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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.

Annalisa Melandri Dominican Republic
Annalisa Melandri

Es muy interesante y creo que verdaderamente las cooperativas agricolas puedan ser herramientas para el superamento de la pobreza 'rural' o sea de las zonas rurales. Lamentablemente, con la poca experiencia que tengo en ese sector puedo solo decir que el desafio mas grande esta en la difusion del latifundio. Vivo en la Republica Dominicana y me este aspecto parece un obstaculo grande a que campesinos o pequeños trabajadores del campo puedan organizarse en cooperativas. Cuando tengo mas datos los voy a compartir. Saludos y gracias por la oportunidad.

Abdou Yahouza CLUSA Projet sécurité alimentaire ARZKI, Niger

Bonjour chers collègues du FSN
merci pour cet important sujet. Ci-dessous
Les coopératives ont des rôles importants à jouer dans la croissance économique, la sécurité alimentaire et l'amélioration des conditions de vie dans les pays en developpement. Toutefois ces coopératives n'ont pas bénéficié des appuis nécessaires pour bien jouer ces rôles. En effet le Programme d'Ajustement Structurel a fait désengager les Etats et devraient permettre aux coopératives rurales de prendre en charge certains services. Malheureusement le PAS a été très vite signé sans pour autant avoir préparé et renforcer les capacités des paysans et leurs coopératives à prendre en charge ces services.Il y'a eu des lois permettant la création de coopératives, mais beaucoup de coopératives ont été créées sans pour autant être bénéfiques pour ses membres, pour l'Etat et pour la communauté. En effet dans la majorité de coopératives on peut constater:
- le manque de structuration, de plan d'action et de plan d'affaire
- le manque de financement : faible mobilisation des ressources internes et externes. Dans les lois des finances nationales il n'y a aucune ligne budgétaire qui concerne les coopératives rurales; peu de coopératives disposent de capital fonds de roulement et d'équipement.
- le manque d'encadrement technico-organisationnel et de suivi des coopératives rurales.
- la méconnaissance des opportunités, droits, avantages et devoirs dans leurs milieux respectifs
- des difficultés d'accès aux intrants, aux crédits,
- difficultés de commercialisation des productions
- des taxes à l'exportation.
- les droits aux exonérations à l'importation ne sont pas effectifs.

Donc pour avoir un monde meilleur il faut soutenir les coopératives rurales:
- conduire une analyse diagnostic et une typologie de toutes les coopératives rurales
- relire et harmoniser les textes régissant les coopératives
- renforcer les capacités techniques, organisationnelles, financières des coopératives rurales
- rendre effectifs les droits aux exonérations à l'importation des intrants et équipements de production et de transformation
- réduire les taux d'intérêts des emprunts aux coopérative
- appuyer les coopératives à développer des plans d'affaires, des circuits d'approvisionnement des producteurs et des circuits de commercialisation des productions agricoles
- Créer les dialogues directs entre les coopératives et les gouvernements
- inscrire des lignes budgétaires d'appui financier aux coopératives dans les lois des finances nationales
- instituer un système de suivi et évaluation des activités des coopératives pour l'amélioration continue.
Abdou Yahouza
Projet ARZIKI - Niger

Enoque Albino Manhique APDCOMA-Association For Community Development and, Mozambique
Enoque Albino Manhique

Dear Member and Forum coordinator
Thank you very much for exposing this topic for discussion. I think that rural cooperative have done something quite positive as they are already organised in such associations. Now to become sustainable they should identify more members and form a clusterisation groups whereby they can identify dynamic markets and commercialize in a close and open circle   all their produces. Additionally they should work hard to have certification of their products, this mean be more engaged in GAP (Good Agricultural Practices), therein they will be able to conquer internal and external markets. Of course this is not easy but with more effort they can firstly push their government attention and while getting the support or assisted by public institutions their vision can grow further.
Thank you
Enoque Albino Manhique
DVM, MSc in Agricultural Development
Agricultural Research Institute of Mozambique

