Jump to... Introduction Service delivery Diagnostic tool ttbd control Delivery systems Transaction costs Lesson Policy implications Conclusions

Source of technology and funding	IFAD-supported research carried out by the International Livestock Research Institute
Expected Benefit:	Improved efficiency in delivery of livestock health services to smallholder livestock keepers, leading to increased use of services and improved livelihoods based on livestock-keeping
Crops and enterprise:	Livestock-keeping
Agro-ecological zones:	All
Target region and countries:	Developing countries
Keywords:	Delivery systems, livestock health services, tick-borne diseases, disease control, transaction costs

Introduction

Smallholder dairy farmers continue to experience losses associated with tick and tick-borne diseases despite the existence of a variety of technologies for the control of the diseases, which they have not been utilizing optimally. This poor uptake of existing control technologies has been attributed primarily to weak or inappropriate delivery systems. We apply here an economic analysis to evaluate current delivery systems and offer suggestions for their improvement.

Service delivery in the past

The provision of veterinary services to smallholders has traditionally been the responsibility of the state. As public funding has declined over the past two decades, these services have become less effective in meeting farmer needs. The Government has responded by encouraging privatization so as to increase competition and improve the efficiency and effectiveness of delivery systems. However, private sector service provision has not developed as anticipated, requiring a continuing role for the public sector. Service delivery therefore remains poor, with the result that farmers are not effectively utilizing the available control technologies. In order to identify opportunities to improve delivery, one must evaluate the performance of current systems through the identification of the inefficiencies and their sources. In this note, we evaluate the performance of current delivery systems for tick and tick-borne disease (TTBD) control technologies and identify opportunities for the improvement of these systems.

Diagnostic tool for assessing delivery systems

One way to evaluate the performance of current TTBD systems and assess their effectiveness is the application of an analytical procedure that combines two complementary economic techniques. The first, the structure-conduct-performance framework, is often used in marketing studies to evaluate the performance of marketing systems and compare this performance to a perfectly competitive model (see TAN #2). Comparing the delivery of livestock services with the way a market system works, structure-conduct-performance can therefore be applied to evaluate the (1) structure of the marketing chain for each type of technology, which includes types and number of players at each level, types of institutions involved, conditions of entry and exit into the market, etc.; (2) conduct of the actors, including their behaviour, price-setting and policies influencing the behaviour of the players.

The second approach, the new institutional economics analyses the role and effects of non-price transaction costs, particularly at the lower end of the market chain where the supply of products is combined with specific services.

The analysis of delivery systems for TTBD control described in this note is based on data collected among 344 smallholder dairy farmers in three districts of the central highlands of Kenya.

The structure of the delivery of ttbd control

TTBD control technologies can be grouped into three types: curative packages (for the treatment of sick animals), tick control products and immunization. Delivery systems for each of these technology types typically consist of a central manufacturer who converts the appropriate inputs into a product, which is then supplied to the distributing channels. The supplier sells the product to the players at the next level in the delivery chain, the various types of service providers, who in turn sell it in combination with specific services to farmers. As an example, the delivery chain for the only TTBD vaccine available in Kenya, the Infection and Treatment Method (ITM) used against East Coast fever is shown in Figure 1. The vertical arrow represents the passage of the product through the various levels, with the thicker part at the lower end representing the product, combined with associated services such as the monitoring of vaccinated animals to treat any reactors.

Figure 1. ITM delivery chain

The structure for specific types of technologies is as follows.

• ITM is produced by a government parastatal, the Kenya Agricultural Research Institute (KARI), and distributed by only one pharmaceutical company, Cooper (K), and only one type of service provider, the veterinarian trained in product handling, can deliver the product to farmers.
• Treatment and tick control products are generally manufactured by several different companies and supplied currently by the same distributors.
• The final provision to farmers is handled by a variety of service providers, including veterinarians, paraveterinarians, farmer cooperatives, different types of stores and individuals trained in fields related to the veterinary discipline.

