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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 for any further information.


My name is Christopher Mulindwa from Uganda. I am one of the directors of Pig Production & Marketing Uganda Limited and the chairman of Watubba Pig Farmers Association. I do my work with rural farmers and mostly those involved in piggery.
My discussion here will mainly focus on co-operatives in my country Uganda.

Farmer organisations are very impotant to both farmers and community development. United farmers can share ideas, are easy to help and can combine efforts to work out tasks that are difficult to a single farmer like bulk production, input purchase, mechanisation, transportation and many others. Collective savings enables them mount a certain amount of money which can be used to extend credit facilities to themselves escaping the tuff terms and conditions of banks and money lenders. Therefore before governments, NGOs, companies and any other body think about extending grants, loans and any other assistance to farmers must first think about how to get farmers organised.

The major reason as to why most rural farmers in Uganda live in poverty is because they are poorly organised. This has been caused by development bodies poor approach to agriculture development, they have not emphasised the importance of unity among farmers.

For purposes of creating/strengthening farmer organisations, concerned bodies should create an environment where farmers don't get into organisations to recieve donations, assistance or support from them.
In case of shortages, such co-operatives will collapse. Let farmers first understand the importance of co-operatives, create them, sustain them for some time and then assistance comes later. With this approach, farmers contribution towards their own organisations can be easily traced and all farmers will be equally responsible for their groups hence their sustainability.

The fact that most farmers here are not educated and yet should be responsible for their organisation management make us think about management capabilities. Training facilities should be extended to farmers, the introduction of adult education in rural areas would be a right approach to this. Am not in any way recommending strangers to take part in farmer organisations leadership, it is farmers who know who should manage their co-operatives.

Information access is another serious issue, most development bodies provide reading materials in foreign languages for example English which most farmers cannot read and understand. Efforts should be combined together among donors,implementors and farmers to translate all useful literature into local languages that can be read and understood by farmers. This literature should be highly simplified, easy and interesting to read. Expressing information by use of pictures and diagrams would be a right approach.

The use of mobile phones is greatly becoming a cheap and easily accesible means of information. Different innovations should be brought to space in relation to this in order to easy communication and information sharing among farmers.

According to what I have observed, most people here especially the youth regard farming as a failure's job because it is farmers who are living a very poor life, there is few commercial farmers in Uganda.
Subsistance farming is the common activity and also not practiced to its fullness because some farmers may even fail to produce what is enough for their faimilies. Co-operatives would be good actors in eroding this perception out of youth minds, previous census stated that most of the Ugandans are youth making close to 19 Million of tatal population so they would have been the largest food producers in our country. The best approach here would be training farmers from their respective local councils in partnership with their local administration.

For the countries like Uganda whose backbone is agriculture, the government should be more concerned about implementing policies that favor co-operative development. The issue of corruption and embezzlement of funds will be no more if government policies involve farmers in decission making. Farmers will know how to fight for their rights and eliminate wrong characters.

Christopher Mulindwa

Mr. Subhash Mehta Devarao Shivaram Trust, India

This is Subhash Mehta again in response to Edward's contribution.

Steps of Evolution:

1. All families of the community who produce some agriculture, forest, horticulture, animal husbandry, poultry, art, craft, etc. are eligible to become producer members/shareholders/owners of the company.

2. The local unemployed educated youth to be trained to become general practitioners (GPs) in agriculture, volunteers/community workers/facilitators/employees of the producer company (PC) or any other community enterprise system to take over all risks and responsibilities other than on-farm activities.

3. The PC/community enterprise system aims to complement the strength of the local community and to integrate all the facilities in a community towards building trust, cooperation and higher quality of life.

4. All producer-members have equal say in management decision on price, policy & profit sharing, etc., but management is left to the professionals

5. Profit of the company after providing for reserves will be shared proportionately among the producer-members at the end of every season depending on their contribution of produce/ product.

6. Collection, sale and profit distribution of the produce shall be:
Level 1: Base price paid as agreed at the time of contracting
Level 2: Profit distributed every year after providing for reserves.

