Draft KFIE SoW FINAL.docx

KENYA FEED THE FUTURE INNOVATION ENGINE (KFIE)

DRAFT STATEMENT OF WORK

C.1 BACKGROUND

USAID/Kenya seeks a Contractor to implement the Kenya Feed the Future Innovation Engine (KFIE). KFIE is designed to foster and bring to scale innovative private sector solutions to persistent poverty and food insecurity.

Poverty and malnutrition in Kenya is the combined result of low agricultural productivity, high population growth, a variety of cultural challenges accelerating urbanization, unpredictable climate change, degradation of natural ecosystems and habitats, poor governance and inadequate infrastructure. As of 2009, 17.8 million Kenyans (46%) lived in poverty. Female-headed households in particular experience lower income and higher poverty incidences. Two million children under 5 are stunted and between 2 and 10 million Kenyans required emergency food aid each year.

Although Kenya’s challenges are daunting, its agricultural sector shows considerable potential. Presently, Kenya’s agricultural sector employs over 75% of the workforce, directly and indirectly accounting for roughly 51% of Kenya’s GDP. In addition, the agricultural sector has the capacity for significant growth if irrigation, road, agricultural input, finance and extension constraints can be addressed.

KFIE is intended to harness the power of innovative private sector approaches to leverage resources and integrate new approaches to agricultural solutions thereby accelerating efforts to address poverty and food security needs in Kenya.

C.2 PROGRAM GOAL, OBJECTIVES AND EXPECTED RESULTS

Program Goal: To harness innovation for cutting-edge results in selected agricultural value chains through private sector strategies with the potential to generate significant measurable increases in household income and/or nutrition.

Program Objectives:

1. To systematically test, cultivate and adapt innovations which further the objectives of the FtF Strategy in Kenya and promote equal opportunities for women, youth and other vulnerable groups (Refer to Annexes 1 and 3)

2. To support broad adoption of innovative approaches across target populations in the FtF regions (Refer to Annex 2) and throughout Kenya

3. To generate sustainable and scalable private sector solutions to further FtF goals (Refer to Annex 3)

4. Where appropriate, to identify and promote innovations with the potential for cross national and/or global adoption, eligible for USAID/Washington Development Innovation Ventures (DIV) support

5. To identify and support Kenyan for-profit and not-for-profit entities in the agricultural value chain USAID expects that the Kenya FtF Innovation Engine will:

· Select promising innovations, illustratively: ten innovations for Stage 1, three innovations for Stage 2 and one innovation for Stage 3 over the life of KFIE (Refer to Annex 1).

· Effectively coach and cultivate selected innovations to support their development.

· Apply evidence-based testing to determine movement from one Stage to another.

· Leverage USAID resources with other public and private resources to grow innovations to scale, establishing a sustainable and scalable model to meet program goals.

· Identify potential innovations for the USAID/Washington DIV where they will be considered for multi-country dissemination.

· Benefit local Kenyan institutions by cultivating and broadly disseminating innovative practices.

Results in the targeted regions and population include:

· Improved agricultural productivity

· Improved agricultural markets

· Increased private sector investment in agriculture and nutrition-related activities

· Increased agricultural value chain on- and off-farm employment

· Increased resilience of vulnerable communities and households

· Improved access to diverse and quality foods

· Improved nutrition-related behaviors

· Improved use of maternal and child health and nutrition services

C.3 STATEMENT OF WORK

C.3.1 The Contractor shall:

· Create and implement a management structure to identify innovations in the target geographic areas/value chains/populations described in Annexes 1 and 2. In doing so, the Contractor shall utilize a competitive process approved by USAID. However, the Contractor’s efforts shall not be limited to these means. The Contractor shall use its expertise to proactively identify promising innovation investment opportunities.

· Provide hands-on technical and managerial assistance and mentoring to all Stage recipients to develop their innovations, increasing the likelihood of eventual success. Assistance shall include providing technical expertise in (illustratively) agronomy, marketing, processing, quality assurance, packaging, trade, information and communication technologies, etc. at the producer/entrepreneur level.

· Apply market research analysis to help determine how innovative proposed projects are (Refer to Annex 1). That is:

· The Contractor, as part of its proposal, shall propose a “innovation measurement scale” to make a determination of a project’s “innovativeness” with respect to (illustratively):

· Increased Cost-Benefit and/or Cost Effectiveness outcomes;

· Effort minimization and or maximum/optimal outcomes;

· Efficiency/Efficacy gains; and,

· In evaluating potential projects for support, the Contractor shall conduct market surveys to make a determination as to whether or not the idea presented represents a novel approach, product, etc.

· Develop relationships with the private sector that result in business linkages between KFIE recipients and more established private sector agriculture sector entities.

· Develop relationships with financial institutions that can result in access to finance for KFIE recipients.

· Select (with USAID: refer to Section C.4 and C.5) promising Stage 1 innovations for development.

