Community Development Through Cooperative in Ethiopia

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AMBO UNIVERITY School of Graduate Studies Institute Of Cooperative and Development Studies Department of Rural Development and Agricultural Extension Program: - MA in Development Studies Topic :- seminar on Community Development through Cooperative in Ethiopia Prepared by: sintayehu chokolu Id. No. GCDS/0011/07 December , 2015 Ambo, Ethiopia 1

Transcript of Community Development Through Cooperative in Ethiopia

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AMBO UNIVERITY School of Graduate Studies

Institute Of Cooperative and Development Studies Department of Rural Development and Agricultural Extension

Program: - MA in Development Studies

Topic :- seminar on Community Development through Cooperative in Ethiopia

Prepared by: sintayehu chokolu Id. No. GCDS/0011/07

December , 2015 Ambo, Ethiopia

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Table of content 1. Introduction 1.1. Background1.2. Objectives of the paper2. Cooperative development in Ethiopia3. Contribution of cooperative for community Development

3.1. Economic contribution 3.2. Social contribution 3.3. Technological and Political contribution 3.4. The Role of Cooperative Organizations on the Rural Community

Development 3.5. Agricultural cooperative and community development 3.6.Cooperatives and socio economic development in Ethiopia

4. Cooperative and community development principles 4.1. Cooperative and community development paradigms.4.2. Strengths of the Cooperative Model

5. Implication of cooperative for future community Development. 6. Challenge of Cooperatives in Ethiopia Conclusion Reference 3

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1. Introduction 1.1. Background

Cooperative organizations all over the world are instruments of social and economic transformation (Ijere, 1992).

However, there is an emerging consensus among many actors, including the United Nations (UN), the International Labour Organization (ILO), the International Cooperative Alliance (ICA) and the European Union (EU), that the cooperative enterprise is one of the few forms of organization that meet all dimensions of poverty.

cooperatives have the advantages of identifying economic opportunities for the poor; empowering the disadvantaged to defend their interests; and providing security to the poor by allowing them to convert individual risks into collective risks (Wanyama, 2008).

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Introduction…By integrating the poor and the relatively well-off

in the same income generating opportunities, cooperatives are also contributing to the reduction of exclusion and inequality (Birchall, 2004; 2003; ILO/ICA, 2003).

The cooperative form of organizing a business enterprise assures any group of individuals an effective means to combine their resources and permits a larger resource mobilization than that within the capacity of most individuals and small enterprises.

It is a catalyst for local entrepreneurial growth; cooperatives retain within the communities in which they operate the capital that they mobilize there, as well as surplus derived from outside transactions, both accumulating for further entrepreneurial development(UN, 1996).

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Introduction…According to Gertler cooperative societies are

practical vehicles for cooperation and collective action as well as build and reinforce community, which are crucial to sustainable development.

Uma (1981) wrote that traditionally cooperatives were expected to serve a broad set of socio-political and economic objectives ranging from self-help and grassroots participation to welfare and distribution‘.

Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity (UN, 2011).

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1.2. Objectives of the paper

The objectives of these papers are:-To analysis the contribution of cooperative for

community development.To identify how cooperative principles apply to

community development principles.To know implication of cooperative for future

community development. Material and MethodTo identify and present and Prepare this seminar

Paper, desktop literature review was conducted from internet, Journal Articles, library books, and teaching materials,7

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2. Cooperative development in Ethiopia

Ethiopia have got a very long social history of working together to fulfill their socio-economic needs; Agriculture, Trade and Military Operations were carried out through cooperative efforts(FCA,2007).

The Federal Government of Ethiopia has identified Cooperative form of business organizations as an instrument of socio-economic change particularly to achieve food security.

In Ethiopia there are three well known traditional cooperatives or self-help groups.

1. Edir: - is one of the traditional forms of cooperatives still operating almost in all parts of Ethiopia, urban and rural. It help to offer assist financially and labor with the deceased family member to overcome difficulties arise due to occurrence of death in members family. 8

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Cooperative development in Ethiopia…

2.  Ekub: is other form of traditional cooperative and a financial form of traditional cooperative formed voluntarily and a rotating saving and credit type association whose members make regular contributions to a revolving loan fund.

3. Debo/ Wenfal/ Lefenty: is a system of farmer’s cooperation during the time of farming, weeding, harvesting, trashing, and house construction etc. It does not have a system of administration like the other form of associations; it is based on equivalent labour or material contribution (Ox) by each farmer.

Modern forms of cooperatives were first introduced in Ethiopia in 1960. The new cooperative movement in Ethiopia was triggered by reforms made to the socio-political system.