Figure 2. Distribution of service providers in study areas

Paraveterinarians constitute the highest proportion of qualified service providers (33%), while veterinarians (18% of total) are more concentrated in Kiambu district, which is close to Nairobi, the main market (see Figure 2).

The main types of service providers for tick control products are the stores.

Conclusions about structure

• Monopoly of supply in ITM delivery
• The most important type of service provider is the paraveterinarian

Assessing market conduct

The main findings associated with the analysis of market conduct for TTBD control is summarized below:

• No uncompetitive pricing behaviour or unfair marketing margins were detected.
• Quality control is only enforced at the top of the delivery chain, but there are no measures for the supervision of product and service quality at the level of service providers and farms.
• There are no market entry barriers on tick control products, meaning that the products are handled mainly by unqualified individuals.
• Policy limits the distribution of ITM to the Kenya coast and excludes farmers located in other parts of the country.
• Veterinarians wishing to own private practices must be registered with the Kenya Veterinary Board and be members of a professional body, the Kenya Veterinary Association. Paraveterinarians are not eligible to register or own private practices, but are expected to operate under the supervision of veterinarians.

Conclusions about conduct

• The market for TTBD treatment and tick control products is generally competitive.
• Policy does not allow paraveterinarians to participate in the private market.
• No measures exist to enforce quality control at the farm level.

Economic characteristics and delivery systems

In order to identify the appropriate roles of the different sectors (public, private, etc.) in the delivery of the various technologies, one can describe the products and their associated services according to their economic characteristics using the principles of rivalry and excludability. When the consumption of a product by one individual diminishes its availability to others, the product has high rivalry. Excludability, on the other hand, means that consumers, particularly non-payers, can be prevented from benefiting (Picciotto, 1995; Holden, 1999). A service or product with high excludability and high rivalry is said to be a private good, the benefits of which are enjoyed exclusively by the consumers, while non-payers can be prevented from benefiting. The delivery of private goods is best achieved through the private sector. Table 1 shows the economic characterization of the various technologies in the case of TTBD control products and services. This characterization can be summarized as follows.

• Most TTBD products and services are private goods, which can be effectively delivered by the private sector since consumers stand to gain from the potential benefits of the products and therefore have incentives to meet the costs.
• There is a role for the state in the delivery of the quality control for TTBD products and services, which normally generate collective benefits, though the delivery involves serious information asymmetries.
• Tick control by dipping is a toll good, as is the production of ITM. Despite their high excludability, they are also associated with externalities, as well as high fixed costs, which may be difficult for the private sector to meet and may require collective action or public subsidy. For example, ITM production for a limited market, such as the smallholder dairy areas in Kenya, may not be feasible for the private sector to undertake unless the market is increased to a regional level.

Table 1. Economic characteristics of TTBD control

Rivalry
Low	High	Excludability
Public goods Health management and advice ITM quality control TTBD drug quality control Quality control of TTBD services	Common Pool goods ITM immunization to establish endemic stability in an area	L o w
Toll goods Tick control by dipping Production of ITM	Private goods TBD diagnosis and administration of drugs Purchasing of treatment packages, acaricides Tick control by hand spraying, pour ons ITM immunization	H i g h

Transaction costs and delivery of ttbd control

Due to the difficulty of the identification and measurement of the transaction costs affecting animal health service delivery, products and services may first be defined by the technical characteristics, which can then be used to derive the associated transaction costs. For example, one characteristic of East Coast fever treatment is the requirement that, to be effective, disease diagnosis and drug administration must be performed promptly. Farmers must therefore identify timely services because delays may increase the risk of the death of their sick cattle. The need to identify a service provider who will provide services quickly means that the farmer is required to obtain information on the available services around him/her in order to make a decision about which service provider possesses the appropriate attributes, including promptness. The farmer engages in this process of information gathering in order to minimize the transaction costs associated with information shortage, in addition to minimizing the direct costs associated with time and transport. Other important transaction costs associated with the delivery of TTBD control technologies are indicated below:

