For years, development projects have emphasized the strategy of organizing smallholder farmers into producer organizations and co-operatives in order to increase their bargaining power in the market and empower individual producers through a commonly-owned enterprise. This seemingly logical strategy is often encouraged by development projects without thoroughly understanding the challenges such co-operative formation and support creates.
Several challenges for very poor smallholders operating in co-operatives:
1. Co-operative groups are challenged in interacting with the market.
2. There is a lack of understanding by the development project of the realities and perceptions of co-operatives within their country's contexts.
3. There are general management challenges.
4. There is limited member participation.
5. Co-operative members do not support the co-operative contracts with market actors.
6. The circumstances and profile of co-operative members provides operational challenges.
7. Co-operative members side-sell or sell to channels outside of the co-operative.
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Examples from the Field
Co-operative members prepare for their Savings & Lending Group meeting
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Selling to External Market Channels - UgandaThe Global Communities’ co-operative development program, Developing Economic Strengthening Interventions for Group Production (DESIGN), in Uganda, has been trying to understand the reason that co-operative members often sell to channels outside of the co-operative. The project-supported co-operative, Kyeizooba Twimkye Cooperative Society, had 245 members in 2015, yet only 97 members sold their harvested beans through the co-operative. The DESIGN team has been consulting closely with the co-operative board and the entire membership to discuss ways to improve patronage. The DESIGN team learned that the lack of funds to pay farmers upon delivery was a key reason why farmers did not sell through the co-operative; this reasoning is strengthened by the fact that harvest periods coincide with periods of other costs, requiring cash. At the co-operative level, beans are held in storage, waiting for the price in beans to rise in the market, meaning that members are not paid until the beans are sold. In response, the DESIGN team will introduce the Internal Savings and Lending Group (ISLG) methodology to the co-operative, which will help the members access funding during the marketing season.
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Reducing Side-Selling - RwandaThe Global Communities' co-operative development program, Enabling Market Integration through Rural Group Empowerment (EMIRGE), in Rwanda, has been working to reduce side-selling through the introduction of a membership production register, in which every member is registered, along with their expected and achieved production quantities. If there are any differences between expected and achieved production volumes - particularly if they are lower than expected - it is then explained. Failure of an explanation would lead to the concerned member being penalized by being charged amounts equal to the difference. As a result, EMIRGE has seen a reduction in side-selling.
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Lack of Transparency - RwandaA membership satisfaction survey report in the Global Communities' co-operative development program, EMIRGE, in Rwanda, concluded, “there was discontentment with the manner with which funds were spent in a number of co-operatives. Thirty-five percent of the respondents did not know whether or not their co-operative had taken out a loan while about sixty-one percent were unsatisfied with the loan’s management”.
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Distrust of Co-operative Structure - UgandaThe Global Communities’ co-operative development program, DESIGN, in Uganda, still faces challenges of trust around the co-operative structure after an essential nationwide collapse of co-operatives decades ago.
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