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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

This discussion is now closed. Please contact fsn-moderator@fao.org for any further information.

Peter Steele FAO, Italy
23.07.2012
Peter

Colleagues,

 Thinking Big

Half-way into the debate and no one has, as far as can be seen, made an attempt to shift the debate to larger-scale cooperatives and, importantly,  introduced the highly successful agro-industrial models that exist for all kinds of enterprises, crops, products and markets. Why is this? Are contributors restrained by their background and experience - typically national-, rural-, historic-, small-scale- and/or subsistency-based; and further constrained by parallel issues of safety nets, social networks, community food security and, not least, the platform provided by FAO/FSN?

Then too, there is the power and prestige of the academic debate with language that quickly shifts into the finness of interpretation; and which can be difficult to understand.

If 'cooperatives' are to continue to find a role with producer/industrial organizations, there is little point in continuing to look backwards to the euphoria of the post-colonial cooperative movement , for example, with the shared opportunities that were promoted at the time. And there is absolutely no point in continuing to see the national government as a potential source of investment funds, expertise and more in support of cooperatives. Success or failure, cooperative enterprises will have to succeed in the private sector.

This contribution then draws your attention to Fonterra New Zealand - a dairy cooperative company that has become the largest producer-processor food company of its kind in the world. You can check out this cooperative at www.fonterra.com and search the supporting pages but, in summary, it is owned by >11,000 dairy farmers (>95% of all national dairy farmers) with assets of the order >US$13B and an annual turnover of >US$15B. It is the largest company in New Zealand and, remember, this is a small country of <5M people that is quite simply miles (i.e x1.6 km) from just about everywhere. The cooperative buys >97% of all fresh milk in the country and exports and sells into >140 countries worldwide. Click on their live world map and follow the joint ventures in a host of other countries; they may have an office close to where you live. Check them out.

The issue is not so much to promote the success of Fonterra but to introduce opportunities that thus far may have not been considered, for example, to focus on what you do best, to produce for quality, to seek regional and/or global partnerships and to think outside of the usual restrictions. Sure, this is difficult; you may be in upcountry Uganda (like Christopher Mulindwa producing pigs or Moises Owiny growing maize) or  in Zambia (like Christian Chilese consulting on agro-enterprises/business) but many of the same issues apply when seen from grass-roots level - lack of just about everything, markets awash with surpluses, costs spiralling out-of-control and a home and family to feed.

Whoever you are and wherever you are you are likely to have a not inconsiderable wealth of community resources - people and their assets; and, if this is insufficient, then you need to mobilize others. There is simply nothing to be gained by waiting for people/assets/resources to come to you. Check out the Fonterra strategy and see how this one cooperative is seeking and developing partnerships worldwide; other agro-food companies are doing much the same. And, if dairy products are not your forte, then follow those producing cereals, beverages, roots & tubers, medicinal crops and more. The larger companies are always seeking new opportunities; search the databases and find those close to where you may be - and then make contact with them.

And, should you consider that you and your community/industry/resources are too small, target your public sector for agro-industrial planning/development on national/regional scale that you may be able to find a niche within the portfolio of national resources that are available - for those investments that can be mobilized and channelled to assist you.

There are an estimated 700M people in Africa and the continent has >20% of the land resouces of the world - much of this highly productive with good soils and sufficient water available, and infrastructure is improving by leaps and bounds. Travel the length of the continent by road - 15,000 km - from Cape Town to Cairo and marvel at the agricultural potential of this little known and poorly managed continent. If you are reading these words in south, central and eastern Africa - even North Africa - you are quite literally living in the world's food basket of the 21st century.

Now there's a role for cooperative ventures and their management teams.

