Posted March 1996
Even a superficial view of the situation in many low-income food deficit countries reveals the existence of a fundamental imbalance in their agricultural policy-making processes. These processes frequently give excessive weight to priorities and needs set by more organized and vocal urban consumer interest groups, such as government salaried workers and organized labour, and not enough to the priorities and needs of rural food producers, particularly small-scale farmers who produce the bulk of domestically consumed food. As is now becoming abundantly clear, if the latter are given the right policy and price incentives, adequate food can be produced and the crisis easily overcome.
In FAO's view, both the cause of and cure for this imbalance is largely organizational. One of the main reason why the concerns of rural food producers in many LIFDCs are not heard in policy making arenas is because they are poorly organized - in both an economic and socio-political sense - and consequently have little voice in shaping government agricultural and rural development policies. To paraphrase the words of sociologist, Robert Putnam, we would assert that rural communities in many developing countries suffer from low levels of modern "social capital", i.e. low levels of "social organization, such as trust, norms, and networks, that improve the efficiency of society by facilitating coordinated actions", an attribute which Putnam regards as a basic prerequisite for fostering democratic development and balanced economic growth (Putnam, 1993).
Quite the opposite appears to be true in most developed countries, where the number of active rural people's organizations, of all types, is much higher. Indeed it is not uncommon to find a typical farmer in Europe or North America to be a member of several rural organizations simultaneously - for example, of a church group, a parent-teachers association, a marketing coop, an electrical coop, a farm supply coop. As Putnam argues, rural people in most advanced countries, with their multitude of inter-linked and overlapping self-help organizational affiliations, have much greater influence in policy making arenas because they are more used cooperating together (through their various self-help networks) to solve these problems than their "cousins" in the South.
Many critics, however, take issue with this assertion, saying that most developing countries already have well-established rural cooperative structures which are supposed to perform this task. Indeed, global statistics on the number of agricultural cooperatives in the Third World and in the transitional economies of Eastern Europe, Russia and China are impressive. For example, the International Cooperative Alliance (ICA) estimates the current number of agricultural cooperatives affiliated to ICA equals 370,490 in 101 countries serving more than 1.8 billion farmers, the vast majority of which are located in Asia. The number of farmer cooperatives in Africa is much smaller, yet still substantial, with roughly 24,000 or 6 percent of the total located in the African region, serving a total population of about 10.4 million organized farmers (COPAC, 1995).
Data on the number of rural people's organizations, especially farmer cooperatives, in the Near East region is sketchy but indicates that their potential is substantial. In Egypt, 5313 multi-purpose cooperatives exist, plus 708 specialized credit cooperatives. Syria reports 4,260 agricultural cooperatives, 198 cooperatives with a membership of 17,839 exist in Jordan and in Morocco, 19.1% of small farmers are members of farmer groups, most of which are cooperative societies (Wassan, 1989). But then, what is the current status of health of all these "cooperatives" and other people's organizations?
The answer is that the overall health of rural people's organizations, especially farmer cooperatives, in developing countries-excluding some Latin American and some more developed Asian countries, such as Korea and Taiwan- is not good, and particularly poor in Africa and the Near East. In fact, cooperatives in most less developed (LDC) and newly industrializing (NIC) countries are undergoing a difficult transition process as they adjust to free market conditions and diminished government intervention and support as a consequence of structural adjustment programmes and market liberalization.
Post-independence governments inherited these modified "cooperative" structures and quickly began to harness them to meet their own ambitious national development plans, or help consolidate their consensus support. To ensure achievement of these objectives, cooperatives were often controlled by government officers, given privileged monopsony or monopoly positions as the sole buyers or sellers of agricultural produce in the local area and used as mechanisms for taxing rural producers to finance national development projects. Donors, often naively, channelled additional credits and funds through these "pseudo-cooperatives" which increased their dominance and dependence on the state. This was particularly so in Africa, but also to some extent, within countries of the Near East region, where excessive government intervention in cooperative affairs is increasingly criticized (COPAC, 1991).
