Cooperatives

Research Area Cooperatives

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The majority of farmers in Ethiopia grow food for home consumption. Encouraging farmers to produce more food to sell is one strategy to reduce poverty and increase economic growth. Farmers face high-transaction costs, unstable markets, and vulnerabilities such as weather-related shocks. Identifying a mechanism to resolve these constraints can help nurture commercialization of locally grown food. Collective action organizations, such as agricultural cooperatives, present a model to overcome high-transaction costs and market failures while also providing small-scale farmers with a bridge to engage with the markets.

More and more, governments, NGOs, and the private sector are turning to cooperatives and other collective action organizations to reach farmers and increase agricultural yields. The government of Ethiopia is also promoting cooperatives as part of its “poverty-reduction strategy." As of 2012, there were 43,256 primary cooperatives in Ethiopia, including agricultural and non-ag cooperatives, with membership totaling more than 6.5 million in both rural and urban cooperatives

Cooperatives are uniquely positioned in the farming community and can play a role in the entire value chain from farm to table: from the provision of seeds and fertilizer to the storage of grains, agro- processing and crop marketing, to the provision of financial services such as credit and savings. As such, a farmer’s ability to join and participate in these organizations can greatly impact their livelihood and foster greater commercialization of their crops. Beyond the economic opportunities, these organizations become a community for members to share and gather information.

Even with the benefits that come from joining a cooperative, membership rates throughout Ethiopia are low; though trends show that these numbers are increasing. In 2005, at the national level, only 9 percent of farmers reported that they participated in a cooperative. Survey data from 2012 indicated that the percentage of smallholder farmers who participated in agricultural cooperatives grew to 36 percent. While the percentage varies across the regions (from 51 percent in Tigray to 11 percent in SNNP), membership for both men and women in the country is low.

Researchers have conducted several studies in Ethiopia and found that cooperatives face low profit margins and high administrative costs and are in need of better funding and support. Strengthening cooperatives will help farmer associations function more efficiently to provide essential services to local communities.

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Related Publications

How regular financial audit services are provided to agricultural cooperatives elsewhere: Lessons for Ethiopia

Agricultural cooperatives in EthiopiaResults of the 2012 ATA Baseline Survey

Role of agricultural cooperatives and storage in rural Ethiopia: Results of two surveys