Cooperatives - A purpose beyond the profit

It’s the last hours of the last day of the 4th global meeting of the Farmers’ Forum, and you would think that the energy of the participants would be running low. I am happy to tell you that this was not the case of the side event on the International Year of Cooperatives (IYC). The meeting room was full of chatter and energy, and simultaneous translations were being done in every corner. We were there to discuss cooperative enterprises, and their role in transforming smallholder agriculture into profitable business. Most importantly we were there to listen to and learn from the experiences of three representatives from cooperatives in Armenia, Cambodia and Kenya:

• Mr. Vardan Hambardzumyan, President of Federation of Agricultural Associations (FAA), Armenia
• Mr. Pan Sopheap, Executive Director of Farmer and Nature Net (FNN), Cambodia
• Mr. Philip Kiriro, President Eastern Africa Farmers Federation (EAFF), Kenya

Why cooperatives, why now?

The United Nations (UN) has declared 2012, as the International year of Cooperatives (IYC). Nora Ourabah Haddad from the Food and Agriculture Organization of the United Nations (FAO) opened the conversation and told us that the IYC has been one of the most popular UN years with a support from over 90 countries. The Rome based UN-agencies have joined forces to promote agricultural cooperatives throughout the IYC and beyond. Nora started her presentation by underlining the definition of a cooperative:

“A cooperative is an autonomous association of women and men, united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.” (International labour organization recommendation 193)

It is important to stress the definition, since the terminology might not be familiar to everyone, and cooperatives may have different meanings in different contexts. An agricultural cooperative is an important platform for rural development because of its financial and social dimensions. The panellists were asked to elaborate on two important aspects of cooperatives: What makes cooperatives viable? And how do you build ownership of the cooperative among its members?

What makes cooperatives viable?

Mr Hambardzumyan said that services offered by cooperatives to their members is one of the main factors of making cooperatives viable. The services need to be targeted and benefiting the members. He said: “The cooperative is a tool in our hand to solve our problems”. Financial turnover is another factor that is of key importance to make a cooperative viable.

Mr Sopheap continued on the same note and said that empowering members to help themselves is one important aspect. He then went on to say that making a profit is also essential, and to allocate a collective fund so that the cooperative can sustain itself. Additionally Mr Kiriro emphasized the importance of having the right policy framework and support to make cooperatives become strategic business partners. Leadership at political level is another relevant and important factor.

In other words, empowerment, policies and profit are key elements in making the cooperatives self-sufficient and viable.

How do you build ownership of a cooperative?

This leads us to the next question that was posed to the panellists, how do you make the members feel real ownership of the cooperative? Building ownership of a cooperative is important. If a cooperative is to live up to its definition it needs to: Be supported by its members and embrace voluntary membership paradigm. It also needs to have grassroots support and to be democratically governed.

Mr Sopheap suggested three key elements to make sure cooperatives and their members are in sync: First of all, introduce the cooperative’s principles to members, make sure everyone knows and understands them. Second, build the members’ trust. The members need to trust that they will benefit from the cooperative. Last but not the least, create an institutional collective fund.

The need for training and resources

The need for capacity building was something that came up several times in the discussion. Training is needed for members of cooperatives and for stakeholders. A representative from the International Labour Organization (ILO) presented the My.coop training package. This package is freely available online and has many learning programmes. My.coop is designed for managers and members of cooperatives, as well as organisations and individuals that train agricultural cooperatives. Its objective is to enable people to address challenges specific to cooperatives in market oriented agricultural development. Try it out!

What came out loud and clear from listening to the experience of the participants was the power and potential of cooperatives in rural development. Cooperatives can help people help themselves and give a voice to poor rural people. During the event new connections were made, and experiences and challenges shared. A conversation with multiple stakeholders started that hopefully will carry on throughout the IYC and beyond.

