Cooperatives can be considered as operating in the semi-formal financial sector. They are not chartered financial institutions but they are empowered or permitted to provide financial services and products. These arrangements generally fall outside the regulation of the banking authorities but operators are usually licensed and supervised by other government agencies, such as the Cooperative Registrar. They regularly have written by-laws, statutes, constitutions or rules of operation. Credit unions and savings and credit cooperatives are voluntary financial organizations owned and operated by members. Their purpose is to encourage savings by creating local deposit facilities and then using the pooled funds to make loans for productive, consumer or social purposes to their members. Primary level credit unions and savings and credit cooperatives are often member-owners of vertically integrated secondary cooperatives which provide them with central banking, trade association and business support services. In some developing countries these secondary institutions are regulated as formal financial sector entities. Multipurpose cooperatives may also provide financial services to their members but do this in conjunction with other services such as input supply or marketing members’ crops. Governments have often been keen to promote cooperatives but to be successful they have to remain private business organizations owned and controlled by the people who use its products, supplies or services.

Library Resources

resource title type year resource
When Microfinance Gets Involved with SMEs: Experience with Cooperatives of Producers Paper 2018

view page
This resource appears in: Cooperatives

The raison d’être of microfinance is to provide access to financial services to those who are excluded from the usual sources. Rapid progress has been made, particularly with very small enterprises in urban areas. But it has to be said that there is still a lot to be done: small and medium-sized enterprises (SMEs) are missing out. 90% of privately-owned companies in Africa are SMEs, but only 10% have access to any funding, making it difficult for them to grow.

Author Olivier Hauglustaine
Publisher SOS Faim
Number of Pages 16 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural & Rural Finance, Access To Finance, SME Finance & Leasing, Microfinance
Related Resources
The Twenty-First Century agricultural cooperative: Increasing the business credibility of smallholders Article 2017 English (en)

view page
This resource appears in: Cooperatives

This essay is part of a special edition being published in partnership with Foreign Affairs, titled “African Farmers in the Digital Age.” This anthology explores the future of African food systems and the role that digital solutions can play in overcoming the isolation of smallholder farmers and speeding up rural development. You can download the article here.

Geographic distance and diseconomies of scale have historically made the cost of doing business with smallholder farmers prohibitively high. Where this problem has been overcome are instances in which public or private sector actors mediate. These firms serve to increase the financial credibility of participating smallholders with input dealers, technology providers, traders, financial services providers, processors, and exporters. I will refer to this role as “business credibility intermediation.”

With the dismantling of parastatals and a dearth of private companies operating in rural areas on a large scale, the future of smallholder agriculture will depend on finding workable alternative approaches to business credibility intermediation. The best candidates to fill the gap in the near future are the large number of smallholder producer organizations that have mushroomed across Africa. Most of these organizations, however, lack the organizational, commercial, and technical capacities to operate effectively.

Modern information and communications technologies (ICT) can enable producer organizations to provide business credibility intermediation both at a lower cost and more effectively for their members. ICT can help overcome the physical, infrastructural, and institutional obstacles facing smallholders, not just with the promise of innovation but first and foremost by reducing costs and ensuring scalability.

The Challenge of integrating African smallholders into agricultural value chains
Increasing globalization presents African smallholders with considerably greater challenges than those faced by Asian producers during the Green Revolution era. African smallholders today need not only to produce more efficiently, but also to contend with far more complex and competitive markets. Growing specialization, rapidly changing consumer preferences, and increasingly intricate technical specifications place significant demands on the average smallholder. With the exception of producers of major traditional and some high-value export commodities, the large majority of African smallholders are isolated from the rest of the agricultural value chain for a variety of reasons, most of which center on their small scale, their geographic isolation, and their lack of capital.

Due to the small scale of production that one household can effectively manage, independent smallholders are unable to realize economies of scale for input procurement and output commercialization. The firms that sell inputs to and buy output from smallholders tend to be significantly larger and better capitalized than the farmer, and do not experience the fragmentation or logistical difficulties associated with agricultural production. When it comes to selling their output, farmers find themselves in a poor negotiating position, and inter-farm competition lowers prices further, relegating many household farmers to subsistence production or migration out of farming.

Inconsistent quality and reliability of smallholders’ output, as well as the costs of assembly, storage, and transport, make financial intermediation complicated and expensive for both farmers and the financial sector. Low productivity and a limited ability to buy and sell reduce the expected rate of return and thus smallholders’ inclination to invest. Small transaction sizes and the dispersion of holdings raise the cost of providing financial services, which in turn raises the cost of capital to those who are inclined.

Compound all of this with a lack of information, unenforceable contracts, and poor physical infrastructure and, operating individually, smallholders are unlikely to generate the demand for financial services necessary to stimulate significant investment by the banking sector. In turn, the banking sector offers a limited range of services that do not meet most smallholders’ needs.

The role of producer organizations in agriculture in developing countries
In Africa, as elsewhere, a plethora of institutional arrangements govern agricultural production , but collective action—increasing scale and market power while retaining independent ownership—is increasingly being recognized as a way for rural smallholders to deal with missing markets or to empower themselves against monopolies or monopsonies. Cooperative producer organizations thus appear to be an essential institution for inclusive agricultural development in rural Africa. In fact, cooperative organizations have been showing consistent growth throughout Africa over the past decade. At the same time, numerous studies show that the role played by collective action organizations in emerging markets remains highly contested). For every success story there seem to be many failures.

A major challenge to the effectiveness of such organizations is their general lack of sufficient customer service and business orientation, which hinders their ability to deal with the commercial and technical issues facing their members. The transformation of producer organizations into market-driven actors that can efficiently provide technical and commercial services to their members and serve as credible business partners will result from the achievement of two objectives: one, organizational maturation and two, market intermediation and technological innovation.

