66319 Beyond the Nakumatt Generation: Africa Trade Policy Notes Distribution Services in Note #26 East Africa Nora Dihel * September, 2011 Distribution services1are an important driver of the population (in many East African countries growth in East Africa. With contributions to GDP over 10% of the active population) and includes ranging from about 11 percent in Kenya, a high proportion of informal, unskilled, female Rwanda and Tanzania to more than 14 percent and part-time workers. Distribution services are in Uganda in 2008/09 distribution services are a among the most rapidly expanding sectors in significant part of all East African economies. East Africa. Over the period 2001-08 (2004-08 The sector also employs an important part of for Uganda), distribution services have grown on average at 8 percent a year in Rwanda, 12 1 percent in Kenya and Tanzania and 20 percent Providers of distribution services generally fall into in Uganda. four categories: retailers, wholesalers, franchisers, and commission agents. Retailers in both the formal There is an emerging recognition amongst the and informal sectors sell goods for personal or East African countries regarding the importance household consumption; wholesalers sell merchandise to retailers or to other businesses. of this sector. For example, distribution is a Franchisers sell specific rights and privileges related strategic sector in Kenya’s “Vision 2030� – the to operating a branded business, for example, the country’s new development blueprint. In right to use a particular retail format or trademark. addition, distribution services were identified as Finally, commission agents trade on behalf of others, a priority sector in the context of the East i.e. they sell products that are supplied and usually African Community Common Market Protocol owned by others to retailers and wholesalers. The main focus of this note is on the retail and wholesale and the negotiations with the EU on services in given that they dominate the distribution sector in European Partnership Agreements by Kenya, East Africa. Rwanda and Tanzania. 1 Distribution services represent a crucial link sector, should be a priority in all East African between suppliers and producers. With countries. Policy action that enables a gradual improved efficiency and higher productivity due transition of informal firms to formality as well to the emergence of large supermarket chains as measures that encourage regulatory reform and the increased internationalization of the need to complement the liberalization of the distribution sector across East Africa, the sector distribution sector in East Africa. has great potential to benefit both producers and consumers and contribute to increased Developing the Distribution Services Sector in food security and alleviation of rural poverty. East Africa to Reach Poor Consumers Modern distribution channels and procurement Informality prevails despite the rapid diffusion systems that reduce transaction costs and of modern retail stores. Increasing population, facilitate market exchanges can increase the continued urbanization, higher incomes, and access of small farmers to high value markets political stability have propelled the growth of and accelerate the transition from subsistence distribution services in East Africa during the farming to market participation. For consumers, last decade. The proliferation of supermarkets organized markets can provide substantial and large retail stores are among the most benefits that include better quality products at significant developments regarding the affordable prices. evolution of distribution services in the region. Supermarkets in East Africa have sustained So far, however, modern distribution channels have failed to capture a large portion of the impressive growth rates over the period 2006- retail market in East Africa. Across the region 10: the compound annual growth rates of retail informality still prevails, small-scale farmers sales reached more than 15 percent in Rwanda, have found themselves marginalized by the about 13 percent in Uganda, almost 12 percent distribution sector and its new practices, and in Tanzania and about 7 percent in Kenya and very poor households (for example, slum Burundi, and retail sales in East Africa are dwellers) are often paying more per unit for expected to grow around 10 to 11 percent per basic products than wealthier households. annum over the next five years (Figure 1). Total retail sales in East Africa are expected to This policy note documents the current state of increase from around 43 million USD in 2010 to distribution services in East Africa, including the more than 70 million USD in 2015 (Figure 2). patterns and the determinants of the diffusion of modern distribution channels and the Formal distributors in East Africa tend to be increased internationalization in the region. It large supermarkets and large to medium sized shows why, despite major transformations retailers and franchisees. Retail outlets, during the last decade, the distribution sector including supermarkets, tend to grow by first remains underdeveloped and the impact of focusing on urban areas and large cities, then branch out to medium size urban areas, and reforms is uncertain. To strengthen the contribution of the sector to poverty reduction, finally out to rural areas. In this way, although policy action that addresses the concerns of the supermarkets generally begin by catering to households and producers at the bottom of the higher income urban consumers, the growth income pyramid, especially in the informal path of retailers in East Africa has the effect of eventually bringing lower income rural 2 consumers into the retail outlets as well, driving urban and rural areas and are often the primary up retail growth rates