Determinants of transaction costs in group-based breeding approaches: the case of dairy goats in the eastern Kenyan highlands

Exotic dairy goats were introduced in the eastern Kenyan highlands by FARMAfrica through a group-based approach about a decade ago. Interested farmers had to organize themselves into legally recognized farmers’ groups which would then register with dairy goat breeding stations established by this international non-governmental organization. It was only after such a collective action process that individual farmers accessed Toggenburg bucks (imported from Europe), local markets for kids and milk, and dairy goats’ husbandry techniques. This process made local communities incur several categories of transaction costs whose huge magnitudes hindered some poor farmers from participating in the dairy goat breeding activities. It is also expected that transaction costs were induced by transaction attributes, e.g. asset specificity, bounded rationality, etc. that are to a large extent dependent on farmers’ socio-economic conditions and farm characteristics. The relevance of these factors in determining magnitudes of transaction costs in group-based small ruminants breeding approaches has not been so far extensively investigated. This is particularly so in the developing world. Using a case study of 165 randomly selected farmers in the Kenyan highlands’ Meru District this paper analyzes determinants of transaction costs of farmers’ participation in dairy goat breeding activities. The paper uses econometric analyses to generate these factors and derives important policy implications that would positively influence future targeting strategies in dairy goat breeding programmes in Kenya.