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Contributions for Enabling rural cooperatives and producer organizations to thrive as sustainable business enterprises

FSN Forum Team Afghanistan
FSN Forum

Contribution posted on behalf of Danilo Beloglavec

Dear John and Janos,
Thank you for the invitation for an online discussion. First I would like to congratulate for the good idea to bring forward the idea of rural cooperatives. I am sure that the consultants will analyze the answers of the questionnaires. I want to submit here only three points that are not new.
1) My personal view is that the most important factor that the coops can succeed and become sustainable is the human factor. If the personal interests of the administration, board members,staff and members are not compatible with their personal ambitions no rules, subsidies or training can substitute it. Unfortunately an efficient manager wants to be well rewarded. If not he has to mismanage (steal), find another job or create his enterprise that will very often compete with his previous coop.
2) The members have to have a real advantage from their coop. Only in that case they will not sell their best products to private enterprises and the second class to the coop. Naturally the coop has to pay in time and not 9 to 15 months late.
3) The management has to improve the productivity and quality of their members. In this since during my time with FAO wery little was done and many donor sponsored large scale projects were not sustainable without outside help and benefited the donor industry and larger scale farmers in developing countries.
I know that is nothing new, and is easier to write model coop rules, legislation an new workshop than to find products that are requested by the market at a standard quality and a competitive price.
Best regards
Danilo Beloglavec
Former FAO Senior Development Officer

Moises Jorge Gómez Porchini Centro Estatal de Capacitación UAT, Mexico
Moises Jorge

En México, el cooperativismo ha pasado por diferentes etapas, dependiendo de la inclinación política de los gobernantes en turno. Así, han pasado de tener un gran apoyo gubernamental a ser éste prácticamente nulo en diferentes ocasiones. Sin embargo, ni el gran apoyo de un régimen ha significado el éxito de las cooperativas ni la falta de apoyo ha llevado realmente a su extinción.
Las principales medidas por parte del estado que han fomentado la creación de las cooperativas han sido el reservar durante más de 60 años la pesca de las principales especies marinas exclusivamente para las cooperativas y el exigir este tipo de asociación para poder tener acceso a una serie de programas de apoyo, incluyendo créditos o financiamiento a fondo perdido.
Hasta antes de la revolución mexicana de 1910, la pesca en México se llevaba a cabo por medio de “Concesiones masivas”, por medio de las cuales se otorgaba la exclusividad de un área o de una especie a determinada compañía, las cuales en ese momento eran extranjeras por regla general. Al triunfo de la revolución, se cambio diametralmente el esquema, reservándose las especies de valor para el aprovechamiento exclusivo  ahora de las cooperativas. Aunque en los 90s cambió este esquema, de cualquier manera fue determinante para que la mayoría de las cooperativas del sector primario estén dedicadas a la pesca.
En lo que concierne a la producción propiamente dicha, tanto agrícola como ganadera, es casi nula la existencia de cooperativas, pues aunque se fomentaron igualmente, la mayoría no logró sobrevivir. Sin embargo, actualmente han surgido como una buena opción para la transformación y la comercialización de productos agropecuarios, constituyéndose las cooperativas como uniones de productores, en donde cada quien maneja su propia unidad de producción  pero se asocia para tener acceso a maquinaria, financiamiento o mercados que de otra forma no conseguiría.   En el caso del frijol, maíz, sorgo, etc, esta figura se utiliza para el establecimiento de la empresa acopiadora y comercializadora, Para los pequeños productores de café, les ha dado oportunidad de participar en la comercialización más allá de la simple entrega, pues les permite contar con laboratorios y certificaciones que de manera individual, por su tamaño como productores, es imposible.  En todos estos casos, es la exigencia por parte del estado de que se constituyan como sociedades cooperativas para tener acceso a los apoyos  lo que ha impulsado la creación de estas sociedades.
En el caso de las cooperativas de ahorro y crédito en la agricultura, éstas han recibido un gran impulso en los últimos años, ya que el estado no trabaja directamente con los campesinos, sino que utiliza intermediarios a los que llama “Dispersores financieros”, siendo ellos los encargados de dar la atención directa en crédito y asesoría a los pequeños productores. Ahora bien, estas “cooperativas de ahorro“ en realidad son empresas que no cumplen con la esencia de la organización cooperativa, pues de ninguna manera se toman en ellas las decisiones de manera democrática, sino que son manejadas por individuos a manera de “dueños”, trabajan con empleados que en los hechos solo reciben su sueldo y no actúan comprometidos con la comunidad, ya que encarecen en forma desmedida el crédito.
En el punto anterior considero que se encuentra el principal obstáculo para el establecimiento de cooperativas en México, pues el tomar las decisiones democráticamente entra en conflicto con el deseo de manejar e incluso de apropiarse de la organización por parte de uno o varios socios, lo cual ha dado lugar a una gran cantidad de fraudes o bien al manejo político clientelar de estas agrupaciones.