· Provide technical input for the selection of promising Stage 2 and 3 innovations for development.

· Manage a process to sub-grant resources to Stage 1 recipients (refer to Section C.5).[footnoteRef:1] [1: USAID/Kenya anticipates providing direct support to innovators at Stages 2 and 3, including but not necessarily limited to grants.]

· Provide organizational and financial management capacity building as required to potential Stage 2 and 3 recipients to support USAID’s ability to make direct grants. Capacity building includes inter alia assessing the entity to determine areas of weakness; designing and implementing corrective actions to address areas of concern, and; monitoring and reporting actions taken. Capacity development should strengthen the entity’s organizational sustainability (such as corporate governance) and financial sustainability.

· Develop and maintain a website (and as appropriate other web and mobile-based ICT platforms such as social networking applications) which solicits participation of potential innovative approaches and showcases the innovations under development that further Feed the Future goals.

· In coordination with USAID/Kenya, proactively seek support for KFIE from other development partners and the GOK, including non-traditional development partners such as foundations and social venture capital funds and the private sector.

· Participate in and provide logistical support (e.g. arranging for conference facilities, coordinating participant arrival and check-in, arranging for necessary equipment) for proposed “Solution Seeking” or “Matchmaking” sessions, as described in Section C.4.

· In accordance with the Annual Work Plan, the Contractor shall produce quarterly reports and information products for public distribution in compliance with USAID Branding and Marking requirements. The Contractor shall establish a website to assist with public dissemination of these produces, and these reports and information products shall include internet publications, newsletters, bulletins, “Success Stories”, etc. prepared by the Contractor that describe KFIE activities, lessons learned, and experiences

C.3.2 Geographic Areas The Contractor shall primarily perform the requirements of this SOW in the two geographic sub-regions identified as High Rainfall Zone 1 (HR1) and Semi-Arid Zone 2 (SA2) targeted by the Feed the Future Strategy which contain the greatest number of rural poor, highest poverty density, lowest income households, highest number of malnourished children and highest percentage of female heads of households (Refer to Annex 2). As the Feed the Future Strategy rolls out, areas of expansion may include High Rainfall Zone 2 (HR2) and Semi-Arid Zone 1 (SA1).

C.3.3 Illustrative Activities/Innovations The Contractor shall identify, test and scale innovative approaches that support agricultural production, market incentives, better nutrition and increased household income. Illustratively, these innovations/activities may include but not be limited to:

· Identifying agricultural varieties that are disease, pest, and drought resistant, especially for alternative crops suitable for adoption by the very poor.

· Encouraging adoption of nutrient dense crop varieties such as lentils and orange-flesh sweet potatoes.

· Catalyzing private sector manufacture of fortified complementary foods to address the nutritional needs of pregnant women and newborns that promotes access by rural women.

· Promoting local-level processing of fortified foods that are easily accessible and affordable to rural women.

· Promoting improved feeding practices and positive change in nutrition behaviors, especially targeting women.

· Reducing transaction costs to enable the very poor to access markets, including “last-mile” extension services, collection centers, and application of information and communications technology (ICT) to more efficiently disseminate agricultural information.

· Buying down the risks of providers to develop, test and/or market new services or products, including but not limited to training and/or technical assistance in safety standards, quality standards, productivity techniques and/or new financial services.

· Selecting and/or co-financing infrastructure, technologies and other capital goods, which could include market and transportation infrastructure, storage methods and facilities, irrigation, processing, and/or packaging technologies.

· Spurring on-farm and off-farm employment through facilitating processing, agribusiness and value-added small enterprises.

· Catalyzing social innovations that reduce gender inequalities in agricultural production and income (e.g. labor-saving technologies, linking women to extension and markets, promoting farming as a family business with an emphasis on positive gender relations in the family unit, innovations that secure women’s access and rights over productive resources, etc.).

· Facilitating public-private investments in the animal feed industry, value-added opportunities in regional markets, contract farming, and other opportunities as they arise.

The above list is illustrative in nature and is not all encompassing; the Contractor shall use its expertise to identify as many activities as is practical.

C.3.4 Incorporating Gender in KFIE Implementation USAID/Kenya’s FtF Strategy notes that inequitable access to the factors and benefits of agricultural production by women is an underlying cause of poverty. The roles of women and men and their relative power affect who-does-what within the home and outside, who controls what resources, and who benefits from the work done. USAID believes that developing strategies and building these differences into the design and implementation of KFIE innovations will help lessen their intensity, resulting in not just better performance but also contributing to great social equity and equality. In this regard, the Contractor shall:

· Complete a gender analysis of target populations in the FtF focus regions to aid planning and design of gender-sensitive innovations.

· Where appropriate, promote innovations that reduce gender inequalities.

· Collect gender-disaggregated data and monitor gender impacts of innovations at all Stages.