• price discovery;
• the lack of bargaining power among farmers and the risk of taking on a non-qualified service provider in areas where there are limited numbers of service providers, such as rural areas;
• uncertainty as to whether the service provider supplies the quality services and goods that the farmer expects;
• the need for information on the appropriate product to use and the way to apply it, for example with tick control technologies;
• compensation in cases in which farmers receive poor services or products, for example in the case of ITM, which requires the maintenance of live organisms within a cold chain. Who compensates the farmer if the cold chain is broken somewhere during delivery?

Lesson regarding the role of transaction costs

Farmers face a wide range of transaction costs, particularly in the case of the information on products and service providers. These costs call for appropriate polices so that they can be minimized in order to improve farmer accessibility to the various TTBD technologies.

Policy implications

In the case of TTBD control delivery, several key issues that have policy implications can be derived from the analysis.

1. Farmer access to services and the paraveterinarian issue. The distribution of veterinarians relative to other types of service providers is low, particularly in rural areas. While this gap could be addressed through greater utilization of paraveterinarians, legislation does not allow the participation of paraveterinarians in private practice, limiting the accessibility to quality services by farmers. With a range of training levels, paraveterinarians are more well distributed in rural areas and live close to the farming communities where they are often well known to farmers. They are therefore more responsive and can reach the farmers easily. An alternative would therefore be to establish a vertically integrated system, whereby veterinarians assume a supervisory role over paraveterinarians and support them so that they can take on more responsibility, particularly in rural areas. Veterinarians would maintain their clinics in the locations they prefer and be connected to paraveterinarians, whom they would visit periodically in order to supply them with drugs and take care of the more complicated cases. The resultant advantages are better veterinarian-paraveterinarian networks, clearly defined roles for paraveterinarians, a more equitable distribution of service providers and effective quality control.

2. The need for information and quality control. Service delivery is associated with asymmetrical information between farmers and service providers. The farmers have less information than the service providers regarding the types and quality of products and services being delivered. This is because the current systems have no mechanism for supplying farmers with information on the types of services available, the scope of the practice of the various types of service providers, or the expected quality of the services. Because of these information asymmetries, service providers may take advantage of the farmers and engage in cheating. Furthermore, there are no performance evaluation mechanisms to ensure that farmers are receiving services of the expected quality. These issues could be addressed through the formation of a regulatory body to supervise service providers by way of random visits (thereby playing a self-policing role), ensure quality control and protect farmers from being taken advantage of by service providers. All private practitioners would be expected to register and become certified. However, since regulation involves costs and the ability of smallholders to pay for these is limited, the body could be composed of certified private veterinarians on a state contract. Their salaries would be met through funds raised from registration fees.

3. The involvement of farmers in delivery. A serious gap that exists in the present system is that farmers do not have a mechanism, a “voice”, to raise complaints if they receive poor products or services. They can only refuse in future to take the services of a service provider whom they find unsatisfactory. However, in areas with a limited number of service providers, such as rural areas, the bargaining power of farmers is limited. One way to address this gap is to recognize farmers as stakeholders in the delivery of health services at the local and national levels by allowing them to be represented on veterinary boards such as the Kenya Veterinary Board. Farmers would also be able to raise their complaints through the supervisory body discussed above.

Conclusions

Using the methodology described in this note, delivery systems for animal health services can be evaluated and recommendations made for their improvement. In the case of TTBD control technologies, delivery systems are generally competitive, but there are inefficiencies in ITM immunization that need to be addressed. In addition, transaction costs are a major constraint limiting the accessibility by farmers to services and products and will require appropriate policies to minimize the costs and achieve improvement. For example, the greater involvement of paraveterinarians in delivery would increase the accessibility to services by a vast majority of farmers, particularly in remote rural areas.