Read more about how IFAD work with rural institutions and cooperatives:

http://www.ifad.org/english/institutions/index.htm

Rural organizations in focus for the International Year of Cooperatives

Written by Sarah Hessel

In 2012 the United Nations celebrates the International Year of Cooperatives. As important partners for the International Fund for Agricultural Development (IFAD), cooperatives are helping to improve the lives of millions of smallholder farmers and their families. On the occasion of the International Year, Tom Anyonge and Monica Romano , who are leading IFAD’s work with cooperatives, offer a background brief on the organizations of rural people:

What opportunities do cooperatives offer to poor rural people?
IFAD has been supporting formal and informal rural organizations, which include cooperatives, for many years. And still, as the Rural Poverty Report 2011 highlights, there is a continued need to strengthen the collective capabilities of rural people for several reasons. They give people confidence, security and power – all valuable attributes in overcoming poverty. Worldwide cooperatives provide 100 million jobs. They enable small-scale producers to access market opportunities and information, and services such as technologies, credit and training. Cooperatives facilitate small producers’ participation in decision making at all levels. Cooperatives support secure land-use rights and help negotiate better terms for engagement in contract farming as well as better prices for agricultural inputs such as seeds, fertilizer and equipment. They also represent a powerful means of supporting marginalized groups, such as youth and women. The Smallholder and Community Services Development Project in Kenya or the tea cooperative in Rwanda are good examples of how members are empowered economically and socially, creating sustainable rural employment through business models that are more resilient to economic and environmental shocks.

Why are cooperatives important for IFAD’s work and what opportunities does the thematic year offer IFAD?
One of IFAD’s objectives is to facilitate poor rural people’s access to services and build their capacity to influence the policies and institutions that affect their lives. Cooperatives are an important vehicle to reach these objectives. This is why we place a lot of emphasis on rural agricultural cooperatives and will continue to enhance our work with them.

The International Year of Cooperatives is a good opportunity to promote engagement with cooperatives and strengthen smallholder farmers on a larger scale. Together with the Rome-based United Nations agencies, the Food and Agriculture Organization (FAO) and the World Food Programme (WFP), IFAD will act as a driving force during the year to raise awareness of the potential role of agricultural cooperatives in increasing benefit streams to rural women and men. In addition, we will support the strengthening of existing networks and assist policy makers to create enabling environments that allow agricultural cooperatives to evolve.

How do you think the International Year of Cooperatives will change the way United Nations agencies and International Non-Governmental Organisations (INGOs) see cooperatives in planning their programmes?
The International Year of Cooperatives raises awareness about the central role that rural organizations, and cooperatives in particular, play in reducing poverty and increasing food security, hence putting this topic on the top of the planning agenda of both policy makers and development practitioners. In partnership with our sister organizations in Rome, we work to reinforce the commitment of United Nations agencies, development organizations and INGOs to put farmers and peoples’ cooperatives in the centre of their planning processes and programmes.

Cooperatives are owned and controlled by their members. Is this bottom-up structure a challenge to effective decision making?
In our work with rural cooperatives we have experienced that they actually represent the views and interests of poor rural people far more effectively than any outside party. However, it is also true that effective, transparent and accountable decision-making processes can be a challenge for them. These processes require full ownership by the members – the poor rural people themselves – including pragmatic leadership and sound management. We work to build the capacity of cooperatives so that they become effective and sustainable and represent the needs of poor rural people.


Suggested reading:
Agricultural Cooperatives: Paving the way for food security and rural development

Agricultural cooperatives are key to reduce hunger and poverty

Managing for impact: learning from successes and failures

The East and Southern Africa (ESA) annual workshop focusing on managing for impact kicked off on 14 November in Arusha, Tanzania. The event brings together 200 participants from 17 countries. 

This is a special event on many fronts. To start with, the participants warmly welcomed colleagues from South Sudan. Secondly, they bid farewell to Ides de Willebois, who is moving on to lead the West and Central Africa division.  And last but not least, this is a unique event because for the first time, participants have embraced moving away their from traditional way of doing workshops and have embraced knowledge sharing methods.

Ides de Willebois in his opening remarks reiterated the fact this is a learning and sharing event. “Without learning and sharing we cannot improve and we cannot have impact”. He also went on to say that “we need to have a better understanding of what we do, so that we can do it better.”