significantly. For example, enterprises engaging in distribution services the Uchumi supermarket expanded in Kenya by outside larger cities. Most businesses in the East first opening stores in Nairobi then shifted its African informal sector are engaged in the retail focus by opening smaller stores located near of food and basic retail household appliances, bus stations used by lower income consumers. and are single shop sole proprietorships. Figure 1: Compound annual growth rate (CAGR) of In the wholesale segment, we observe a high retail sales in East Africa, 2006-2010 and forecasted degree of duality between traditional and CAGR of retail sales, 2010-2015 specialized wholesalers. Traditional chains are 18.0% 16.0% still widely prevalent in all East African 14.0% economies. Farmers and traders supply 12.0% 10.0% traditional wholesalers, who then sell to 8.0% 6.0% individual retailers and processors. But most 4.0% modern retail stores have their own direct 2.0% 0.0% procurement systems and buying centers. Burundi Kenya Rwanda Tanzania Uganda Several supermarkets – for example, Nakumatt CAGR 2006-2010 Forecasted CAGR 2010 to 2015 – have also developed regional distribution centers to perform the wholesale function for Figure 2: Retail sales in East Africa, millions of usd their outlets. The franchising segment is small and mostly limited to foreign firms. This is partly due to the lack of intellectual property enforcement in African countries, which hampers the process of branding that is required for successful franchising. For example, the weak enforcement of Intellectual Property (IP) and lengthy resolution of IP disputes2 in Kenya prevents the establishment of international Source: Planet Retail, retail sales data, 2011 franchises. Some Kenyan firms, however, have been successful in establishing franchises in Despite the growth of the higher end East Africa, such as Kenchic in the poultry supermarket segment, including in rural areas, segment and Deacons in the apparel segment. the number of traditional small stores that sell local produce remains high in East Africa’s retail A common characteristic across the distribution market. In general, the distribution sector sub-sectors of all East African countries is the includes a small number of large supermarkets, large proportion of the informal sector. An a slightly greater amount of large to medium sized wholesalers and retailers, and a much 2On average it takes about 8 to 9 years to resolve IP larger number of independent and often cases in Kenya. informal small retail shops and street vendors. Such informal retailers can be found in both 3 estimated 70-80 percent of sales in East Africa businesses operating in the formal sector of all still go through informal enterprises, with only countries except Kenya tend to be companies about 20 percent of sales going through formal with substantial foreign equity. For example, outlets. In Kenya, for example, an estimated 88 the supermarket segments in Uganda and percent of businesses in the distribution Tanzania are dominated by South African and services sector are considered informal, Kenyan chains. Kenyan supermarkets are also employing 80 percent of the total labor force in present in Rwanda, and Nakumatt is preparing the sector. Low entry barriers and the relative its entry into Burundi in 2012. The Burundian ease of operations are among the factors that distribution sector has already several foreign could explain the high level of activity in the operators from Belgium, China, India, the informal distribution sector. However, Netherlands and Pakistan. By contrast, the informality can be also a byproduct of low Kenyan market has been challenging to foreign productivity. World Bank (2010) shows that as investors in distribution services. Foreign Zambian firms became increasinglyproductive, retailers such as the South African Metro Cash they became more formal. & Carry and Lucky 7 exited Kenya’s market in 2005 after brief operations. The limited success Although informal enterprises handle the large of foreign companies in Kenya’s retail segment majority of sales, turnover is low for most has been attributed to strong competition, individual informal enterprises and businesses insufficient and expensive suitable locations tend to be very small. Enterprises in the and inadequate market entry strategies among informal sector are more limited in their others. operational capacities than businesses in the formal sector. Furtermore, the lack of access to Kenyan supermarkets began establishing finance, uneven cash flows, the absence of foreign operations in the EAC from about 2002 management knowledge, highly fragmented and have since stepped up their efforts to and inefficient supply chains, and poor penetrate the regional market. Currently, the infrastructure are key constraints faced by three largest Kenyan supermarkets have a enterprises in the informal sector that combined total of seven branches in Uganda discourage their transition to formal activities. and one in Rwanda. The main market entry strategy employed by these supermarkets is Th eprevalence of the infoprmal market can acquisition of existing supermarket chains. In sometimes discourage large formal business 2011 Tuskys acquired the Ugandan supermarket from entering this market segment. Informal chains Good Price and Half Price and has now retailers are also suboptimal from a governance four stores in Uganda. perspective, since it is difficult or impossible to collect taxes (VAT, excise tax, import duties, etc) The estimated Kenyan FDI in the East African from unregistered businesses without licenses. supermarket segment amounts to USD22 - 28 million (table 1). Total Kenyan FDI outflow in Regulatory barriers limit the benefits of distribution services is estimated to be around