WOLLEGA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS

THE IMPACT OF FARMERS COOPERATIVE ON THE LIVELIHOOD OF

HOUSEHOLDS (IN CASE OF AIRA WOREDA)

RESEARCH PROPOSAL SUMITTED TO DEPARTMENT OF ECONOMICS PRESENTED

IN PARTIAL FULFILMENT OF THE REQUIRMENTS FOR THE DEGREE OF BACHELOR
OF ARTS IN ECONOMICS

 PREPARED BY: IFA GAMULA GAISA ID NO: WU1103094

 ADVISOR: GEMECHU M.(PhD)

FEBRUARY, 2021
NEKEMTE, ETHIOPIA
Table of Contents
ABSTRACT.................................................................................................................................................i
ACRONYMS.............................................................................................................................................iii
CHAPTER ONE..........................................................................................................................................1
INTRODUCTION.......................................................................................................................................1
1.1. Background of the study...................................................................................................................1
1.2 Statement of the study.......................................................................................................................2
1.3 Objective of the study........................................................................................................................2
1.4 Significance of the study...................................................................................................................3
1.5. Scope of the study............................................................................................................................3
1.6 organization of the study...................................................................................................................3
CHAPTER TWO.........................................................................................................................................4
LITERATURE REVIEW............................................................................................................................4
2.1. THEORETICAL REVIEW..............................................................................................................4
2.1.1 Definition of Agricultural Cooperative...........................................................................................4
2.2 Empirical review literature................................................................................................................8
CHAPTER THREE...................................................................................................................................10
METHODOLOGY OF THE STUDY.......................................................................................................10
3.1 Description of the study area...........................................................................................................10
3.2 TYPES OF DATA AND SOURCES..............................................................................................10
3.3 METHOD OF DATA COLLECTION............................................................................................11
3.4 SAMPLING TECHNIQUE.............................................................................................................11
3.5 METHOD OF DATA ANALYSIS.................................................................................................12
CHAPTER FOUR.....................................................................................................................................13
WORK AND BUDGET PLAN.................................................................................................................13
4.1 Work plan........................................................................................................................................13
4.2 Budget plan.....................................................................................................................................13
REFERENCE............................................................................................................................................15

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 ABSTRACT
The study will focus on the role of farmers’ cooperative in improving agricultural productivity.
In accomplishment of this task will be obtain data from two source of information. Those are
primary and secondary source of data will be used. The primary data will collected through
questionnaires and interviews. The secondary data will be collected from report of various
organization, federal cooperative agency, other economic journals, internet, document of Aira
office of agricultural cooperative and woreda agricultural bureau. For this the researcher use
simple random sample from total population household from 8 groups of this study area. The
sampling is random sampling method with sample size of 60 respondents. Data will be analyzed
using descriptive method to discuss the role of farmers’ cooperative in improving agricultural
productivity. Depending on the nature and the type of data gathered through questionnaire and
interviews. To analyze data the researcher will be use qualitative and quantitative of data
analysis.

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 ACRONYMS
EEA: Ethiopia Economic Association

ACE: Agricultural cooperative in Ethiopia

ICA: International cooperative Alliance

ILO: International labor organization

NCBE: National cooperative business association

ICA: International cooperative agency

FCA: Federal cooperative agency

USAID: United State aid

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 CHAPTER ONE

INTRODUCTION
1.1. Background of the study
Ethiopia is the one of the least developed nations that depends on agricultural sector, a pillar to
its economy. the economy is highly influenced by the preference of the sector .It is contributed
the largest share of gross domestic product is around 46.6% ,absorbed huge part of labor force
and hence creating employment to more than 80%(USDA 2001). According to Ethiopia
agricultural research center report of 1998, Ethiopia is basically an agricultural country. Its
economy is agrarian with agricultural providing the major part of the material production, export
and employment's. As matter of the fact that Ethiopian's principal natural resource is the total
areas of the country. It is clear that the large segment of population between 84%-90% earn their
living from agriculture.
Agricultural have played an important role in rural community where they are encourage
democratic decision making and leadership development education. Cooperative provide
economic benefit to farm familiar though increasing stability of the Farmer sector ,also improve
market access for their productivity and strengthening Farmer position in agricultural food chain
improving farmers living condition, support's rural development and preserve the variability of
rural community in Ethiopia above 73 million individual in rural area member deprive benefits
from agricultural cooperative (USD 2004).
Agricultural cooperative is the part of dynamic environment for the nature production.

Agricultural choose manly chooses occur outside the cooperative system which has little ability

to influence them (USDA 2002).Generally agricultural cooperative play crucial role in

supporting the rural economy and local administration live emphasis to improve agricultural

production and productivity through cooperation (J.M.Kumar 1999).this also provide a market

for commodities produced by isolated small farms in the rural area which is collective action.

