Local Cooperative Linked to Finances and Market

Originally published on November 7, 2014.

KOAIBU, a local dairy cooperative in the Rubavu District at the foot of the misty Virunga Volcanic Mountains in the rural northern Rwanda, used to face difficulties in finding a stable market for their milk. Despite being located near Rwanda’s top tourism and foreign exchange earner, the mountain gorillas, the underdeveloped infrastructure in this area makes for a challenging operating environment. Like many businesses in Rwanda, KOAIBU was not able to access loans from financial institutions and had limited knowledge on best dairy practices and improved technologies.

As part of the U.S. Agency for International Development (USAID)’s Rwanda Dairy Competitiveness Program II (RDCP II), support was provided to KOAIBU to improve members’ dairy technologies and best practices, secure a reliable market and build financial backing to enhance business efficiency and effectiveness. This initiative is part of a larger USAID RDCP II effort to increase the competitiveness of Rwandan dairy products in both domestic and regional markets.

We used to register significant losses before we were given the testing kits and trained on the economic significance of milk quality management. We can now go a whole month without rejecting even a single liter of milk.

Mr. Christopher Gahimano (Cooperative Founding Member and President)

Adoption of best practices and technologies
In November 2013, RDCP II provided hands-on training on milk testing, handling, and quality management, and Seal of Quality milk testing kits at the KOAIBU Milk Collection Center (MCC) and its seven milk aggregation points. Prior to receiving training, 120 liters of milk was being rejected by buyers every day. “We used to register significant losses before we were given the testing kits and trained on the economic significance of milk quality management. We are very glad that the situation has tremendously improved. We can now go a whole month without rejecting even a single liter of milk,” says, Mr. Christopher Gahimano, the Cooperative founding member and President.
Reliable market secured  

As a consequence of unreliable buyers who often failed to collect milk, sales and profits were inconsistent. RDCP II linked the cooperative with Rubavu Dairy Company Limited, a milk bulk buyer that supplies the country’s largest dairy processor, Inyange Industries. The buyer now offers a stable milk market to the cooperative.  As a result, in July 2014, KOAIBU landed a lucrative contract to supply 2,500 liters of milk every two days. The cooperative, which collects milk from 149 farmers, now supplies 37,500 liters of milk to Inyange Industries per month. This market linkage resulted in the milk price per liter increasing from just 80 Rwandan francs (11 cents USD) per liter to 140 francs (20 cents USD) per liter – a massive 82 percent increase. Because of the increased price and milk quantity sold, the cooperative is now realizing an average gross revenue of 5,250,000 Rwf (7, 641 USD) per month.

Building financial muscle  
With support from RDCP II,  KOIABU was able to identify various need-points for the cooperative to expand and position itself as a strategic pillar in dairy development in surrounding communities. One of the key strategic intervention involved linking the cooperative to a partnering financial institution – Urwego Opportunity Bank (UOB). In fact, UOB was one of the banks that was previously trained by RDCP II to develop financial products for the dairy value chain. In addition, UOB provided a loan of 26,615,371 Rwanda francs (38,741 USD) to 64 farmers to buy dairy cows. The cows will substantially increase milk supply to the KOAIBU MCC and contribute to business growth and farmer livelihoods.

Women at work
In addition, RDCP II linked a women’s cooperative – Tuzikamire Kabumba – to the KOAIBU MCC. This cooperative, whose core business is to collect and transport milk, supplies 2,000 liters of milk per day to KOAIBU. Going forward, RDCP II will procure a tricycle to help enhance the transportation of milk collected by these women.

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