In concluding his remarks, de Willebois mentioned that he is planning to start an exchange visit between East and Southern Africa and West and Central Africa. “I hope that West and Central Africa colleagues will join next year’s annual event, so that they can learn from your experience”. 

Breaking the mould

Whenever you decide to innovate or break away from business as usual, there is some apprehension. You feel gratified when breaking the mould ends up being successful and resonates with the expectations. And this is exactly what happened at the ESA event.

It was so refreshing to see 200+ participants embrace knowledge sharing methods such as openspace, spectogramme and world cafe type discussions. Thanks to these participatory methods, they started to mingle, bond and in no time they got to know each other.  

In the process, they heard many stories, including one about how ESA implementation workshops evolved from a being top-down loan administration events to more learning events owned and organized by the projects.

The majestic mount Kilimanjaro and the Kalali women dairy cooperative

As a child, when school was  over, I would be counting the days so that I could join my grandmother in Mount Damavand. Damavand is Persia’s tallest mountain in the Alborz mountain range. Grandma had these wonderful stories about mount Everest, the far way mount Fuji and then a majestic mountain in Africa - mount Kilimanjaro. 

I was intrigued by mount Kilimanjaro, because as a I child I found it difficult to fathom that Africa had mountains. So, on Monday when we had to sign-up for the field trips, I could not believe that finally I would be able to see this far far away mountain.

Unfortunately the majestic mount Kilimanjaro decided to remain pretty veiled and the clouds did not cooperate. But nonetheless, seeing it was an emotional moment and brought back many fond childhood memories.

We then moved on to visit the Kalali women dairy cooperative. This cooperative is part of the Agricultural Sector Development Programme where IFAD is investing loan funds in supplementing financing to the nationwide development programme, to counteract the depletion of the initial funds committed by development partners as part of a basket fund arrangement.

The cooperative is located in Machame division, Hai district in Kilimanjaro region. Inspired by a local daily community business, this cooperative was established with 132 members in 1988. The cooperative’s goal is to:

• increase income of poor rural households, particularly women in the area through a number of different income generating activities
• improve lives of orphans and provide assistance to poor families who were unable to provide education and sound nutrition for their children

“To get going the cooperative members contributed 1000 shillings each and payed a membership fee of 50 shillings,” explained Nancy Manasseh Kidin, the cooperative’s chairperson.

Considering their scarce income, these monies were paid in 4 installments. The cooperative started with 8 dairy cows. In 1995 they had 41 dairy cows.

Considering the vital role women play in rural societies, the cooperative decided that women headed-households were the ones to receive the cows.  They agreed that the person who receives the cow for a period of seven months would:

• give one litre of milk a day to the orphanage
• give the calves to other women headed-household and members of the cooperative 

As a result in a short time, 24 women who had signed up to this deal managed to provide dairy cows to 117 cooperative members.

Today the cooperative has a total of 260 members.

Diversifying activities

These industrious women used their income to diversify their business. In the 90s they bought themselves a milling machine.

“We provided milling service in the local market and expanded our business by buying a container to store the maize”, said Kidin.

“We also used the profits from the milling business to buy seeds.”

In 1993, they went one step further and bought themselves an electric machine and donated their diesel operated milling machine to another women group.

With the profit from their milling business they bought feed for the cows.

A terrible blow

They had a flourishing business, produced milk in abundance and sold this to a company in Arusha, thinking that a company is a reliable partner.

“We failed to ask for the money upfront and the company failed to pay us 12,000,000 schillings”, said Kidin.

This was a terrible blow for them. The community lost confidence in cooperatives and felt let down.

This mishap taught the cooperative an important lesson: never accept an “IOU”, always finish a transaction, sell, get your money and go on.

Despite this set back, they managed to back on their feet, thanks to the generous contribution of Italians.

A new door opens: dairy processing 

The Italians provided them processing instruments and that is how they started making butter and cheese.

Today they produce:

• 400-800 litres of milk a day
• 10-20kg of cheese per day
• 50-95 packs of butter per week
• 400-600 packs of yogurt per week

They keep track of their daily production and make some impressive graphs without using Excel. They also have a sophisticated booking keeping practice.