internationalization in the distribution sector. USD 26 – 32 million over the period 2002-2009. Foreign direct investment (FDI) is starting to Expected investment in the EAC distribution play an important role in the distribution sector services sector over the next five years is of most East African economies. The largest 4 projected to be USD 30-503 million. Major restrictions: there is a 50 percent limit on drivers of investment in East Africa include the foreign ownership if the foreign firm is acquiring adoption of the EAC Common Market Protocol a state-owned retailer, and the licensing criteria and the harmonization of tax regimes and tend to favor and promote domestic retailers. customs import regulations. (data from Borchert, Gootiiz and Mattoo, 2011). Table 1: Kenyan Supermarkets with EAC With a population of more than 140 million Presence4 people, the East Africa region provides a vast Kenyan No. of Branches in Estimated FDI retail market for formal retail traders with Supermarket EAC Countries Investment * important benefits for consumers and Flows ($ millions) producers. According to Nakumatt Holdings Uganda Rwanda Research the current regional population has an Nakumatt 2 1 8.25 opportunity to sustain at least 10 major retail Tuskys 4 11 stores in each town. In the next ten years, Uchumi 1 2.75 Nakumatt Holdings is forecasting that close to Total 7 1 22 25million customers across the region will have access to formal retail trade facilities with Source: Consultant Interviews 2010/11. monthly sales reaching the US 700 million mark The foreign presence in the distribution sector and selling space reaching close to 40Million of the East African economies has been made square feet up from 15 million square feet possible by extensive trade liberalization today (Nakumat CBC, 2011). measures adopted by these countries. Burundi, Several regulatory measures obstruct the entry Kenya and Rwanda are largely free of any major of formal distribution firms and limit their impediments to foreign presence in retail operations in East African markets. Most East services. Tanzania imposes a few explicit policy African countries have some form of regulation 3 Nakumatt plans to invest $20 million in its EAC on market access (World Bank, 2011). In Kenya, expansion over the next 5 years, Deacons $10 Rwanda, Tanzania and Uganda new businesses million. Nakumatt is looking at opening 2 new stores must register with the commercial registry and in Kigali, Rwanda by the end of 2011. Uchumi is must notify authorities. These countries also looking to commence its Tanzania operations in require that a new business obtain licenses and 2011. permits in order to engage in commercial 4 activity, with fees depending on the type of Average investment required for establishing a supermarket in EAC is $2.75 million. This figure was business permit required. Multiple licenses are calculated using past investment spend of Kenyan a significant challenge in distribution services. supermarkets in EAC. Nakumatt invested about $3 For example, a Kenyan distributor who covers a million for each of its Uganda branches, $2.5 million territory spanning several local authorities will of their Rwanda branch. Uchumi invested about $2 be required to have licenses from each local million for its branch in Uganda, and are poised to authority to drop off goods at particular spend $2.5 million for their planned branch in Tanzania. customers and receive payment. A similar problem occurs in the case of exporting. A distributor is required to have documentation 5 for each product regardless of whether it is in numerous food produts to address food the same product category. For instance, if the security concerns despite a strong opposition distributor is exporting yogurt in different from the private sector. Across the region flavors export documentation for each flavor is particularly problematic are the cartels that required. control the prices and the flow of certain goods such as sugar or maize. In Kenya and Rwanda businesses selling certain types of goods must also comply with outlet site Several countries have regulations on the regulations, in addition to compliance with local quality and the standards of sourced products. urban planning provisions. Large outlets have But often such standars do not take into an additional set of regulations. In Uganda, account the technological or economic foreign retailers are required to establish their constraint in the region, producers – especially outlets in the city area - establishment small-scale producers - are unable to implement anywhere outside the city is prohibited. This the standards are remain informal (see Jensen decelerates the expansion of retailers from et al (2010) for an example in the dairy sector). urban to rural areas. Rwanda has regulations on tax registration for micro-retail businesses and Finally, it is worth noting that regional imports franchising. By contrast, Burundi has very little by modern retails chains face a number of non- regulation in place with regards to distribution tariff barriers related to standards and rules of origin as well as delays due to bureaucracy and services. With the exception of pharmacies, which have to follow zoning and location rules, congestions at the ports. This has an impact on regulations or registration requirements are the cost of importation and stocking of absent for most businesses. This lack of appropriate inventory levels, and limits the role regulation has created a legal vacuum that of foreign distribution companies as regional actually constrains business growth and allows integrators. many opportunities for unfair competition and The distribution sector in East Africa has corruption. undergone major transformations in the last The main restrictions affecting