Saludos cordiales desde México

Moisés Gómez Porchini

Ms. Reema Nanavaty SEWA, India


Due to rapid industrialization and in the absence of the necessary backward-forward linkages for inputs and marketing, the small and marginal farmers and agriculture workers in Mehsana district were slowly losing most of their land and assets.   In particular, excessive irrigation from bore wells dramatically reduced the water table and rendered the remaining water high in fluoride content; thus, irrigation became exorbitant and without dependable rains, many small and marginal farmers were forced to either migrate or take up casual labour.  Women agriculture workers were even harder hit: they could find no alternative work and often had to walk miles to collect the necessary fodder and fuel.

SEWA organized the women agriculture workers into a co-operative. They demanded and eventually received government revenue land.  However, it was not an easy process as the existing, disjoint laws in both departments led to a tricky struggle. As per the Co-operative Act, the cooperative could be registered only if the members own land.  However, as per the Revenue department, the revenue land could be allotted only to a cooperative.

The struggle dragged on for two and a half years, until finally, with SEWA’s continued intervention, the Revenue and the Co-operative department came to a mutually agreeable alternative: the landless agriculture workers had to be registered as a tree growers’ cooperative rather than as an agriculture workers’ cooperative. They were able to form a cooperative for growing trees on government revenue wasteland.  Only then, on registering the cooperative, could the revenue wasteland be allotted.
Through the cooperative, the women systematically planned how to make optimum use of the available land employing a multi-faceted approach. Through partnering with the local Research Station of Gujarat Agriculture University for technical assistance, they were able to maximize production and income by using scientific agriculture practices, including horticulture, agro-forestry, drip irrigation, compost pits, and rainwater harvesting techniques. They utilized low-cost methods of boosting productivity such as designing cropping patterns to enrich the soil. For example, the mung plant’s root increases the soil’s nitrogen content; therefore, strategic placement and alternation of mung augments subsequent crops. In all activities the cooperative encouraged participation of all village communities and women in their efforts. A green house is also developed at the Centre and the women are trained in raising of crops in the green house and its maintenance.
The members of the Vanlaxmi cooperative developed the wasteland into cultivable land through access to various trainings and agricultural inputs. They have been trained in farm planning and farm management also. These members take 3 crops in a year and use the farm planning techniques to decide on which crops to grow in which season and multi cropping. All this helps the women in improving the productivity and thereby helps tin increasing their income. Also the members grow vegetables, pulses & grains and medicinal plants at the cooperative. This is done with a view to ensure that a family can get the required vegetables, pulses and medicines from the Centre only.

Today, the Vanlaxmi cooperative stands as a model for the entire district of how the landless poor can successfully implement collective agriculture.  Women who used to earn just Rs. 15 as agricultural day labourers and, who never engaged themselves in matters of yield, sale, expenditure or market, are now recognized as farmers.  They now meticulously manage their land, tracking each and every cost. The cooperative has acquired improved equipment such as a power tiller, thrasher, and a drip irrigation system. The plan also ensures full employment for the members and the land meets the fodder and fuel needs of the village.  As it has been licensed as an authorized seed distributor by the Gujarat State Seed Corporation Ltd., the cooperative also provides timely and reasonably priced quality seeds to not only their own village, but to the entire area.

For the past two years the farm is has been developed as a demonstration centre for awareness raising and education to the communities from the other villages and the other districts. This site has been developed as an eco tourism centre; which not only helps in awareness generation among the community at large, but at the same time will also generate income for the women farmers. This is not only be helpful to the rural communities but at the same time students from schools, younger and older generations, private companies from cities and urban areas can also see and learn from the women of the Vanlaxmi Co-operative. The visitors enjoy the day in the calm and serene surroundings of the farm and enjoy the clean atmosphere. The trip starts from Ahmedabad. The tourists are welcomed by a traditional welcome ritual. This is followed by serving the guests breakfast and beverage. This is followed by a tour of the farm. A sumptuous lunch is served thereafter. The evenings are reserved for a local entertainment program followed by a trek back to the city.