Now this is changing. The debt crisis and the impact of structural adjustment programmes have now changed all that. As H. Munkner, a well-known expert on cooperatives recently stated (Munkner, 1992),
"Structural adjustment programmes introduced in some African countries ... are obliging the state to withdraw from economic and social spheres which have been dominated by public and parastatal institutions for a long time... For co-operative development this means that the period of state-controlled co-operatives...is coming to an end".
"Competition, increased capital costs and inadequate access to credit following structural adjustment measures, hit at the very foundation of cooperative organizations namely their business operations. ...If cooperatives fail as businesses, they will fail in all other respects as well. They will simply disappear. The outlook is harsh indeed-adjust and succeed, or fail and disappear".One would expect a similar scenario developing within many Near East countries.
If we agree that genuine collective self-help organizations, especially those that are based on member initiatives and controlled and financed by them, can play an important role in creating the kind of "social capital" in rural areas that is regarded as a pre-requisite for development, yet recognize, at the same time, that the majority of state-led and subsidized farmer "cooperatives" found in LDCs do not fit this definition, what solutions do we have for changing this situation?
In FAO's view, the solutions to resolving this cooperative crisis are three-fold:
FAO has played an important facilitating role in promoting this reform process. It has assisted member governments in developing new legal policies that encourage rather than inhibit healthy independent rural cooperative growth in a number of developing countries, including Ethiopia, Guinea, Tanzania, Vietnam and India. For instance, FAO collaborated closely with the Cooperative College in Moshi, Tanzania in the testing of a variety of small group- and cooperative-based participatory training approaches helped influence the development of Tanzania's new cooperative law of 1991 which gives greater operational autonomy to cooperatives. FAO is also currently working closely with the Government of Vietnam in the reform of its new cooperative law. Most recently, FAO assisted in the organization of an International Workshop on Cooperative Law in China, in collaboration with the Ministry of Agriculture in December, 1994 in Beijing, the first workshop ever held on this topic in that country.
Improving rural people's organization management. Another focus of FAO technical assistance has been on the re-orientation and re-training of rural people's organization and cooperative managers and government support staff in the use of more participatory, member-driven approaches to cooperative development aiming at the strengthening of the business character of these organizations. An example of recent FAO assistance in this field is the Comprehensive Participatory Training Programme launched with FAO support by the Cooperative College of Tanzania at Moshi. This innovative training programme has resulted in the preparation of a new participatory training framework for teaching cooperative business development which has been based on experience gained within the FAO People's Participation Programme (PPP) project in the same country (see also People's Participation/Resources: Introduction to the People's Participation Programme).
Indeed, FAO's experience gained during the past decade in Africa and Asia in the implementation of People's Participation Programme (PPP) projects in Ghana, Kenya, Lesotho, Tanzania, Sierra Leone, Zambia, Zimbabwe, Sri Lanka, Pakistan and Thailand has provided new insights regarding the advantages of using more participatory "bottom-up" approaches to building rural people's self-help organizations, including farmer cooperatives, but starting with the small informal group as the basic building block. Though this "bottom-up" organization-building process takes more time, field evidence has clearly shown that the organizations formed are far more sustainable and self-reliant than their "top-down" government imposed counterparts (FAO, 1992). Numerous training materials and videos have been developed on related topics of technical concern including: inter-group association performance; small group promotion; strategies for the promotion of self-help organizations of the rural poor; and group enterprise management and are available from FAO upon request.
Since existing accounting and bookkeeping systems for agricultural cooperatives in many African countries are particularly weak and need strengthening, FAO has also recently launched an effort to improve that situation. A survey in Kenya, Uganda, the Gambia and Tanzania, aimed at identifying the main deficiencies of current accounting and bookkeeping methods/techniques in the region has just been completed. This will serve as the first step in developing a more focused technical assistance programme for testing and introducing improved manual as well as PC-based systems of bookkeeping and accounting for use at primary and secondary levels. The results of the survey are now being analysed in order to identify member country technical assistance needs in this field to be dealt with in 1996.