Organizational evolution and maturation
Organizational maturation is reflected in the capacity of producer organizations to apply effective governance and management practices that ensure transparency and accountability. Historically, the organizational evolution of cooperative producer organizations has proven problematic. Practically all cooperatives start on a small scale, with a small number of founders—neighbors, colleagues, and relatives—most often all living in the same small geographical area. Establishing a jointly owned organization entails significant risk by creating mutual dependence; if one or a few members decide to free ride, the entire group suffers. Therefore, the establishment of a producer organization requires a high level of social capital. To run its operations and make the necessary investments for vertical integration, however, a cooperative must build up financial capital. The resource base of cooperatives is the social capital that makes the members willing to supply financial capital.

To stay competitive, cooperatives—like any business—tend to integrate vertically toward the more lucrative and less price-sensitive consumer goods markets, where there are greater possibilities for product differentiation and market segmentation. The strategy of vertical integration is especially resource demanding; the cooperatives need more capital, and the capital must ultimately originate from members. Likewise, cooperatives integrate horizontally, mainly through mergers, to lower costs through economies of scale and scope. However, the shift toward horizontal integration (large-scale operations) tends to create large, heterogeneous memberships. Management becomes increasingly autonomous, with members having less influence on the cooperative’s decision making.

The strategies of vertical and horizontal integration are a way to adapt to the developing market situation, but such market orientation is at odds with the member orientation necessary for cooperatives to succeed. Social networks based on reciprocity and trust appear to be the most essential asset of cooperatives, in comparison to investor-owned firms. Failing cooperatives often characterized by an imbalanced relationship between financial and social capital. From this perspective, social relations within a firm should not just be assessed as a random configuration of human beings but as a concrete resource, the productivity of which depends on the organizational form.

The challenge for producer organizations going forward is to identify the size and level of heterogeneity at which they can maintain a stable base of social capital while generating sufficient financial capital and establishing credibility with business partners.

Market intermediation, financial services, and technology innovation
The transformation process also requires the acquisition of the technical, commercial, and financial resources necessary to meet the needs of the producer organization’s membership and develop into business entities that can serve as credible business partners. Historically, smallholder cooperatives have acquired technical and commercial skills through services provided by public or private organizations. However, even in the first couple of decades after independence, when extension services had their widest coverage and strongest capacities, skill development of smallholder cooperatives had very limited reach either in terms of subsectors involved, topics covered, or both. Hence, very few cooperatives have been able to successfully integrate vertically and enable smallholders to participate in emerging value chains.

Cases of successful integration of smallholders into value chains, however, do exist. In West Africa, for example, smallholders have been able to aggregate and sell groundnut and cotton competitively to global export markets. Common to all cases where smallholders have successfully integrated into value chains is the important role played by third party, public or private sector firms in providing services.

The third party helps negotiate business contracts, facilitate payments, and source technology, as well as access training and other advisory services. Through the partnership between the producer organization and this service provider, smallholders are able to access to improved seeds, fertilizers, pesticides, herbicides, machinery, transport, storage facilities, packaging, and other quality management equipment and infrastructure. In value chains where public or private sector firms have not been operational, such as millet and sorghum or to a lesser extent cassava or maize, yield gaps and dispersion tend to be larger and input use lower, as are the volumes of sales.

It is important to note that the costs for all the services and support provided by public or private third parties are usually paid by the farmers themselves. The role of the public and private entities is largely to signal to other value chain members, through their presence and link to producer organizations, that the associated smallholder farmers are credible partners. Over the last three decades, however, the number of public sector companies providing such services has dwindled to near zero after the dismantling of costly parastatals in the 1980s, and the private sector remains hesitant to expand its presence substantially. The only option to integrate smallholders at scale is to work directly with a critical mass of producer organizations and help them acquire the technical, commercial, and organizational skills and capital they need in order to effectively fulfill the same credibility signaling function, and to enter into their own agreements with technology providers, market operators, processors, and financial services providers. They need to build their own credibility and capacity to serve their membership.

Technical skills will enable producer organizations to:

  • source and apply technologies by working with technology providers; and
  • claim a greater share of the added value through processing by meeting the technical requirements of third party processing firms or mastering the technical operations of their own plants.

Commercial skills will enable producer organizations to:

  • work with financial services providers to meet the capital and insurance needs of their members;
  • strengthen their bargaining positions with traders and exporters; and
  • where possible, competitively expand their participation in trading and export activities.

Organizational skill will enable them to

  • avoid erosion of social capital;
  • achieve the level of governance and coordination required to participate in value chains; and
  • improve the effectiveness and efficiency of service delivery to their members.

The role of ICT in increasing social capital, efficiency, and effectiveness of producer organizations
At the heart of the cost of doing business is the making, monitoring, and enforcing of contracts, processes influenced by the extent of imperfect information involved in any transaction. Central to the economics of a producers’ organization is therefore the cost of acquiring information.

The cost and risk associated with doing business includes coordination cost (the cost incurred in coordinating with units actually or potentially producing an input or purchasing the output), operations risk (stemming from conflicting goals among the parties and supported by information asymmetries or difficulties in enforcing agreements due to differences in bargaining power or incomplete or unenforceable contracts), and opportunism risk (the risk that other parties in the transaction willfully misrepresent or withhold information, shirk their agreed-upon responsibilities, or take advantage of a lack of bargaining power or the loss of bargaining power directly resulting from  the execution of a relationship, that is, a difference between ex ante and ex post bargaining power).

Strategic deployment of ICT could help producer organizations minimize risks by reducing the cost of communicating and reacting to information and of explicit coordination. Increased information availability and information processing capacity reduces operations risk by making monitoring easier and by enabling more efficient incentive structures. ICT investments could lead to more outsourcing and other strategic business partnerships, thus enabling producer organizations to reap the benefits of greater coordination, specialization, and economies of scale.

In the context of a producer organization, efforts to reduce the cost of acquiring information using ICT sometimes take place through the development of a portal. In such cases, mobile-to-web technology can then be used to collect essential data on the business operations of producer organizations (i.e., virtual bookkeeping). Such a portal can increase the transparency of the operations of producer organizations and, if made accessible to banks, for instance, can increase the transparency and credibility of an organization. In addition to the portal, ICT can be applied in a more targeted fashion such as grading and certifying products, delivering technical content, or improving organizational management skills.