Mr. Subhash Mehta Devarao Shivaram Trust, India

The role of small holder producer organizations/ company (PC) interventions could feed the world and promote economic growth” The Government of India, realising the problems faced by the Cooperatives and Societies, being a department of the State Governments, legislated the Producer Company (PC), amendment IX-A of the Indian Companies Act 1956, as a sustainable local community enterprise institution of, for and by the smallholder farmer/and rural producers. The PC has the features of an enterprise and will be driven by the cooperative and societal spirit of the community. This local institutional intervention, staffed by professionals, will serve as a single window through which their members (smallholder farmer/ rural producers) will transact with various external forces by taking over the risks and responsibilities, viz., management, finance, banking, imparting knowledge/ training and capacity building, product development, factor market, capital market, research-extension services, value addition, delivery of government programmes, logistics, etc.. It will also be responsible for all internal management of the smallholder farmers/producer viz., integrated agricultural production for meeting their own need of nutritious food and at farm gate prices, planning, budgeting, value addition, women empowerment, nutrition, health, education, increasing purchasing power and net incomes, ensuring safety, quality, livelihood improvement of the small holder farmer/producer families and their communities and a positive 'cash to cash cycle'. To be able to put up such a farmer led and professionally managed local institution, public funding towards overheads, working capital, basic infrastructure, technical and managerial support need to be provided for the first 5-8 years, depending on the nature and type of agricultural communities. An example of such a Producer Company can be viewed at The Funding and Loan Projects considered by the Financial Institutions must not only directly fund the PC intervention as the PEA but also make such an intervention compulsory, before sanctioning any project, as it takes over all risks and responsibilities from its mostly illiterate, resource poor members, other than on farm activities. The Governments of developing countries need to make huge investment in this area for not only correcting the mistakes made in the past but also for feeding their populations and ensuring economic growth, but also to get back the small holder farmer / rural producers at the centre of sustainable farming activities. Briefly, the functions of the Producer Company (PC) will be: PCs will be set up by competence and capabilities of the rural producers, staffed by unemployed educated youth trained to become GPs in agri 'culture'/ professionals to take over all risks and responsibilities other than on farm activities, requiring handholding by the village elders, CSO/ NGO working with the community, till break even ( about 5 years) Increase net incomes and purchasing power of members by focussing on the local successful integrated agriculture producing to meet their own nutrition, food and health needs at farm gate prices, surplus sold in the vicinity for meeting their cash needs, achieving long term sustainability Impart now how/ training of the successful integrated farming in the area, especially on farm production of quality inputs and water conservation Contracting successful farmers, for training on their model farms and wide replication of their integrated agriculture system, to meet their nutrition, health, food and cash needs Arrange with financial institutions (IFAD, NABARD, etc.) the annual limits for capital, seed capital and working capital needs Primary and secondary value addition to increase shelf life of produce/ products, minimizing post harvest losses and increasing net incomes Plan, budget and market produce/ products at farm gate price to members/ communities, for meeting their nutrition, food and health needs, surplus first stored as reserves for emergencies and balance converted to cash in the vicinity (food miles) Empowerment of women by fully involving them in the planning, budgeting, decision making and Governance of the PC Convergence of Government programmes and schemes for delivery to members Etc. Prior to setting up the PC by the rural producers in that community, they need to be given all the information about the features of the PCs and the benefits that would accrue to them by their NGOs and the local Government bodies. The role of NGOs will be vital as the rural communities have lost faith in the mainstream agriculture systems, having been driven to hunger and poverty, if we are to succeed in the execution of the project during its formative period. It is understood that their role would be confined to organizing communities, creating cadres, building trust, developing skills and overseeing the professionals staffing the PC, etc., important role in ‘hand-holding’ until the business breaks even, the staff has the confidence to manage the ‘cash to cash cycle’, thereafter keeping an eye on the professionals and thus ensuring that the interests of the resource poor illiterate members are protected. Subhash Mehta, Trustee, Devarao Shivaram Trust, NGO Association for Agricultural Research Asia Pacific (NAARAP), Hegenahalli PO, Devanahalli Taluka, Bangalore Rural North.

