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

John Rouse Italy

The majority of contributions to this final week of discussions seemed to have focused on two main themes: (1) extension and training methodologies aimed at strengthening the profitability and self-reliance of rural producer cooperative businesses and organizations, and (2) new approaches in the use of ICT to promote cooperative business self-reliance and growth.

Extension and training methodologies.

Reema Nanavaty (India) highlighted the case of women agricultural workers in Gujarat, who after years of effort and partnering with SEWA and professionals from the Research Station of Gujarat Agriculture University finally succeeded in establishing a successful and profitable tree growers business cooperative

Danilo Beloglavec (Retired FAO Officer) in his contribution emphasized the importance of the human element in cooperative business success, arguing that cooperative trainers need to not only focus on strengthening the individual business management capacities of members but also educate them in how to identify and select leaders and managers based on their business and collective decision-making skills and motivation, and ensure they are adequately compensated for their performance.

Olivia Muza (Zimbabwe) added that cooperatives trainers and extensionists need to adopt a complete “value chain” approach to building cooperative business self-reliance but with a strong emphasis on promoting rural member savings.

Lisa Kitinoja (USA) provided the most comprehensive case study of the use of a value chain business approach to strengthening rural producer organization self-reliance. She did so by highlighting the successful USAID-CARE funded Agricultural Export for Rural Income (AERI) Project in Egypt. According to the report she attached, the aim of this multi-million dollar pilot project has been to enable research and extension staff, partnering with private sector firms and farmer associations, to assist small farmers in supplying on a profitable basis key markets in the European Union. According to the author of one report, several factors led to the capacity building project’s success:

•    Research and extension first focused on identifying high-value export crop market niches in European Union countries, including the food quality standards, input requirements, processing, storage and transport standards for each of those niches

•    Farmer training concentrated providing farmer association members and leaders with a comprehensive understanding of the roles and responsibilities of all players at each level of the international supply chain and then comparing alternative supply chains for supplying specific markets with different products.

•    The introduction of contractual instruments that allow the selected farmer associations (FAs) to contract with one or more exporters, and in turn to contract with each of its members.

Food for the Cities multi-disciplinary initiative Secretariat (FAO, Italy) emphasizes that capacity building efforts should not just focus on rural cooperatives and producer organizations, but also build the capacities of urban and peri-urban agricultural producers, many of them women, who are engaged in the production of high-value perishable agricultural products for the domestic and international markets.

The use of new information and communications technologies to improve coop and farmer access to market information, to facilitate social capital building and to improve coop business info systems.

Michael Riggs (FAO Italy) provides convincing case study information on a wide range of successful initiatives focusing on use of new Information and Communication Technologies (ICT) to improve rural cooperative business profitability and governance. Especially worth examining is the World Bank’s “ICT in Agriculture Sourcebook” that Riggs attaches to his contribution. The sourcebook provides a mass of new case studies on how appropriate ICT technologies can improve cooperative and rural producer organization business performance and self-reliance. Interestingly included in the sourcebook is mention given to an FAO funded project in Kenya implemented in collaboration with the Department of Cooperatives that resulted in the successful computerization of the Tulaga Dairy Cooperative and provided the basis for the development of an FAO guidelines manual on cooperative computerization. Also worth mentioning is the successful introduction of the FrontierSMS system in El Salvador, China and Indonesia which involves the establishment of computer-mobile phone networks in farmer associations. These networks help link farmer association members together and provide them with up-to-date SMS-based information on market prices, product shipment and delivery dates, meetings dates, etc.

Closing participant comment on the online discussion

Edwin Tamasese (Samoa) who happens to work out a brilliant closing comment for this online discussion on enabling rural cooperative and producer organization and self-reliance. Tamasese argues that the most important feature of successful and self-reliant cooperatives is that they are formed from the outset to address a common member business need. We two facilitators completely agree with him on this point. Much too often cooperatives get formed from the top-down and for political reasons rather than common economic need reasons. Yes, pooling resources together is an effective method for ensuring financial self-reliance independence and sustainability, but the key factor according to him is creating a group vision where the individual member identifies his or her personal business benefits in a forum that creates group business benefits. Tamasese says that he is currently doing this with several groups in Samoa. We wish him good luck in his work and thank him.

Facilitators closing comments

The over 50 interventions made during the three week duration of the online discussion on enabling the development of more self-reliant cooperative businesses and producer organizations highlighted a number of important sub-themes, namely:

•    The promotion of increased rural savings and cooperative capital. Several participants mentioned the importance of strengthening the internal savings capacities of individual rural cooperative members and encouraging them to collectively invest more in their cooperative business. It is the view of the two facilitators that more case studies of successful methods of member rural savings and cooperative capital formation need to be conducted to better understand which methods and mechanisms are the most productive.

•    Almost all participants highlighted the need to further strengthen cooperative member business and cooperative business management capacities aimed at improving business profits and sustainability. The underlying principle that should guide the capacity building process is that cooperatives are businesses and their sustainability and operational autonomy depend on the ability to earn a profit and invest part of it to finance business growth.