A multitude of applications are currently being deployed in many parts of Africa targeting smallholder farmers. A key weakness is that many are targeting an isolated problem for a single segment of a given value chain, often in a specific geography. They offer solutions that are either not replicable or not scalable. Effectively linking farmers, in numbers large enough to make a difference, into modern value chains will require integrated solutions that deal with all major interfaces between smallholders and other value chain actors.

The twenty-first century producer organization can be more than an advocate or marketing body. With modern information and communication technologies at their fingertips, such organizations can upgrade their skills as well as their operations, to offer a comprehensive set of services to their members. With such an intermediary working in their interest, the potential of African smallholders can be harnessed to feed the continent and fuel economic development.

The Twenty-First Century agricultural cooperative: Increasing the business credibility of smallholders  -  English (en)

Alternative Formation of Rural Savings and Credit Cooperatives and Their Implications: Evidence from Ethiopia Paper 2017

view page
This resource appears in: Cooperatives

What is the optimal size and composition of Rural Savings and Credit Cooperatives (RuSACCOs)? With these broader questions in mind, we characterize alternative formation of RuSACCOs and their implications in improving rural households’ access to financial services, including savings, credit and insurance services. We find that some features of RuSACCOs have varying implications for delivering various financial services (savings, credit and insurance). We find that the sizes of RuSACCOs have nonlinear and varying implications across the various financial services that RuSACCOs provide. We also find that compositional heterogeneity among members (including diversity in wealth) improves members’ access to credit, while this has little (no) implication in improving households’ savings behavior. Similarly, strong social cohesion among members is shown to improve households’ access to financial services, particularly savings and credit access. These empirical characterizations suggest that the optimal size and composition of RuSACCOs may vary across the domains of financial services they are meant to provide. These pieces of evidence provide some new insights on how to ensure financial inclusion among smallholders in remote and rural areas, a pressing agenda and priority of policy makers in developing countries, including Ethiopia. The results also provide some insights into rural microfinancing operations and saving cooperatives which are struggling to improve their customers’ saving rates.

Author Kibrom A. Abay; Bethelhem Koru; Gashaw Abate; Guush Berhane
Publisher International Growth Center (IGC)
Number of Pages 44 pp.
Primary Language English (en)
Region / Country Africa
Keywords Rural Cooperatives, size, composition, social cohesion, compositional heterogeneity, wealth diversity
Related Resources
Agriculture : les coopératives africaines gagnent leurs galons Journal Article 2016 French (fr)

view page
This resource appears in: Cooperatives

L'agriculture africaine n'a pas encore fait sa révolution. Industriels, producteurs et pouvoirs publics vantent l'intérêt des coopératives pour professionnaliser et structurer ce secteur clé, premier créateur d'emplois sur le continent. Jeune Afrique a publié un dossier sur son site composé de différents articles sur le sujet.

Sommaire du dossier :

  • Agriculture : quand l’union fait la force des coopératives africaines
  • Coopératives : pourquoi les agriculteurs africains choisissent ce modèle
  • Au Burkina, les producteurs de coton veulent discuter d’égal à égal avec les industriels
  • Banane : comment les planteurs antillais dynamisent la filière ivoirienne
  • Climat – Infographie : des récoltes africaines bien compromises
  • Reportage : en Côte d’Ivoire, Olam se veut au plus près des producteurs d’anacardes
Lien vers le dossier  -  French (fr)

Author Jeune Afrique
Publisher Jeune Afrique
Number of Pages 6
Primary Language French (fr)
Region / Country Global, Africa, Western Africa
Burkina Faso, Côte d'Ivoire
Keywords Cooperatives, Associations de producteurs, Chaînes de valeurs agricoles
Related Resources
Financiamiento de segundo piso- Cooperativa de ahorro y crédito ABACO - Perú Paper 2015

view page
This resource appears in: Cooperatives

Con el fin de propiciar la expansión  de servicios financieros rurales en el Perú la Cooperativa de Ahorro y Crédito ABACO como parte de su estrategia  de crecimiento, diversificación y atención con crédito a nichos subatendidos, desde el año 2005 la cooperativa encargó a su división regional la tarea de desarrollar productos innovadores  de crédito de segundo piso basados en un diagnóstico nacional de demanda a través del cual se identificaron 45 cadenas productivas o cluster de productores, de los cuales 29 son rurales y realizan actividades agropecuarias. Se  diseñaron nuevos productos crediticios de segundo piso para entidades que tienen dificultades en obtener recursos externos que pudieran ser canalizados hacia diferentes clientes y pequeños productores rurales. Con estos nuevos productos financieros, ABACO se convirtió en la única institución privada del sector financiero peruano que financia entidades de primer piso con énfasis en el sector rural.  Con esta estrategia innovadora ABACO contribuye a resolver el déficit de servicios financieros rurales del Perú pero además ha logrado reconocimiento local e internacional y ha despertado el interés de otros organismos y financiadores por expandir y replicar este modelo de financiamiento de segundo piso.

Author Financiamiento de segundo piso- Cooperativa de ahorro y crédito ABACO - Perú
Publisher FOMIN
Number of Pages 23
Primary Language Spanish (es)
Region / Country Global, Americas, South America
Keywords Cooperativa de ahorro y crédito
Related Resources
Role of Cooperatives in Improving Livelihood of Farmers on Sustainable Basis Paper 2015

view page
This resource appears in: Cooperatives

Cooperatives are present in all the countries and in almost all the sectors, including agriculture, food, finance, health care, marketing, insurance & credit. A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise. Agriculture continues to be the engine of economic growth in most developing countries. Strong cooperatives are able to overcome many of the difficulties faced by the farmers; wherein in a country like India 85% are small and marginal farmers. Cooperatives work on the set seven principles, among these principles the seventh principle - Concern for the community derives cooperatives to work for the sustainable development of the community. There are a number of successful cooperatives in India itself like IFFCO (Indian Farmers Fertiliser Cooperative Ltd.) and KRIBHCO (Krishak Bharti Fertiliser Cooperative Ltd.) in the fertiliser sector, the Institution like AMUL in Dairy Sector and Self Help Groups (SHGs) formed by various Institutions have immensely benefitted farmer members in increasing crop productivity and overall income by generating support in various programmes related with agriculture. Suitable Farming Systems to generate year round employment and sustainable income through crops, vegetables, fruits and livestock have been achieved by the members of the cooperatives. Initiative has been taken to go in for Agro Forestry combining plantation of fruit trees, fuel trees, and forest trees to improve the overall climate on wastelands by cooperatives like IFFDC (Indian Farm Forestry Development Cooperative Ltd.). This has helped ecological resilience and rural livelihood enhancement among the community. The farmer members have been immensely benefitted in increasing efficiency of various agri inputs and overall crop productivity and finally making better profit through the efforts of cooperatives.

