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Updated November 1999

E-mail conference
24 September-11 November 1998
Small farmer group associations: Bringing the poor together

FAO experience: SFGA organization and management


Introduction

Proceedings Conference documents

Question 12. Should initial priority be given to internal resource mobilization (e.g., through savings) as the source for SFGA development, or to external resource development?

FAO experience

Our experience shows that initial priority should be given to internal resource mobilization. Focusing initially on member resources is important for several reasons: (1) it is an important "litmus test" of the level of member commitment to the SFGA endeavour; (2) it teaches the habit of saving for SFGA development rather than borrowing for it, i.e., of self-financing SFGA growth; and (3) it builds in an important leadership accountability mechanism, which is "membership ownership stake." When members contribute jointly to a group action or enterprise - regardless of how small that contribution might be - they become "investors" and like any investor become concerned about the proper management of their joint enterprise, since they now have something to lose or to gain.

We have consistently found that small farmer groups with strong savings programmes perform better than those with weak ones and are more sustainable, and we assume that the same will hold true for SFGAs, though more evidence is needed on this point.

An interesting question is whether SFGAs composed of member groups that have strong savings programmes of their own perform better than SFGAs whose member groups have weaker programmes. For example, do member groups with adequate savings at their disposal play a more active role in SFGA decision-making and in the financing of SFGA joint activities? This point needs further research.

Unfortunately, many governments and donors seem to regard external financing at below-market rates as the best and fastest way to stimulate SFGA development, yet we believe that such an approach generally creates dependencies that undermine long-term financial self-reliance and SFGA sustainability. At the same time, some external finance may help. The big questions are: "How much is too little and how much is too much?" and how can that financial assistance be provided in such a way that it strengthens rather than undermines movement towards the financial self-reliance and sustainability of SFGAs.

  • What has been your experience? Or what is your opinion on this matter?


    Question 13. Which methods for internally generating income to meet SFGA running costs seem to be most effective?

    FAO experience

    In the initial stages of SFGA development, the financial costs of running the SFGA may be close to zero, since much will depend on voluntary, in-kind contributions of SFGA members in sacrificing their time, providing a place for meeting, etc. Yet, quickly thereafter, real financial (money) expenses will need to be incurred. They may be small expenses at first, to buy notebooks to record the minutes of SFGA meetings, to finance the travel costs of the SFGA chairperson to the nearest agricultural extension office to obtain critical information on the availability of a new seed variety, or to the local bank to obtain or repay a group or SFGA loan.

    Normally these initial costs are covered by charging each member group some form of membership dues. This can be on an annual or periodic basis. Our experience shows us that the payment of annual membership dues may be harder to enforce. A preferred method seems to be for member groups to pay every time they meet. The amount of dues need not be much but enough to remind them that the perceived benefits of meeting should outweigh the costs (lost time and membership fee and other participation expenses) to the group. If the inter-group meets monthly, then it is recommended that the payment be monthly; if they meet every other month, then two-monthly, etc. Normally, all member groups pay the same amount, whether a rich or poor group; and non-payment is punished by fines and/or eventual expulsion from the SFGA.

    As the SFGA develops and begins to provide services to its member groups, the charging of some form of service fee can be devised to cover part or all of SFGA service delivery costs. Several methods for calculating the fee can be used. Some SFGAs charge a uniform or flat service fee which does not vary with the volume or quantity of service received. This is usually the simplest way, from an accounting perspective, but may not be the fairest. Where SFGA accounting skills are stronger, percentage or proportional rates should probably be charged, with the fee charged based on a percentage of the volume or estimated value of the service provided.

  • What has been your experience? Or what is your opinion on this matter?


    Question 14. How can SFGAs raise capital to finance the development of their business organization?

    FAO experience

    The development of SFGA service or income-generating activities often requires large in-kind (labour, materials) or cash outlays, for example to build a central meeting place or storage facility, to purchase a rice husker or hammer mill, to purchase a theft-proof safe for storing member financial contributions or cash for operations, etc.

    These resources can come from internal or external sources, but our advice would be to emphasize internal means rather than look for external means, for the same reasons as mentioned in Question 11.

    These resources can be mobilized internally by calling on all member groups to voluntarily contribute a certain amount in cash, labour or material equivalent. Since these contributions involve larger outlays than normal, and are used to finance the purchase of physical assets which remain with the SFGA and strengthen its service delivery capacity, some sort of equity or ownership value is attached to them and they are viewed as member group share contributions to the collective enterprise. Ownership is "operationalized" by giving the contributor a right of limited compensation for their share contribution should the member group decide to withdraw from the SFGA. In order to keep accounting simple in new SFGAs, all member groups generally are asked to contribute an equal amount to obtain one "share" in the SFGA enterprise. If a member group cannot afford to make the required share contribution then arrangements are usually made for that group to gradually purchase the share on split payment basis. There are many arrangements possible, each with its pros and cons.

    Internally-generated funds to finance development of SFGA activities can also come from the retained profits of SFGA-sponsored income activities. If, for example, substantial profits are earned from collective marketing activities, then the retained profits of these activities can be used to finance such investments. The sharing and/or re-investment of SFGA profits is a complicated subject and could be an area for extensive discussion in this conference.