As a result of the Vanlaxmi Cooperative, 20 women, who are the members of the cooperative, get an income of Rs 4000-6000 per month through various activities including agriculture. SEWA’s approach has been to treat agriculture also as an industry so that agriculture moves form subsistence to becoming viable and profitable.


Sustainability of cooperatives and Saccos, can be looked as well as from the evolution over time of the economic, financial and market conditions of the cooperatives. The original model of a savings and credit society was to mobilize savings from members and pool the same for on lending to the borrowing members. This model worked well, for a while, until foreign parameters like investing in non core businesses and borrowing from commercial organizations, was introduced in the equation.

The dilution of the cooperative model and function came with burden of high cost of capital, which over the years has enslaved the once vibrant sector into an emasculated sector with little innovation to excite the members. Some societies collapsed, further worsening the bad situation.

This has meant that for cooperatives and Saccos to survive, they must enhance current and seek more viable financing models that will support both on lending and capitation requirements. In a world where standards and compliance matter the cooperatives. Must have capacity requirements to meet the requirements set by both the regulators and the financiers in order to drive toward a self-financing Cooperative

Example of Kenya - Prior to the Sacco Societies Act of 2008, the lack of regulation was the main reason for Saccos stagnating: brought by issues of mismanagement, poor structure risk and mismanagement. The setting up of a strong legal and institutional regulatory framework has led to several reforms creating order, sustainability, stability and growth in the sector.

However, under the regulation framework, mandated by Ministry of Cooperatives and enforced by Sacco Societies Regulatory Authority (SASRA), Saccos MUST meet the legal requirements in key capital adequacy in the sector and liquidity ratios to achieve growth and sustainability while operating efficiently.

When cooperatives and Saccos reform, and as the member’s confidence with them grows, they will support them through savings, shares and deposits. This is the stage where the cooperatives and Saccos start running from their internally generated funds from the members.



Dear Moderator and members in FSN Forum,

Cooperative and Digital Divides in Nepal’s Rural Communities

Evidence shows that some farmers take advantage of digital technology through cooperative. Many Nepalese commercial vegetable farmers have formed cooperative. Some cooperative representatives live in Kathmandu and sell the products sent by farmers from countryside. They also sent instant market price information to farmers on mobile. Based on the information farmers decide whether to harvest their vegetable on the day or wait for a few days. The information also helps them whether sell the product to local brokers or send to Kathmandu. Some farmers used mobile to call cooperative manager and ask availability of fertilizers. Greater number of farmers depends on radio based information of market prices. Some of cooperatives representative put some information in internet and access to members only. Internet based information are used only by brokers and a few rich commercial farmers.
Some farmers do not want to be members in cooperative.  When the agricultural inputs are shortage in the market the cooperative often do not sale the inputs to non-members.  These evidences indicate there is cooperative as well as digital divide in farming communities. A good extension and training supports to farmers would reduce the digital technology divide and help to utilised potential benefits of cooperative and digital technologies.  It is interesting that the people managing extension division and field workers know little about the problem of digital divide and areas for interventions.

Thank you.
Bhubaneswor Dhakal

Jacques Berthelot Solidarité, France

We should not idealize the cooperative model
Jacques Berthelot (, Former lecturer in agricultural policies at universities of Tananarive (Madagascar), Lomé (Togo) and Toulouse. PhD thesis on Les coopératives agricoles en économie concurrentielle, Editions Cujas, 1972.

There are profound contradictions between, on the one hand, small scale Northern and Southern agricultural cooperatives proritizing a strategy of food sovereignty centered on domestic food needs, agro-ecological and labour intensive farming systems and, on the other hand, large-scale Northern cooperatives. Taking the case of the EU – where cooperatives represent 60% of the turnover of the collection, processing and marketing of agricultural products –, the largest cooperatives pursue a strategy similar to the large private agro-industries, creating capitalist subsidiaries abroad and prioritizing the competitiveness of the cooperative business over the prices paid to farmers. To maintain their farmer members' competitiveness they agree with the necessity to enlarge the size of farms with input intensive production systems despite their negative impacts on farm employment and the environment. On the trade side, the EU apex cooperative body, COGECA (Cogeca, Brochure - Agricultural cooperatives in Europe - main issues and trends, 24 November 2010,, pleads to maintain an efficient import protection within the EU although some large cooperatives prefer a freer trade, but all deny the trade-distorting impact of the huge direct payments received by the EU farmers so that they don't care about their dumping effect and import-substitution effect.