operations in the decade but the impact on poverty reduction distribution sector are related to price remains uncertain. The emergence of large regulation. The justification for such regulations supermarket chains across East Africa and the is consumer protection, but price restrictons increased internationalization of the have a negative effect on competition. Price distribution sector have transformed the retail controls exist in most East African countries for environment in the region. Numerous middle essential goods. In Burundi gas and sugar are class consumers benefit from a greater variety price controlled; in Rwanda there are price of goods at affordable prices in modern retail controls on gas, gasoline, and pharmaceuticals. outlets. The modern procurement systems and buying centers established by supermarkets Tanzania has price controls on a large number of goods and services, with fuel, water, have also improved the lives of many electricity, transport fares, and participating farmers. Several procurement and telecommunications all being regulated. More marketing studies focusing on fresh fruits and recently, Kenya has introduced price controls on vegetables, dairy products and crops in Kenya, Tanzania and Uganda document the positive 6 implications of the reorganization of supply basic goods and services than do wealthier chains and transformation of food systems for consumers—either in cash or in the effort they farmers, food security and rural poverty must spend to obtain them—and they often (Hooton and Omore, 2007 and Ngugi, Gitau receive lower quality as well. Box 1 illustrates and Nyoro 2007). the price penalty for cooking fat, sugar and maize affecting poor consumers in Nairobi’s However, very poor households at the bottom Mathare and Kibera slums. of the income pyramid pay higher prices for Box 1: The bottom of the pyramid penalty Within informal settlements retailers buy normal goods from wholesalers or retail outlets and break them down into smaller affordable quantities. For instance, consumers living in slum areas cannot afford to buy the 2kg packet of sugar that retails at about KES 200 (or USD 2.5) in most shops; however, they can afford to buy a pack of 50 grams at KES 10 (or USD 0.12). This makes goods affordable for slum dwellers many of whom live on less than USD 1 a day. Though the smaller quantities are more affordable to consumers in slum areas, they are paying a considerably higher price for these products. Table 1 illustrates this point where a 10 grams pack of cooking fat retails at 300 percent premium, and a 50 gram pack of sugar at 141 percent. The poorest members of the society pay more for their essential goods than ordinary Kenyans. Table 1: Price Comparison of Selected Products in Informal Settlements Commodity Kiosk: Price for Supermarket: Price Differential Units under 250 Price for Units under grams (Kes/grams) (Kes/grams) 250gms (%) Cooking Fat 0.50 0.125 300% Sugar 0.20 0.083 141% Maize Flour 0.05 0.030 67% * Some retailers in informal settlements, such as Mathare, have weight scales. But by and large the portions are meted out without the use of weighing scale. Thus the packs found in these retail kiosks weigh sometimes more, sometimes less. Source: Interviews in the Mathare and Kibera slums of Nairobi, 2011. Moreover, in all these countries where the in modern procurement systems and continue majority of the population depends on to supply traditional wholesalers, who then sell agriculture, small-scale farmers have sometimes to individual retailers and processors. As the found themselves marginalized by the supermarkets in the highest tier tighten their distribution sector and its new practices. Given demands in terms of consistency in volume and the high fixed costs associated with quality, small producers and under-capitalized participation in modern chains, many small brokers face tougher competition from larger farmers and traders are not able to participate 7 producers and risk being squeezed out of the the distribution services sector. Criminal groups system altogether. such as the ‘mungiki’ control certain regions and extort money from formal and informal Talent shortages impede the development of distributors on their territories. the distribution sector. The availability of adequate skills remains an issue across the Cumbersome importation processes due to distribution sectors in East Africa. Despite the overly burdensome bureaucracy and congestion economic importance of the sectors, targeted at the ports increases the price of imported training programs remain largely unavailable goods and complicates stocking and inventory across East Africa. Only Kenya’s Jomo Kenyatta planning. University of Agriculture and Technology (JKUAT) offers a diploma level retail The limited availability of market data affects particularly distributors at the bottom end management training course in East Africa. Consequently, most formal distribution where business is highly fragmented. It is businesses rely on training on the job. Also, extremely difficult to measure the value of there is limited influx of knowledge with regard goods that move through this channel. Even in to best or good practice in the sector. Lack of the modern distribution segment information is access to specialized training has led to slow difficult to obtain. Distributors are unable to growth and late adoption of modern retailing gather information on their market shares or performance indicators with negative techniques. For example, many large supermarkets are only beginning to understand implications for the development of marketing the value of and adopt modern retailing strategies, new product development, and techniques such as merchandising, category forecasting and strategic planning. management and just-in-time inventory