Financiamiento Productivo Agropecuario de las Cooperativas de Ahorro y Crédito Rural Case Study 2015

view page
This resource appears in: Cooperatives

El documento es un informe de asistencia técnica cuyo objetivo era el de realizar un estudio de las iniciativas de financiamiento productivo agropecuario de cuatro cooperativas de ahorro y crédito rurales con el fin de rescatar aprendizajes y propuestas de trabajo que complementen al nuevo Banco de Desarrollo Rural. El trabajo busca además i) caracterizar las experiencias de financiamiento productivo agropecuario de las cooperativas de ahorro y crédito seleccionadas ii) sistematizar los aprendizajes de la implementación del financiamiento productivo agropecuario desde las cooperativas de ahorro y crédito seleccionadas y iii) elaborar propuestas de potencial complementariedad entre las cooperativas de ahorro y crédito seleccionadas con el nuevo banco de desarrollo rural.

Author Benitez, Manuel
Publisher RIMISP y FIDA
Number of Pages 39
Primary Language Spanish (es)
Region / Country Global, South America
Keywords Financiamiento Productivo, cooperativas
Related Resources
Inclusive Investment in Agriculture: Cooperatives and the role of foreign investment Brief 2014

view page
This resource appears in: Cooperatives

Investment in farmland has been in the spotlight for a number of years, and is increasingly being seen as a series of “land grabs”. However, other types of agricultural investment are more common, such as joint ventures, cooperatives, management contracts, contract farming and outgrower schemes. Although not without their own drawbacks, these business models can be profitable for farmers and investors, while at the same time being socially and politically acceptable—especially by allowing farmers to maintain control over their land, water and other natural resources.

This policy brief focuses on the business model of the cooperative as one that promotes inclusive agricultural investment. It examines the role of investors and governments in supporting the development of cooperatives. Although cooperatives are not without their own challenges, they nevertheless provide a valuable potential avenue for investors and farmers to enter into collaborative partnerships and ensure an equitable distribution of returns.

Author Marina Ruete
Publisher International Institute for Sustainable Development (IISD)
Geneva, Switzerland
Number of Pages 8 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Cooperatives, Investment
Related Resources
New Paradigms of Agricultural Development Cooperation in Africa: Lessons from Brazil and China Brief 2014

view page
This resource appears in: Cooperatives

As Africa attempts to boost agricultural productivity, many countries are turning to Brazil and China for the possibility of alternative approaches and technologies. Both countries have boasted numerous agricultural achievements, and both are increasing their engagements with African partners.

This policy brief will address these similarities and differences by examining the following questions:

1) How does development ‘aid’ differ from ‘cooperation’?

2) How do Brazil and China describe their approaches to development cooperation and in what ways do they see themselves as different to “traditional donors”?

3) How do Brazil and China support African agricultural technology development in practice?

4) What lessons do these approaches offer for the New Alliance partners?

Author Future Agricultures
Publisher Future Agricultures
Number of Pages 12 pp.
Primary Language English (en)
Region / Country Global, Americas, South America, Asia, Eastern Asia
Brazil, China
Keywords Cooperation, Agricultural Development, Investment
Related Resources
Ecuador: cooperativas de ahorro crédito e inclusión financiera Paper 2014

view page
This resource appears in: Cooperatives

El estudio realiza una evaluación de la capacidad de sostenibilidad financiera de las Cooperativas de ahorro y crédito (COACs), mediante el análisis de la evolución de un conjunto de variables explicativas de carácter financiero entre diciembre de 2007 y junio de 2014. El trabajo concluye principalmente que el capital es una primera línea de defensa para proteger los ahorros de los asociados, por lo cual se debería promover su fortalecimiento mediante herramientas de política pública que promuevan la generación de economías de escala, ingresos, fortalecimiento del patrimonio y solvencia. Los autores recomiendan simplificar los procedimientos para el otorgamiento de micro créditos y fortalecer los procesos de educación, cultura y alfabetización financiera y burós de crédito.

Establishing cooperatives for effective community development in rural China Paper 2012 English (en)

view page
This resource appears in: Cooperatives

The article presents the results of participatory monitoring and evaluation of projects which aimed to aid the establishment and development of 24 modern rural cooperatives in Shandan County, Gansu Province, China. The evaluation was designed to assess the economic and community development outcomes of the cooperatives after three years of operation. The data were collected from four cooperatives using surveys, group work, and semi-structured interviews of stakeholders. The evaluations showed that within two years of inception cooperatives were improving social and economic outcomes for members and communities. Improvements for establishing and sustainably operating rural cooperatives are suggested.

Paper  -  English (en)

Credit unions and cooperatives in Fiji: a missed opportunity for financial inclusion Paper 2011

view page
This resource appears in: Cooperatives

This report scrutinizes the sustainability of operations of five large member-based financial institutions in Fiji and their potential to contribute to financial inclusion. It reveals that all institutions have been coping with difficulties resulting from inflexible regulations, a challenging economy, and ineffective governance and management structures. At the same time, these four credit unions and one credit and thrift co-operative have continue to operate and serve members while the majority of financial co-operatives have failed. The report concludes by providing opportunities for these institutions to better serve members and others and in doing so become instruments of financial inclusion.