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Cooperative development in Ethiopia… A proclamation No. 147/ 1998 to provide for the

establishment of cooperative societies had been also declared by the Federal Government to bring all types of cooperative societies under one umbrella.

Definition A cooperative is an autonomous association of

people united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.

Cooperative Society” means a society established by individuals on voluntary basis to collectively solve their economic and social problems and to democratically manage (ICA, 2003).

While community development is a group of people in a community reaching a decision to initiate a social action process to change their economic, social, cultural and environmental situation Christenson et. al.(1989).

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2.1. Seven Cooperative Principles

1. Voluntary and Open Membership 2. Democratic Member Control3. Members’ Economic Participation4. Autonomy and Independence5. Education, Training, and

Information6. Cooperation among Cooperatives7. Concern for Community

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2.2. Types of Cooperative Organizations

The following are some of the types of cooperative organization

1. Agricultural Cooperative Societies;2. Housing Cooperative Societies;3. Industrial and Artisans Producers’ Cooperative

Societies;4. Consumers Cooperative Societies;5. Savings and credit Cooperative Societies;6. Fishery Cooperative Societies;7. Mining Cooperative Societies.

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3. Contribution of cooperative for community Development

3.1. Economic contribution 3.1.1. Wealth Creation

According to Birchall (2003) cooperatives began by enabling people to raise themselves above poverty, but later they became a means by which low and middle income people continued to accumulate economic advantages.

Nembhard (2002) says that successful cooperative businesses create wealth and help their members accumulate wealth.13

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3.1.2. Employment creation (income generation )

Employment opportunities are provided by cooperative organizations to the teeming population of the rural populace which helped greatly towards Socio –Economic development of both urban and rural areas (Ibrahim, 2001). Cooperatives create employment opportunities in three different ways;-

1. They offer direct wage employment to people:-who work in primary and secondary cooperatives as well as in governmental cooperative support institutions (e.g. ministries, departments, cooperative colleges, etc.).

2.Cooperatives offer self-employment to members:-whose participation in the economic activities that they make possible substantially guarantees a decent income.

3. Cooperatives also indirectly employ through the spillover effects of their activities on non-members:- whose income-generating activities are only viable through the transactions they have with, as well as opportunities created by, cooperative ventures.

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Employment creation …ModelAccording to FCA (2008a), cooperatives also support

the self employment of 115,079 members.For instance, Adi’a Liban Farmers’ Cooperative

Society employed 70 permanent staff in 2007 and paid a total of ETB 225,600 (USD 24,442) in salaries.

Kenteri Primary Cooperative Society of the Jimma district of Oromia employed nine permanent staffs and paid a total of ETB 42,300 (USD 4,583) in salaries during 2007. It also employed 51 casual workers for 83 days that amounted to a total wage bill of ETB 24,271 (USD 2,630).

Hunde Challa Rural Saving and Credit of Lode Itossa in Arsi Zone of Oromia employed five permanent staff and had no casual workers.15

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3.1.3.Resource mobilization and capital formation by cooperatives

cooperatives mobilized some local resources such as human and financial by promoting the participation of local people in development, and by pulling their small resources together for better use. Besides, they also have attracted resources from elsewhere outside the locality in the form of loan, donation and other means.

Furthermore, it can promote investment in social infrastructures such as roads, health centers, schools, and other socio-economic institutions, that are basic in attracting more resources (investment) either locally and/or from elsewhere for local development(Nyamwasa, 2007). 16

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3.2. Social contribution 3.2.1. Educational centers

Cooperatives are serving as educational centers for members (Nyamwasa, 2007).

It is also significant to note that cooperatives participate in health promotion campaigns.

In Ethiopia there are five cooperative unions in Oromia region have established HIV/AIDS clubs for raising awareness about the disease and enhancing the use of prevention and control measures to reduce its spread among members.

This effort has created a forum for exchanging experiences with people living with HIV/AIDS as well as disseminating information on the disease through the distribution of translated manuals provided by the ILO (Lemma, 2007).17

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Social contribution…

3.2.2. social services In many countries, cooperatives are substantial providers

of social protection, especially health coverage. In Ethiopia, all cooperatives are required to allocate 1-5%

of their profit to a social fund that is used to provide basic social services and develop communal infrastructure such as roads, schools, health clinics or watering points.

It also provides school uniforms and other educational materials to 250 orphans annually.

In the same spirit, Dibandiba Primary Cooperative Society made a contribution of 7,500 Ethiopian Birr towards the construction of a watering point and the purchase of chairs at a local primary school in 2005 (Lemma, 2007).

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Social contribution…3.2.3.social protection

Cooperatives in Ethiopia give a wide range of an implicit social protection to their members. They collect products from their members at fair prices during harvest time, when prices usually fall drastically. Produce is then sold when prices recover.

