This article outlines the specific benefits and workings of Farmer
Cooperatives (also known as Agricultural Cooperatives).
- 2012 has been declared as the International Year of Cooperatives (IYC)
by IFAD, in partnership with the UN Food and Agricultural Organisation and
the World Food Programme[1]
Farmer cooperatives are formal methods of organisation for groups of
farmers within communities, hamlets, or regions. They are operated by local
group members who generally ‘share’ resources and earnings, and work
towards mutual benefits for all members. As such, farmers cooperatives
unify the farms of small-scale producers while each farmer continues to own
her/his land and farm it individually[2]
<http://www.entrepreneurstoolkit.org/index.php?title=Farmer_Cooperatives#cite_note-1>.
As all cooperatives in general, Farmers Cooperatives are voluntary
member-based organisations that exist in every sector of the economy. The
primary objective of all types of Cooperatives is to meet the economic and
social needs of their members. This sets them apart from investor-owned
businesses, which have the primary purpose of maximizing profits for
shareholders. (See more on cooperatives in general here, including the
seven international principles of all co-operatives
<http://www.entrepreneurstoolkit.org/index.php?title=Cooperatives>).
Why form a farmer cooperative?
For small-scale farmers, ensuring household food security or income can be
difficult given the constraints of farm size and access to technical modes
of production - farm sizes of less than two hectares form 85% of all farms
in the world[4]
<http://www.entrepreneurstoolkit.org/index.php?title=Farmer_Cooperatives#cite_note-3>.
Therefore, the establishment of a cooperative is a step towards creating a
viable local enterprise that may have more bargaining and purchasing power
for its members which work towards poverty reduction objectives. As a
group, cooperative members may be able to pay less for agricultural inputs
and take over the processing of products to shorten the chain between the
producer and the consumer.
Furthermore, collective organisation around one issue at the community
level can lead to increased participation in other areas of social
development, such as access to land and land rights claims.
Agricultural cooperatives in rural areas are typically categorised
according to the following activities, sometimes operating within all three
areas:
- a) Production – farms are organised as corporations (the most common
form)
- b) Supply – purchase products, services and inputs for their members
- c) Service – a variety of services related to education, advice and
training
In many developing countries, cooperatives are primarily village-based.
Cooperatives begin at the local (community) level and as they grow, they
can partner with neighbouring cooperatives to expand at the district and
regional levels and advocate further up the chain, increasing political
reach and clout[3]
<http://www.entrepreneurstoolkit.org/index.php?title=Farmer_Cooperatives#cite_note-GEAC-2>.
Mobile financing platforms such as the M-Pesa in Kenya or Smart Cards in
Andhra Pradesh, India, extend banking services to clients via mobile
transfers and accounts; this concept is being scaled-up to include
small-scale insurance packages which can be extended to groups of farmers
[10]
<http://www.entrepreneurstoolkit.org/index.php?title=Farmer_Cooperatives#cite_note-9>.
Risks faced by Farmer Cooperatives
- Increasing market linkages
Increasing market linkages refers to intervening to develop markets for new
agricultural products. The promotion of increased market linkages is a
somewhat controversial topic in development circles primarily because of
price volatility in the markets; this is particularly relevant for
small-scale farmers who are not yet able to diversify their crops or
sources of income and therefore can be more negatively affected by a price
drop (i.e. they may not be able to recoup their investments and/or become
indebted to a creditor). Since access to credit and inputs is essential for
cooperatives, they can also become beholden to multiple micro-lenders and
if there is a poor harvest or market failure, may be unable – even as a
group – to repay money owed (See: Micro-finance page for further
information)[8]
<http://www.entrepreneurstoolkit.org/index.php?title=Farmer_Cooperatives#cite_note-ILO-7>).
- Political and/or Elite Capture
In countries in Latin America and Central Asia, government has had a level
of control over local cooperatives, utilising them as political platforms
and reducing their function to an extension of the state[5]
<http://www.entrepreneurstoolkit.org/index.php?title=Farmer_Cooperatives#cite_note-pinto-4>.
Elite capture refers to individuals or groups who have more power in the
decision-making process and whose interests are given priority within a
community at the expense of less influential groups.
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