They package their products and have a registered trademark. “We sell the dairy products at Moshi, to grocery stores, to hotels and send our cheese and butter all the way to Zanzibar”, explains a proud Kidin.

The cooperative has the necessary certification to package its product, however, they are faced with the challenge of not having adequate technical support. This means they are unable to take their business to the next step and benefit from industry’s best practice.

One thing that we observed was the BEST BEFORE DATE on their products. Without exception their products seem to have a shelf life of one year!!!!

Kidin shared with us that the cooperative aspires to be able to:

• procure large 50 litre metal containers to store the milk instead of using plastic containers
• avail themselves of technical expertise and training so that their products are of high quality meet regional standards, have bar codes and can compete with Kenyan products
• have access to veterinary service
• have access to East African Community Market and get packaging machinery 
• have all the women of the community become members of the cooperative
• become a renown cooperative both inside and outside Tanzania

In conducting their business, the cooperative has learnt the importance of:

• providing thorough and in depth training to the machine operators, so that they do not only know how to operate the machine, but also maintain it properly
• understanding the market demand and their potential competitors
• doing a good market search before buying equipment and better understanding what is needed and how a piece of equipment can help them 

Expanding the business and facing new challenges

With a relatively good income from their dairy business, the cooperative bought a sunflower oil pressing machine and started a savings credit cooperative (SACCOS).

The SACCOS has 375 members and started with a capital of 3.2million schillings.

The older women of the community put their savings in the SACCOS and the more business oriented women use the SACCOS to get a loan. The loans have an interest rate of 3%.

Kidin shares with us that the SACCOS are faced with two challenges:

• underpayment
• corruption

This has led to a loss of 22 million schillings.  This loss made the community understand the importance of choosing right people as SACCOS board members. They now know that a board member:

• needs to be a trusted member of the community
• one who understands the ins and outs of the business and entire process
• one who has knowledge of financial management so that they can play a supervisory role, detect collusion and immediately take corrective actions

Investing in health and eduction of young people

The community is committed to provide education for the children and young people - especially to orphaned children and those from less advantaged families.

They use their profits to send children from disadvantaged families to school and are also assisted by Italians who are sponsoring a number of children and putting them through school.

Their vision is that every child has to go to school.

Their sustained programme of investing in education of their children is one of their great successes. Thanks to this initiative many young people have successfully finished school, obtained their degree and now serve as accountants, agriculture specialists, engineers and health workers.

Many have heard of WFP’s school feeding programme. Well, the Kalali women dairy cooperative runs a similar programme - they support school feeding by providing one glass of milk per class. 

The cooperative challenges

Kidin shared with us the cooperative challenges: 

• continuous power cuts which lasts days
• lack of access to adequate and state of the art machinery for packaging and conservation so that they are able to compete in the  market
• lack of access to technical expertise to take the business to its next level
• lack of local talents and expertise
• lack of access to appropriate equipment for conservation
• high taxation and cumbersome regulations
• competition with Kenyan products

The cooperatives aspirations

Kidin and the cooperative members aspire to:

• have all women in the area become members of the cooperative
• give dividends to all the members and not just provide contributions in kind
• create more employment opportunities
• send all children to school
• expand the sunflower pressing business
• innovate and continuously provide new services to the community
• provide capacity building
• build technical and leadership skills and groom local talents
• set up a milk bar so that community members understand that there are other options to drinking alcohol
• do more follow-ups and have a better feel what you can realistically achieve 
• develop robust business plans

We cannot but wish this group of hardworking and resilient women the best of luck. They are a great example of how when a community takes development in their hands, despite set back, they are able to move on and bring about change. I am sure the Kalali women dairy cooperative will go from success to success and manage to fulfill all their aspirations and be a model for many more women.

Recognizing the importance of rural institutions to socio-economic development: 2012 The International Year of Cooperatives.

2012 has been declared by the United Nations (UN) as the International Year of Cooperatives. However, it all starts today on the 31st October, when the year is officially launched at the UN Headquarters in New York.