Policy recommendations management. Raising awareness about the importance of Poor infrastructure, insecurity, cumbersome distribution services is an important first step in import processes and lack of market data designing a comprehensive reform strategy that further constrain the development of the is linked with national development plans. The distribution sector. Business representatives in sector urgently requires a broad development East Africa identified the following additional strategy and recognition as a key economic issues as important constraints to the driver to facilitate its growth to the next level. development of the sector: The importance of the formal distribution High transportation costs due to poor road sector that is heavily contributing to economic networks conditions, especially in rural areas, growth and is currently the second leading (formal) employer has been acknowledged by and traffic congestion in main cities. several East African countries. Steps must be Insecurity is a recurrent concern. The frequent taken to raise awareness about the importance hijacking of goods during transport leads to of the sector in a consistent way on the basis of increased insurance, storage and transport detailed economic performance analyses and costs. A hidden cost associated with insecurity benchmarking exercises, and incorporate the is the growth of organized crime filtering into informal sector into the landscape of 8 distribution services. The large size of the  Facilitate access to financial services in informal sectors in all East African countries the informal sector. Several case studies underscores the importance of distribution show that increased access to credit by strategies that can efficiently reach households micro and small enterprises has at the bottom of the income pyramid and contributed to the growth in the integrate small-scale farmers into the distribution sector particularly in the distribution system. informal segment. Addressing the concerns of the poorest  Provide support to traditional and households and facilitating the inclusion of informal operators to acquire relevant smallholders in modern distribution chains skills. For example, training courses should be a priority in all East African countries. focusing on basic hygiene standards, The majority of the population, who account for merchandising, sampling or promotion a significant percent of overall income, remain techniques offered in the slums could at the base of the pyramid and are excluded improve the skills of retailers in wet from the benefits that large distributors have markets, kiosk sellers or hawkers. There brought to middle class families in terms of are several examples of innovative wider availability and lower unit prices for basic solutions to localized conditions that products. Possible policy actions to address the rely on consumer behavior and private constraints that prevent informal forms from public partnerships with commercial formalizing, meet the needs of the poorest potential (see Box 2 for an example). households and expand their access to basic products at affordable prices include: Box 2: Pharmacy Accreditation Programs for Informal Retail Operators – Tanzania Because they allow access to treatment in areas and conditions where no formal commercial entity could operate at a profit, distribution models that leverage existing physical infrastructures and consumer habits to distribute drugs in remote areas have an enormous development potential. An accreditation and training program and access to microfinance services enabling small rural shops (duka la dawa baridi) to sell essential drugs is a business model that has significant development impact that can also be financially sustainable. Given high retail margins, charging fees for a 40-day training program that allows regular shop owners to sell essential medicines is a viable business model. This has been implemented in Tanzania through the Accredited Drug Dispensing Outlets (ADDO) scheme on a pro-bono basis. However, regular retail shop owners have demonstrated a willingness to pay for this training that includes marketing support in order to enter the lucrative retail drug market. These business models dramatically increase access to drugs for remote populations by increasing the number of medical outlets available. In addition, training programs for small retailers can improve their awareness of counterfeit and substandard products, thus enlisting them as key agents in improving product quality. Source: IFC 2007 9  Encourage firms to design and apply products and use smaller pack sizes to business models that deliver the right increase trial purchases and volumes, build products at the right price point. For strong distribution partnerships and adapt example, to meet the needs of marketing strategies (see Box 3 for an consumers at the bottom of the example) pyramid, companies must re-design Box 3: Reaching the Bottom of the Pyramid – Innovations in Distribution in India Business strategy enabling access. Some of the higher prices paid by consumers at the bottom of the pyramid can be ascribed to the difficulties and added costs of distribution in low income communities. Many companies are finding innovative ways to reach poor consumers. For example, Hindustan Lever Limited (HLL) requires new managers to spend six to eight weeks in a rural area and learn from these consumers as part of their training. HLL uses non-conventional marketing to reach this consumer segment: fairs, festivals and travelling cinemas have become part of the company’s consumer outreach combining entertainment with hygiene education. HLL has reached deeper and deeper into rural areas and has set up networks that carry its products to the most remote villages by whatever means