MoreMilk – reviewing policy options for the informal dairy trade

IIED and ILRI are studying what the alternatives are to formalising informal dairy markets – and what these alternatives need to work.

December 2016 - June 2021
Alejandro Guarín

Principal researcher, Shaping Sustainable Markets

Sustainable Markets research group
Outside of a milk bar

A typical milk bar in Kenya (Photo: copyright Dave Elsworth/ILRI)

Most of the food produced and consumed in the world travels through informal markets. This may come as a surprise to those of us who depend on supermarkets for our daily food needs, but in developing countries supermarkets are for a small minority.

Food is sold in street markets, open plazas, corner stores and places in between, mostly by vendors who are unregulated and don’t pay taxes. Transactions are in cash and relationships trust-based.

For tourists these are the places to visit if they want the authentic experience, but for the poor these markets are the places upon which access to cheap and nutritious food crucially depends.

Despite their importance, governments tend to dislike informal markets. They are seen as dirty, chaotic, tax avoiding – a barrier to modernisation and development. Formalisation seems to be the only tool available, and when it doesn’t work – and it mostly doesn’t – those who participate in informal markets are ignored, sidelined or, worse, harassed.

The problem with milk

In many countries, milk is bought and sold in informal markets, usually raw or unprocessed, and from street vendors. But there’s a problem with milk: it’s highly perishable, and prone to contamination and adulteration.

It also happens to be one of the only, if not the only, source of animal protein for millions of people, especially children. Understandably, governments and consumers are concerned that milk that is bought and sold in unhygienic conditions may be a risk to public health.

So why are informal markets so persistent? In Kenya, for example, pasteurised milk is widely available. But it is more expensive and less convenient. And Kenyan people just like raw milk. They also happen to boil it before drinking it, which greatly reduces the risk of food-borne disease. In fact, microbiological tests have shown that industrially processed milk is not always safer than the milk sold on the streets. However, governments are intent on formalising this informal dairy trade.

Is “light-touch formalisation” a third way?

There seem to be only two policy options on the table: formalise (which vendors and consumers don’t want, or can’t achieve), or ignore (which the government doesn’t want). The push to formalise the informal dairy sector has generated conflicts between the state, which argues that formalisation is needed to ensure quality and safety, and vendors, who see compliance as impossibly expensive, and a sure way to push them out of business.

What is IIED doing?

MoreMilk is a research project about a light-touch approach to formalisation that has been or is being trialled in Kenya, Tanzania, and the Indian state of Assam.

In the early 2000s donors, including the UK Department for International Development and the International Livestock Research Institute, supported a training, certification and marketing (TCM) scheme to bring the positions of the government and the vendors closer together – a sort of policy middle ground.

Vendors would receive training on hygienic milk handling schemes, and in return would get a certificate that was acknowledged and accepted by the government, allowing them to operate without harassment. Pilots of this 'light-touch formalisation' scheme were conducted in the three countries, with varying degrees of success.

IIED’s role in MoreMilk is to help assess how those policy innovations worked, and why they struggled to continue beyond a pilot phase in some countries.

In Kenya, for example, the intervention was initially very successful: traders signed up for the training and certification, their incomes improved, and their customers were happy. But the link between licensing and certification broke down, meaning a major incentive for traders to participate in the scheme was lost. The high turnover of traders also meant that the benefits of the training were not sustained.

In Tanzania and India there were similar partial successes, but it appears that the schemes struggle to be sustained. Why did this happen?  And how can future interventions be designed so that they expand and continue without donor money?

To answer these questions, IIED is conducting a literature review of the dairy sector in Kenya, Tanzania and Assam, and is carrying out extensive fieldwork in these three countries, talking to governments, dairy boards, vendors and consumers.

IIED’s research will explore the perspectives of different actors in the dairy market, aiming to build a comprehensive picture of the system, its problems and the adequacy of the intervention. Comparing Kenya, Tanzania and Assam will allow us to see how interventions play out in different contexts, enabling us to provide some recommendations that may be generalisable.

MoreMilk explores a relevant, but untested, policy area. Showing what an alternative to formalisation can look like in practice, and what the challenges to its implementation are, has potentially far-reaching implications for how governments deal with the food sector of the majority of the world’s poor.