Capital formation in agricultural cooperatives. A 1990 World Bank study of 25 Bank financed rural development projects involving cooperatives noted that "...experience from the state-initiated cooperatives-where member contributions are insignificant and where resources often are brought in from the outside-indicates that members pay little regard to the prudent management of external resources. On the other hand, when members have a significant financial stake in the cooperative society and depend on it for services, they tend to participate more actively in an effort to ensure that the society is operating in an efficient and sustainable manner" (Hussi et al, 1993). The weak capital base of rural cooperatives was also cited as a major problem in recent studies on the cooperative sectors in Morocco and Tunisia (COPAC, 1991).
Typically, member contributions have constituted a limited source of capital for agricultural cooperatives in most LDCs and most continue to rely heavily on outside sources of finance, often at concessional rates from governments. Yet with foreign assistance flows now rapidly declining, this situation is dramatically changing . Agricultural cooperatives are increasingly faced with the dilemma of learning fast how to raise capital on their own, which is turning out to be a painful learning process.
How does one convince cooperative leaders and government bureaucrats- long accustomed to government intervention and largesse- that relying on internal capital (i.e. capital generated from member contributions and retained cooperative business earnings) as the major source of investment capital is the key to cooperative long-term sustainability and success? It is not easy, especially when they may be personally benefiting form such largesse, but fortunately there are many successful agricultural cooperatives in developing countries that can demonstrate the importance of financially self-reliant cooperative business growth.
In 1992, FAO- in collaboration with the Committee for the Promotion and Advancement of Cooperatives (COPAC)- launched a special research programme in India, Kenya and Guatemala with the objective of identifying successful local strategies for capital formation in agricultural cooperatives in these countries. Research activities have now been completed and the results are currently being analysed, in collaboration with a number of institutions, including the World Bank, the Finnish Cooperative Centre, the Institute of Rural Management at Anand, India and the Kenya National Federation of Cooperatives. The aim of this FAO-sponsored applied research effort is to develop an improved set of guidelines for the financing of sustainable agricultural cooperative development in developing regions, based on actual cooperative experience in this field. (See also Analysis: Capital Formation in Agricultural Cooperatives in Developing Countries: Research Issues, Findings and Policy Implications for Cooperatives and Donors.)
It is FAO's view that these are indeed the "worst of times" for agricultural cooperatives and other farmer self-help organizations, yet also the "best of times." The "worst of times" because this transition process will be a painful one. Belts will have to be tightened and self- reliance will have to be emphasised. Yet they are also the "best of times" because they will encourage a return to the basic cooperative values of self-help and collective action upon which the cooperative movement was founded more than 150 years ago.
History has shown time and again, through economic depressions and natural calamities, that genuine cooperation thrives during periods of adversity and difficulty. We at FAO therefore look forward to assisting governments in building more effective rural people's organizations to help achieve sustainable food security goals.
Putnam, R., "Making Democracy Work: Civic Traditions in Modern Italy", Princeton University Press, Princeton, New Jersey, 1993., page 167.
FAO, "The role of the public and private sectors in the provision of agricultural services for small farmers", paper prepared for 4th Session of Near East Regional Economic and Social Policy Commission, 13-17 October, 1991, p. 2.
Committee on Promotion and Advancement of Cooperatives (COPAC) Statistics, Rome, 1995.
Wassan, S. "Organization and Management of Agricultural Service for Small Farmers in the Near East", FAO/ESH, Rome, 1989.
Committee for Promotion and Advancement of Cooperatives (COPAC), "Country Information Note on Tunisia", Rome, 1992; "Country Information Note on Morocco", Rome, 1991.
Munkner, H., "African Co-operatives and the State in the 1990s", in Yearbook of Co-operative Enterprise 1992, Plunkett Foundation, Oxford, 1992 pp. 19-29.
Birgegaard, L. and Genberg, B., "Co-operative Adjustment in a Changing Environment in Sub-Saharan Africa", International Co-operative Alliance, Geneva, 1994., p. 3.
FAO, "Participation in Practice- Lessons from the FAO People's Participation Programme", Rome, 1992.
Hussi, P., Murphy, J., Lindberg, and Brennerman, L., "The Development of Cooperatives and Other Rural Organizations: The Role of the World Bank", World Bank Technical Paper No. 199, the World Bank, Washington, D.C. USA, 1993.
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