required – motorbike, bicycle, oxcart – and has also employed direct sales agents. The approach builds brand loyalty and creates employment. Source: World resource Institute and IFC 2007. warranted that puts emphasis on soft Steps should be taken to ensure a gradual skills and contextualized management transiton of informal firms to formalily. The structures; transformation of distribution and procurement systems may offer participants higher returns  Coordination between farmers that but they also introduce new risks and costs. focuses on subcontracting With fewer and more powerful buyers, small arrangements, different forms of tenant farmers are confronted with reduced farming (e.g. exchange of labor for a negotiating power in addition to important portion of harvest) or reverse tenancy transaction costs. Policy actions to facilitate the (e.g. leasing of land management to a access and participation of smallholders in larger operator in exchange for rent) modern distribution chains include: could be alternatives to associations  Encourage horizontal coordination – and cooperatives; such as farmer associations and cooperatives – to increase the  The widespread duality between bargaining power of small farmers, traditional distribution chains and allow for economies of scale and lower modern procurement systems in East marketing and negotiation costs. Given Africa could be exploited to increase the mixed experience with such the participation of small farmers in associations, a case by case approach is modern chains. Rather than bypassing 10 traditional wholesale systems and operations in the formal distribution sectors of increase the gap between traditional East African countries. domestic markets and the formal processing sector, encourage the Improvements to existing regulatory frameworks should eliminate disproportionate upgrading of traditional wholesale systems to support the interaction entry requirements such as lengthy registration between the modern and traditional procedures, multiple licenses, or inadequate systems. The main focus should be on zoning regulations. Price controls imposed improving basic safety standards, across the region and the cartels in place in increasing the traceability of products several East African countries represent a and reducing spoilage rates in the serious impediment to competition and should traditional markets. This can improve be removed. the structure of wholesale markets and Address skills issues in the distribution sector. enable upstream linkages with A strong distribution sector will require local producers and downstream linkages know-how and talent. At first, companies will with retailers and processors. need to bridge the gap by using a mix of local Steps should be taken to eliminate the and international employees. In parallel, regulatory barriers that limit investment in the investments in developing and retaining local talent are required. Developing local training sector. Although all East African countries have made progress in removing explicit restrictions programs and putting in place apprenticeship to trade, the lack of regulation in critical areas, opportunities will be critical to achieving long- onerous regulation elsewhere or an unequal term success. enforcement of regulation pose serious Address the other constraints identified by the problems to competition and affect formal, business community. Steps must be taken to including foreign operators, in the distribution address the infrastructure and insecurity sector. concerns raised by the business community. Reforms should focus on developing the The removal of non-tariff barriers that hamper necessary regulatory frameworks for modern the imports of distributors should be on the distribution services including rules and policy agenda of all East African governments. regulations affecting the business environment. Finally, all governments in the region as well as The lack of licensing and operation rules for business associations can play a constructive distribution companies, inadequate codes on role in collecting and disseminating relevant investment, commerce, labor, and taxation, as market information for distribution operators in well as the lack of bankruptcy procedures the formal and informal segments. create significant uncertainty and burden for firms that are trying to conduct business 11 *About the Authors Nora Dihel is a Trade Specialist in the Africa Region of the World Bank.This note was prepared with input from Richard Gicho and Joseph Kimoto (Kenya), Joseph Butoyi (Burundi), George Gandje (Tanzania), Henry Rugamba (Rwanda). Pumela Salela and Nicholas Strychacz provided assistance with the data collection. This work is funded by the Multi-Donor Trust Fund for Trade and Development supported by the governments of the United Kingdom, Finland, Sweden and Norway. The views expressed in this paper reflect solely those of the authors and not necessarily the views of the funders, the World Bank Group or its Executive Directors. This work is funded by the Multi-Donor Trust Fund for Trade and Development supported by the governments of the United Kingdom, Finland, Sweden and Norway. The views expressed in this paper reflect solely those of the authors and not necessarily the views of the funders, the World Bank Group or its Executive Directors. References Borchert, I., B. Gootiiz and A. Mattoo (2011), "Policy Barriers to International Trade in Services: New Empirical Evidence", World Bank: forthcoming. Hooton, N. and A. Omore (2007). “Policy Innovations in Small-Scale Milk Markets in Kenya and East Africa�, Regoverning Markets Innovative Policy Studies, IIED, London. IFC (2007), “The business of health in Africa�, World Bank Group. Jensen, M., J. Keyser and N. 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