Cooperatives for staple crop marketing Paper 2010

view page
This resource appears in: Cooperatives

Rural producer organizations, such as farmers’ organizations or rural cooperatives, offer a means for smallholder farmers in developing countries to sell their crops commercially. They hold particular promise for Sub-Saharan Africa, where small-scale farming is the primary livelihood but commercialization of foodcrops is very limited. Using the experience of smallholders in Ethiopia as a case study, this research monograph identifies the benefits of rural producer organizations for small farmers, as well as the conditions under which such organizations most successfully promote smallholder commercialization. The evidence from Ethiopia indicates that they do increase farmers’ profits from crop sales, but that the beneficiaries do not tend to be the poorest smallholders. Moreover, a rural producer organization’s marketing effectiveness is precarious: it can easily diminish if the number or diversity of its members increases or if it provides more nonmarketing services. The authors conclude that these organizations have a role to play in the agricultural development of Sub-Saharan Africa, but that role should be complemented by other programs that directly target the poorest farmers. Further, the effectiveness of rural producer organizations should be preserved by allowing them to follow their own agendas rather than being encouraged to take on nonmarketing activities. The assessment of rural producer organizations presented in this monograph should be a valuable resource for policymakers and researchers concerned with economic development and poverty reduction in Sub-Saharan Africa.

Author Bernard, Tanguy; Spielman, David J.; Seyoum Taffesse, Alemayehu; Gabre-Madhin, Eleni Z.
Publisher International Food Policy Research Institute (IFPRI)
Number of Pages 104 pp.
Primary Language English (en)
Region / Country Global
Keywords Cooperative, Economic Development, Agricultural Marketing
Related Resources
African cooperatives and the financial crisis Paper 2009 English (en)

view page
This resource appears in: Cooperatives

This paper considers how cooperatives, particularly financial cooperatives and cooperatives in the agricultural sector in Africa are managing the current crisis. The paper also provides an analysis of the triggers of the crisis and considers how economies throughout the world are being affected, with attention given to cooperatives in Sub-Saharan Africa.

It is found that cooperatives are being affected by reductions in global demand and volatility in commodity markets, as these factors have potential to undermine the income of members. It is expected that unemployment and the number of people in extreme poverty will increase substantially, with individual producers likely to the worst affected by the financial crisis in Sub-Sahara Africa. Given this context, cooperatives need to closely monitor their operations to ensure that their net worth does not deteriorate.

African cooperatives and the financial crisis  -  English (en)

Innovative Cooperative Training: A Trainer’s Source Book Book 2009

view page
This resource appears in: Cooperatives

This publication aims to change the way we think about training in the cooperative context. It speaks of new organizational and training paradigms. It hopes to introduce innovation in cooperatives through helping trainers become more innovative themselves. It also aims at making a qualitative change in the way the trainer sees him or herself and use that knowledge to dramatically improve training methods. It hopes to build on the competencies that trainers already have and help them develop the “spark” that will really make a difference.

Mixtlan Rural Cooperative, Mexico: Does Being Federated Help Remote Outreach? 2008

view page
This resource appears in: Cooperatives

Cooperatives have long been recognized for their ability to reach rural populations. Legitimate concerns, however, have been raised regarding cooperative performance: Low repayment rates, problematic governance linked to over-subsidization, and domination by local elites, among others. Smaller, more decentralized member owned institutions (MOIs) can face liquidity shortages and demand for more diverse products than local management can handle. In this context, large cooperatives or federations of cooperatives with economies of scale and a stable asset base could be one solution to these concerns. Mixtlan, a rural cooperative within a largely urban federation in Mexico, illustrates this scenario.

In Mexico, there is a trend towards the creation of bigger cooperatives and cooperative federations that reach formalization and scale, through regulation. While this policy is an important step to reduce risk in the sector given past fraud, there are some worries about the viability of remote cooperatives under the new rules. However, Mixtlan case proves that the situation could be different. Mixtlan has shown strong rural outreach that could not have been achieved to the same extent as a savings and credit cooperative (SACCO) on its own.

The “Jardín Azuayo” Savings and Loan Cooperative, Ecuador: A Governance Model for Rural Outreach Case Study 2008

view page
This resource appears in: Cooperatives

The case demonstrates a reversal in the trend of rural siphoning (taking savings from rural areas to finance urban lending) common in Ecuador and elsewhere. Financial management of Jardín Azuayo enables it to transfer surplus resources from offices that have a positive balance from deposits gathered toward offices that have a deficit but that need resources for lending. This has improved JA’s image and trust among members in remote areas. Members report a strong sense of ownership because of the community. Equally important to them is the range of competitive products available including various loan and savings services but also money transfers and more recently, electronic banking.

The case also provides interesting lessons for policy and regulation. Jardín Azuayo is a self-financed cooperative that has successfully moved from a system of selfregulation to prudential supervision by the Superintendency of Banking and Insurance (SBS). It has done so through strong information and reporting systems, standardization and built internal capacity.

Author Rural Finance Network (Red Financiera Rural)
Publisher Coady / Ford Foundation
Number of Pages 30 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Microfinance, Cooperative, Outreach
Related Resources
El mercado de microcrédito productivo rural: comprobación empírica en el sur de Santander Paper 2005

view page
This resource appears in: Cooperatives

El estudio desarrolla un modelo económico en base al cual concluye que el papel económico de las cooperativas como entidades microfinancieras es importante dado que en algunas regiones de Colombia es el único intermediario financiero presente o cercano y por lo tanto su manejo de las microfinanzas en general es muy importante en el desarrollo del área rural. Sus principales fuentes de recursos son los depósitos (tipo micro ahorro) de los asociados y los aportes sociales (micro aportes de capital). El estudio concluye también que las cooperativas rurales de ahorro y crédito de Santander presentan una destacable capacidad de autosostenibilidad financiera.