C.3.5 Period of Performance The period of performance will be for a base period of three years, with two option years.

C.4 ROLE OF USAID

USAID will be actively engaged in the development and execution of the activities outlined in this SOW and in the Annexes. Specifically, USAID will:

· Lead the development of criteria and the selection of Stage 1, Stage 2 and Stage 3 innovations. Further, USAID may propose other non-USAID participants in the selection process, including representatives of DIV.

· Provide Innovation Fellow(s) and other resources independent of the Contractor to support the evidenced-based decision making process. Fellows will be engaged in both the research design and execution.

· Directly support Stage 2 and 3 recipients through grants or any other appropriate mechanism

· Apply innovations identified and tested by the KFIE into the broader Feed the Future Strategy under implementation by USAID and its partners.

· Facilitate coordination with other USAID innovation initiatives, such as the activities of DIV.

· Possibly host one or more “Solution Seeking” or “Matchmaking” sessions that bring together USAID staff including Innovation Fellows, researchers, academic and other development professionals to discuss the greatest opportunities and potential innovative solutions for food security in Kenya.

· Conduct external evaluations of the Kenya Feed the Future Innovation Engine, including a mid-term evaluation.

· Solicit support for the KFIE from other development partners, including non-traditional development partners such as foundations and social venture capital funds.

The Contractor shall work with the USAID Contracting Officer’s Technical Representative (COTR) for the KFIE activity. The Contractor's team leader, or his/her designee, will communicate regularly with the USAID COTR on a monthly basis. On an as-needed basis, the staff composition of the meetings will be determined by the COTR and the Contractor to reflect the special nature of the meetings; for example, instances where the Contractor's financial manager and other USAID staff will need to be in attendance.

C.5 GRANTS UNDER CONTRACT (GUCs)

It is anticipated that the Contractor will make grants to Kenyan Stage 1 recipients, as described above (Section C.3.1) pursuant to ADS 302.3.4.8 (Grants Under Contract). Use of the GUCs procedure is subject to specific approval by USAID and must meet certain conditions, not all of which are summarized herein. The Contractor may be required by USAID to develop a grants procedure manual, approved by the USAID Contracting Officer, for the administration of GUCs. USAID must be significantly involved in establishing selection criteria for GUCs and must approve the actual selection of grant recipients. In addition, USAID will retain the right to terminate grants unilaterally.

C.6 PERFORMANCE MANAGEMENT PLAN AND EVALUATIONS

The Contractor’s monitoring and evaluation plan and Performance Management Plan submitted as part of its proposal, is hereby incorporated by reference into the contract.

As noted above (Section C.4) USAID/Kenya intends to conduct one or more external evaluations of the overall KFIE activity, including a mid-term evaluation. (This should not be confused with evaluations described in Annex 1 that determine the success of supported activities through the various Stages.) These evaluations are intended to document progress as well as make recommendations to increase the efficiency and effectiveness of KFIE. While the Contractor is not responsible for the conduct of this evaluation, the Contractor shall provide information to the evaluation team.

F.1 REPORTING REQUIREMENTS

The Contractor shall submit the following outputs to the USAID/Kenya COTR or his/her designate. Each of the reports shall be submitted electronically using Microsoft Word, Excel, or PowerPoint software. All reports shall be written in English. All reports are subject to approval by the USAID/Kenya COTR. Written reports will be in the form of regular reports (as described below) as well as ad hoc written reports for which content and length will be determined jointly by the USAID/Kenya COTR and the Contractor.

F.1.1 Quarterly Progress Report The Contractor shall submit a Quarterly Progress Report not later than thirty days (30) following the end of each calendar quarter. The reports shall reflect the structure of the Annual Work Plan and the PMP, and address at least the following points:

· Activities completed under each planned intervention

· Activities to be undertaken in the following quarter

· Outputs accomplished and results realized in the quarter

· Achievements of the quarter (and cumulative to date) as defined by the PMP

· Aggregate outputs accomplished and results realized since project inception

· Budget execution, clearly showing actual versus planned expenditures, and a forecast of the expenditures for the remainder of the project

· Discuss and propose solutions to issues or problems that are affecting the delivery or timing of interventions, or the achievement of results of this project

· Electronic and hard copies of all reports, success stories, and other relevant documents prepared during the quarter (to be submitted as annexes)

F.1.2 Annual Work Plan For the purpose of the Annual Work Plan, “Annual” is defined according to the U.S.

Government fiscal year: i.e. October 1st to September 30th. Within thirty (30) days after award, the Contractor shall submit and finalize – with input from the USAID COTR – an Annual Work Plan for year one; or if the commencement of work is during the course of the fiscal year, the initial work plan shall cover the period from 45 days after award to the end of September for that year. Subsequent full year Work Plans are due October 1st; the USAID COTR shall approve, in writing, the Work Plan by October 30th. Each intervention should be supported by additional information such as expected direct results, measures of success, estimated timeframe and responsible person(s). In addition to a narrative description, intended interventions should be presented in a graphic format such as a table or a graph. Any substantial revisions to the Work Plan shall require the written approval of the COTR.