Peter Steele Independent Consultant Agricultural Engineer, Italy
Peter Steele


Considering producer groups in the context of agro-industrialization of rural communities
Great subject - people focussed development is always challenging - but 'Agricultural cooperatives key to feeding the world'; that's almost a title too far. Not so much that collectivization of people is not important - wherever they may be within the value chain - but the contradictions between 'cooperatives' by definition and their role within 'feediing the world' quickly become apparent when you consider the worldwide social (-economic) trends of the current day - urbanization, industrialization, the scamble for natural resources, inequalities between countries, people and regions (and within these groups). Link this into global macro-issues of climate management, energy alternatives and expanding populations with people everywhere demanding higher living standards, and the role for 'cooperatives' becomes less easy to appreciate. 'Small is not always beautiful' and small producers remain highly vulnerable.

Then too, there are contradictions between 'cooperatives' and 'sustainable businesses' that are not always easy to understand, for example, with the former servicing members and promoting shared (even democtratic) principles of equality, and the latter servicing profits and shareholders. And, should you want to explore these issues further there is an excellent booklet published by FAO 'Mobilizing Capital in Agricultural Cooperatives' that dates from 2004; and was co-authored by one of the sponsors of the current discussion. If you had to summarize the booklet in a few words, it would be one whereby the more sustainable the business models within the cooperative, the greater the shift from 'cooperative'; with the cooperative becoming simply one more agro-business company (albiet a successful one). Whether cooperative or agro-business, the first principle of either entity must be one of making profits/surpluses that ensure continuity in that particular market sector.

Enterrprise longevity is always a challenge in the less well-informed rural communities - wherever they may be. This is refered to in the lead in to this discussion (this thing about external support from the public sector, NGOs, development agencies and others). Remain in the development business long enough and you are sure to come across cooperative societies that started well, received ever diminishing support (you name it - economic, technical, financial and more), became highjacked by cliques within the community and/or, worse still, became channels for political motivated development movements (sure you can mention a handful of countries, particularly from the period 1960-1990s).

The key issue is not so much that 'cooperatives' are inadequate per se, but that they may not necessary be the right kind of collective group required by that particular community/region/industry. Other groups may have equal value - and more so in the modern era with that earlier reference to 'competition for resource's. Search the Internet and follow the international and regional agro-industrial companies that are contracting for land in places where it may be plentiful, where rural people living on the same land have limited options and where national decision-makers can continue to make choices that focus on minority interests (usually, but not always, from self-interest).

Cooperatives in rural communities will typically focus upon agro-production; hoping to exploit markets for the crops, livestock and materials produced. There is that famous picture of several thousand turkeys all facing the same way and looking into the distance; with the caption 'Now that we are organized, what shall we do?' No point in starting mid-point in the value chain then - this is more a case of identifying markets and working back to the kinds of materials, standards, quantities, delivery schedules, competitors and more that will be essential before organizing the agro-producers concerned. Herein is the role of the entrepreneur with her/his information, contacts, access to resources (including finance and agro-producers) that will be essential. Sure, this can be done by groups of people - but small agro-producers, for example, are notorious for their lack of business acumen. Bring in that well-meaning public sector? Useful, true, and particularly if they are able to provide start-up finance, technical information, equipment and more at competitive/subsidized rates, but public servants typically stop work late afternoon and rarely work over the week-end. Not so good if you're in business.

Working with an industrial crop some years back we introduced what was called at the time an 'Authority'; combining the resources of the relevant ministries - typically 'Agriculture' and 'Cooperatives' together with a quazi-government marketing board. Existing cooperative societies responsible for individual processing centres and grower communities were dissolved; they had been defunct for a number of years, with the marketing board taking ever greater responsibilities (but coming up against contradicting mandates - of how best to support two competitive groups within the industry). The Authority took responsibility; managing existing field staff, established advisory groups of growers with community responsibilities, contracted for services including sales to the marketing board, and renovated factories and built new ones. Simple, but tranparent, systems of payment for processed crop were devised based on trends forecast for crop markets for later in the year; with a two tier system involved. First payment on delivery to factory, and second payment on receipt of prices in distant markets. Industry-wide, everyone knew who was in-charge.

The key to the level of the second payment was that of quality of crop sold; and this tended to vary between managent at the different factories. Everyone from manager to factory labourer was trained in the same way; but output quality varied on the basis of attention to detail - from the ripeness of the incoming crop, washing, fermenting, drying, sorting, bagging and more (even the newness of the bags and evenness of the stitches counted) . Cleanliness remained supreme; and then we published annual feedback from buyers as a result of samples tested from the individual factories, and factory managers/staff were able to compare their work/performance with others. The industry never looked back - as people became competitive, and quality and income climbed.