At the launch the UN Food and Agriculture Organization (FAO), the International Fund for Agricultural Development (IFAD) and the World Food Programme (WFP) will host a side event that focuses on agricultural cooperatives and their importance for food security. The event will be webcast and you can tune in at 1.15 pm (GMT -4).

Cooperatives are business enterprises owned and controlled by the members they serve. The difference between cooperatives and other types of businesses lies in the importance of keeping the balance between pursuing profit and meeting the interests of the community and their members. According to ILO cooperatives provide 100 million jobs worldwide. Agricultural cooperatives are important in supporting small agricultural producers and marginalized groups because they create sustainable rural employment, and they facilitate access to markets, food and productive assets. They also help them influence policy and decision making.

For the International Year of Cooperatives and beyond, the three Rome-based United Nations agencies (FAO, IFAD and WFP) will continue to raise awareness and support rural institutions, farmer and producer associations, and cooperatives.

For more information: Agricultural Cooperatives: Paving the way for Food Security and Rural Development.

Photo credit: ©IFAD/Radhika Chalasani

Learning Route on Gender and Microfinance-Uganda

Learning for empowerment !!!! by Maria Fernanda Arraes

Our third stop was in Kyarumba, Kasese District on the foothills of Ruwenzori to visit the Bukonzo Joint Cooperative Microfinance Ltd. This was an excellent case to learn about their good practices, mainly in skills development for microfinance services. We were able to see new approaches in microfinance gender sensitive services and adaptions of the products to the communities’ reality. It was clear that women have fewer resources for accessing financial products and this has always constrained them from building assets and satisfying their financial needs. There is need to tailor the products and services to meet their needs.

Bukonzo Joint Cooperative has offered products to its members that range from savings, loans and investment building on the savings made which act as collateral. The loans offered are for buying coffee cherries during coffee season, payment of children’s schoolfees and buying scholastic materials, money for small businesses and investment in these other economic activitis.

To understand the products and services as well as delivery methodology used by Bukonzo Joint Cooperative and the changes at the communiy and household livelihoods, we spend one full day with them... We were overwhelmed by the warm welcome the community gave us: traditional, joyful music performed by the friendly, ever smiling women was just the beginning. This was followed by a wonderful taste of their very own organically grown coffee.

The introduction was great, we were invited to pick a friend (one visitor, one host) in order to break the language barriers, the host taught us how to use symbols to introduce themselves. The day’s agenda in symbols was all planned by them and presented based on a picture drawn in detail with a lot of curious symbols.

Based on their experience, they told us about their main issues and their main activities, in the community, group and individual levels. They expressed the role of men and women in the economic activities, the income and outcome of these activities and many other details about their situation. They shared their vision and all the steps that they planned to achieve these ideas, all expressed through colorful and structured pictures!

This way, we could know about some women individual lifestories, and also their visions and dreams: plans of building a house, the reduction of family violence, or the opportunity for their children to receive education. We saw that they had clear ideas how to achieve these goals and the necessary steps to do it, like diversifying their economic activities, accessing new markets and becoming part of the decisions in their cooperative and in the community.

Given the high illiteracy rate among the community members, the Bokonzo Cooperative could help them to really improve their skills using the pictorial methodology. The trainers told us that the most of the trainings have focused on having women issues at the forefront, however the realization of the training focus on women is counterproductive as the men became hostile. So, they recommend that all trainings should incorporate issues of both sexes and involve all family.

The women’s abilities to express their stories and visions about life through pictures has been built up with the extension staff for 12 months. Improving the method while practicing, the Cooperative seeks to educate its members in the importance of individual and business savings. Finally, they could achieve many of these objectives through an empowerment process based on a learning process, a lot of effort, work and agriculture and small business loans to members offered by their cooperative.

Generally the women are the biggest target of microfinance institutions because the lack to financial services and because they are consider more responsible and better financial managers. This experience shows us that the microfinance products can be more adapted to the rural communities needs, gender sensitive and based in families and rural communities’ dynamics, involving men and women and given then opportunities to understand the role of each. It can permit changes in the social inequities.

If you want to know more about these issues, please joint us in this journey... we´re going to our next stop in Iganga to learn from the Farmers Association and their experience with the Village Savings Loans.