Cooperatives in Kenya play a vital role in enhancing socio-economic development by pooling resources and providing collective solutions to members’ needs. Conducting a feasibility study for cooperative products and services is crucial to determine whether these offerings can succeed and sustainably meet members’ demands. This chapter focuses on the practical steps and considerations for conducting a feasibility study specifically tailored to cooperative products and services, ensuring that cooperative managers make informed decisions that align with members’ expectations and market realities.

1.1 Commodity Feasibility Study

A commodity feasibility study is an in-depth evaluation of a specific product or service to determine its viability before full-scale implementation. For cooperatives in Kenya, this study helps to assess market demand, cost implications, resource availability, and potential profitability. By doing so, cooperatives such as agricultural societies, retail cooperatives, or SACCOs can avoid costly failures and focus on products and services that will deliver value to their members.

1.1.1 Purpose of Commodity Feasibility Study

The feasibility study aims to establish whether a cooperative should invest in a particular commodity or service. It provides a framework for decision-making by examining critical factors such as market potential, competition, and financial requirements. For instance, a dairy cooperative considering value addition through milk processing must understand cost structures, milk supply consistency, and customer preferences before committing resources.

1.1.2 Key Components of Commodity Feasibility Study

A commodity feasibility study typically includes five essential components:

• Market Analysis: Examines demand, target customers, and competitors to determine if there is sufficient market space for the product or service.
• Technical Feasibility: Assesses the cooperative’s capacity to produce or deliver the commodity, including technology, skills, and raw materials.
• Financial Evaluation: Projects costs, revenues, profitability, and cash flow to establish economic viability.
• Legal and Regulatory Review: Identifies compliance requirements such as licensing, standards, and taxes relevant to the commodity.
• Risk Assessment: Evaluates potential risks such as price fluctuations, supply interruptions, and market changes that could impact success.

1.1.3 Process of Conducting Commodity Feasibility Study

Conducting the study involves systematic steps that guide cooperative managers through data collection and analysis:

1. Define the Commodity or Service: Clearly specify the product or service under consideration.
2. Gather Market Data: Use surveys, interviews, and secondary data from sources like Kenya National Bureau of Statistics to understand demand.
3. Analyze Production Capability: Review internal resources including equipment, human capital, and supply chains.
4. Prepare Financial Projections: Estimate start-up costs, operational expenses, expected sales, and profitability.
5. Evaluate Legal Requirements: Consult regulatory bodies such as the Kenya Bureau of Standards or SACCO Societies Regulatory Authority.
6. Make a Decision: Based on the compiled information, recommend whether to proceed, modify, or abandon the project.

1.1.4 Importance of Commodity Feasibility Study in Cooperatives

The feasibility study minimizes risks by providing evidence-based insights before committing significant resources. It also strengthens member confidence and attracts potential investors or lenders by demonstrating due diligence. For example, a cooperative in Kisumu planning to introduce organic fertilizer must conduct such a study to ensure demand exists and production costs are manageable, avoiding losses and reputational damage.

Chapter Summary

This chapter examined the process of conducting a feasibility study for cooperative products and services, beginning with the assessment of commodity feasibility to determine the viability of specific goods or services. It then explored various types of products and services offered by cooperatives, including savings products, loans, SACCO assurance, and extension services, highlighting their distinct characteristics. The chapter emphasized the importance of thorough market analysis to understand demand and competition. Different types of feasibility studies were discussed, focusing on technical, economic, and market feasibility to evaluate the practicality, cost-effectiveness, and market potential of cooperative offerings. Planning a feasibility study was outlined as a critical step to ensure systematic data collection and analysis. The role of market surveys in gathering relevant information was detailed, followed by techniques for analyzing survey data to draw meaningful conclusions. Finally, the chapter addressed the preparation of a comprehensive feasibility study report that summarizes findings and guides decision-making for cooperative product and service development.