Management of the Authority was more autocratic than that possible from the earlier cooperatives responsible for production and quality, and the latter always lacked the resources to make a difference.

For an early contribution to this debate then, consider the role of the agro-producer group within the industrialization of the agro-communities involved. Working recently with agro-industrial planners in a small SE Asian country, we put together proposals for a road-map for industrializing agriculture. A statement concerning agro-producers summarized findings as:

'Working to establish rural communities as service providers for farmers, traders and factories, the key role of farmers groups will be established; and, further, these groups will be captured within contract farming practices that will service trading markets and processing networks'.

The approach to agro-industrialization in this particular case can be explored further should sufficient interest exist.

All strength to those involved with the wider issues of this potentially interesting debate.

Peter Steele


Mohammed Shams Mekky Nagdy Mekky Agricultural Research Center, Egypt
Mohammed Shams Mekky Nagdy Mekky

The main weed control practices available in Egypt is hand hoeing or hand weeding, often exercised in late period after seeding or planting. Generally, at least 20% of the crop yield is lost due to delaying of first weeding. Unfortunately, this problem is not always stressed in working with farmers. They should be made more aware of the need to keep fields weed-free early in the crop life cycle. Small farmers cannot afford the use of selective herbicide, but they are also ignorant of other ways to reduce weed infestations through the application of integrated weed management which include the use of preceding crops in rotation to smother weeds, adequate land preparation for the control of weeds, and intercropping to increase crop density and to suppress weed growth in crop areas. In addition, preventive measures for weed control are poorly practices. Un-cleaned crop seeds, irrigation water and untreated green manure contain huge amounts of weed seeds, which commonly brought into crop area and increase the level of weed infestations. This problem is more acute in newly reclaimed areas in Egypt for example.
Artemisia is a well-known medicinal plant that has been utilized for a number of purposes. The need to reduce chemical inputs into agricultural systems has renewed the interest to use of allelochemical produced by plants in the genus Artemisia (Marco and Barbera, 1990). Many researchers studied the allelopathic effect of crops on weeds have appeared recently such as Artemisia annua, Chen et al, 1991 showed that artemisinin an allelochemechical isolated from Artemisia annua, gave the same level of growth inhibition as 2,4-D and glyphosate in mung bean phaseolus. Lydon, et al (1997), Kil and Yun (1992), Yun and Kil (1992), Duke et al (1987) and Chen and Leather (1990) suggested that artemisinin had potential to be used as natural herbicide, due to the sesquiterpenoid lactone peroxide constituent which can be extracted from annual wormwood (Artemisia annua) where under laboratory and plant residues field studies caused significant inhibition in germination and decreased seedling elongation of receptor plants, redroot pigweed (Amaranthus retroflexus L.), common lambsquarters, soybean and corn, lettuce (Lactuca sativa) and common purslane (Portulaca oleracea L.). Wormwood extract I50 was estimated by 15 mg dry weight/ml for redroot pigweed Mekky (2008). Putnam and DeFrank (1979 and 1983) and White et al (1989) showed that the wee-suppressive activity of several cover crops has been attributed to the release of allelochemical.
The objectives of this investigation was to study the allelopathic effect of aqueous or wormwood extracts by natural white vinegar at 5% and 2.5% acetic acid concentrations on germination of maize as well as biological agent for suppressing species as wild oat, canary grass, dentated duck, redroot pigweed purslane and deccan grass as allelopathic recepters.

