Annex. Views on the Meeting on Capital Formation in Agricultural Cooperatives

Prof. M.S. SRIRAM
Institute of Rural Management
Anand, India

“Unlike the corporate counterparts who go to the market for generating capital, co-ops cannot do so easily. This is because of the primacy ascribed to transactions based on cooperative principles, which unfortunately restricts the success stories in the co-op sector to high turnover based, low capital intensive activities. For co-op members to gain maximum benefits from their enterprise, it is often essential to enter into capital intensive activities. This can only be done through sustained internal capital generation.”

“In countries in transition, the lack of capital will remain a major bottleneck for cooperative development, since the members are still not considering cooperatives as their enterprises, and are therefore not willing to invest their assets into their own cooperatives. Hopefully meetings like this will bring us closer to acceptable, practical solutions.”

“There are two conceptions of cooperation: one consists in believing that the sole aim of cooperation is to enable members to receive all that they need. With such a conception, members are only waiting to receive something. They are reluctant to initiate collective action and they do not accept to deliver capital in their cooperatives. The other conception, in contrast, regards cooperation as a collective self-help action through which members can obtain some answers to their needs. With this second conception, members are economic actors and they accept to deliver capital when they think it will be useful or necessary in supporting their cooperative action.

Until I attended this workshop, I thought that people mainly preferred the first conception of cooperation. Now I have the feeling that people are changing their views.”

“The secret and only option left for the survival of agricultural cooperatives in my country is mobilization of their own resources in line with current business challenges, e.g. that guarantee returns in both services and projects. Capital formation requires very urgent attention. Dependence, whether from governments or donors reduces the ability to grow, allows outside control and generates lack of loyalty from members.”

“The International Technical Meeting on Capital Formation in Agricultural Cooperatives has allowed us to exchange views on a very important subject for cooperatives in industrialized countries, as well as in developing countries where the majority of the population living in rural areas do not foresee access to credit except within a context of dependence.”

“The incentives for capital formation in cooperatives are different from those which govern capitalization of joint-stock companies. In the latter case, capitalization is stimulated by an ever increasing dividend on capital, while in the former the benefits that the member receives from the services provided by the cooperative are more important and each member has equal rights despite his/her capital contribution. This is a basic principle of cooperative democracy and a main feature of its social function.”

“The International Technical Meeting on Capital Formation in Agricultural Cooperatives has been a unique and entirely useful experience, have personally learned quite a lot about the importance and technicalities of capital formation in agricultural cooperatives and I hope to be able to transfer much of this new knowledge and experience to the Greek agricultural cooperative movement believe that this very useful new knowledge should be disseminated as widely as possible among agricultural cooperative movements around the world, probably by holding regional workshops, while a further attempt should be made at corroborating the theoretical framework, probably by commissioning three additional case studies in cooperative movements at different stages of development. For this, I am very much indebted to FAO and to COPAC for their kind invitation to attend the Meeting.”

“Efforts to develop cooperative members’ involvement in the cooperative activities should not only concentrate on such an option as increasing member shares. To some members, this might be even regarded as a financial obstacle. The openness of the cooperative to new members may be another source for increasing the cooperative’s own capital. Such a solution may also enable the cooperative to develop a range of services and to attract (and reach) new clients.”

“The relationships between capital formation in cooperative societies, the sources of this capital, inducements and motivational factors cannot be generalized due to the great differences that exist in the local cultural, legal, political and business environments within which cooperatives operate. Cooperative capital formation methods must be tailored to fit each basic type of environment and diffusion strategies developed, identifying individuals in different regions and countries who can, in turn, serve as catalysts to various efforts to address cooperative capital formation. The sooner, the better.”

“China is now going through a new period of change as it shifts from a highly centralized to a more decentralized system based on the principles of the market economy Cooperative movements in our country are also entering a special period of financial crisis. This meeting has been quite useful to us in learning from other country’s experiences. On behalf of the Department of Rural Cooperative Economy, Ministry of Agriculture of China, we wish to express our sincere thanks to COPAC and FAO for hosting this meeting.”

“The quality of a cooperative’s capital can determine it’s quantity.”

“Member participation in capitalizing their business increases their financial stake in the success of the collective enterprise and encourages them to protect that stake by insisting on more efficient management and more participation in decision making.”

“Cooperative capital formation is the key element in the enhancement of productive investments and employment in rural areas. This previously neglected issue provides an opportunity for cooperative growth, added value to members and may assist in turning the present tide of rural - urban migration. Further research into stakeholders’ attitudes and behaviour in the varying local circumstances should be supported.”

“Capital formation that involves increased member stakes - whether as equity, savings, delivery rights - is central to autonomy and accountability and critical to the success of cooperatives.

This meeting has helped identify some of the main elements and constraints to successful capital formation in agricultural cooperatives and will be of great assistance in the development of a set of practical guidelines on that topic for cooperative managers as well as members.”

“Agricultural cooperatives need capital to operate and successfully meet their members’ business needs. There are two sources for this capital: internally generated profits and external investment of members’ funds. In today’s ever more competitive agricultural and financial markets, cooperatives must operate efficiently in order to build profits, they must select their markets and products carefully and they must make sure that the capital instruments they offer meet their members’ needs for safety, liquidity and yield. Cooperative leaders need to focus their development efforts on improving operating efficiency and creating capital instruments which increase in value (appreciate) and can be easily sold (transferred to new members). This will improve farmers’ incomes and wealth - the two economic goals of agricultural cooperatives - and lead to a rebirth of the movement during the coming decades.”

D/W5069E/1/6.97/500