The evaluation by Rainer Kühl of the EU cereals cooperatives concludes: "The larger the size (in turnover or number of members) of the cooperative becomes the more the institutional governance of cooperatives deviates from the traditional cooperative model. More and more the board of directors or the management takes the final decision and there is a growing separation between the member relationship functions, which are assumed by the regional councils and the operational functions, which are assumed by the management. The procedures of internal governance in these cooperatives become more and more similar to those of investor-owned firms. This observation could be made for nearly all cooperatives in all sectors that were analysed" (

H.H. Hansen, speaking particularly of Danish cooperatives, is more precise: "Both cooperatives and capital owned companies usually have the objective to ensure owners the highest possible earnings… Profits of member of a cooperative will come through dividends and through more favorable sales or purchase prices… Among the 100 largest food companies in Denmark, 52 per cent of the turn over comes from cooperatives, and 48 per cent from capital owned companies… In recent years, Danish cooperatives have been very focused on global off shoring of production and the use of foreign commodities. For several large cooperatives production abroad now exceeds exports based on the members’ own production… Globalization of cooperatives in the form of foreign members, increased use of foreign commodities, investments in foreign production, etc. will imply a shift of paradigm for many cooperatives" (Henning Otte Hansen, Agricultural cooperatives and globalization: A challenge in future?, 2009,

This globalized strategy can also be seen in France. The French sugar and cereals cooperative Tereos distributed the 13 September 2011 to each of its 12,000 sugar beet Members 180 euros for each of their 173,700 hectares as dividends paid by its private subsidiaries Guarani in Brazil and Companha Sena in Mozambique producing sugar cane and ethanol. Which corresponded to an average dividend of 2,600 euros per cooperative Member ( but the average revenue of each cooperator from his average 14.5 hectares of sugar beet was of 50,600 euros (including dividends, additional prices and interest on the cooperative shares). However the average beet producer has a farm of around 100 ha – of which about 75 hectares of cereals and 10 hectares of oilseeds and pulses – which generates a decoupled direct payment (the Single Payment Scheme) of around 350 euros per hectare, adding 35,000 euros of revenues per cooperator. And this without taking into account the revenues from high market prices for their cereals, oilseeds and pulses. In other words these sugar beet cooperators are among the richest French farmers.

In September 2011 21,909 employees (excluding the sugar beet cooperators) of Tereos International were working in Brazil and Mozambique or 82.2% of the total 26,657 employees. Tereos annual report for 2008-09 stresses the "cooperative spirit" motivating its actions: "Since its creation, Tereos has drawn from its cooperative origins a specific approach of its development… Tereos begun as soon as the 1990s a diversification allowing it to enlarge its field of activities in new zones (European Union, Brazil, Africa, Indian Ocean)… under the status of subsidiaries of its hard core constituted by the cooperative. This successful diversification is a response to markets globalization and the critical size of its customers and competitors… Thus Tereos' historical activities, its international development and its diversification continue in obeying to the cooperation values – transparency, solidarity and equity –, but with a modern and prospective vision. Tereos is built owing to its cooperative members but also its 13,500 employees who share a well agreed mutual interest, anchored on the various territories" (

However, the employees of its sugar factory Sena in Mozambique do not seem to "share a well agreed mutual interest" with the 12,000 Tereos cooperators, as they were periodically on strike. In early July 2008, 7,000 cane cutters accused Sena for not paying the work made on public holidays and not providing the boots and protection equipment required by law ( The 8 August 2009, 3,000 cane cutters began a strike for 4 days and burnt 150 hectares of sugar cane to protest against the too low wages – the minimal wage in the sugar sector in Mozambique was of 54.3 dollars (38.9 euros) per month in 2009 – and the lack of protection equipment requested the previous year. The 18 September 2009, as the company did not fulfill its commitments to raise wages, the striking employees burnt an ambulance and six of them were injured after police intervention (Na Companhia de Sena: Falta de diálogo precipitou a greve - conclui ministra Helena Taípo, The situation worsened in 2010 when Brazilian replaced the Maurician managers: the transport premium was suppressed and some employees must walk 10 kilometers, with wages reduced in case of late arrival to the factory ( On the other hand the population of Marromeu, where the factory is situated, complains that the ground water is polluted by the leakage of the irrigation water, full of pesticides and fertilizers, and the effluents of the factory (Rodrigues Gaspar, A população de Marromeu preucupada com a agua potavel, 3 de Setembro de 2009, /2009_09_01_archive.html; Such a situation would likely worsen as Tereos intends to raise the irrigated area from 7,000 ha in 2011 to 10,000 ha in 2014 and finally 30,000 hectares later on, given the irregularities of pluviometry.

