Enabling rural cooperatives and producer organizations to thrive as sustainable business enterprises

Dear Forum members,    

Rural cooperatives and producer organizations play a crucial role in the eradication of hunger and poverty, in the promotion of social harmony and in the achievement of more equitable economic growth.

In the context of the International Year of Cooperatives 2012 , FAO, in close collaboration with  the International Fund for Agriculture Development (IFAD) and World Food Programme (WFP), is taking the lead in promoting agricultural cooperatives. The Rome-based Agencies (FAO, IFAD and WFP) are committed to strengthen the capacity of rural cooperatives and producer organizations, as well as encouraging governments to establish favorable policies, legal frameworks and participatory processes to promote their growth and sustainability.

Following the interest in cooperatives and rural organizations, “Agricultural cooperatives – key to feeding the world” has been chosen as the theme of the 2012 World Food Day, to highlight the role of cooperatives in improving food security and contributing to the eradication of hunger.

Since one of the weaknesses of many cooperatives promoted by outsiders is their over-dependence on government or donor support, the purpose of this online discussion will be to share your experiences in this field and help identify the ideal external business, legal, policy, etc. conditions that will enable these member-based organizations to become more self-reliant and sustainable business enterprises.

For the purpose of this three-week on-line discussion, participants are invited to  refer, enrich and discuss the elements of the pillars listed below:

  1. Business environment: Economic incentives and business conditions which promote the development of more self-reliant, sustainable and effective cooperatives and other producer organizations; including incentives to invest in agriculture and environmentally sustainable production processes; and access to local, national and international markets, etc.
  2. Legal framework: Legal, judicial, fiscal and administrative legislation that facilitates and/or encourages the formation of more  autonomous cooperatives and other producer  organizations.
  3. Introduction of information systems that more effectively assess the direct and indirect economic and social benefits of cooperatives and other producer organizations at different levels - member, community and country.
  4. Policy: Policies that promote and sustain producer organizations (eg. Tax and credit incentives for small scale processing investments by cooperatives and other producer organizations  funding for training or capacity building, incentives to facilitate access to credit for cooperatives).
  5. Consultative and participatory processes: Consultative mechanisms or arenas for dialogue between the government and cooperatives in place ensuring an active role and voice in the formulation of policies affecting small farmers and their organizations.
  • Capacity development and information programs: include a set of training, information, communication and extension programs specifically tailored to different organizational forms of joint self-help action, informal as well as formal.
  • Cultural norms and customary rules: Socio-cultural characteristics can facilitate or impede the development of cooperatives and other producer organizations (eg. Difficulty of women to associate and be involved in cooperatives, norms prohibiting the right to association).

The outcome of the online discussions will feed into the global, regional and national debates, as well as policy actions and future Plan of Action of the International Year of Cooperatives 2012 under the theme “Cooperative Enterprises Build a Better World”. 

For the purpose of this discussion, we use the term “rural cooperatives” to cover agriculture, fisheries and forestry and we refer to the seven Cooperative Principles, adopted by the International Co-operative Alliance in 1995: 1. Voluntary and Open Membership; 2. Democratic Member Control; 3. Members' Economic Participation; 4. Autonomy and Independence; 5. Education, Training and Information; 6. Cooperation among Cooperatives; 7. Concern for Community.

A brief word about ourselves: we are both been working on issues directly related to cooperatives and rural organizations. John Rouse is the former head of the FAO Cooperatives and Rural Organizations Group and Janos Juhasz is the former FAO Cooperatives and Rural Organizations Officer with extensive field experience in Central and Eastern Europe.

We look forward to a lively and interesting exchange!

John Rouse and Janos Juhasz

Esta discusión ha sido cerrada. Por favor, póngase en contacto con para cualquier información adicional.