Mr. Georges BAZONGO Self Help Africa, Burkina Faso

Le développement agricole pour une sécurité alimentaire effective en Afrique passe nécessairement par l’émergence/dynamisation des coopératives/groupements agricoles ayant des capacités avérées pour s'insérer dans les filières agricoles et prendre leur place dans la chaine des valeurs. mais il faut reconnaître que cela passe par une législation favorable dans nos Etats et une liberté d'organisation effective. Pour ce faire, les acteurs doivent de démarquer de la mise en place de coopératives "acquises" et qui ne vivent que le temps d’existence d'un projet, programme Etatique ou ONG. Cela a été malheureusement le cas en Afrique subsaharienne depuis les indépendances.
Pour remédier afin à cela,
- Il faudra au préalable une bonne campagne d'information sur la législation et aussi la différence entre les coopératives actuelles et celles qui ont existé dans le passé avec leurs corolaires de mauvaises expériences (pas de spécialisation et mauvaise gestion financière et administrative) sur lesquelles on se base pour avancer/corriger.
- les coopératives doivent être mise en place par les structures compétentes de l'Etat avec un processus participatif et démocratique même s'il faut l'accompagnement des autres acteurs tels les ONG et projets de développement pour éviter toute filiation compromettante.
- Enfin, il faut que les acteurs acceptent d'investir pour le renforcement des capacités techniques et organisationnelles de ces coopératives afin de leur donner des compétences pour offrir des services à leurs membres et s’enserrer convenablement dans les filières agricoles.

Chargé des programmes
Self help AFrica - Afrique de l'ouest - Ouagadougou - Burkina Faso

Nishadi Somaratne Sri Lanka
Nishadi  Somaratne

It's very important to discuss this topic, as rural cooperatives have the potential for poverty alleviation and food security. In my experience as a specialist in rural community Development, two main factors impede the progress and maintainability of rural cooperatives:
1) They usually depend on donors or governments and rarely develop to the level of self-reliant rural organizations, because, their stock of collective assets (that has capacity to reinvest in order to make more profits) developed at the end of the project period is too small, as well as their reinvesting capacity (analyzing profitable ventures and ability of risk taking with proactive measures taken against possible risks) is not sufficiently developed during the project. Therefore, carrying a "Strategy for self-sustainability " needs to be a key area in rural cooperative development projects, and this strategy needs to be included with development of more collective asset base for the organization as well as development of capacity for business analysis and risk taking.

2)   Another factor that commonly impede the success of rural cooperatives is, they being isolated in its business operations mostly in their communities and not having resourceful (useful) contacts and networks beyond their community. Therefore, their resource base especially in terms of human and social capital is limited, and it in turn limits the scope of ventures and ability of the cooperatives progressing in a sustainable manner.  Therefore, the projects that focus on development of rural cooperatives need to be having strategies to develop social capital- connections to useful people and networks beyond their community.

Wish you all the best for the discussion
Nishadi Somaratne (PhD)
Consultant (freelance) in Gender, Social Capital, and Rural Community Development

Abbas Khaled INRA Algérie, Algeria

A cette occasion très forte et très significative pour le développement agricole et rural durables, nous avons eu le privilège d'organiser en mars dernier à Sétif (Algérie)une journée nationale sur les coopérative agricoles. D’imminents spécialistes ont rapporté l'histoire de cette forme d'organisation en Algérie, les avantages qu'elle offre, ses performances dans le monde et ont analysé la situation des coopératives agricoles en Algérie. La journée a connu en outre, un riche débat sur la question pour aboutir à des recommandations très intéressantes qui incitent à la mise en oeuvre d'un programme spécial de réhabilitation des nombreuses coopératives en état d'arrêt des activités et de mise à niveau managérial des coopératives en activité. Nous avons aussi mis le doigt sur certains aspects réglementaires et juridiques constituant des blocages notamment au niveau de leur juste application et démontré le bienfait du regroupement des coopératives en fédérations afin de leur permettre d'évoluer hors de leur territoires.... je suis prêt à répondre aux questions des intéressés salutations Khaled Abbas

Chris Cook Nordic Enterprise Trust, United Kingdom
Chris Cook

There are two key tools necessary, I believe.

Firstly, a consensual two-way framework agreement valid both domestically, and across borders. This creates no new organisations, but is simply a framework for self organisation to a common purpose.

I have coined the name 'Nondominium' for such a neutral platform.

Secondly, there is the ability for producers to issue credits which may be cleared and redeemed within such a framework agreement, and to agree with service providers - on a revenue/production sharing basis - how to get products to market.

Using such a collaborative architecture - which requires no change in any law - unnecessary financing and funding costs and other rent-seeking such as compound interest become unnecessary, and stakeholder interests are aligned through creating networked co-operatives of co-operatives.