Peter Steele

Rome

22 July 2012

 

Mr. Subhash Mehta Devarao Shivaram Trust, India
23.07.2012
Subhash

Dear John, Your request for successful producer orgs. I had given the link,www.navajyoti.org, a successful producer org case study, set up by smallholder producers in one of the poorest areas in the State of Orissa, North East India. The hand holding is being done by Prof Dr AKJ Nayak, assisted by some colleagues at the Xavier Institute of Business Management, Bhubaneshwar, Orissa. The have also developed a curricula for women and mostly rural unemployed educated youth, for being trained as general practitioners (GPs) in agriculture (entrepreneur professionals),for staffing the PCs to take over all risks and responsibilities from the members, other than on farm activities. Warm regards Subhash

Mr. Subhash Mehta Devarao Shivaram Trust, India
22.07.2012
Subhash

Dear John, I am giving a brief introduction to COA Producer Company Ltd,please see: http://www.chetnaorganic.org.in/, for more informtion. I will be happy to send the case study direct to you as it is 2.5 MB. Warm regards Subhash 'The formation of COAPCL is aimed at providing the member farmers with a fair business alternative so as to enable them to: i) get the best possible price for their produce and ii) enjoy the benefits of a fair and transparent transaction. As a farmer-owned producer company, COAPCL is specifically involved in the following activities:- Sensitizing and training existing farmer groups for participating in value addition of their produce and collective marketing for better margins Managing the organic cotton marketing process of member farmers, hitherto managed by COFA Oversee the certification process of farmers pertaining to organic certifications, fair trade certification and any other that the organization may feel the need to subscribe to from time to time Organize marketing of non-cotton crops of farmers, wherever possible as organic and fair trade, otherwise in alternative formats Business planning for local level farmer co-operatives/societies and providing expert inputs on conducting such businesses/local level economic activities Facilitate fund raising for farmer’s co-operatives/societies to conduct above mentioned business/local level economic activities Conduct/organize/facilitate suitable research and advocacy activities – in collaboration with COFA - that are in the benefit of its member farmers Assist farmers of partner projects of FFID, COFA in marketing activities and/or undertake marketing activities on behalf of such projects

Mr. Subhash Mehta Devarao Shivaram Trust, India
22.07.2012
Subhash

Dear Colleagues,
The attached doc is the report submitted by me to FAO in 2007 on the producer and institutional producer orgs.
I felt it fair to share it with all participants for them to use it as a base to build on not having to re invent the wheel.
Warm regards
Subhash

See the attachment:SM.PC doc 9 12 07.doc
John Rouse Italy
21.07.2012
John

PART TWO If participants know of individual cases of cooperative success in achieving self-reliance and sustainability and the key factors that led to their success I am sure the rest of us would be interested in learning more about these cases. In addition to collecting more analytical data on individual cooperative success in achieving financial and technical self-sufficiency, Somaratne goes one step further and suggests that both governments and donors should link their assistance to recipient achievement of specific self-sufficiency targets or milestones which could be used to monitor progress in this direction. do you think this would be a good idea? Several participants ( Mulindra, Bazongo and Yakasai) mentioned member illiteracy, the geographic isolation of manynrural coops and coop masnagers lack of computer skills and business skills as major constraints to developing cooperative self-reliance. Could the new information technologies including the more widespread use of mobile telephones be useful in bridging this gap? Here are some other questions to ponder: Should cooperatives be granted special taxation exoneration privileges or subsidies to encourage their development, or would this discourage them from achieving full self-sufficiency? Are cooperatives organized to get donations? Bazongo mentions what he calls "project cooperatives" I.e. coops that are organized only for the durations of a project. Once the project ends so does the cooperative. whatbdomyounthink? Are cooperative principles to be strictly observed or can some flexibility contribute to more business efficiency? (Millns, Steele) We look forward to your response to the above points or any other points raised in the discussions to date John and Janos

John Rouse Italy
21.07.2012
John

First of all Janos and I want to thank all of you for your very useful initial comments on this important topic. In order to keep our discussions ass focused as possible we think it is critical that we all are clear on what we mean by the term "rural cooperative and producer organization". By this we mean: any independent, member-controlled, primarily member-financed business enterprise whose profits are either reinvested to increase the business's capital base or redistributed to members according to their use of the group business' services. As Millns rightly points out in his first intervention, the definition is sufficiently broad to include a wide range of informal as well as formal group enterprises serving their rural producer members. We notice that many of the comments so far have centered on the problems that governments orndonors have encountered in promoting these types of organizations in rural areas. these include: Over-dependence on government support and excessive government or political interference in the running of the cooperative (Bazongo, Somaratne, and Yakas) Problems in mobilizing internal capital (Millns and Yakouza) And Weak business profitability and financial self sufficiency (Somaratne and Steele) Others have commented highlighting government successes in promoting cooperatives and producer organizations in India, Bangladesh, Nigeria, Burkina Faso and Sierra Leone (Mehta, Mahmud, Yakas, Bazongo and de Oliveira); however, what seems to be lacking in these presentations of successes so far is a more detailed analysis of the extent to which these organizations have achieved authentic self-reliance and sustainability--which as you know is the main topic of this debate. Yakouza and Mehta have both mentioned the need to collect more analytical data on individual cooperatives that have achieved financial and technical self-sufficiency in order to identify some of the enabling conditions (business activity focus, management, capitalization policies, etc) as well as external conditions that have influenced this success. END OF PART ONE (To be continued)

