMackinnonParkPark

LokichokioLokichokio

KarunguKarungu

KakumaKakuma

EmbuEmbu

NanyukiNanyuki

ThikaThika

GilgilGilgil

MbalambalaMbalambala

Garba Garba TulaTula

MandoMandoGashiGashi

WajirWajir

El WakEl Wak

TarbajTarbaj

RamuRamu

BunaBuna

MoyaleMoyaleSololoSololo

MarsabitMarsabit

North HorrNorth Horr

South HorrSouth Horr

MaralalMaralalKapedoKapedo

MarigatMarigat

Archer’sArcher’sPostPost

IsioloIsiolo

ManderaMandera

KisumuKisumuNakuruNakuru

GarissaGarissaNyeriNyeri

KakamegaKakamega

NAIROBINAIROBI

CENTRALCENTRAL

WESTERNWESTERN

NAIROBINAIROBIAREAAREA

Karungu

Lodwar

Lokichar

Kangatet

Kitale

Eldoret

Butere NyahururuFalls

Kericho

NarokLolgorien

Magadi

Namanga

KonzaMachakos

Kibwezi

Vol

Tsavo

Kwale

Shimoni

Malindi

Garsen Lamu

Bodhei

KolbioBura

Nguni

Ikutha

Kitui

MackinnonPark

Lokichokio

Karungu

Kakuma

Embu

Nanyuki

Thika

Gilgil

Mbalambala

Garba Tula

MandoGashi

Wajir

El Wak

Tarbaj

Ramu

Buna

MoyaleSololo

Marsabit

North Horr

South Horr

MaralalKapedo

Marigat

Archer’sPost

Isiolo

Mandera

KisumuNakuru

Garissa

Mombasa

Nyeri

Kakamega

NAIROBI

CENTRALNAIROBI

AREA

E A S T E R N

R I F T VA L L E Y

C O A S T

N O R T HE A S T E R N

N YA N Z A

WESTERN

E T H I O P I A

SOMALIA

TANZANIA

UGANDA

SUDAN

Ng’iro M

ilgis

Suam

Turk

wel

Tana

Mara

Galana

Athi

Ewaso

Thua

Tsavo

Loga Bogal

Lak Dera

Lak Bor

INDIANOCEAN

Lake

Victor ia

LakeTurkana

To Murle

To Juba

To Dila

To Imi

To Kismaayo

To Bur Gavo

To Dar Es Salaam

To Moshi

To Arusha

To Seronera

To Musoma

To Kampala

To Mbale

Yat ta P lateau

Ndoto M

tns.

Lot ik ipi P lain

Mau Escarpment

Cherangany Hi l l s

ChalbiDeser t

Ngangerabel i P lain

Bi lesha P lain

Daniss

a Hi l l

s

Mt. Kenya(5,199 m)

34°E 36°E 38°E 40°E 42°E

34°E 36°E 38°E 40°E

2°S

0°

2°N

4°N

4°S

2°S

0°

2°N

4°N

KENYA

0 40 80 160120

0 40 80 120 Miles

200 Kilometers

IBRD 33426R

MARCH 2008

KENYASELECTED CITIES AND TOWNS

PROVINCE CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

PROVINCE BOUNDARIES

INTERNATIONAL BOUNDARIES

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.