    Another avenue which can be pursued for financing development of the SFGA is to rely on external financing sources. There are some advantages to "using other people's money" rather than that belonging to member groups, but there are many dangers, which can threaten SFGA financial self-reliance and long-term sustainability.

  • What has been your experience? Or what is your opinion on this matter?


    Question 15. How can multiple activities be best organized and managed within an SFGA?

    FAO experience

    Similar to small farmer groups, SFGAs normally get involved in providing a variety of services to their member groups. Initially, these services may involve nothing more than simple coordination of group activities in the area, exchange of information and mediating disputes within member groups or between them. But as SFGAs develop, they normally get involved in providing more services.

    A major problem confronting SFGA leaders is how best to manage these multiple activities and how to finance their expansion. Normally, the first step that SFGAs seem to take is the establishment of functional service committees within the SFGA to deal with these services. The leadership of these committees are generally composed of persons particularly interested in the technical area and who are not formal SFGA leaders. Members of the committees also include those farmer group leaders or members especially interested in the service area or viewed as technically competent in that area. This approach towards functional decentralization and broadening the leadership base seems a practical one, though no detailed analysis has yet been done on how it might improve or weaken SFGA performance.

    At an initial stage of development, this approach seems to have been useful in guaranteeing better results, but problems have developed in financing the operation of these various services. For instance, should each SFGA service be able to cover its costs, or should some SFGA services be subsidized by income earned by other services? Certainly the adoption of some form of "cost centre" or "profit centre" accounting method would probably be useful to assess the utility of a particular service.

    One interesting feature of SFGA committee structure in FAO-executed projects has been that it is far more complex and varied in those implemented by Ministry of Agriculture extension services and other rural development service agencies than in those projects implemented by agricultural credit agencies, where the functional specialization tends to focus primarily on credit delivery/receivery matters.

  • What has been your experience? Or what is your opinion on this matter?


    Question 16. Should SFGAs have a set of formal written rules and procedures for governing basic association functions and activities? If so, at what stage of their development?

    FAO experience

    Since SFG members tend to have low literacy levels, the preparation and use of written rules and procedures for governing group decision-making is not that practical; however, where one or more SFG members are literate, then the use of such procedures is usually helpful. Since SFGAs are larger and more complex organizations and since there is a stronger likelihood that some SFGA group representatives and leaders will be literate, some type of uniform rules and procedures - defining the rights and responsibilities of members and leaders, and procedures for holding meetings, electing officers, voting, capitalizing the SFGA, and so forth - are needed. Such written procedures also help in improving the efficiency of meetings, in minimizing disagreements, in ensuring equality of treatment, etc.. Generally, SFGA leadership seems to include at least one or two literate persons. This argues in favour of some system of written rules being instituted after a period of trial and error, but perhaps backed up by memorized or ritualized non-written rules for those who cannot read.

    One way to reinforce such rules and procedures in verbal ways is to develop ways for ritualizing procedures which can strengthened by mnemonic devices (songs, rhymes, rules of thumb, etc.).

    If external promoters of network-building programmes (e.g., government) are interested in promoting a particular form of organization, there may be some argument in developing a model "skeleton" written constitution for new SFGAs that emerge, but such a framework should be a flexible one and networks should be encouraged to innovate and modify or refine this framework to suit the particular needs of their membership.

    What should be the basic elements of such a model constitution (written or oral)? In our view, such a model constitution should include the following as a minimum:

  • What has been your experience? Or what is your opinion on this matter?


    Question 17. What would be the minimum set of reporting, accounting and monitoring and evaluation (M+E) mechanisms needed for ensuring transaction transparency and efficient management of SFGA activities?

    FAO experience

    Reporting and accounting systems can be either written or orally based. Again, the best system will depend on the level of literacy of SFGA leaders and members. Typically some kind of "mixed" system, incorporating both mediums, might work best. The key is that the systems should be easy to maintain, they should promote transparency of SFGA transactions and decision-making and largely focus on improving SFGA services to members and strengthening of SFGA self-reliance and sustainability.

    Maintaining some written records of SFGA meetings is important since they can serve as the institutional memory for decisions reached. The network secretary should therefore be a person with some writing skills. However, for non-literate members to understand and "remember" what was decided and done, it is usually a good idea to ensure that the minutes of the previous meeting are read before each succeeding meeting and members given a chance to correct or reject what has been written down.

    Wherever possible some written accounts should be kept, but they should be kept simple. At a minimum, any such a system of accounts should record: (1) the source, the amount and the utilization of contributed funds, (2) the income and expenses (profit/loss) associated with SFGA business and non-business activities, (3) any amounts receivable and debts payable, (5) member group financial contributions (dues paid and other contributions), together with and some basic record of member group utilization of SFGA services, and (6) utilization of profits/loss. It is important that all members are given frequent opportunities to collectively review the written reports or listen to a verbal presentation of the same.

    Other methods for self-assessing SFGA performance involving non-written techniques should also be devised. One method that has been tried with some success is for the SFGA to decide upon a number of measures of SFGA success - such as member service quality, profitability, self-reliance and sustainability - and to then set up a simple system of relative scores it can achieve for "poor," "below average," "average," "above average" and "outstanding" performance votes. Such a system is far from precise but is usually accurate enough to guide development of the SFGA in its early stages of growth.

  • What has been your experience? Or what is your opinion on this matter?


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