Agricultural cooperative capture the benefit of value added. In addition the cooperative are

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responsible for stimulating poor farms to make entry in to market enhance demand for standard

and grades for perishable commodities (Todaro 2004).

1.2 Statement of the study

In sub-Saharan African countries like Ethiopia, where the small scale farming dominate, the

overall national economy, agricultural production and productivity is very poor. The agriculture

of the economy is characterized by limited use of improved input and back ward agricultural

sector has been declining at the rate of 1.2% per annual, (CSA, 2005).for the last 42year in

Ethiopia majority of people live in rural areas we need no further evidence than the over

worsening poverty situation of the rural population realizing on poor agricultural productivity.

Even worse as size of countries population increase per capital income gained from the

agricultural sector has been declining consequently the level of income is low and failed to meet

the food demand of the over growing population (CSA, 2005).

The Farmer adoption rate and preference of prompted technology has been very law. One of the

reasons enticed by farmers was the poor performance of the package.

There for the study will be answer the following questions:

 Do the farmer cooperative increase the farmers level of productivity

 What is the role of farmer cooperative in increasing income of households?

 Do the farmer cooperative improve the productive capacity of households?

 Whether farmer cooperative increase or not outputs of households?

1.3 Objective of the study

I. General objective
The study will examine the impact of farmers’ cooperative on livelihood of households

II. Specific objective

The study will address the following specific objectives:

 To identify the role of farmer cooperative in improving farms productivity.

 To examine the importance of farmer cooperative in increasing income of farmers

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  To study contribution of farmer cooperative in improving productive capacity of

households

1.4 Significance of the study

This study will play a significant role to providing useful information regarding to technical in

efficiencies in production and marketing and help to identify that factor affecting the

development of agricultural economy. This will make useful information regarding the situation

of agricultural cooperative and who need to make further agricultural cooperative on Farmer

productivity in Aira woreda. The study will have significant role in giving for those who want to

undertake detailed study on the related topic in the future.

1.5. Scope of the study

The study will focuses on role of agricultural cooperative on farmer productivity. The study will

emphasize only on farmers supply agricultural cooperative. Cooperative economics is impact

which purchase in volume, distribution Farmer supply and impact to members of cooperative in

Aira woreda, Western Wollega, Ethiopia

1.6 organization of the study

The study is being organized in to four chapters. The first chapter described the introduction that

includes; background of the study, statement of the problem, and objectives of the study,

Significance of the study, Scope of the study, limitations of the study and organization of the

study. While the second chapter includes literature review, the third chapter methodology, the

fourth charter describes time and budget plan. Then the fifth chapter will focuses on conclusions

and recommendations.

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 CHAPTER TWO

LITERATURE REVIEW
2.1. THEORETICAL REVIEW
2.1.1 Definition of Agricultural Cooperative
Agricultural cooperative is defined according to different scholars in different ways. This

definition resolves around one main idea joining to help each other. Agricultural cooperative

land associate of person who have voluntary join to other to achieve common and through the

formulation of democratically controlled of organization making equitable contribution to capital

required and accepting a fair of share of the risk and benefit of under talking in which the

member actively participated (ICA,Geneva,2004).Agricultural cooperative is a group of small

produce of good or consumer of good and service that wishes to band together to achieve

competitive advantage of large site marketing or places such groups may form agricultural

cooperative in which production marketing or purchasing facilities are jointly one end and are

operated many to provide a services to members rather than make profit farmers tailor and other

producer (Worku 2006).

The basic principle of cooperative societies as a farm self-help and mutual help are the

membership shall been open, not determined by religious and political or other considerations

irrelevant to the objective of the society, that the affairs of the society be controlled in a

democratic manner on the basis of one man one vote, not in proportion to capital. That interest

on capital be fixed, and the member benefit from the activity of the society in proportion to the

business they do with in a consensus membership is voluntary based on mutual interest in

removing disadvantage or achieve the desirable objective, and regarding a willing ness and

ability to confirm to the condition agree up on (N.Gregraru Mandiw 2000).

The primary proposes is to make a profit for its patron’s use of the cooperative, not for its

investor. The member of cooperative serves themselves. A contractual agreement between the

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cooperative and patrons requires that all margin above the cost of production to their

cooperative. An agricultural cooperative represent an attempt by farmers each of who has a

different set of resources and perhaps gals. The cooperative involves farmers an elected board of

director, hired management, organized labor, government officials, bankers, and other may be

involved decision by cooperative (M.P Todro 1994).