This reduces the vulnerability of the producers to exploitation from traders, and thus provides an implicit insurance for the cooperative members, which means that the value of their produce will not fall below an acceptable limit.

The other form of social protection that cooperatives offer to their members includes lending money when their members face unexpected expenses. These financial services protect cooperative members from selling their productive assets. SACCOs are effectively working in these case (FCA 2008b).

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3.3. Technological and Political contribution 3.3.1. Technology adaptation and transfer Model The Edget Seed Production and Marketing (ESPM) Union is the first

formal cooperative of its kind in Ethiopia. The union has 15 primary seed production and marketing cooperative members that operate in three Silte zone woredas (Silti, Lafro, and Sankura) and three woredas in Guraghe zone of the SNNP (Sodo, Marako and Meskana), with six and nine cooperatives, respectively.

These 15 cooperatives established the union in 2009 for the purpose of facilitating their access to input services and seed marketing and production.

The NGO Self Help Africa (SHA) also played a key role in supporting the establishment cooperatives’ union. Farmers’ marketing cooperative roles encompass:

(i) improving the bargaining power of member farmers in grain marketing;

(ii) procuring and providing inputs and services at lower costs; and (iii) promoting modern agricultural technologies along with members’

education and training ( Dawit Alemu ,2011).20

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3.3.2. Women Empowerment

Cooperatives have been successful in not only increasing social participation of women but also in developing drives, initiatives and leadership qualities (USAID, 2005).

women more than 80% of the respondents are involved in farm activity and only 5% are engaged in paid work. 90% of the respondents have joined their cooperatives to access financial sources and improve their bargaining power (Aregawi ,etal, 2012).

Women Associations at the Grass root level have facilitated access for the rural poor, particularly women, to available services and inputs for rural development.21

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3.4. The Role of Cooperative Organizations on the Rural Community Development

Agricultural cooperatives play an important role in food production and distribution, and in supporting long-term food security (Pollet, 2009).

Cooperative tend to be locally owned and transfer the benefits of that ownership to the local community, this potentially generates a greater economic impact than business that are not locally owned and which distribute the benefits of ownership outside the community where business is conducted.(Crooks,2004).

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3.6.Cooperatives and socio economic development

A large number of cooperatives in Ethiopia participate in marketing of agricultural inputs and produce (Bernard et al., 2007).

Cooperatives provide marketing options for the members and non-members, though the members receive higher prices for their produce. Cooperative unions are involved in export and domestic marketing activities, financial transactions and social capital development.

The economic role of cooperatives is significant in terms of foreign currency earning for Ethiopia.

For instance, four unions (Oromia, Yirga-Chefe, Sidama and Yeka-Chaka coffee farmers’ unions) have generated a total USD 104,154,838 by exporting 36,593.36 tones of coffee between 2000-2007/08.23

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Cooperatives and socio economic…This was equivalent to 0.9 per cent of Ethiopian GDP in

2006 (CSA, 2006). The major services delivered by cooperative unions to primary cooperatives include the following.

1. Cooperative unions import agricultural inputs, such as fertilizer, seeds and chemicals, and distribute these inputs to members at reasonable prices.

2. Some cooperative unions provide machinery renting services to cooperative members in order to introduce modern farming techniques at lower rental prices.(Lume Adama Grain Farmers Cooperative Union in Oromia)

3. Other services cooperative unions provide to members include transportation of produce, storage of produce, credit, and facilitation of training to primary cooperatives.(Geda Livestock Marketing Cooperatives Union in Oromia and coffee cooperative unions) (CSA, 2006). 24

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4. Cooperative and community development principles

It also possible to examine the potential for cooperatives as a strategy under three contemporary community development paradigms:

4.1. Cooperative and community development paradigms.4.1.1. Self-help community developmentThe self-help model places community members at the core of a

development process with two goals: to improve the quality of life within the community , to increase the community’s internal capacity to create further

change by institutionalizing the community development process and

primarily to meet their own needs. working together to meet collectively the needs of the community. (Christenson 1989; Flora, Flora, and Fey 2004; Green and Haines 2002; Littrall and Hobbs

1989;Walzer and Merrett 2002; Zeuli et al. 2005;) Wilkinson and Quarter 1996..

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Cooperative and community principle…4.1.2. Asset-based community developmentAsset-based development starts from an assessment of a

community’s resources and thinking about how to mobilize those resources for the benefit of the community (Green and Haines 2002; Shaffer, Deller, and Marcouiller 2004).