•    There was considerable discussion on how to efficiently deliver cooperative business management training and skill development services to cooperative members and managers. Three skill areas that should receive greater emphasis in cooperative business training programs include: improved strategies for mobilizing member capital to finance cooperative business growth; the advantages and disadvantages of using new ICT technologies to collect and monitor business cooperative performance.

•    The pros and cons of vertical integration of cooperative business structures within or alongside existing agricultural product value chains was also discussed. However, there was consensus that most successful vertically integrated cooperative businesses were built slowly from the bottom up and not from the top down.

•    Virtually all participants seemed to favor the introduction of new laws and policies that give value to and encourage the mobilization of cooperative member capital and savings to strengthen cooperative self-reliance. One participant suggested that one of the best ways to ensure greater rural cooperatives self-reliance would be to require both donor and governments providing aid to cooperatives to monitor recipient cooperative progress towards technical and financial self-reliance.

•    Participants presented a number of useful case studies on allegedly successful cooperative business development. However, no clear verifiable evidence was presented on the degree to which these cooperatives had achieved technical and financial self-sufficiency.

•    Another popular topic discussed was the potential role that ICT technologies could play in strengthening rural cooperative business self-reliance. Of particular interest was the presentation of the World Bank guidelines manual on ICT in Agriculture and its specific mention of two cases: one involving the development of a PC-based mobile phone-network for collecting and quickly disseminating market price and supply price. The other involving an FAO-supported pilot project that succeeded in computerizing a Kenyan dairy cooperative in Tulaga. The Facilitators might add that the experience gained from the implementation of this latter pilot project served as an important input in the development of FAO’s own guidelines manual on cooperative computerization.

In closing we would like to thank all of the participants for their useful comments on topic of how to promote increased rural cooperative and producer organization self-reliance and hope that you have found our facilitation of the discussions stimulating. One thing for sure is that it has generated a number of questions and recommendations regarding follow-up to the conference that we would like FAO and its member governments to consider:

A list of questions

Do cooperatives deserve special taxation treatment (e.g. tax exemption, capital injections) by the state/government or should they be treated as ordinarily?

Should coop principles to be strictly observed or can some flexibility contribute to business efficiency? In this respect, we should emphasize that in addition to formal cooperatives we consider all forms of member owned and controlled self-help rural economic organizations “cooperatives” in a broader sense.

Rural cooperative businesses suffer from a range of problems hindering business efficiency and sustainability as pointed out in the discussions: poor organization and management capabilities, problems in accessing national and international markets, dependence on donors (the typical “when the project is closed the cooperative also disappears), isolation in own communities, lack of capital, lack of consistence product quality and supply, lack of entrepreneurial thinking and capacities of farmers, too small size of cooperatives and lack of integration into larger associations/secondary cooperatives. How can these broad issues affecting cooperative self-reliance be more effectively addressed by outsiders without creating more dependence on external support?

How can the new ICT technologies be used to strengthen member access to agricultural and other information, to improve cooperative business accounting systems and to forge working links with other rural and urban organizations and private sector agencies active in rural areas?

Our final recommendations

To member governments:

There are many more successful cases of self-reliant and sustainable rural cooperative business enterprises in developing countries that meet the eye. More objective case studies of these cooperatives need to be done so that government, donors and NGO agencies promoting cooperatives gain a better understanding of the key internal (member capitalization, business management and member governance) and external (legal, policy, financial and extension and training) conditions that have influenced that success.

Financial and technical aid to cooperatives and rural producer organizations should be tied to the assisted cooperative’s achievement of well-defined, measurable self-sufficiency indicators.

ICT can help bridge communication gaps. Appropriate ICT is the answer.

Proposals for FAO:

Given the need to provide technical advice and field assistance to FAO member countries on how to create a more vibrant, self-reliant and sustainable network of independent farmer organizations to support more equitable and sustainable rural development, FAO should give serious consideration to establishing a special technical unit on cooperative and producer organization development staffed with experienced personnel in the field of cooperative business and producer organization development. To that end, FAO should urgently re-establish one or two full-time positions for officers in charge of cooperative development and reorganize some kind of cooperative unit/team.

FAO should devote resources (capital and human) to become once again an authority in agricultural/rural cooperative development.

FAO’s approach should be down-to-earth, realistic and practical. The organization should not enter into high-level academic discussions on principles and definitions, it should focus on the selection and promotion of tangible, efficient and sustainable business solutions for and training cooperatives and other rural self-help organizations.

To start with, FAO should carry out a stocktaking action on what it had done in the past and what it has to build upon in terms of ideas, programmes, projects, guides, training materials, etc.

Based on the above a draft - at least medium-term – cooperative development programme/work plan/road map should be prepared for discussion, revision and approval at an international workshop with the participation of all potential collaborating partners, counterparts, cooperative practitioners and experts.

John Rouse and Janos Juhasz