7. Stages of building a sustainable community owned enterprise system.
a. Registration of the company
b. Election of a board of directors under the guidance of a respected father figure who will continue this role till the enterprise starts making a profit
c. Selection of professionals to staff the PC
d. Macro (5 yrs) and one year micro plans and budgets along with marketing plan for surplus produce/products submitted to all concerned institutions for seed capital, funding and or financing
e. Contracting a successful farmer of the area as the model for wide replication of member farms, transfer of know-how for integrated agriculture, production of inputs, primary value addition to increase shelf life to minimise post harvest losses and storage of seeds for the next year
f. Farm management plan/annual calendar for each member farm/enterprise
g. Create central facilities for storage, production of inputs, need based primary and secondary value addition facilities to increase shelf life of the produce to minimize post-harvest losses and logistics for marketing
h. Create the required infrastructure on each farm for water harvesting and or re-charging of wells/tanks and or tube wells
i. Create the required facilities to store produce for meeting emergencies
j. Create the required office and training facilities for members, unemployed educated youth, etc.
h. To take over responsibility from the local government/banks/etc., the delivery of all services meant for, and or required by, members and the community

Subhash Mehta, Trustee,
Devarao Shivaram Trust,
NGO Association for Agricultural Research Asia Pacific (NAARAP),
Hegenahalli PO, Devanahalli Taluka,
Bangalore Rural North, Pin Code: 562110,
email: icapsm (at)
Tel: +91-80-28494009 / +91-80-22712290,

Edward Mutandwa Mississippi State University, United States of America
Dear FSN Coordinator,
Thank you for this very interesting and relevant topic. Although cooperatives are often touted as a viable way of promoting agricultural and rural development, the debate about the “best bet” approach to improving rural livelihoods remains wide open on global forums. Rwanda provides a good example of how cooperatives can be used to stimulate rural transformation through coordinated action.
 In Rwanda, the government crafted the Vision 2020 policy document which is anchored on six pillars including the need to transform agriculture from subsistence orientation to commercial agriculture. The country is small with an estimated surface area of 26,338 km sq. Given land bottlenecks, all farmers in the country are usually encouraged to form cooperatives. It is because it will be easier to support farmers through coordinated actions.
Cooperatives are not only seen as vehicles of development but also means of reconciliation and promoting social cohesion after years of war. Thus they are important means of nation building. The basis of their formation largely depends on friendship and gravitation towards common objectives. Evidence from two studies we conducted with farmers in the Northern Province showed that farmers’ decision to join and participate in cooperatives depends on perceived social and economic benefits. 
In my view and experiences from the field, there are necessary conditions which are important for cooperatives to be successful. There is need for an effective policy environment and institutional framework. Although governments can play the major role, there is also need for public and private partnerships which will complement public policy actions in the sphere of agricultural production. Several tea producing cooperatives in the country are being supported through various PPP initiatives. In Rwanda, the Rwanda Cooperative Agency is responsible for coordinating all activities related to cooperatives. Support is critical but may not necessarily be financial. It is true that without the necessary support especially in the initial stages of formation, cooperatives may fail. Many members of cooperatives are poor rural farmers without the requisite agricultural knowledge, financial resources and assets for use in agricultural production. It is therefore logical to support them so as to build human and technical capacity. The government supports cooperatives through frequent trainings and meetings. Major constraints usually facing many cooperatives are related to management and governance issues.
To ensure that cooperatives are sustainable platforms of rural development, it is also important to ensure complementary policy actions. For example the government implements its programs of land use consolidation and crop intensification through them. The cooperative model used in Rwanda has seen quantum changes in agricultural productivity through coordinated support from the government thus leading to better livelihoods.
Edward Mutandwa,
RDA, Rwanda
Mr. Subhash Mehta Devarao Shivaram Trust, India

Thank you John. I will go through it and respond.
Warm regards

Mr. John Millns Meden Consultants Ltd, United Kingdom

Very interesting. Please find attached a paper I recently completed: 

Policies and Programmes to Support Farmer and Rural Organisations in Central and Eastern Europe.

Best regards,


Mr. Subhash Mehta Devarao Shivaram Trust, India

Dear John and Janos,
In response to the contributions made I am adding to my earlier contribution for further clarity.