On the other hand the control of Sena by Tereos is a good example of the land grabbing going on all over Sub-Saharan Africa. Tereos International, which controls 75% of the Sena company capital, received a concession of 98,000 hectares for 50 years, renewable, with a possible extension of 15,000 hectares. According to Tereos, producing sugar and ethanol in Mozambique presents three advantages: the land belongs to government (what about the traditional land rights?), there are large tax exemptions (reduction of income tax by 80% and total exemption of taxes on dividends) and duty free-quota free exports to the EU, Mozambique being a less developed country benefitting from the EU "Everything but arms" decision of 2000 ( According to the World Bank (World Bank, Rising Global Interest in Farmland, Can It Yield Sustainable and Equitable Benefits? 7 September 2010, page 30 :, investment in the sugar-ethanol chain in Mozambique values the land price at 9,800 dollars per hectare whereas it is rented by the State at 0.6 dollar per hectare per year for 50 years. Such an increase in value implies a profitability rate of 21.4 % per year (0.6 dollar invested at that rate would generate 9,800 dollars after 50 years).

Let us add that Tereos, which produces 40% of the EU sugar, received 117.9 million euros of export refunds for the marketing year from 16 October 2008 to 15 October 2009 (, plus 12.7 million euros received by its subsidiary of the French overseas department La Réunion, la Sucrerie du Bois Rouge. Incidentally, given also the predominance of cooperatives in the EU cereals and dairy sectors, they were also the main beneficiaries of the EU export refunds, at least before 2010 when they were discontinued.

To conclude we should not be obsessed by the cooperative statutes, in the North or the South. Cooperatives can be the best or worst types of enterprises and it is not necessary to adopt these statutes to put in practice the spirit of cooperation and solidarity. What is clear is that in the EU as in the other Western countries cooperatives share the same profit maximizing objective for their shareholders cooperators as private companies and do not claim to change the CAP rules and the WTO trade rules even though they are unfair for developing countries farmers. In fact COGECA, the coordination body of all EU cooperatives, is closely linked with COPA, the coordination body of the EU mainstream farmers unions which tend to defend the interests of the largest farmers, first of those of arable crops. As most COPA leaders are also national leaders of large cooperatives, they have a clear tendency to defend CAP rules prioritizing the interests of large cooperatives, which are almost the same as the private agro-industries. Which helps to understand why the EU leaders of COPA-COGECA and their national colleagues have no appetite to change the CAP rules and the WTO Agreement on agriculture (AoA) rules, despite their unfair impact on DCs farmers, and to rebuild them on the food sovereignty principle.

In West Africa there are presently few formal cooperatives within the ROPPA network of national platforms of family farmers associations ("organisations paysannes"). Legal statutes much more flexible than cooperatives, as those of "groupings of economic interest" ("groupements d'intérêt économique" or GIE), were largely adopted in Senegal (, at least to run the economic activities not implying foreign trade. But all these small farmers organizations belong at the same time to national platforms, members of ROPPA (Network of peasant organizations and agricultural producers of West Africa), which defend clearly the necessity to rebuild their national agricultural policies on the promotion of small family farms, agro-ecological production systems and to rebuild the AoA on food sovereignty, a principle they also defend against the Economic Partnership Agreement (EPA) that the EU pressures them to sign. The same positions are shared by the other regional platforms of African farmers organizations – EAFF (East African Farmers Federation), PROPAC (Regional platform of peasant organizations of Central Africa), SACAU (Southern African Confederation of Agricultural Unions), UMAGRI (Farmers Union of Maghreb) –, grouped together in the PFAOP (African platform of peasant organizations). It is this political dimension which is lacking in Western cooperatives which have lost the spirit of solidarity which characterized the founders of the cooperative movement in the 19th century, all viewing cooperatives as a means to build socialist economies.