Mr. Fabrice Larue Fondation pour l'agriculture et la ruralité dans le monde (FARM), France

Fabrice Larue

Fondation pour l’agriculture et la ruralité dans le monde (FARM), Paris

Depuis 2008, la fondation FARM accompagne des organisations de producteurs dans plusieurs pays d’Afrique de l’Ouest (Bénin, Togo, Mali, Burkina Faso), afin qu’elles développent des services économiques viables et qui répondent aux besoins de leurs membres : approvisionnement en engrais, commercialisation en commun des produits agricoles, crédits de campagne, etc.
Plus les organisations de producteurs (OP) accèdent à un niveau de professionnalisation élevé, plus leur viabilité et leur expansion dépendent de l’accès au financement. La capacité de ces organisations à emprunter à des conditions acceptables, en volume et en taux, conditionne la modernisation de l’agriculture africaine et l’augmentation de la production agricole.
Les institutions financières sont donc des partenaires stratégiques des OP. Dans les projets que nous soutenons, il s’agit de banques coopératives, membres de la Confédération des Institutions Financières (CIF) de l’Afrique de l’Ouest. L’expérience montre que les relations commerciales entre les OP et ces institutions doivent évoluer d’une simple prestation de service entre une entreprise et un client, à un réel partenariat. L’analyse du partage des risques entre l’OP et l’institution financière doit être menée au cas par cas. Lorsque les organisations de producteurs développent des outils de gestion des risques, cela doit être apprécié et intégré dans l’analyse de risque des institutions financières.
Ainsi, certaines OP ont construit des bases de données qui leur permettent de suivre efficacement l’historique de leurs membres en termes de respect des engagements de remboursement de crédit et de livraison de produits agricoles, ce qui leur permet de faire une catégorisation et une présélection de leurs membres. Ces organisations internalisent donc, en quelque sorte, les premières étapes de l’analyse du risque que les institutions financières devraient réaliser. L’amélioration de la professionnalisation des organisations de producteurs est une nécessité, mais les avancées réalisées doivent être reconnues par les institutions financières. Il incombe à ces dernières de mettre en œuvre des outils d’analyse du risque mieux adaptés aux activités agricoles des OP auxquelles elles prêtent, de mieux former leurs agents et leurs analystes de crédit aux spécificités du secteur agricole et de s’engager dans des partenariats favorables au développement des services économiques des organisations de producteurs. Déjà, les résultats fructueux obtenus entre des OP et des institutions financières démontrent l’importance de l’amélioration de leurs relations commerciales et invitent à l’innovation.

Peter Steele Independent Consultant Agricultural Engineer, Italy
Peter Steele

Seeking Novelty and Success - Potato Producers in Uganda
The moderators were seeking information to describe cooperatives and other producer groups that may warrant further scrutiny for the value of their models, modus operandi and performance.
Towards the end of last year we prepared an appraisal: 'Irish Potato Production in East Africa'. This was sub-titled 'Appraisal of the prospects and requirements for improved food industry value addition and technical efficiency of the regional Irish potato industry'. Sure, that's a mouthful, but this was the description contained in the ToR for the work required.
We explored production in six East African countries and came up with an action plan for boosting regional production - co-ordinated, more efficient use of resources, market-orientated, profitable, etc. You can ballpark the criteria involved but, for the current debate focused upon 'cooperatives', our findings may have some value. The action plan contained six sub-programmes of which sub-programme 1 entitled :'Strengthening potato value chain' contained the following key outcome points:
•    Growers linked to markets.
•    Innovation captured and linked to growers.
•    Information shared.

In support of these key points we listed a number of activities that should be followed/adopted - separated in two parts:

1. Improve value chain performance
•    Indentify the main players in the value chain.
•    Encourage the main players to form groups.
•    Put groups in contact one with the other.
•    Establish permanent linkages between groups.
•    Promote the intentity/reality of the value chain.