F.1.3 Final Contract Completion Report The Contractor shall prepare and submit one electronic version (as a single Word file) of the Contract Completion Report to the COTR which summarizes the accomplishments of this contract, methods of work used, recommendations regarding unfinished work and/or project continuation, and the financial status of the contract. The final Completion Report shall also contain an index of all reports and information products produced under this contract. The report shall be submitted no later than the estimated completion date of this contract. Along with the Completion Report, a CDROM depository will be submitted, containing all written documents, reports and presentations. The depository shall be organized in a user-friendly system.

F.1.4 Environmental Report In accordance with Section H.1. below, before starting implementation the Contractor in consultation with the USAID Mission Environmental Officer (MEO) will assess and identify any potential negative impacts of proposed activities on the environment and on human health using the standard Africa Bureau Environmental Screening Form (ESF). In case potential impacts are identified from the screening, the Contractor will document the impacts in an Environmental Review Report (ERR) and develop an Environmental Monitoring and Mitigation Plan (EMMP). In the event planned activities involve use of pesticides, the contractor will develop a Pesticide Evaluation Report and Safer Use Action Plan (PERSUAP). All reports (ESF, ERR, EMMP and PERSUAP) will be submitted to USAID for approval. Once approved, the EMMP and the PERSUAP will form part of the Contractor’s work plan and shall be monitored and reported along with all other project activities on a frequency agreed upon by the MEO, the COTR and the Contractor.

As required by the USAID/Kenya Economic Growth program Initial Environment Examination (IEE), sub-projects (such as Stage 1 sub-grants) will be screened for potential environmental risks as and when their activities are known. This will be an on-going process as sub-projects are identified. Furthermore, project implementation will emphasize Integrated Pest Management (IPM) activities within the guidelines of the PERSUAP that will be submitted by the Contractor for USAID approval.

F.1.5 Financial The Contractor shall prepare and submit to the USAID/Kenya COTR a Quarterly Accrual Report that includes:

· Total estimated cost of the KFIE award

· Total amount obligated

· Total amount invoiced for

· Total amount expended but not yet invoiced for

· Expected expenses to quarter-end

· Remaining unexpended funds

· Amount committed and disbursed to each sub-awardee

The Contractor shall submit this report to the COTR 20 days before the end of each calendar quarter (e.g. March 11, June 10, September 10 and December 11), or on any other date as agreed between the USAID/Kenya COTR and the Contractor. The Contractor shall prepare and submit to USAID/Kenya other financial reports as required under the contract.

F.2 CONTRACT DATA REQUIREMENTS LIST

Due Date

Organizational and financial management capacity building provided to potential Stage 2 and 3 recipients

H.1 COMPLIANCE WITH USAID ENVIRONMENTAL REGULATIONS

All projects funded by USAID must conform to USAID Environmental Procedures (22 CFR 216) requiring evaluation to ensure that any potential negative environmental impacts resulting from the project implementation are identified and mitigated. Through development of the Initial Environmental Examination (IEE) and ancillary Environmental Review Reports (ERR), Environmental Monitoring and Mitigation Plan (EMMP), 22 CFR 216 (“Reg. 216”) ensures that potential negative impacts to the environment and human safety (i.e., natural resource or public health) as a result of USAID-funded activities are identified and mitigation and monitoring measures proposed.

The IEE that is particular to this Statement of Work identifies some classes of activities that are Categorically Excluded from initial environmental examination as no environmental impacts are expected as a result of these activities. The IEE makes a threshold “Negative Determination with Conditions” for other selected activities that promote or support (i) increased productivity of targeted agricultural sub-sectors; (ii) development and strengthening of financial markets; (iii) development of small-scale technologies for micro-entrepreneurs to increase productivity and profitability; (iv) small-scale construction; (v) small-scale water development; vi) bio-safety systems and the use of bio-technology; (vii) the use of pesticides, and; (viii) the generation, handling and disposal of hazardous agri-veterinary waste. In addition, the document describes procedures for undertaking environmental review of proposed activities and for monitoring compliance with “Conditions.” USAID will ensure that the Contractor identifies potential environmental concerns of proposed activities, including those executed through sub-grantees, and plan any necessary mitigation at the work planning stage. This process will ensure activities remain Categorical Exclusions or within the bounds of the “Negative Determination with Conditions” as described in the IEE.