Christian Chileshe 3C Development Management & Entrepreneurship Experts Limited, Zambia
20.07.2012
Christian Chileshe

Greetings,

In the several years that I have spent with rural producer and other groups, including cooperatives, I have been brought to a point of deep reflection on what it will take to help them break through to a level that will set them on a path to success (as defined by themselves).

I live in a country where cooperatives have been part of our development agenda for at least close to 50 years.  Many people know about cooperatives from encounters, not from a conceptual perspective. We therefore have major differences in how they are perceived, even amongst political and other decision-makers. Continued changes in the country's political economy have left our cooperatives in disarray.

I think that, in our quest to obtain the results that cooperatives can bring to especially rural development, we have tended to forget or overlook some fundamentals that underpin their success.

I put forward four specific thoughts for our consideration, some of which may sound like book stuff. But then, I think this is one of those instances when theoretical principles really matter, especially when they are defined within relevant context.

1. Cooperatives are substantially a social institution that has potential to produce economic and political benefits. So people organising themselves into cooperatives is largely a matter of them (and any facilitator) understanding the current and ideal sociological circumstances.

If so, to what extent do cooperators allocate space to clearly reflect on their current sociological circumstances and on what they perceive as ideal? Or do we start with only economic benefits in view, overlooking key process aspects that could help us get there?

2. Cooperatives are about how people organise themselves (not organised by outsiders) to respond to various specifically or broadly defined opportunities.

To what extent, then,  is effort devoted towards developing a common vision, mission and objectives. I am not referring to the development of a strategic plan (which is often largely developed by an outsider anyway), but to an ongoing institutional process that reinforces locally grown vision, mission and objectives.

3. The members will already have been socialised in some way and this comes with them into this new social group.

How much space exists for cooperators to reflect on how their social backgrounds may positively and/or negatively affect the new institution? Could there be need for some "resociolisation"?

Two quick examples may help to illustrate this point:

Ordinarily, cooperatives will adopt a horizontal form of collectivism - a devolved democratic structure where ownership is held in common. Most rural African communities have been socialised in a vertical structure where authority (and all that is perceived to go with it, e.g wisdom of the ancestors rests, etc) rests in particular hands and the rest take instructions. Some of the most practical challenges I have faced have actually been around this aspect!

Another example could be with cooperators dealing with the concept of "group business" in an environment where group activities have not been perceived to have a strong economic dimension to them

4. What mechanism are being employed to identify and tap into individual members competencies, and to work with this to build strong internal structures? What bases are used to determine who does what or holds what position? This is one area when gender (amongst other issues) arises.

Notice that there above core aspects require cooperators themselves to deal with, not an NGO or government. The role of external players is to facilitate a process leading to realisation and action by cooperative members.

How can this be done?

Well, it is certainly more than running training workshops (which are generally found to be a convenient intervention in many respects!). It involves multi-faceted conversations that engages the group, key individuals, community players, local & central government, NGOs, etc to ensure the particular society is, as much as possible, moving in a generally common direction (or at least leads to minimal to no resistance).

In Zambia's earlier years, cooperatives become (albeit unintentionally) structures for receiving government support (e.g agric subsidies) and not enterprises. This has been difficult to shake off, and at some point, a previous government decided to simply ignore cooperatives. There is now fairly serious thought on how cooperatives could become part of especially rural development efforts. But I don't think many people know how this can be done, and if they do, I am not sure if they are prepared walk the long road of re-orientation (which may very well be heavily sociological and deal with the issues raised above, amongst others).