2. Develop market prices information systems
And listed five key activities that should be followed.
Out study highlighted the relative productivity of smallholder production (particularly in Rwanda & Kenya), but the paucity of marketing skills, information and dexterity when selling surpluses. There were deficiencies thoughout the production/processing chain, much of which could be re-evaluated/improved with the promotion of producer groups. That is - these groups and those who finance them take on the role of industrial entrepreneurs; organizing production, and meeting the requirements of processors/consumers.
National industries are suffficiently small-scale to enable potato-growing communities to provide the resources with which to boost productivity throughout the chain. To provide one example, explore the performance of the Nyabyumba United Farmers (NUF) of Kabale, Western Uganda with their links into a commercial fast-food outlet in Kampala: supplying >7 tonnes high quality bagged ware potatoes on a bi-weekly basis over a period of >5 years, and boosting returns on investment  by members of the order 70%.
These are 120 ex-farmer field school small-scale growers who formed a producer organization, chased contracted demand 300 km from home and delivered the quality and quantity required on the basis of little more than enthusiasm and a light truck; and met delivery schedules. You can source  their story at: It's entitled: 'Linking smallholders to remunerative markets: how smallholder potato producers in a remote district of Uganda market their potatoes to NANDOS in Kampala'.
Potatoes are the ideal East African food crop - high nutritional value, high productivity, etc. and importantly, they can be grown throughout the region, and match the changing demands of urban lifestyles for foods that are novel, quick and easy to prepare, and which project a sense of modern change. Walk the streets in most East African towns/cities - after school, during the evening 'rushhour' or at the week-end and count the number of kiosks, shops and outlets selling crisps, fried potatoes and other potato snacks. Sometimes it seems that everyone you can see is walking and eating potato foods.
Cooperatives may be a means to an end - and not an end in itself - but you have to produce to meet market requirements, and those markets are largely nuetral to the kind of production/delivery systems that may evolve. The issues then become those of choice.
We can explore the potato industry/markets reporting further in the context of producer groups if this is of interest
Peter Steele

Lizzy Nneka Igbine Nigerian Women Farmers Association, Nigeria
Lizzy Nneka

Enabling rural cooperatives and producers organizations to thrive is to enable the rural population feel the presence of governance and thriving means improvement in their living standard.
Most of the time this group is forgotten and abandoned, the only aspect they are remembered for is producing cheap foods which are consumed by urban dwellers and the reward is low income of farmers. The high prices of food in the urban goes to sharp practices of middlemen.
To have an enabled rural cooperative is a good project that if supported will go a long way. The term cooperative have been a functional aspect of community life , ie self help but the issue is how effective , and at what capacity are they operating.
It then means that this aspect should be exploited to the benefit of all parties, including the rural farmers and the food consumers. How can this be done?
Research has proven that farmers if encouraged always do more. It is well known that major challenge of farmers especially in rural areas is low funding and low capacity.
This issue has been a long standing one and should be addressed if we are ready to feed the world’s population.
Enabling rural cooperatives should be a priority in Agriculture Governance, and this could be tackled by:
a) Adequate knowledge of the Farming population in a particular area.
b)Proper Organisation of the farmers into separate cooperatives.
c)Training and education of the cooperative groups.
d)Government promulgation of laws to encourage savings with good returns and low interests for cooperative , agricultural loans.
e)Proper management and disbursement of funds budgeted for agriculture and timely and honest practice from politicians, their aids, civil servants and all who manage agricultural funds.
Cooperatives if properly harnessed will put not only money in the hands of farmers but POWER and wellbeing.
I am an advocate of farmers cooperative and open and good governance in Agricultural funding and Farmers integration to Agriculture as a Business.
lizzy Igbine (mrs).
National President,
Nigerian women AA farmers association.  

John Rouse Italy

The case study mentioned by Lisa Kitinoja "Linking Smallholder Horticultural Farmers with Lucrative Export Markets" raises several other issues not yet touched in the discussions, namely:

1) governments and donors need to understand that the promotion of sustainable cooperative businesses is a long-term educational/training process that requires technical assistance over alonger period than the typicalm2-3 year development project allows. I would also add to this point the one raised earlier by Nishadi Somaratne that such assistance should be linked to the assisted cooperative's achievement certain well-defined business performance and self-sufficiency targets.

2) such assistance should primarily focus on trading to enhance member business skills, not just cooperative managers business skills and farmer members should be treated as "agri-business people" rather than just as farmers.

3) the primary aiims of the training should focus on increasing the profitability of the cooperative business, investing in business growth and increasing member benefits

4) another important lesson learned from the study is the usefulness of small informal group approaches in business skill training, especially in larger cooperatives where the gap between members and cooperative leaders is greatest.

5) evidence demonstrates that rural women are better savers and accumulators and often have better micro-business management skills than men. That being the case, the increased participation of women in cooperatives and at middle and higher levels of management should be encouraged.