A community’s assets include the human, social, physical, financial, and environmental, or taken together what Green and Haines (2002) call “community capital.” By virtue of being locally developed, locally owned and locally controlled, cooperatives clearly build on a community’s human capital, social capital, and financial capital.

The cooperative contribution to human capital development (education, skills, and experience) may be its most substantial community development impact.

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Cooperative and community Principle…4.1.3. Self-development“The objective of self-development

efforts is to gain control of the local economy by the community.

Self development efforts operate for the benefit of the whole community while promoting the collective management and ownership of the enterprises” (Shaffer, Deller and Marcouiller 2004).

In general, since cooperative owners are also community residents, they are acting rationally.

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4.2. Strengths of the Cooperative Model

Community Interest: From a local development perspective, a critical feature of the cooperative model is that it can be owned and controlled by community residents.

Flexible Profit Objectives: are set by their members and often focus on providing services rather than on maximizing overall profit for the business.

Financial Advantages: Cooperatives are eligible to apply for loans and grants from a number of federal and state agencies designed to support cooperative development.

Finally, cooperatives may also be able to take advantage of lower labor costs, as members may be willing to contribute labor instead of capital as a form of investment in their business.

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5. Implication of cooperative for future community Development.

5.1. Cooperatives as a Community Development Strategy

According, Quebec International Summit of cooperatives(2014) the cooperative's relationship with the local community has an important role, such as promoting the economic and social well-being of members, stimulating community participation and also contributing to improve the population's quality of life.

cooperatives are widely seen to have potential to impact on development and poverty reduction (Birchall, 2008).

DFID (2010), for example, argue that cooperatives make an important contribution to sustained economic growth and to making markets function better for poor people (DFID, 2010).

Several studies argue cooperatives not only directly benefit their members, but also have positive effects for the rest of society (UN 2009).

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Implication of cooperative for future…5.2.The cooperative as

development partner • Co-operatives can play

important role in linking the local community (the members) with different development actors.

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Implication of cooperative for future…5.3. Cooperatives as Poverty Reduction strategy • Research evidence on Heterogeneous

impacts of cooperatives on smallholders, shows that the majority of farmers in Ethiopia grow food for home consumption and encouraging farmers to produce more food to sell is one strategy to reduce poverty and increase economic growth (Tanguy Bernard, et.al).

The government of Ethiopia is also promoting cooperatives as part of its “poverty-reduction strategy."

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6. Challenge of Cooperatives in Ethiopia

Some transient problems have confronted the agricultural cooperatives in Ethiopia. Such as: financial constraints, transportation problems, shortage of skilled manpower, delay in provision of supplies like fertilizer, improved seed etc (Mekonnen Gebre, 1992).

Currently the government of Ethiopia is encouraging and supporting the establishment of cooperatives in various spheres of the counter’s economy. As a result, the cooperative movements is expanding, diversifying and growing at a rapid speed.

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Challenge of Cooperatives in Ethiopia…6.1. Organizational and Structural ProblemsMembers’ awareness is a precondition for

organizing a cooperative. Many cooperatives in Ethiopia are multi-purpose cooperatives with limited means. Unfortunately, government has very limited personnel and other resources to conduct awareness creation activities (Ibid).

6.2. Resources and CapacityIt faced difficulties to mobilize financial

resources from the members and they living in a unstable condition and they can’t contribute considerably to build infrastructural facilities for the cooperatives.

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Challenge of Cooperatives in Ethiopia…6.3. Political and LegalThe concept of the people to accept cooperatives as

an economic alternative was affected due to the political interference in the affairs of cooperatives and delay in settlement of disputes.

The cooperative proclamation gives clear direction and guidelines to run a cooperative as an autonomous association. But it is not reached to the people fully yet (ibid).

6.4. Monitoring and EvaluationMany cooperative employees are not having adequate

training to maintain their accounts property. Cooperatives need supervision, inspection and audit

at regular intervals in order to ensure the members of the board and the employees work properly or not.

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Conclusion

Cooperatives are community based, rooted in democracy, flexible, and have participatory involvement, which makes them well suited for economic development.

The process of developing and sustaining a cooperative involves the processes of developing and promoting community spirit, identity and social organization as cooperatives play an increasingly important role worldwide in poverty reduction, facilitating job creation, economic growth and social development.

They contribute to sustainable human development and have an important role to play in combating social exclusion.

Generally, Cooperatives contribute in at least five ways:-reducing market failures, stabilizing the economy, to keeping the production of goods and services close to the needs of the people that they serve, adopt a long term perspective, as they often become productive assets for the communities in which they operate and contribute to a fairer distribution of income.

Thus the promotion of cooperatives should be considered as one of the pillars of national and international economic and social development.

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THANK YOUFOR YOUR

ATTENTION!!!

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