Differences in Structure, Functions, Relationships & Purposes between the Producer Company(PC)/ Farmer Organizations and the Industrial Corporations/ Companies under the Indian Companies Act 1956

Issues relating to costs, taxation policy, legal requirements, structure deficiencies & purpose in developing countries:
1. The central and state taxes, duties, etc., to be paid by the Farmer’s Rural PC/Farmer Organizations, Self Help Groups, Societies and Producer Cooperative, etc., formed by smallholder and marginal farmer producers should be exempted.
2. Inability and relevance of the Rural Producer groups to be able to absorb the cost of registration, various taxes, duties, etc.,, that maybe applicable.
3. Type of documents required and procedures to be followed are difficult even for the educated entrepreneurs and thus beyond the competence and or means to be produced by the smallholder producers to register themselves as a PC.
4. Ability of the small and marginal producers to provide the different types of documents for registration of the PC.
5. Equity (seed capital) required for formation of a producer company/cooperative and its feasibility for marginal producers to come together on this.
6. Tax benefits available to producer companies/cooperatives vis-à-vis other large business houses, should be need based
7. Type of subsidies available to industrial organizations/private business enterprises vis-à-vis producer companies/cooperatives should be much more as it serves public interest
8. Provisions for grant and seed capital available for producer companies/cooperatives should be liberal
9. Provision for producer companies/cooperatives (formed by a group of farmers/producers) to avail the various schemes and departmental programmes of the government that individual farmers are eligible for be converged and accepted as the promoters contribution/ margin
10. Ownership structure of producer companies formed needs to be of the rural farmers/ other producers but staffed by professionals, to meet all the
needs of their members by filling in all the gaps
11. Different types of formal and informal sources of credit developed for the small and marginal producer orgs could be sourced
12. Types of credit required by the small farmers/producers could all be sourced by their PC
13. Type of credits and flexibility offered by the money lenders to the small producers could be taken over by the PC and at low rates of interest
14. No documents required to be produced by the farmers to borrow loan from the government system of formal credit system as the PC would provide the colateral.
15. Challenges faced by small and marginal farmers in borrowing money from the formal credit system is enabled with the PC intervention and supported by the financial institutions/ Government.
17. Amount of money borrowed by the PC intervention to meet the needs of their members, namely, marginal and small farmers and other rural producers becomes possible and at very low rates of interest from the formal credit systems.
18. Capital available in the future from the savings made by the small and marginal producers
Warm regards

Annalisa Melandri Dominican Republic
Annalisa Melandri

Veo que hay aportes y experiencias interesantes que en el marco del cooperativismo se están llevando adelante en Africa por ejemplo. Retomando lo que estaba comentando ayer y por explicarme con más claridad, quería llevar como ejemplo algo que vi en Honduras en la región del Bajo Aguán donde hay un conflicto por la tierra muy fuerte y violento. Algunos campesinos lograron retomar posesión de unas tierras que de una forma u otra(sea por medio del uso de la violencia que con algunas formas solapadas de créditos agrarios que obligaron los campesinos a vender sus tierras) potentes terratenientes les habían quitado. En esta zona es muy desarrollado el cultivo de palma africana. La que mal llamaron “reforma agraria” a principios de los 70 entregó a los campesinos tierra con la obligación de sembrarla a palma africana. Fue el principio del fin para ellos. Esta forma de monocultivo ha acabado con las pequeñas producciones locales y si los campesinos ahora quieren comer yuca, frijoles o cebollas tienen que comprarla a los supermercados. Es una historia que se repite a lo largo y ancho de toda América central y AL. Toda la economía agrícola y los sectores relacionados, comercio, transporte etc viven alrededor de este modelo productivo estrechamente vinculado con la políticas económicas neoliberales. Lo que me llamó la atención fue que los campesinos que por fin lograron reconquistar sus tierras (hasta con legalización de eso en el marco jurídico) a precio de muertos y enfrentamientos violentos con las guardias privadas de los latifundistas y que tenían finalmente la posibilidad de juntarse y ponerse a producir algo que sustentara sus familias o que beneficiara directamente sus comunidades al fin y al cano no tienen otra opción que seguir cultivando palma africana para la producción de aceite porque la tierra no da para más nada, porque toda la economía lo que pide y hace rentable es la palma africana, y porque los mercados nacionales y extranjeros están al servicio de esa producción. “Eso es lo que da dinero y eso es lo que el mercado pide”, me dijeron los campesinos del Aguán. En Republica Dominicana pasa y el sector agropecuario está en crisis por falta de inversiones y por los altos costos de producción. La pequeña producción nacional no recibe incentivos y hay que importar hasta las cebollas. Los campesinos del Aguán están condenados a seguir con el monocultivo sabiendo que ese tipo de producción es la que tanto daño ha llevado a sus comunidades, a la tierra y al producción agrícola del país. Si quieren yuca, habichuelas o lo que sea, algo muy sencillo, lo tienen que comprar en los supermercados. Me imagino que la situación sea igual en toda AL. Eso para decir que si no se hace algo a nivel de políticas nacionales y de modelo económico que estas persiguen veo un futuro difícil para las cooperativas rurales o agrícolas. Importante el caso de Haití, se sabe por cierto que en Haití se están focalizando las miras de los grandes grupos económicos para implementar políticas neoliberales que seguramente no irán a favorecer la población local, ¿como se está moviendo en este contexto por ejemplo la FAO? Reciban un cordial saludo.

