My third concern is the over emphasis on the cooperative business model to assist smallholder farmers. This is very disturbing because it only takes some brief computations on basic business parameters to show that reliance on a cooperative is far more likely to push smallholder farmers deeply into poverty than be a mechanism for poverty alleviations, despite the tremendous rhetoric to the contrary. The reason is the cumbersome administrative overhead costs associated with running a cooperative, particularly if the success of the cooperative requires seconded outside managers. This overhead cost will usually exceed the much promoted but never quantified financial benefits from bulking input purchases or produce for sale. When this happens you have to find a buyer who will pay extra for dealing with a cooperative, or reduce what you can pay the farmers, pushing them further into poverty.
The emphasis on cooperative in development projects goes back some 40 years and is based on the unsubstantiated vilifying claims that private traders were exploiting farmers. Such claims if not substantiated are slanderous and thus subject to litigation. Given the financially suppressed economy common to developing countries this is actually impossible. The limited buying power of the general population put tremendous downward pressure on consumer prices. Fortunately the farmers aren't that gullible and avoid the cooperatives like the plague leaving the development effort catering to a very small percent of the potential beneficiaries and even then the members’ side selling the bulk of their produce to the vilified private traders in contradiction to approved cooperative by-laws. The only market volume passing through most cooperatives is in-kind loan repayments and the net impact on the community economics is trivial.
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