Fully agree with John Rouse addition. Development of rural cooperatives should ideally be bottom -up....incremental efforts where those involved take small but incremental steps on various attributes that make a cooperative successful. Small incremental steps such as self selection, self organization and self management, enable the cooperatives have the ''glue'' in governance and cohesion that holds them together. That ''Glue'' is their determination, motivation, willingness, courage, idea with market and being able to produce good quality products. From our own experience, those external people who help such cooperatives, should avoid temptation of providing gifts in form of resources, etc, but focus instead on giving them basic enterprise skills that will help glue them together and operate as a business entity.

Joseph Mulupi


Running Farmers Cooperatives on business Principles:

How can farmers cooperatives become sustainable enterprises? From our field experience, when farmers form cooperatives they must try and maximize chances of those cooperatives succeeding. Therefore, they must see their cooperatives first and foremost as businesses. As such they must succeed in market places, competing with other cooperatives and businesses. To compete successfully, they must do most of the things that other businesses do at least as well as those other businesses. What we have seen at times are the opposite: Cooperatives that have prima facie all attributes of a well founded enterprise, but lack the attributes of being run and managed as business.
Farmers have to see their cooperatives not as an end, but as a means. Hence they must see it as a not a business unto itself but a business model, through which they mobilize their collectiveness to provide services to its members, leverage resources, embed corporate governance, market members produce and utilize economies of scale among other attributes.
Run a business badly and you are likely to fail, whether you’re operating a public company, a partnership, a co-operative or a stall in the market.
Joseph Mulupi Musuya
Cooperative Specialist, Women for Women, Washington D.C.

John Rouse Italy

Thinking Big or Thinking Different?

My colleague Janos' response on Peter Steele's provocative comment was right on-target. Successful self-reliant cooperatives businesses are built from the bottom-up, not the top-down-- and that takes time. It's a step-by-step group learning process in which rural producers, often with little or no experience in doing business together, learn how to cooperate and run a group business, accumulate capital and make it grow. "Thinking Big" can sometimes be part of the problem, not part of the solution. One has only to look at the dismal performance of many of the large federated cooperative structures set up in many African and Asian countries during the early post-independence period to understand this. They thought "big" but not "different"--to steal a phrase coined by Apple co-dofounder Steve Jobs.

John Rouse
Rome Italy

Janos Juhasz Hungary

Just a short note on Peter Steele’s latest contribution. Peter raises the question why nobody shifts the debate to larger-scale cooperatives or better to say cooperative companies. The issue of “thinking big” is, no doubt, valid and important. In addition to Fonterra New Zealand a long list of successful large cooperative structures could be given by each of us mainly in the US and Western Europe and in practically any sector of the economy. There is only one thing Peter seems to forget about: All those large-scale cooperatives started small and it took them many years of struggle and development to become large and strong. Cooperatives’ institution building is typically bottom-up. Normally local cooperatives are organized to meet local economic needs. Nevertheless, the importance and need for various forms of inter-cooperative associations, the establishment of secondary and tertiary cooperatives or even international cooperative organizations have always been high on the cooperative agenda precisely for reasons of enhanced business efficiency and competitiveness. In other words, cooperators do think big, but they see large-scale cooperatives as a means and not as a goal in itself. The question, therefore, is whether cooperatives can skip some phases of development and come into being as large-scale organizations from the very outset. Large-scale organizations can, of course, be established in both the public and the private sectors and you may even call them cooperatives, as it was the case in the CEE countries under the centrally planned system. But this is a top-down exercise by definition. What would then ensure that the organizations created that way are owned and controlled by their members which are basic requirements for a cooperative? Who would manage them if not the few privileged having power and management skills in, say, “a poorly managed continent”? To what extent and in what ways would they develop the technical, entrepreneurial and management skills of the small-scale, sometimes illiterate, producers?

All the above, of course, is not to say that cooperatives are a panacea for and exclusive means of agricultural and rural development. Other organizations, private or public, may also prove efficient and successful, but I think that is a theme for another discussion.

Janos Juhasz
Budapest, Hungary


As stated it is important to consider logistical solutions that aim at boosting and facilitating rural cooperatives and producer organization.

However, the cooperatives have played an important role since its inception but they may need some modification and introduction of some new policies that will enable producers reach the maximum of productivity and profit realization.