H.2 USAID MARKING AND BRANDING REQUIREMENTS

USAID has developed specific guidance for implementing partners concerning marking and branding of activities funded by USAID. Marking refers to applying graphic identities or logos to program materials or project signage to visibly acknowledge contributors, identifying organizations supporting the work; branding refers to how a program or project is named and positioned and identifies the sponsor of the work. In implementing this program, the Contractor shall adhere to all USAID marking and branding guidelines, as described below:

H.2.1 Marking

(a) It is USAID policy that USAID-financed commodities and shipping containers, and project construction sites and other project locations be suitably marked with the USAID emblem.

(b) Specific guidance on marking requirements should be obtained prior to procurement of commodities to be shipped, and as early as possible for project construction sites and other project locations. This guidance will be provided through the USAID/Kenya COTR indicated on the cover page of the contract, or by the Mission Director in the Cooperating Country to which commodities are being shipped, or in which the project site is located.

(c) Authority to waive marking requirements is vested with the Regional Assistant Administrators, and with Mission Directors.

(d) A copy of any specific marking instructions or waivers from marking requirements is to be sent to the Contracting Officer; the original should be retained by the Contractor.

H.2.2 Branding The Contractor shall comply with the requirements of the USAID “Graphic Standards Manual” available at www.usaid.gov/branding, or any successor branding policy.

SECTION C ANNEXES

ANNEX 1: BACKGROUND

The USAID Feed the Future (FtF) Strategy Kenya is among the twenty focus countries under “Feed the Future” ─ the U.S. Global Hunger and Food Security Initiative.[footnoteRef:2] USAID/Kenya’s Feed the Future Strategy[footnoteRef:3] is designed to address Kenya’s most pressing food security, poverty and malnutrition challenges by designing and implementing interventions in the horticulture, dairy, maize and staple food crop (e.g. cereals and pulses) value chains. Working in coordination with the Government of Kenya’s Agricultural Sector Development Strategy, USAID/Kenya’s Feed the Future (FtF) Strategy will concentrate in two geographic sub-regions (High Rainfall (HR) Zone 1, Semi-Arid (SA) Zone 2; see Annex 2) which contain the greatest number of rural poor, highest poverty density, lowest income households, highest number of malnourished children and highest percentage of female heads of households. USAID/Kenya’s FtF Strategy focuses on market-led development of Kenya’s most important, small-holder dominated agricultural commodity value chains ─ maize, dairy, horticulture, and other staple food crops. [2: http://www.state.gov/globalfoodsecurity; www.feedthefuture.gov ] [3: http://kenya.usaid.gov/sites/default/files/KenyaFTFMulti-YearStrategy.pdf]

The FtF Strategy will realize its objectives by investing in:

· Agricultural Policy Support

· Agricultural Research and Technology Transfer

· Productivity

· Market Development

· Capacity Building

· Knowledge Management

· Nutrition

· Innovation

Please see the FtF Results Framework (Annex 3).

Constraints to Food Security and Nutrition in Kenya Obstacles to agricultural productivity in all targeted value chains include:

· High cost of inputs; especially fertilizers, lime, farm equipment and labor. Thus, the majority of farmers (women especially) are unable to access them. This results in low productivity and subsequently low food security.

· High post-harvest losses; both before and during storage. Most farmers are unable to keep their produce for long due to poor storage conditions which predispose the produce to pest attacks and possibly uncompetitive prices, resulting in high losses.

· Poor infrastructure. Due to the poor state of roads and other means of transport agricultural produce cannot reach the market in good time or good condition, resulting in high losses. Similarly, the cost of transportation in most places is exceedingly high making transaction costs excessively high as well.

· Effects of climate change. Over-reliance on rain-fed agriculture means any changes in weather patterns ─ e.g. droughts and floods ─ ultimately translate into adverse effects on agricultural productivity thereby impeding food security.

Obstacles to good nutrition in all targeted value chains include:

· Poor feeding practices; particularly of infants and young children.

· Insufficient caloric intake; often due to environmental shocks such as droughts and flooding.

· Micronutrient deficiencies; due to a lack of access to (or knowledge or acceptance of) nutrient-rich foods and a diversified diet.

· Lack of potable water

· Improper hygiene

· High disease burden; particularly HIV/AIDS and malaria.

KFIE will identify innovations, leveraging resources and integrating new approaches into the strategy’s implementation to address the constraints to agricultural productivity as outlined above.

Target Farmer Population, Innovation, and Adoption Recent interviews emphasize that not all farm households have the same propensity to adopt innovations and to benefit from interventions designed to enhance agricultural productivity and income.