Author López, Sonia, Peña, Enith/ Pontificia Universidad Javeriana - Facultad de Ciencias
Publisher Pontificia Universidad Javeriana - Facultad de Ciencias
Number of Pages 66
Primary Language Spanish (es)
Region / Country Global
Keywords Microcrédito productivo, Microcrédito rural
Related Resources
Democratic Governance and Member Capital Stakes in Cooperatives Paper 2005

view page
This resource appears in: Cooperatives

This short paper begins by noting that presently governance has been one of the most talked about topics for academics, policy makers, executives, development professionals, corporates, and bilateral and multilateral aid/assistance organisations. It further points out that like many social constructs, governance also has multiple meanings and definitions. This paper attempts to review the literature on democratic governance at the cooperative level and its relationship with members’ capital stakes.

The basic argument set out by the authors is that there is a close positive relationship between the extent of member capital stakes in a cooperative, the extent of member participation in the decision making processes, the quality of services provided by the cooperative and hence their patronage and the performance of the cooperative and member satisfaction.

The hypothesised relationships suggest that if the members have higher capital stake in the cooperative, they are likely to take more interest in the decision making processes influencing the cooperative to provide services that are relevant and useful to the members, which will result in greater patronage of such services. This in turn, it is said, will improve the performance of the cooperative and result in member satisfaction.

The paper provides basic evidence from the literature on Indian Cooperatives, including evidence from dairy cooperatives and from multi-purpose cooperatives. It ends with two strategies for mobilising funds that emerged from an analysis of the cases – the appendix to the paper sets out in details the cases of a cooperative located in a resource poor region (Mulukanoor) and the fund raising strategies of Achanta cooperative.

Author Prathap Reddy, K, Srinivasan, R, Sriram, MS, Raju, KV
Publisher IRMA Silver Jubilee Symposium
Number of Pages 13 pp.
Primary Language English (en)
Region / Country Global
Keywords Governance, Cooperative, Fund-Raising
Related Resources
Member-owned Financial Institutions: Lessons from Uganda and Tanzania 1997-2004 Paper 2005

view page
This resource appears in: Cooperatives

Member-owned financial institutions face three challenges:

  1. effective internal management of the operations,
  2. monitoring and enforcement of loan contracts, and
  3. building mutual trust and relationships with the community by offering their member owners value propositions that can meaningfully translate into improved lives.

The extent to which they meet these challenges is largely determined by a variety of economic, social, and moral incentives and to a lesser extent by the forms of enforcement and penalties that can be created by such institutions. One major issue is to what extent member ownership by itself can bring about meaningful participation, representation, and sound management. This paper combines theoretical reasoning and field evidence collected by the author during the 1997 – 2004 period. The theoretical framework is based on an analysis of economic and social (including moral) incentives that determine institutional and member behaviour. It combines the concepts of financial intermediaries as delegated investors by their depositors, embeddedness of financial transaction and economic behaviour in social relations, collective action and problems of groups, and contract enforcement.

The field evidence is based on the author's work in Uganda and Tanzania with a project which aimed to invest in locally owned member-based organizations known as financial service associations (FSAs). An apex organization would mobilize, establish, train, and supervise the FSAs, which would provide local financial services such as savings and individual loans at a low cost with outreach to the underserved markets and remote areas. The FSAs would raise equity/shares from local members, use inexpensive local human resources for their own management and governance, use locally available information about the borrowers and use the social relations and networks (social capital) to generate the needed trust and cooperation for loan recovery.

The paper gives a very good resumé of how the FSAs work and goes on to review the results in terms of operations - shares, savings and loans; loan repayment, contract enforcement and loan recovery; portfolio diversification and product development; human resources, training and governance; and finally supervision and linkage with the financial sector. In conclusion the author lists fourteen lessons learned, which provide a valuable insight for any promoter of member-owned institutions. Three examples are:

  • The most important determinant of performance is the ability of the member-owned financial institution to offer economic incentives first to the majority of its own staff and then to its members for committing to the institution. Social incentives play an important although secondary role in this regard.
  • To offer the needed economic incentives, the institution must generate a minimum volume of business to generate the needed income. In this regard good business locations perform better while remote areas often perform poorly.
  • FSA borrowers were willing to pay a high interest rate on loans. Surveys showed that interest payments usually represented a small percentage of their cash flow. Over time the income from interest payments covered intermediation costs, risk premiums, and the needed financial incentives.
Computerizing Agricultural Cooperatives: A Practical Guide Guideline 2005

view page
This resource appears in: Cooperatives

This practical guide begins by highlighting that agricultural cooperatives in developing regions are being hit from all sides. They are receiving far less support from government than they have in the past, and with the liberalisation of agricultural markets, many of them are struggling to survive in an increasingly competitive business environment. The guide argues that these changes tend to favour small, decentralised organisations that are able to respond rapidly to the ever-shifting demands of the market.

The guide also notes that in large measure, this transformation is being enforced by the liberalisation and globalisation of markets and the growing use of information and communication technologies (ICTs). It argues that if agricultural cooperatives are to survive, they must learn how to compete and suggests that the immediate advantage of computerisation is the enhanced ability to handle large amounts of information. The introduction of ICTs can facilitate the collection, analysis, storage and reporting of information much faster and more accurately than could be accomplished using manual systems. Furthermore, computerisation can also help cooperative managers streamline operations, cut operating costs, enlarge networks of members and affiliated institutions, increase sales and respond to signals from far away markets.

Yet the guide also points out that the benefits do not come as quickly as might be expected. This is because computerisation also involves changes in work habits and the way people relate to one another; these behavioural and institutional changes cannot easily be predicted or planned for beforehand. The guide argues that they are the result of experimentation and innovation after adoption of the technology, and this can take time.

The purpose of this guide is to assist agricultural cooperatives considering computerisation. It is based upon a review of computerisation experiences in Asia, Africa and South America. The manual is designed for developing country cooperatives that are just starting to consider whether or not or how to computerise – the target audience includes managers, trainers and policy makers with little experience in working with computers.

