Online Reporter
COOPERATIVES have tended to be looked down upon, being seen as something second rate compared to individual or company ownership, yet the cooperative model should be driving a great deal of development, especially in rural areas or where joint ownership of assets is a good idea.
So the revised National Cooperative Societies Development Policy has come at the right time, the goal being to empower smaller producers and to bring them into the sort of prosperity they deserve as part of an upper middle-income country.
One area where cooperatives have proven themselves in several countries is in smaller-scale agriculture.
This goes far beyond common ownership of assets such as tractors or the dairy cool-rooms that small-scale dairy farmers need to share to make it worthwhile for someone to collect their joint daily output.
Cooperatives have played a leading role in moving whole communities, villages if you like, into the next stages of processing the products that come from crop and livestock farming by smallholders. It is here that we start seeing the specialist cheeses, salamis and other traditional products that can earn the cooperative members decent incomes.
The cooperative might own some of the assets used jointly, but more importantly it makes a whole village or similar community big enough on a commercial map for their specialist product to become noticed to a general market. A single small-scale farmer, no matter how talented, is unlikely to make a big enough splash to get the best prices.
A cooperative can combine the marketing, and even hire technical advisors and salespeople, to produce a consistent, but still personalised product, and get it to the markets. Most farmers know that adding value is important but larger-scale farmers can make their decent incomes by simply increasing quantities.
Small-scale farmers do not have that option. They have to add value by increasing quality and looking for ways of processing their output on farm or at least in the village or modest group of villages. These are those specialist products that gain national recognition and in some cases even international markets.
Some of the intended benefits can be obtained by a respectable processing company contracting farmers to grow what is required, or raise the right sort of livestock under contract. But moving up a notch to a cooperative means the members are not seeing the profit of the venture going to a contractor, but being shared members.
There are initial difficulties, mainly in financing, but members of the cooperative can build their own decent credit ratings by showing they are producers who grow quality and who never indulge in side marketing. A cooperative’s credit rating is the sum of those individual credit ratings of members, who generally have to guarantee each other, which not only reduces risk but makes sure that they think seriously about admitting a new member, wanting to make sure that newcomers can meet their standards.
So a cooperative with mutual guarantees starts becoming a customer that a commercial bank or finance house wants on its books. This helps when the seed money usually has to come from special Government funds. But if there is a policy of seeding a cooperative and then, as it reaches commercial viability, getting the banks interested then the seed money can be reinvested in the next start-up.
The same sort of process can be used in urban manufacturing cooperatives. We have already seen conglomerations of skilled people making furniture or other items. They group together to make it easy for their customers to look at what they are doing. But this could be formalised with many advantages.
A cooperative of furniture makers, for example, could probably rent its own premises, a factory floor, and install the necessary fire prevention and safety equipment without waiting for a development agency or local authority to do that. It could also have decent technicians to repair and maintain equipment and even start owning some of the higher priced equipment.
Setting of joint standards and marketing could add considerable value since it would be easier to find potential customers and then assure them of the quality standards. That will raise incomes.
The main result of a growing economy and prosperity is increasing incomes for those in that economy. Whether individuals gain this higher prosperity by working for themselves, setting up a company or joining a cooperative will depend on circumstances.
But cooperatives should be considered as a commercial option, not as some attempt to survive, but rather as a way of gaining a decent income.
