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1. Mobilising Capital for Farmer Co-operatives in LDCs: The Problem

The question of capital formation is problematic for co-operatives in several ways: Capital surplus is paid back to the members, farm producers are permitted to join a co-operative by paying a nominal fee for one share, there are no markets for cooperative shares, and the member who withdraws from membership is refunded only the purchase value of his/her share. In recently liberalised markets in many developing countries, co-operatives are now faced with a new competitive environment, where the ability to mobilise investment capital to finance business growth is a key to long-term success.

In this new competitive environment, monopolies are removed, subsidised financing is no longer available, advisory services are discontinued and co-operatives have to survive in competition in the market place with other types of organisations such as investor owned firms.

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