Issue 47: Market information systems

Computerizing dairy cooperatives

Open source software improves efficiency of Kenyan dairy cooperatives

Rop Kiplagat

Faced with increased competition and fewer subsidies, many Kenyan dairy cooperatives are now using an information management program specially developed to help farming cooperatives run more efficiently.

Dairy production in Kenya, as in many ACP countries, is carried out by small-scale dairy farmers located in rural areas, often with low levels of literacy and very few technology skills. For most Kenyan dairy farmers, their only source of income comes from selling milk. But over the years, many small-scale producers have pooled their resources and built up strong cooperative societies that collect the milk and then sell it on to bulk processors. Some cooperatives belong to an even bigger union that also processes milk from its members before selling the final product in retail markets.

There is, however, increasing pressure on the Kenyan dairy industry as cheap imports compete with locally produced milk. Farmers are further strained since the government stopped providing farm subsidies, leaving farmers to meet the full cost of production. For dairy cooperatives to survive they have to streamline their operations and improve their management processes if they want to have a positive balance sheet and some surplus money to pay dividends to their members.

One way the cooperatives could increase efficiency is to use increase their use of computers. Computers can remove the duplication of efforts often seen in the manual accounting systems and transaction recording. Processing payments by hand is time-consuming especially for cooperatives with many members. Paper transactions can then be difficult to trace, leading to complaints from farmers and, in some cases, a feeling of being cheated. An erosion of trust, questions of accountability and an accounting system that is open to abuse can all cause the collapse of a cooperative.

To combat these issues and improve the efficiency of agricultural cooperatives, open source software developers in Kenya have worked together to develop Coopworks. Development began in 2006 and the programme is now freely available for download. The developers designed the system specifically as a farmers’ information management system to help agricultural cooperatives manage their accounts, membership details and production records. The system currently supports dairy cooperatives and developers are now working on a facility to extend the program to coffee cooperatives by mid-2009.

Advances

The program automates daily operations such as member registration, milk delivery, collection, analysis and storage, and can report information much faster and more accurately than the manual systems previously used by many cooperatives. The member management registration process, for instance, can contain more details than the old style member register and administrative staff can now find a single member record in seconds.

The milk delivery module can track daily, weekly and monthly deliveries of milk by any farmer and the system can compile reports based on collection routes, farm location and region. By calling up a particular farmer’s production record the cooperative can offer advance credit to that farmer against future deliveries. The system also shows any outstanding loans and can display the farmer’s previous repayment record. The development team is working on an addition to the system where members can query their balance via a text message from their mobile phone.

The program can also help the cooperative with disease control planning. If a delivery of milk is rejected for any reason, the problem is noted in the system along with details of the milk’s source. Coopworks can show if more supplies have been rejected from a particular farm or region and warn farm managers of a possible disease outbreak. The system can also immediately display the store’s inventory and show if cooperative has enough medicine to deal with a possible outbreak.

Access to a reliable and stable source of electricity, however, is the biggest challenge for cooperatives that want to invest in computers and use digital management systems. Tanykina Farmers Cooperative Society, in Kenya’s Rift Valley, for example, powers its computers by generator. But due to the high cost of fuel, they can only switch the generator on for a few hours a day to allow the computer to capture the day’s transactions. Tongaren Farmers Self Help Group, on the other hand, uses a solar powered laptop.

The cost of acquiring computers presents another major obstacle, especially for small cooperatives. The Coopworks team has been advising farmers to buy refurbished computers but the cost of these machines can also be beyond the budget of some cooperatives and are not always readily available.

A third issue limiting the implementation of computerized management systems is the lack of computer literacy in many rural areas. Though Coopworks was designed to fit international accounting practices, each cooperative always has to customize the program to fit in with their in-house working methods. If cooperative staff have limited technical skills adapting the program can be quite difficult. In fact, instead of getting their member statements on time, in some cases, cooperatives have had delays in the process since adopting the system.

Experiences

The system was piloted in five major cooperatives around Kenya. Tulaga Farmers Cooperative Society in Kinangop, north of Nairobi, initially had 800 members. Two years after installing Coopworks their membership has swelled to 3400. Farmers say they joined Tulaga because they were able to get their member statements on time, unlike with the other cooperatives which were not computerized. Significantly, the rapid increase in the number of members did not require additional staff. The society has now purchased their own milk cooler as result of increased revenue due to increased members and the number of extra deliveries.

The next stage in the development of the software is to add an extra function where, for example, reports can be displayed as graphs or charts. Having a more visual representation of important performance indicators such as sales, profit and loss, variations in market prices and stock level reports helps the cooperative explain its management process to members which in turn encourages a much wider involvement in the running and planning of the business.

Extending the program so that it can automatically send and receive text messages from mobile phones will be especially useful. Farmer can query their statements without having to travel to the cooperative’s office. Since the telephone numbers of all its members will be stored on a database, the society can send text messages to farmers giving technical advice, market prices, alert them to disease outbreaks or inform them of a meeting.

The Coopworks team also plans to link the system to digital weighing scales which will automatically report back to the farmer via text message to confirm the amount of product delivered at the collection point. The farmer can then verify that the amount is the same as that collected. To achieve this, however, the team is looking for input from software developers around the world and has made the code available for anyone to contribute on the SourceForge website, a site which encourages collaboration on open source software development.

The introduction of computer software to manage the daily running of cooperatives can bring many benefits to the society as well as its members. The agricultural sector has lagged behind business and education when it comes to the adoption of communication technology, especially in countries where power supply, internet connectivity and computer literacy are major challenges. But information management systems, like Coopworks, can significantly increase the efficiency of a cooperative and help to ensure that it, and the individual farmers, can continue to compete even with the pressures of the modern marketplace.

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Rop Kiplagat is one of the software developers working on Coopworks.