Risk Averse: This cohort includes very poor households, often those with landholdings that average less than 2 hectares and are less likely to have access to financing (40% versus 55% for more affluent farmers), apply fertilizer (64% versus 84%) or utilize improved varieties of seeds (55% versus 75%).[footnoteRef:4] Such households typically have larger family size (7 versus 5 members) and are principally producing to meet consumption requirements. Support for these families will concentrate on first increasing yields through the introduction of improved agricultural inputs, allowing the household to satisfy consumption needs while increasing the portion available for sale. Over time, very poor households will be encouraged to diversify staple crops and to introduce complementary value chains, such as horticulture. [4: Olwande, John and Mathenge, Mary, “Market Participation among Poor Rural Households in Kenya” October 27, 2010, Egerton University]

Very poor households have historically demonstrated limited willingness to adopt innovations. Efforts to reach such households will need to demonstrate applicability, provide an integrated package of finance and service, and overcome transportation barriers. Where applicable, farmers should be organized into local producer groups to establish a platform for dissemination and testing of innovations. Adoption rates of very poor households may proceed more slowly than that of more affluent farmer households.

Early Adopters: There is an emerging class of farmers who have begun to recognize farming as a source of business income, much as they may look to other kinds of jobs or small business. While growing food for household consumption is part of the equation, such “Business Farmers” also grow crops with a primary goal of generating revenue through product sales. Farm sizes are larger, typically greater than two hectares, and may include dairy, horticulture and other high value-added production. Strategies to benefit such Business Farmers will include diversification of crops, improved storage and marketing facilities, agro-processing, introduction of livestock and fish-farms, among others.

Such Business Farmers typically are early adopters, demonstrating greater willingness to innovate, though along with other small holders seek demonstrated proof of new approaches before being willing to adopt more broadly.

Both the Risk Averse and the Early Adopters are integral in achieving the goals of the Feed the Future program. Seventy-five percent of total agricultural output in Kenya and 70% percent of market agricultural produce comes from the smallholder sector. [footnoteRef:5] Five million smallholders produce crops on less than three hectares of land; of these, almost 3 million are resource poor with less than one hectare under cultivation. USAID’s FtF Strategy specifically seeks to increase the food security and household income of this population. By further enhancing their productivity and better use of natural resources management, Kenya will be better positioned to meet its total food production requirements while furthering sustainability goals. [5: This section is drawn for the Government of Kenya Agricultural Sector Development Strategy Medium Term Investment Plan.]

Feed the Future and Nutrition In Kenya today, under-nutrition contributes to one in three child deaths every year, and one of three children suffers from chronic under-nutrition. Stunting of cognitive development associated with under-nutrition causes poorer educational outcomes and perpetuates the cycle of poverty in Kenya. [footnoteRef:6] [6: Source: USAID/Kenya Draft Integrated Nutrition Strategy.]

Feed the Future complements the Agency’s Global Health Initiative by providing a vehicle to apply a nutrition-sensitive lens to agricultural investments. Kenya, as a priority country for both Initiatives, has the ability to implement a comprehensive program that will support the Government of Kenya’s (GOK) stated nutrition priorities, as expressed in their draft National Food Security and Nutrition Policy. This Policy envisions private sector involvement to address malnutrition. KFIE and Kenya’s FtF program can support the “business case” for nutrition by catalyzing the private sector (producers and processors) to produce nutrition-dense foods, and encourage households to adopt healthful practices. Fortification of cereal crops to combat anemia and ensure that babies receive sufficient protein and micro-nutrients is a key strategy in this regard. Horticulture, one of the FtF target value chains in Kenya, has a particular role to play as fruits and vegetables are a vital source of micro-nutrients.

The Role of Women in Kenya’s Agricultural Sector It is estimated that 40% of Kenya’s smallholder households are managed by women, largely attributed to rapid rural to urban migration by men in search of employment.[footnoteRef:7] Rural women in particular are responsible for 80% of paid and unpaid labor in food production including staple crops which provide up to 90% of the rural poor's food intake.[footnoteRef:8] Their contribution to secondary crop production, such as legumes, fruits, vegetables, wild roots and tubers, is even greater. [7: Kimenye, 1999] [8: FAO, 2003]

Nevertheless, women face severe constraints in access to and control over household income. Prevailing social beliefs and perceptions about women’s role in the household and in the economy reduce opportunities to enhance their economic participation as farmers, clients of goods and services, and managers of firms. Practices that require ownership to land to participate in agricultural institutions such as producer associations exclude women from accessing inputs, credit, and technology. Even as we recognize that broad societal changes are required to increase the role of women in the agricultural economy, KFIE is intended to support USAID’s development hypothesis ─ more effective control by women over productive assets, including financial assets, will result in both increased agricultural production and resilience for vulnerable communities and households.

KFIE Linkage to USAID/Kenya’s Assistance Objective and Other USAID/Kenya Feed the Future Activities KFIE falls within the USAID/Kenya Assistance Objective “Increased Rural Household Incomes”, overseen by the Agriculture, Business and Environment Office (ABEO). ABEO implements programs in all of the FtF value chains (dairy, horticulture, maize and staple food crops) under this Objective, providing resources for technical support to improve productivity and increase trade among smallholder farmers. In addition, the USAID/Washington-supported Horticulture Collaborative Research Support Program (HortCRSP) is active in Kenya with the goal of facilitating domestic and international trade in horticulture products and applying research findings to increase smallholder participation in horticulture markets. Overall, the FtF program in Kenya creates opportunities for agricultural sector stakeholders, the constrained poor and the very poor to take advantage of regional markets to boost agricultural productivity and hence increase incomes from farming.