The guide, which is supplemented with practical examples of how agricultural cooperatives in developing countries tackle computerisation problems, is organised in the following sections:

  • Why should cooperatives computerise? Advantages and risks;
  • The computerisation project: stages of a typical computerisation plan. Things to look for at each stage, advice and suggestions;
  • A case example of a cooperative that designs a computerisation project;
  • Conclusions and recommendations on the application of technologies in cooperatives;
  • Annexes: a glossary, references, a series of checklists, and more details on the case study.
Rural Community Development: Ownership and Functioning Paper 2005

view page
This resource appears in: Cooperatives

The traditional rural areas are the key to any successful development movement in the emerging world. In these countries there are numerous attempts to create rural communities aimed at the promotion of sustainable development of the rural population. This paper will try to learn from some of these attempts, especially in understanding the links between the individual members of these communities and their respective communities.

A special emphasis is given to cooperatives, which in their multi-purpose mode are the initial structure to build up strong rural communities. Understanding what are cooperatives, their advantages and limitations, is an important part of any attempt to succeed in this development. The author gives his interpretation of share capital, surplus value, asset valuation and dealing with reserve funds.

He concludes that when really successful cooperatives are created in the traditional rural areas, they can serve as the basis of the creation and the elaboration and the strengthening of rural communities. Simple multi-purpose societies have the best chance of success.

Community-Based Microfinance Models in East Africa Paper 2004

view page
This resource appears in: Cooperatives

This paper notes that facing increasing competition and market saturation in some urban markets, urban based microfinance institutions (MFIs) slowly start to discover that rural areas offer significant business opportunities. However, the challenges of costs, risks and adaption of products and methodologies, have so far confined the operations of both commercial banks and NGO-type MFIs to the more ‘urban’ segment of rural areas (e.g. market towns, business people).

The paper states that beyond the dominant paradigms of microfinance, concepts and methodologies are being developed that aim to reach the rural poor (especially farmers) in rural villages. This study notes that in East Africa, over the past five to ten years this has resulted in several new or improved ‘models’ for rural, community-based MFIs. In this publication the term Rural Financial Institutions (RFIs) is used to cover a variety of organisational and legal forms: SACCO, Microfinance Association, Financial Services Association etc.

The first part of the paper presents a brief overview of four selected models from Tanzania, Uganda and Kenya:

  • Rural Finance Scheme, Tanzania
  • Dunduliza/DID Model, Tanzania
  • K-REP/FSA Model, Kenya
  • KRC/MFA Model, Uganda

Following on from this, the second part of the publication then focuses on sharing lessons learned in the implementation and promotion of community-based microfinance. Although the lessons drawn up are mainly based on experiences in Tanzania, it is felt that many of the issues, lessons and ‘preconditions for successes’ generated go beyond the specific situation of Tanzania. As such, they should be useful to those involved in the promotion of community-based microfinance initiatives elsewhere.

The topics covered in the second section are:

  • To Be – or Not to Be – a Cooperative?
  • Selection of Communities
  • Economic Potential
  • Radius of Operation
  • Accessibility
  • A Spirit of Voluntarism & Development Vision
  • Role of Local Leaders
  • Role of Local Promoters
  • Governance
  • Election & Capacity of Leaders
  • Transparency, Accountability & Active Participation of Members
  • Image
  • Entry Fees, Share Capital, Savings & Lending
  • Portfolio at Risk
  • Role of a Formal Financial Institution
  • Role & Commitment of the Promoting Agency
  • Planning and Timeframe of Promotion Agency
  • Capacity of the Promoting Agency
  • Material Support by the Promoting Agency
New strategies for mobilizing capital in agricultural service cooperatives Book 2004

view page
This resource appears in: Cooperatives

This booklet produced by the Sustainable Development Department of FAO, looks at the changing cooperative environment and how agricultural service coops face declining financial support from donors and governments and an increasing need to compete in open markets. This trend towards greater independence is creating new opportunities for cooperatives to grow and prosper on their own terms and become viable businesses, serving their members' needs.

Cooperatives can increase the financial returns to their members only through business transactions. Typical transactions include members' delivery of produce to the cooperative for processing or marketing or purchase of inputs and materials from their cooperative. To be competitive cooperatives have to offer efficient services at attractive prices and, therefore, need to find ways to minimise costs or improve service quality.

The booklet goes on to examine the different ways that cooperatives can be funded, with the core sources being directly from members, from retained business surpluses and from outsiders. There is a discussion on which kind of funds are best and guidance is given on how the mobilisation of member funds can be improved, which has the simultaneous benefit of enhancing member involvement and control. A later section looks at innovative capitalization from external sources and the final part focuses on strategies for achieving cooperative self-reliance.

The Cooperative, the Member and the Question of Ownership Paper 2003

view page
This resource appears in: Cooperatives

This short paper attempts to explain that the members of a cooperative and the co-operative itself are one and the same. A co-operative is established by its members and its property belongs proportionally to each individual member. According to the author, the concept of two bodies of property – one belonging to the members, the other belonging to the cooperative – is a contradiction in terms of logic. If the cooperative property does not belong to the members, who does it belong to?

Using examples from Israeli cooperatives, the author illustrates his view of the reality of share capital and how it should be calculated. He explains how to compute the value of a share in membership for a new member and one method of calculating the value of members’ shares after a number of years, taking depreciation into account.

Author Galor, Z.
Number of Pages 6 pp.
Primary Language English (en)
Region / Country Global
Keywords Cooperative Society, Assets
Related Resources
Member-funds and cooperative performance Paper 2002

view page
This resource appears in: Cooperatives

This paper reports on some research into the role of member-funds in multi-purpose cooperatives in the state of Andhra Pradesh, India. The central thesis is that member-funds, both in terms of quantity and quality, can enhance the control members exert on the cooperative. The involvement of members through their capital stake could be at various levels – by the provision of permanent capital, long or short term capital. The researchers expected that each of these would have differing effects on control and on the culture and systems of the cooperative.

The effect on control was expected to directly drive cooperative performance, and indirectly to enhance cooperative performance through greater usage of the cooperative by the members. Enhanced cooperative performance would in turn satisfy members, and the loop would hopefully be completed when satisfied members would place more funds with the cooperative.

