Farm diversification is considered an optimal farm plan decision for mitigatingvarying degrees of risks and uncertainties which surround agricultural production, and also has a benefit of stabilizing or increasing income. Diversified agriculture is widely practicedin Konoin district but smallholder farmers earn low incomes asevidenced by poor living standards amongst the smallholders. The purpose of the study was to evaluate the role of on-farm diversification in poverty alleviation among the smallholder farmers. To achieve this purpose, the study measured the contribution of on-farm diversification to incomes of smallholder farmers and then characterized smallholder farmers based on diversification.In this study an empirical examination of on-farm diversification was carried out by use of cluster sampling and simple random sampling procedures which were employed to sample 154 small-scale farmers in Konoin District.The herfindahl indexand t-tests were usedto measure the contribution of on-farm diversification to farm incomes and to characterize smallholder farmers based on diversificationwhile the Tobit model was usedto identify the factors influencing on-farm diversification.The study obtained a herfindahl index of 0.39 in a continuum of zero (0) to one (1).Out of all the sampled farms, 30.5 percent of them were found to be highly diversified while 69.5 percent were less diversified. This shows that the smallholder farmers in Konoin District are considered less diversified for purposes of income generation given that the index is lessthan 0.5. On-farm diversification was found to have positive relationship with income given that the highly diversified farms had bigger gross margins than the less diversified farms. Access to the extension services positively influenced farm diversification. Market prices for the farm produce and the distance to the product markets negatively influenced on-farm diversification.

More than half of the human population in developing countries live in rural areas where poverty is most extreme (World Bank, 2008). In Kenya, more than 80% of the citizens live in rural areas where agriculture is their main occupation. In these rural areas, the prevalence of poverty in absolute terms is 49.1% (RoK, 2007). Achieving stable and secure household incomes is generally assumed to be a fundamental step out of poverty and food insecurity (Henriette, 2007). Agriculture sector which employs most of the rural poor contributes over 24% of Kenya’s Gross Domestic Product (GDP) thus making it the backbone of the country’s economy (RoK, 2007). There is need for ways and measures to help smallholder farmers to achieve sustainable increase in their on-farm income. 

While uncertainty and risk to varying degrees surround all forms of activity, Kimenju and Tschirley, (2008) in their study found that it is more of a problem to agricultural production than for industrial production. This is because the sector in general is faced with different types of uncertainties such as; climatic factors, crop or animal diseases, price fluctuations and policies related to agricultural production, marketing and trade. To mitigate such uncertainties, farmers in developed countries use private risk management strategies such as insurance, production and marketing contracts to reduce financial risk and variability in production. According to Mathenge and Tschirley, (2008) the crop and livestock insurance in Kenya and other developing countries is not yet fully developed. This therefore calls for the alternative measures to curb these risks. On-farm diversification may be considered as a spontaneous response to avoid many of these uncertainties (Mahendrarajah, 2005).It involves rural households engaging in multiple agricultural activities within their farms and maintaining such portfolios as a measure to mitigate against risks and increase income (Frank, 2004). Normal recurrent and abnormal periodic risks are most easily weathered by those households which have access to two or more economic activities. According to RoK (2008) theidea ofthe specializing in two or three cash crops per plot is proposed in order for agricultureto contribute to the increase inKenya’s GDP by six to eight percent. 

Tea farming in areas designated as having potential fortea growing is a major enterprise and a core source of income to residents. A large proportion (60 percent) of tea growers in Kenya have diversified to other farm enterprises including dairy, maize and horticultural crops. Tea was the leading family enterprise among three quarters of all farmers (Mwaura and Ogise, 2007). 

Konoin District is endowed with suitable ecological conditions for agriculture and most of the farmers engage in variety of farm activities. However, this was not the case in about 10 to 15 years ago when tea was the only cash crop for most of the farmers. Land sizes have also been declining due to the population pressure and fragmentation as a result of the culture of inheritance (RoK, 2005). The main farm activities in the district are small scale tea farming and small scale dairy farming, and food crop production. Food crops grown include; maize, beans, Irish potatoes and vegetables. Dairy farming is largely for subsistence with excess milk being sold. This surplus of milk is sold to the residents of the nearest trading centres or milk processors such as Kenya Cooperative Creameries (KCC) and Brookside Dairy Limited. The green tea produced by these farmers is sold to Kenya Tea Development Agency (KTDA) which has factories within the district.

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