community Development through Cooperative

1. AMBO UNIVERITYSchool of Graduate Studies
InstituteOf CooperativeandDevelopmentStudies
Departmentof RuralDevelopmentandAgriculturalExtension
Program: - MA in DevelopmentStudies
Topic :- seminar on Community Development through Cooperative in Ethiopia
Prepared by: sintayehu chokolu
Id. No. GCDS/0011/07
December , 2015
Ambo, Ethiopia
1

2. 2

3. Table of content
1. Introduction
1.1. Background
1.2. Objectives of the paper
2. Cooperative development in Ethiopia
3. 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
Reference3

4. 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).
4

5. 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).5

6. 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).
6

7. 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 Method
To identify and present and Prepare this seminar Paper,
desktop literature review was conducted from internet,
Journal Articles, library books, and teaching materials,7

8. 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

9. 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.
9

10. 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).10

11. 2.1. Seven Cooperative Principles
1. Voluntary and Open Membership
2. Democratic Member Control
3. Members’ Economic Participation
4. Autonomy and Independence
5. Education, Training, and Information
6. Cooperation among Cooperatives
7. Concern for Community
11

12. 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.
12

13. 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

14. 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.14

15. Employment creation …Model
 According 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

16. 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

17. 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

18. 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).
18

19. 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).19

20. 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

21. 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

22. 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).
22

23. 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

24. 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

25. 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 development
 The 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..
25

26. Cooperative and community principle…
4.1.2. Asset-based community development
 Asset-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.
26

27. 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.27

28. 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.
28

29. 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).29

30. 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.
30

31. 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."
31

32. 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.
32

33. Challenge of Cooperatives in Ethiopia…
6.1. Organizational and Structural Problems
 Members’ 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 Capacity
 It 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.
33

34. Challenge of Cooperatives in Ethiopia…
6.3. Political and Legal
 The 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 Evaluation
 Many 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.
34

35. 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.
35

36. 36

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