KFIE will complement these efforts by identifying innovations, leveraging resources and integrating new approaches into FtF strategy implementation. In implementing their own activities, it is expected that other ABEO FtF Implementing Partners can serve as a source of ideas for the KFIE, particularly at Stages 1 and 2 as described in “Scaling Innovation” below.

Additionally, USAID/Kenya implements the Financial Inclusion for Rural Markets (FIRM) project. The goal of FIRM is to improve productivity and growth of agricultural value chains through expanded financial services access to underserved groups, geographic locations and new product areas. Coordination with FIRM will be of particular interest to the KFIE Implementing Partner as supported projects transition from Stage 3 to Graduation, as described below.

Development Innovation Ventures (DIV) KFIE draws its inspiration from Development Innovations Ventures (DIV). Launched in 2010 by USAID/Washington, DIV identifies, develops and transitions to scale breakthrough approaches to pressing development problems.[footnoteRef:9] DIV is a global facility which supports innovations across all sectors, each with the goal of reaching at least 75 million people worldwide. DIV is intended to: [9: See http://www.usaid.gov/div/

· Support a continuing culture of innovation and evidence-based policy throughout USAID; and,

· Bring together USAID staff and leading development researchers to develop, test and transition to scale promising innovations.

Like KFIE, DIV provides funds to support high return (and potentially high risk) innovative projects. Innovations identified in the context of the KFIE may ultimately demonstrate multi-country potential and in some instances satisfy the requirements of DIV, thereby potentially generating deal flow for DIV.

GOK National Food Security and Nutrition Policy KFIE ─ like all FtF interventions ─ is intended to support the Government of Kenya’s priorities for food security and nutrition. These priorities are expressed in the National Food Security and Nutrition Policy – Draft Sessional Paper, February 2009. This Sessional Paper defines food security as a state whereby “all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life.” GOK priorities include inter alia:

· Increasing the quantity and quality of food that is available and accessible

· Per food safety, ensuring the availability of high quality food by setting, promoting and enforcing appropriate guidelines, standards and a regulatory framework

· Providing special nutrition interventions for specific groups with high risk, and creating awareness and skills to provide nutritious foods to all family members

The Sessional Paper specifically recognizes the need for private sector involvement to achieve the goals of the Policy.

USAID FORWARD: Implementation & Procurement Reform A key expectation of USAID/Kenya is the consideration and inclusion of the implementation and procurement principles of USAID FORWARD,[footnoteRef:10] which is that as a result of USAID development assistance there will be increased capacity (technical, financial management, and governance) of local systems, public and private, that facilitate increased levels of resources moving through local systems to achieve development objectives. One of the six objectives of Implementation and Procurement Reform (IPR) is to strengthen local civil society and private sector capacity to improve aid effectiveness and sustainability, by working closely with implementing partners on capacity building and local grant and contract allocations. [10: See http://forward.usaid.gov/reform-agenda/implementation-and-procurement]

The Contractor is expected to meet the objectives and aspirations of the USAID FORWARD by supporting and strengthening local partners such as local NGOs and private sector actors as much as possible, such as by supporting local entities’ performance through capacity assessment, and development of internal institutional and capacity improvement activities.

KENYA FtF INNOVATION ENGINE (KFIE)

Given the scale of challenges facing Kenya’s agricultural sector there is a need to create and scale new solutions to accelerate change. Integral to the success of USAID/Kenya’s Feed the Future Strategy is the launch of an Innovation Engine which will identify innovations, leverage resources and integrate new approaches into the strategy’s implementation. KFIE contrasts from a traditional grant or sub-granting mechanism in several respects as will be described herein. KFIE differs from existing sources of agricultural loan finance by offering funds for projects at a nascent or experimental stage at which loan funds are inappropriate. Rather, the KFIE is intended to operate as a venture capital fund that invests “equity” ─ the return to USAID being achievement of our FtF objectives. The KFIE specifically takes the model provided by USAID’s DIV initiative and tailors it to the Kenya Feed the Future context.

The Kenya FtF Innovation Engine will catalyze innovations which specifically support the FtF Strategy as outlined above, recognizing that all along the value chain there are numerous innovative activities currently going on with the potential to be identified, championed and scaled-up. Illustratively, innovators may be: input suppliers, financial institutions, producers/producer organizations, business service providers/buyers, retailers, processors, entrepreneurs or research or academic institutions. Additionally, innovations identified in the context of the Kenya FtF Strategy may ultimately demonstrate multi-country potential and in some instances satisfy the requirements of DIV, thereby potentially sourcing and generating deal flow for the USAID/Washington-based DIV.