In the wake of a looming food and nutritional crisis, I don't think we should lose more time. My main challenge is to the enlightened citizens of developing countries. There is a lot that we know we can do. How much of this have we done? What world will we leave for our grandchildren? What will we be remembered for?

It is time to focus on dealing with the underlying issues and not just the symptoms. This is tough, but such is life! So let's get going with it . . .

 
Christian Chileshe
Principal Consultant
3C - Development Management & Entrepreneurship Experts
Lusaka, Zambia

Mr. Georges BAZONGO Self Help Africa, Burkina Faso
19.07.2012
Georges

Toutes les contributions aussi interessantes les unes que les autres montrent la pertinence de l'emergence de sociétés coopératives agricoles fivables et capables de répondre aux attentes en matière de sécurité alimentaire et nutritionnelle de nos Etats africains. Self help Africa forte de son expériance en Afrique (de l'Est, du Centre et de l'Ouest) d'environ 30 ans a développé une approche de renforcement des capacités des coopératives à travers ses partenaires d'exécution axée principalement sur:

- La spécialisation des coopératives autour d'un maillon d'un filière agricole car la clarification des uns et des autres sur leur domaine d'actions prioritaires permet d'éviter d'avoir des coopératives consciente de leur rôle dans la filière indiquée et son interrealtion avec les autres maillons de la filières (approvisionnement en intrants, production, transformation, commercialisation/exportations).

- L'amélioration de la gouvernance au sein de ses cooperatives est un gage de leur crédibilité visi à vis des acteurs et aussi des potentiels adhérants car cela favorise et consolide la confiance mutuelle. Pour se faire, l'accent est mis sur les capacités en matière de management administrative et financière et aussi de services offerts aux membres;

- L'amélioration des compétences techniques et professionnelles des coopératives selon leur domaine d'action afin qu'elles mieux participer aux fonctionnement de la filière tout générant de srevenus pour leurs ménages respectifs. Afin de transferer durablement ces compétences l'approche des "Leads farmers" est développée afin de doter ces cooperatives de personnes compétentes à même de fiare le transfert de compétences aux autres memebres de la coopérative, d'appuyer pour le suivi des actions et l'élaboration de compte d'exploitation ou de plan d'affaires adaptés à leurs réalités;

- La mise en relation de ces coopératives avec d'autres acteurs de la filière dans laquelle elles évoluent ou avec de potentiel partenaires financiers tels les instituts de micro finance pour le financement de leurs activités et susciter l'envis de s'informer afin d'être informer sur les opportunités qui se présentent, les lois, politiques et stratégies qui pourraient les intéresser ou influencer leurs actions afin de pouvoir saisir les opportunités qui se présentent et ausii s'impliquer dans le plaidoyer.

* Cette approche est souvent influencer par les défis de la disponibilité de structure de communication de proximité, le niveau d'alphabétisation/scolarisation des acteurs, et le financement du secteur agricole par les banques en Afrique. Quelles sont les situations dans les autres pays concernant ces défis???

Georges BAZONGO
Self Help AFrica
Burkina Faso

Rabiu Auwalu Yakasai Trans Sahara Global Foods Investment Ltd, Nigeria
19.07.2012
Rabiu

Dear FSN Forum Coordinator, It is a good timing for this particular topic at least for us in Nigeria because it presents opportunity for everyone in the policy corridors to see the global trend affecting cooperative societies. May be that would trigger action in the direction most considerate for the required cooperative development. Kindly check the attachment for my contribution.

 

See the attachment:PSDC.pdf
Dismas BIRINGANINE APRODEA, ACTION POUR LE DEVELOPPEMENT ECONOMIQUE E, Democratic ...
19.07.2012
Dismas BIRINGANINE

As  APRODEA, NGO working in South Kivu/DR CONGO, we work with 32 72O smallholders gathered into 20 agricultural cooperative.

To enable them: we organize them into cooperatives around  each crop
- we form training of trainers (TOT) on how to manage, to fertilize, in organic agriculture
- we give them  seeds and other tools
- we give them fund as credit in order to produce more after they will reinburse crops or money.
We help them to access local, national and international markets. The problem is to get certification in order to export their products.

We would like to works with you in partnership with FAO in order to implement some projects.
Looking forward the responses. God bless you richly.