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Background Information

In Kenya the importance of agro-industry is underpinned by the fact that most of the population derives livelihood from agriculture and its linkages with other sectors. This way, the agriculture industry in Kenya is by far the most prominent and important industry accounting for 25% of the country’s GDP, 20% of employment, 75% of the labour force, and over 50% of revenue from exports in 2015 [Kenya Economic Outlook 2016, Deloitte]. Likewise, Food Processing is the dominant manufacturing sector in Kenya and the most developed in the region, with a USD 3.25 billion market, accounting for 3.2% of GVA, 2.4% of employment and 8.5% of exports in Kenya in 2015 [Agriculture and food processing in Kenya, World Bank October 2015]. Besides, Kenya's Food industry is made up of more than 1,200 businesses [Kenya Embassy of Netherlands] and food sales are expected to grow 12.5% in 2017, while the compound annual growth rate (CAGR) from 2016 to 2021 will be 13.4 [Kenya Food & Drink Report, BMI Research 2017]. Particularly, the Horticultural sub sector is the fastest growing industry within the agricultural sector in Kenya, recording an average growth of 15% to 20% per annum [The Fresh Produce Exporters Association of Kenya-FPEAK]. Likewise, Horticulture is one of the fastest growing sub sectors in Kenya's export sector, growing at over 7% annually and recording 100.96 KES billions exports in 2015 [Export Promotion Council].,The sub sector employs approximately 4.5 million people countrywide directly in production, processing, and marketing, while another 3.5 million people benefit indirectly through trade and other activities [FPEAK].

Nevertheless, as is the case for many emerging markets in Africa, high energy input costs are a challenge that hinders the potential growth, with energy costs accounting for 40% of manufacturing production costs in Kenya [Manufacturing in Kenya, Anzetse Were August 2016]. Besides, the resource-intensive nature of the Horticultural Processing industry and its high dependency on natural resources pose significant challenges for its development, especially considering Kenya’s vulnerability to climate change. In view of this the switch to improved resource efficiency and sustainable consumption is an undeniable need. Nonetheless, the Horticultural Processing sector faces a number of constraints at financial, technical, policy and market level that hinder the switch to green, especially in the case of MSMEs.

The most remarkable constraints at financial level are (i) lack of access to capital and limited knowledge on green financing opportunities among MSMEs, (ii) financing institutions’ aversion to risks in new projects and low level of awareness on green finance; (iii) insufficient dialogue and poor connection between MSMEs and financing institutions; and (iv) MSMEs’ reluctance to invest in SCP due to their lack of awareness of the potential cost reductions derived from SCP uptake.

At technical level major barriers for SCP adoption are: (i) limited access to information on SCP and lack of the capacity to interpret the information to identify cost-effective green technologies and to adapt resource efficient practices; and (ii) insufficient expertise of business intermediaries and service providers on SCP practices and appropriate mechanisms for their adoption.

At policy level major barriers are insufficient legislative, economic & voluntary incentives to stimulate the uptake of SCP, while at market level the major constraint is the inability of consumers to make informed choices due to a lack of transparency and complete information, and the proliferation of standards, which may be unclear, unchecked or simply complicate the comparison of information [10YFP CI].

In this sense, it is worth noting that although recent studies have demonstrated that acquiring an internationally recognized certification, particularly the ISO certifications, facilitates MSMEs’ venture into global markets and thus the creation of jobs and alleviation of poverty, in 2015 less than 40% of the exporting firms and 15% of the non-exporting firms in Kenya were certified against ISO 9000, 9002 or 14000 [Prosper F. BANGWAYO-SKEETE et Al., 2015].