The Kenya FtF Innovation Engine both realizes the potential of innovation within the local context, focusing innovation within a key USAID initiative, while spawning innovation with possible global applicability.

Innovation Defined Most simply expressed, innovation is defined as introducing something new or different.[footnoteRef:11] The U.S. Department of State 2010 Quadrennial Diplomacy and Development Review states “Innovation is informed risk-taking.”[footnoteRef:12] Innovation defined more specifically is “A substantial positive change compared to an incremental change in (illustratively): Improved quality; Creation of new markets; Extension of the product and/or range; Reduced labor costs; Improved production processes; Reduced input materials; Reduced environmental damage; Replacement of products and/or services; Reduced energy consumption; Improved conformance to regulations; etc.” [11: On-line dictionary] [12: www.state.gov/qddr]

In the context of KFIE we will be seeking breakthrough innovations which support the specific FtF value chains and the overall goals of the FtF initiative through private sector strategies with the potential to scale, thereby generating measurable increases in income and/or nutrition. “Private sector strategies” means that the proposed innovation must, at maturity, be financially sustainable without donor or other public resources.[footnoteRef:13] This approach envisions that for-profit firms will have adopted the innovation as part of their business model. [13: An exception would be where the innovation is considered to be a “public good” and is adopted by the Government of Kenya (GOK) for further implementation with GOK funding.]

For this purposes of this Program, we recognize four types of Innovation.[footnoteRef:14] [14: Tidd et al (2005)]

· Product Innovation ─ New products or improvements on products. Examples here may include: new seed varieties, new grain storage facilities that are accessible to “deeply rural” producers, new financial products such as pre-harvest or post-harvest loans, new low-cost chilling devices, newly-developed “drying beads” to maintain seed quality, development of natural bio-fortified foods using locally grown ingredients, new highly nutritious processed foods such as flour made from orange-flesh sweet potato.

· Process Innovation ─ Where some part of the process is improved to bring benefit. From the FtF context, process innovations address the various actions along the value chain (marketing, finance, distribution, etc.) and may include innovations such as mobile-based management information services or “last-mile” extension service delivery.

· Positioning Innovation ─ Re-positioning entails taking a proven method and using it in a new context. In general, new ways of disseminating an existing technology or practice to increase its uptake and impact are examples of “positioning” innovations. Weather-indexed crop-insurance has existed for years, but using agro-dealers as insurance agents and SMS technology to increase efficiency making it possible to insure single bags of seeds is new. Dairy chillers to support milk supply chains are not new, but distributing very small chillers so that they are conveniently accessed by small farmers helps to extend value chains to those who typically remain outside the market.

· Paradigm Innovation ─ Innovations that change fundamental behaviors have far-reaching potential to influence multiple products and processes. Safaricom’s M-PESA mobile money product has effectively introduced a paradigm shift, allowing rural farmers and others to make or receive payments over the phone. We are seeing M-PESA enabling contract farming, warehouse receipts, agricultural input delivery, loan payments, distribution of cash support payments, with uptake greatly facilitated by access to reliable and timely payments.

Scaling Innovation In the context of the KFIE, “scale” means that supported innovative ideas must, at their maturity, materially and beneficially affect a significant number of households. The KFIE seeks projects that represent “game changing” methodologies and approaches that will lead to transformative changes in the Kenyan agricultural sector. The FtF Innovation Engine is modeled on the successful DIV model and will look to support innovation through stages:

Stage 1: Proof of Concept: Seed funding will be provided to incubate new ideas, supporting the development and experimentation needed to transition innovations from ideas to “proof of concept.” Illustratively, seed funding will have a ceiling of $50,000 and for most projects the proof of concept stage will last from six to twelve months.

Stage 1 projects will be independently evaluated to assess the potential proof of concept. Evidence-based methods will be used to assess effectiveness of the design, uptake by local farmers and private sector, and/or reliability of results. Based on this evaluation, those ideas most promising will transition to Stage 2.

Stage 2: Roll-out: At this stage, once proof of concept is secure, projects will be rolled-out to test its applicability. Roll-outs will be accompanied by rigorous testing to assess impact and benefits for the farmers and households reached. (See Evidence-based Decision-making below.) Where possible, projects should aim for demonstration at a broader regional scale than the pilot (e.g. district or county level) and include the architecture or other systems that would allow the innovation to scale even further. Typical start-up funds will be around $0.5 million; for most innovations these funds will be spent over 1-3 years.

Stage 3: Scale-up: The most promising projects that meet the criteria for success in Stage 2 will be eligible for transitioning to Stage 3. Such innovations will demonstrate the potential for scalability and sustainability via either the private or public sector. It is anticipated that most competitive Stage 3 proposals will leverage additional funding from investors, donors or public resources.

Stage 4: Graduation: The final step for successful projects will be graduation and no longer require support from the Innovation Engine.