Cooperatives in many developing countries, face increasing financial difficulties which threaten their survival as businesses. One cause of these difficulties has been the withdrawal of government and donor funding because they face budget problems of their own and because they have become discouraged with cooperative performance. A second cause is that economic reforms have removed restrictions on markets and challenged the monopoly that some cooperatives have enjoyed as beneficiaries of government regulations. This in turn has lead to increased competition from other businesses and a consequent loss of income to cooperatives.
These changes have left many cooperatives with insufficient funds for operations and investment.
As with any business, agricultural service cooperatives require capital1 to operate successfully. Funds are needed to pay wages and other operating costs and to purchase equipment or other inputs for expansion. Without capital, the business cannot provide services to its members. It cannot grow and develop to compete in today’s market economies.
1 ‘Capital’ refers to the funds used by the cooperative in its business.Due to the loss of traditional funding, cooperatives’ need alternative sources of capital to maintain and strengthen their position in the market. In the short run, external sources of financing for cooperatives will be limited. They will therefore have to rely more on member financing to guarantee their continuation and development.
Capital mobilization is the subject of this booklet. Greater attention to capital can assist cooperatives in developing their market position and in member control of the cooperative itself.