At a joint conference on 24 April 2012, organised by Euro Coop (consumer co-operatives) and COGECA in Brussels, entitled ‘Co-operatives working towards a fair and competitive food supply chain’, Claire Bury, Director at Directorate E (Services), backed the idea of integrating co-operative values and principles into the supply chain. Ms Bury said: “The founding fathers of the Equitable Pioneers, in Rochdale, who founded the principles of co-operative movement, brought social conscious into business, which echoes very loudly into the world. These principles are still relevant and make business sense” ( For sure but this social consciousness into business should not stop at the EU frontier.

Abbas Khaled INRA Algérie, Algeria

lors du séminaire que nous avons organisé cette année sur les coopératives en agricoles en Algérie, il est apparu que parmi les facteurs de réussite d'une coopérative (COOPSSEL de Sétif: coopérative spécialisée des services d'élevage), figurent surtout: la facilitation de l'accès au crédit de campagne auquel beaucoup de petits éleveurs ne sont pas éligibles ainsi que la valorisation du lait par sa transformation et sa commercialisation.Cette coopérative a en effet innové par la création d'une laiterie fonctionnant uniquement avec le lait de vache. Les petits ateliers laitiers des éleveurs dont la fonction a souvent été l’approvisionnement de la trésorerie servant à l'achat d'intrants et auparavant peu viables pour approvisionner les grandes laiteries étatiques, se sont vus devenir plus importants du fait de la progression de l'attractivité du produit et la souplesse de de sa commercialisation (pas de délais dans la facturation et le payement, facilité de se faire payer en intrants)qui constituent des services parmi d'autres disponibles pour les adhérents de la coopérative.
K. Abbas

John Rouse Italy

Facilitators' feedback - John Rouse and Janos Juhasz

This past week's conference discussions have highlighted a number of important points regarding the topic of cooperative self-reliance and sustainability.

Encouraging farmers to save more.

Agnes Luo Laima (Zambia) argues that governments should create conditions and incentives that encourage farmers to accumulate more savings. We agree that this is critical. It is well known that rural rates of cash savings and investment are too low in many developing countries to support sustainable rural development. Furthermore, evidence shows that farmers with cash savings are more likely to be self-reliant than those without. The same is true with cooperatives. Cooperatives that succeed in accumulating surpluses and attracting member capital to invest in the cooperative business also tend to be more self-reliant and sustainable. Joseph Musuyu points out, rural SACCOs (cooperative credit and savings cooperatives) in Kenya have been relatively successful in mobilizing farmer savings, and the government is now encouraging more SACCOs to be organized alongside existing coffee cooperatives in the hope that this will encourage more sustainable coffee cooperative growth.

Is continuous business turnover a factor in cooperative success?
Joseph Musuya (Kenya) seems to think so He says it's a factor explaining the success of rural SACCOs in achieving self-reliance in his country. Interestingly, dairy cooperatives (which generate more daily transactions per member than other cooperatives engaged in marketing seasonal crops)in many developing countries have also done relatively well. What do you think about this? How might this help in achieving cooperative self-reliance?  

Cooperatives are businesses

Christian Chileshe (Zambia) states in his otherwise excellent contribution that "cooperatives are substantially social institutions that have the potential to produce economic and political benefits". We have to disagree with Christian on the over-emphasis that he gives to the social function of cooperatives. Cooperatives are primarily economic organizations that seek to satisfy the economic needs of their members. They may also address other social and other needs of their members, but their primary function and purpose is an economic one. Joseph Musuya (Kenya) further adds that farmers need to run cooperatives as a business, not as an end in itself. We would have to fully agree with Joseph on that point, because if cooperatives are not managed as a business, they will surely fail.

The pros and cons of vertical integration

Several participants (Igbine-Nigeria; Luo Laima-Zambia; and Steele-Italy) have raised the question of where cooperatives should position themselves within the marketing chain. It's well known that profit margins per unit sold are highest near the top of the marketing chain rather than near the bottom. That would seem to be a powerful argument favoring the vertical integration of cooperative marketing structures to capture these margins. However, it's important to realize that not all vertically integrated cooperative structures are self-reliant and sustainable and the ones that are are built upon a sound foundation of self-reliant primary cooperatives at local level who help capitalize the structure and to protect their member equity stake in the enterprise, ensure that higher level management of the structure is responsive to their member needs. Unfortunately, many of the federated cooperative union structures one finds in Africa have changed little since colonial times and remain top-down structures, heavily controlled and financed by the government rather than by base members and, as a result, are neither democratically run nor self-reliant .

