Capital accumulation in cooperatives is often difficult. It is shaped, and to some extent constrained, by a unique set of principles that define the cooperative identity and set it apart from other businesses. While its egalitarian rule of “one member, one vote” and its anti-profiteering precept of “limited return on capital” make the cooperative form of business appealing to a broad audience, these features can create genuine problems in mobilizing capital for growth.
Despite this, cooperatives in many developed countries have found innovative ways to mobilize capital from their members, while retaining important elements of their cooperative identity. Unfortunately, efforts to mobilize member capital have been less successful in developing countries where conditions are less favourable. This is particularly true for agricultural service cooperatives, which were often established by newly independent governments to meet nation-building goals and therefore relied on government support and subsidies.
New donor and government priorities, plus changed global conditions have led to “downsized” government budgets and to liberalized markets. Subsidies for agricultural cooperatives are fast disappearing. To survive and grow in an increasingly competitive business climate, cooperatives must raise more capital from their members and also possibly from commercial sources.
The aim of this booklet is to highlight some of the issues that cooperative leaders must confront in meeting this challenge and to provide suggestions about how capital, especially member capital, can be mobilized in more effective ways.
Maximiliano Cox
Director
Rural
Development Division
Food and Agriculture Organization