Producers in many countries in Africa have cooperative that are in operation but little is being done to help the producer realize their maximum rate of productivity.
(1)    Not educating farmers on key areas that can boost their production where as cooperatives are just helping in one way that buying from farmer and provision of input to the producers. So if cooperatives can join forces with Agriculture engineers and professionals then most farmers will learn on how to have the production increase because they will be consultant to give technical advice to the farmers.
(2)    The legal framework must recognize farmers as important component. National industry and that they are part and parcel in the National development of the country. Government need to recognize farmer to be entitled in accessing loans. Also that capital investment by government most also go into establishing young farmer to increase capacity in their Agro business. Loan facilities should include machinery livestock, cash and other important input. Most cooperatives have only facilitated the agro farmer in transportation, and buying of the produce. But does not look which farm producer should receive loan of what kind. Cooperatives are best place at position where they have data of all producers and how much each is able to sell from this statistics. They will be in the position to link farmers to banks and connect farmers to loan facilities. Also to give advice to farmer on having savings account which, will enable them to access loans from bank. Cooperatives should harness farmers as a mother body that mediates farmers who are producer to have direct link in accessing incentives that will promote producers to have maximum productivity and receive good profits from their label. It is also important to understand that farmers need constant education of their business. New policies and incentives must be past on the farmers through brochures and through various forms of media communication as in case of farmer in the remote areas. Cooperatives should establish a center which has to educate farmer on certain methods of farming. Through education, sensitization and equipping farmers with knowledge that will empower farmer do the right thing at the right time. This program if introduced by cooperatives they will no challenge faced by farmers and how those challenges can be solved.
(3)    In cultures which have cultural norms that dominate Agriculture should also be address to remove ignorance and cultural impediment to food security e.g. people who aim at having animals as a basis of making name where as they may not sale even if animal have multiplied in number due to their cultural understanding.
(4)    Producer must also have access to have their produce exported through cooperatives which will make them sell their produce at much better price this marketing strategy can be organized by cooperative to facilitate their sales.

The cooperative should extend their marketing strategy by finding and accessing external market where as they would sale produce on behalf of the farmer and then the money would be deposited in the individual farmer accounts.

Then the shares would be according to the rate produced by each farmers. These external markets include exporting produce to neighbouring countries. It is therefore the duty of cooperative to source for foreign markets, where the commodity is needed. Cooperatives would just levy a small service charge to farmers for conducting business on their behalf.

Agnes Luo Laima
Zambia National Marketeers Credit Association (ZANAMACA)

Dr. Lisa Kitinoja The Postharvest Education Foundation, Estados Unidos de América

I spent several years working with the University of California, Davis as Project Director for the USAID El-SHAMS project in Egypt.
Many farmers organizations/associations/cooperatives were developed and nutured during the life of the project, and we got the chance to go back to Egypt in 2009 to reasssess the outcomes and long term impacts.
Here is a case study we developed with some lessons learned. Overall we found that the farmer associations "need longer term technical assistance for improved organizational development, to establish and maintain good business practices, manage links with buyers, and to learn to properly manage and maintain their postharvest facilities" in order to be successful over the long term. 

Dr. Lisa Kitinoja
The Postharvest Education Foundation
PO Box 38, La Pine, Oregon 97739 USA
Website homepage:

Case Study:
Linking Smallholder Horticultural Farmers with Lucrative Export Markets
Project name: Agricultural Exports and Rural Incomes - Enhanced Livelihood from Smallholder Horticultural Activities Managed Sustainably (AERI- EL SHAMS)
Years of operation: 2003-07
Country and region: Upper Egypt
Purposes: To increase rural income in Upper Egypt by building the capacity of small and medium sized farmers to improve their production, processing and marketing of horticultural products. To enhance the livelihoods of smallholders in Upper Egypt by enabling them to participate in the high-value export chain for fruits, vegetables and medicinal and aromatic plants.
Implementer(s): CARE, UC-Davis, ACDI/VOCA, NVG and EQI
Donor: USAID
Link to the final evaluation report which contains the case study: 
BMGF Appropriate Postharvest Technology Project (WFLO 2009-10)