The research used data collected from 923 individuals and 30 multi-purpose cooperatives, as well as case-studies of four successful multi-purpose cooperatives. The conclusion was that member-funds have a central role in enhancing cooperative performance. Funds provided voluntarily, either as an outcome of collective cooperative level decision making or of individual level decisions are of particular significance. Externally compelled member funds are less useful, as are short-term member funds.

Rajesh Agrawal is a faculty member in the Finance and Accounting Area of the Indian Institute of Management, Ahmedabad (IIMA); KV Raju is a faculty member and K Prathap Reddy is the Director of the Institute of Rural Management Anand (IRMA). R Srinivasan is Dean (Academics) and Professor of Finance and Control at the Indian Institute of Management Bangalore (IIMB). M S Sriram is a faculty member at the Centre for Management in Agriculture at IIMA.

Cooperative Law Guideline 2002

view page
This resource appears in: Cooperatives

This paper provides a definition of a cooperative society and outlines the fundamental principles of cooperation. It describes the main types of cooperatives, the role of members and the democratic structure of a cooperative. There is a useful review of the different types of general meetings: inaugural, annual and extra-ordinary, with examples of conditions which should pertain to each. The paper continues with an outline of the role of the cooperative committees, particularly the management committee and the control committee, and then explains the financial structure of a typical society. Clear explanations are given regarding share capital and handling a surplus, if one should be created.

This is a concise review of the type of rules which define a normal cooperative and may be useful to someone aiming to establish a cooperative society within the cooperative laws of a country.

Financial technology of small farmer cooperatives ltd. (SFCLs) Case Study 2001

view page
This resource appears in: Cooperatives

Recent studies of the Small Farmer Cooperatives Ltd. (SFCLs) in Nepal have produced a very positive picture of these small, member-based institutions both in terms of impact and viability. This particular paper concentrates on the organisational structure of SFCLs and how they admit new members, how they design their savings, loan and insurance products and and the details of their savings mobilisation and credit delivery processes.

The case study is based on a small sample of the active cooperatives which number more than 100 but the author believes it is extensive enough to give a good idea of the innovative procedures and products they use. Key elements in their success are:

  • SFCLs genuinely live the idea of local ownership
  • a clustered structure is employed through joint liability groups of small farmers at village level, inter-groups at ward level and a main committee at Village Development Committee level.
  • SFCLs use the advantage of being multi-service cooperatives without getting caught in the associated traps.
  • Monthly interest collection, incentives for early repaymnet and penalty rates for late repayment enforce loan discipline.
  • SFCLs receive strong support from the Agricultural Development Bank of Nepal and GTZ.
The Co-op Start Up Manual Toolkit 2001

view page
This resource appears in: Cooperatives

This manual has been designed for people seeking information on the practical ins and outs of forming a cooperative. The manual has three parts. Part 1 contains questions and answers about cooperatives and things to consider before starting and during start-up itself. Part 2 has a number of case studies, including:

  • Peagrowers Coop Ltd.
  • The Watchem Community Coop Ltd.
  • Nullawill Farmers Coop Ltd.

Part 3 covers the issues of business planning and cooperative principles and ideals, plus tips from the experts and a glossary of terms.

Corporate Governance and Management Control in Cooperatives Paper 2000

view page
This resource appears in: Cooperatives

The paper comments that the core element in corporate governance is the mechanism by which owners, in the widest meaning, can effectively supervise the activities of a company and also obtain the largest possible benefits. Furthermore, it is suggested that cooperatives are subject to the same pressures for greater efficiency and change in corporate governance as other enterprises, and for this reason, it is important for cooperatives to consider corporate governance within the framework of their cooperative origins. An effective internal control system will be key for good governance.

The paper begins by noting that corporate governance has been a major economic and managerial question ever since ownership and management in a company were separated. Owner-based policies and emphasis on shareholder value originate in listed companies. However, whilst owner value is defined differently in a cooperative from a listed company, the paper argues that owner-based thinking is highly suitable when considering corporate governance in cooperatives - it notes that a member in a cooperative society normally has full rights and duties of ownership. Furthermore, the goal of a cooperative is to produce the goods and services required y its member-owners.

Nevertheless, cooperatives differ from traditional investor owned companies with respect to their ownership character, goal-setting, methods of financing and profit distribution, and decision making. These differences are said to not only bind members more effectively to the activities and running of the cooperative, but also blur the ownership role and bring to the owners many other interests in addition to the success of the enterprise.

Following a chapter on the background to the debate on corporate governance, chapter 2 discusses the main mechanisms of corporate governance in relation to the special character of cooperatives. The final two chapters then cover the governance of cooperative groups (looking at federal organisations as well as hybrid organisations) and cooperative incentive schemes (covering remuneration of managers and remuneration of non-executives), respectively.

Manual for the Preparation of a Budget for a Cooperative Guideline 1996

view page
This resource appears in: Cooperatives

The preparation of a budget in a cooperative is considered by many cooperative leaders and members as a very difficult task. This manual shows that it is possible for everyone in the cooperative to prepare an annual budget.

The manual is divided into two parts:

  1. The first part deals with a single-purpose cooperative budget. The manual discusses the nature of a cooperative enterprise and shows how to prepare the budget for consumers cooperatives, marketing cooperatives, saving and credit cooperatives and producers cooperatives.
  2. The second part of the manual examines the annual budget of a rural multi-purpose cooperative. It distinguishes the preparation of the budget into three levels:
    • Members level budget
    • Cooperative department level budget
    • General expenses level budget

Complete with numerous examples, typical of Israeli cooperatives, the manual walks through many useful calculations and cash-flow tables. The manual uses a realistic approach to cooperative budget preparation placing importance on the fact that the cooperative is financed by and held accountable to its members.

Author Galor, Zvi
Publisher The International Institute Histadrut
Number of Pages 27 pp.
Primary Language English (en)
Region / Country Global
Keywords Budgeting, Cooperative
Related Resources

Error message

Deprecated function: Array and string offset access syntax with curly braces is deprecated in include_once() (line 20 of /usr/home/cmoyer/public_html/moyerdcs/fao/rflc/cms/includes/

Search Library Resources