An interesting case study
Peter Steele mentions the case of smallholder potato producers in Nyabyumba, Uganda, where a 120 member marketing association of potato producers was formed from six smaller Farmer Field School groups. The case would seem to be a good example of a bottom-up approach to self-reliant cooperative and rural producer organization development. However, the case study lacks data on that one important point. The association earns a profit but it's not clear on the extent to which the organization has reached technical and financial self-reliance. is such information available?

Laws and policies that encourage self-reliant cooperatives
Lizzy Nneka Igbine (Nigeria) recommends that the promotion of self-reliant and sustainable cooperatives be made a government priority and presumably set down in legislation or formal government policy. We think that formalizing this as an objective of government might help. It certainly wouldn't hurt.  

Areas of cooperative action
In her contribution Ms Igbine, Nigeria complains that “high prices of food…go to sharp practices of middlemen”. This raises the issue of the potential areas for cooperatives activities. Experience shows that in agriculture, in addition to primary production, cooperatives have great potential and are most needed in the up-stream and the down-stream sectors, i.e. in the supply of farm inputs and in the processing and marketing of farm products. These are the two sectors of the product chain take the overwhelming share of the consumer dollar spent on food and this is the money farmers should aim to get access to through cooperation.

Financial partnering with rural producer organizations and cooperatives.
Fabrice Larue (France) mentions in an interesting contribution that progressive financial institutions need to think more seriously about business partnering with some of the more mature rural producer organizations where sound investment opportunities exist, but to do so, they will have to improve their understanding of how these organizations work and analyze their investment risk. We couldn't agree more. But at the same time, cooperatives and other producer organizations also need to better understand how these financial institutions analyze investment risk and what are the expected costs and benefits of risk sharing between the two.

We forgot to remind you of one thing
We would like to remind all participants that a whole list of useful publications and manuals is available for downloading on the conference's main page in the rightmost column. Take a look! You might find something useful.

We look forward to your response to our comments.

John Rouse and Janos Juhasz


Why Rural SACCOS are more successful than Rural Cooperatives.

I think rural SACCOS are more commercially inclined than their SACCOS which unfortunately in many cases seem to be stuck as being social enterprises, who don’t seem to grasp well concepts of ‘doing business’. Rural cooperatives are have a lot of the yesteryear illusions of state subsidies, funding and cheap capital, which unfortunately it is no more. The rural SACCOS on the hand, being commercially driven are innovative to create business for the benefit of their members. They consider their members, equally as investors too who want to earn profit. As a result they have adapted and developed business networks outside the traditional cooperative movement which they tap into, and leverage more resources for their members.

Historically, rural cooperatives have had an external hand, be it in the form of state/government subsidy ( even if at district or local level), they have had political inclinations at times and also their focus on service combine to make them less business oriented. The SACCOS, always have this dedicated group of a few people who have a sense of a customer friendliness to grow their business. Across Africa, the financial requirements of the people are not homogeneous and often vary according to the local conditions and circumstances. The rural SACCOs succeed here through customization of credit packages, which they base also on the nature of activities the credit is to support.

The rural SACCOS that are successful also dues to necessity divert into different financial products, including savings mobilization, short, medium and long term loans, loans in Kind and even transfer services.

The rural cooperatives, which have are mainly single commodity based, tend to operate ‘‘seasonally’’. Their activities peak at times of say harvesting and marketing and getting inputs. They get accustomed to this cycle and have no room for innovation or adaptability. They cease to be a model for doing business. Vital part of any cooperative organization is its members and their active participation in and loyalty to the cooperative is integral for its success. With a season to season patronage of the service of the cooperative this can be tested to the limit. It can affect their attitude towards the cooperative negatively.

John Rouse Italy

A question that begs answering.

Why do rural credit and savings cooperatives seem to be more successful at achieving sustainable business self reliance than other types of rural cooperatives? What methods and incentives do they use to attract member savings and capital to invest in the cooperative business? Can some of these methods be adapted for use in other types of cooperatives? What do you think?