Walter de Oliveira FAO, Sierra Leone
Walter de Oliveira

Dear Moderator
I would like to bring the discussion towards the role of the public sector investment in rural development with an example of an approach, currently being implemented in Sierra Leone with the support of FAO. The approach is enabling small-scale farmer organizations to succeed as sustainable business enterprises.
The Smallholder Commercialization Programme (SCP), under the Global Agriculture and Food Security Programme (GAFSP) is setting the basis for the development of an enabling environment for pro-poor agricultural growth in the country. It is a nationwide investment plan for agricultural growth and food security involving government, private sector and development partners.
The SCP, covering the years 2010-2014, is implemented by the Ministry of Agriculture, Forestry and Food Security (MAFFS) and composed by six inter-linked components:
Component 1-Smallholder Agriculture Commercialization: Production Intensification, Diversification, Value Addition and Marketing: improving smallholder production and commercialisation by setting up 2,750 FBOs and building 650 Agricultural Business Centres (ABCs) nation-wide;
Component 2-Small-scale Irrigation Development: developing small scale irrigation to boost rice production on 18,000ha of land;
Component 3-Market Access Expansion through Feeder Road Rehabilitation: improving access to markets by rehabilitating and maintaining 4,000km of feeder roads;
Component 4-Smallholder Access to Rural Financial Services: providing better access to financial services specifically tailored to rural farming groups or individuals through the creation of 130 Financial Services Associations (FSA);
Component 5-Strengthening Social Protection, Food Security, and Productive Social Safety Nets: providing a social protection safety net to vulnerable households to increase food security and nutrition for 1,5 million people and;
Component 6-Planning, Coordination, Monitoring and Evaluation: implementation and support.

The establishment of ABCs, under component 1, is intended to boost small-scale farmers’ productivity and improve access to agricultural support services (inputs, post-harvest technologies, extension services and technical advice) and rural markets. By the end of 2011, a total of 193 ABCs were established and equipped at different level of operations.
The ABCs are farmer owned multi-purpose form of cooperatives providing rural communities with a place to trade goods and services and acting as an interface between famers and service providers, thus enhancing access to markets and technologies.
The ABC is a process that started with the Farm Field School (FFS) approach, organizing smallholders into Farm Based Organizations (FBOs) with technical and managerial capacity to manage the ABCs.
Each ABC is planned to deliver services to around 400 members, covering approximately 110,000 smallholder farmers in the country. The services include micro-credit, sale of inputs, rental of labour-saving equipment, storage of seeds and crops to reduce post-harvest losses, and the transport of harvests to markets.
One of the key objectives of the ABCs is, amongst others, to provide a one-stop point where farmers can access a total service package for their production activities, facilitate mobilization of human and material resources, provide some forms of functional education, improved seeds and chemicals and ways of generally improving agricultural activities.
The ABC is also aimed at resolving problems related to diseconomies of scale faced by smallholders in accessing credit, extension services, input supply and access to markets, as well as in facilitating the dissemination of information on new technologies and environmentally friendly practices, in a rapid and more cost-effective way through the FBOs.

I believe this can be an example where public sector investment in smallholder farmers, with appropriate policy, institutional and technical support are critical to ensuring that the smallholders organizations can effectively carry out their functions.
In this way, the public support is creating an investment climate conducive to rural growth, and empowering the poor to share in the benefits of that growth.

Thank you

Mr. Moses Owiny Women of Uganda Network (WOUGNET), Uganda

I like the idea of Cooperatives having worked with rural women farmers in Northern Uganda who produce large quantities of agricultural produce such as simsim, groundnuts, maize,cassava,beans,millet and many other crops.The challenge with rural farmer groups is that, even when they get together and produce such large quantities, normally there are few buyers of such produce or else they would sell them to small scale retailers who eventually end up cheating them. Lack of market opportunities, linkages with buyers, input suppliers and all those aspects necessary across the value chain is seriously lacking and hence the farmers access to markets or good prices for the crops they would have produced remain a great challenge.

In one of the women groups in Apac District in Northern Uganda under the project on Promoting and improving access to Agricultural Information using ICTs by WOUGNET; we have women farmer groups each consisting of 30 members. One of my experience as a Project Officer by that time around 2008 was that one of our groups had decided to take on the production of Maize as a priority crop and eventually embarked on the production of large quantities.In that year, there was bumper harvest of maize across the region and the prices per kilogram fell drastically. The farmers had huge stock of maize in store whom we thought the price would increase but never again and eventually, disappointed as the farmers and us as the project staff, they had to sell them cheaply as efforts to get good price tag or even negotiate better prices from medium to large scale buyers was extremely difficult by that time.

So in such instances, where the overall aspects of linkages with potential and large scale buyers are lacking, farmers end up producing and selling their crops cheaply.The idea of linkages between farmers and medium buyers for instance is necessary for a sustained mutual and long term relationship in which both of the parties support each other in achieving desired outcomes.Also because farmers would want to satisfy household demands, the produces can not stay in store for long and of course coupled with other factors such as as lack of storage facilities in rural areas and post harvest management of crops for example. I later thought of the idea that if we already had identified some of the buyers and linked them to farmers and introduced some element of value addition, we would have fared well in this example.

Also,Uganda had a strong cooperative base in the early 80's supported by Government and relevant legislation. Today, the whole aspects of cooperatives have dwindled only left for rural farmers, small Government entities and NGOs to support in some instance farmers to form groups/associations to try to achieve certain objectives.Government has abandon the idea of cooperatives and left the market economy to thrive at the expense of cooperatives which could have boosted the market driven economy

waled mahmud Knowledge Discovery, Bangladesh
waled mahmud

What conditions can enable rural cooperatives and producer organizations to become successful and sustainable business enterprises? In the rural areas, farmers provided their best efforts for maximizing food productions not only to serve the people, but to get higher margin from financial perspective. They are not the enterprises or entrepreneurs. This is the vital business stage that avail maximum opportunity by collecting foods from the farmers and resale to the wider markets including participating on government food stock activities. They enjoy the maximum profit by exploiting the farmers. It is very common in Bangladesh. Therefore, the farmers are always depriving from getting the actual or expected price from their produced foods. Promotion of forming cooperative and producer organizations might be an alternative option where the farmers may also play the role of entrepreneur. It means the farmers will get the opportunity to search market for selling their own produced foods. In Bangladesh, there are successful such practices, which is practicing in south-eastern part of Bangladesh; the name of the district is “Comilla”. BIRD is the main organization for promoting such initiative. At the grassroots areas in Bangladesh, there is a constitutional provision of serving the people through establishing GO-NGO network. It is considered as the entry point to organize farmers in formation of a cooperative or in other form, the producer organization. NGOs can take initiative to organize the farmers for adopting such type of opportunity in formation of cooperatives or producer organizations by maintaining close collaboration with the local government organization. NGOs have direct access among the general people. So, active initiative of NGOs in organizing farmers can be an effective initiative. Because the farmers haven’t the process and knowledge of cooperatives and producers organizations, therefore, NGOs may provide technical cooperation to the farmers in this regards by transforming knowledge. Different types if capacity building and ignition initiatives can be taken for promoting farmers. Mr. Abdul Hakim is the main and successful initiator in Bangladesh of experiencing such type of practices. Bangladesh Academy for Rural Development (BARD), Comilla, Bangladesh is the organization which established by the renowned person. You may visit the official website: for getting results of various types of researches and studies. Major considering factors are mentioned below: Policy framework Consultative and discussion processes Apply Community Based Participatory Approaches Capacity Building initiatives: message dissemination in different forms, campaign, rally Networking among different stakeholders Favorable business environment: ensure open market situation With best regards, Waled Mahmud Management and CBO Expert ============================================== Waled Mahmud, MDS, M.Com, PG Dip. Mgt. Consultancy Executive Director Knowledge Discovery