Agricultural cooperative is a business owned and control by the people who use its service. The

finance and operate the business or service for their mutual benefit of working together they can

reach an objective that would attainable. Agricultural cooperative are member ship based on

organization owned by their “users " people to be provided direction facilities. Agricultural

cooperative have documented potential role on agricultural commodities through agricultural

cooperative. Although agricultural cooperative create the ability for the supply of required

agricultural input's that production of commodity done timely to enhance production. They also

provide the insured for commodity's produced by isolated small farmers to the rural area. In

addition agricultural cooperative are responsible for stimulating enhancing demand for standard

and grade for perishable commodities (Hollo way et al .1999).

2.1.2 ECONOMIC BENEFIT OF AGRICULTURAL COOPERATIVE

As Barton (1998) puts its agricultural cooperative is user controlled business that distributes

benefit on the basis use which indicate the distributing concept and principle use, principle that

person who owned and finance agricultural cooperative is by those who use cooperative. Their

control principle that controlled agricultural cooperative is those who use cooperative. The user

benefits principle, benefit that agricultural cooperative distributed user on the basic. Theirs

service member receive benefit of economic social value because other association with

agricultural business .benefit of economic value to stock holder are numerous including the

product ,service and Price variable person who by from or sell to the business. The distribution

of income to participating the farmer of patron ages .they also include is lasted capital paid to

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owner water paid to employee according to profit sharing plan since members are those who

organized and controlled agricultural cooperative benefit are primary intended. Other may share

in the benefit also share the risk to the cooperative. Although there are motivation force

agricultural cooperative activities it's accepted that the primary motivation in agricultural

cooperative to improve their economic benefits.

2.1.3. AGRICULTURAL COOPERATIVE DEVELOPMENT

Diner to need to engage statically with cooperative as play's in a broader market

system. They need to be clear how their engagement will improve the performance

and profitable of agricultural cooperative and how this will lead to poverty

reduction. They recognized agricultural cooperative as part of private sector and

looked are carefully at their support has ended and its benefit to the poor are

sustained through market form action. It is important that work on sector such rural

and urban. Diner engage the network level diner have they key role strengthening

contribution of agricultural cooperative diner can develop profitable business

(OFLO; 2008).

2.1.4. FUTURE OF AGRICULTURAL COOPERATIVE

Agricultural cooperative are special typeset corporation that is owned and controlled by those

who in use its service. It is state character business or organized and operated under its law to

further their mutual benefit member may finance and operate business. By working together

member any able to meet objective that would not be feasible for them to do as individual hence

the financial retrying to individual operation may be increased (L. Insur 1997).

However, in significance way cooperative is purpose of ownership control and distribution of

benefit. Cooperative interest is providing service to the members at lower possible constant

together. The high possible return to meet continuing needs for found most corporates controlled

democratically on one member one basic. However some cooperative a limited proportional vote

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based on member use of the cooperative service. Returns to member equality investment usually

are limited in order to focus attention and return to members for their use the cooperative service

(Chang Kefun 2011)

2.1.5. THE BRIEF HISTORY OF COOPERATIVE IN ETHIOPIA

Cooperative is the way of life of Ethiopia and has large or long year of experience. This

cooperative may be cultural or religious that makes the population a close lie, for example, iddir,

ikub and wenifel. However a modern cooperative relative in Ethiopia was standard at the time of

Emperor Haile Selassie I in 1961. During this time the cooperative legal action was made and it

is known as by degree member 44/1961. According to wolddiya (2003), cooperative movement

in Ethiopia started in the late 1960’s with launching of comprehensive agricultural development

until (CADU), the main reason for this degree was the increase member of unemployment, past

increase of migration from rural to urban, the increase member of student who drop out of their

education, and finally the disagreement of the military without proper compensation and pension.

The second attempt to Ward legal cooperative was in 1994, and the time was end of first 5 year

development plan. Based on evaluation of this plan, the need for cooperative form of

organization for the development of the nation was considered to be inevitable. There for the first

cooperative organization legal proclamation known as proclamation number 241/1964 was

declared. The objective of his law was to decrease the amount of interest paid for credit, to

minimize the risk of individual in of bankruptcy and to increase the implementation of

innovation in particular life. Nevertheless it focuses on area that can cultivate economically

importance crops. So it was unable to meet the demand all Ethiopian poor.

In 1974 Emperor Haile Selassie government fall was replaced by socialist government, and

proclaimed cooperative organization in 1978 and its proclamation number 138/1978.The main

objective of the proclamation was transform rural part of the Ethiopia agriculture to socialistic

type and have socialistic marketing relation between the rural and urban area up to 1990. At that

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time the government gave attention for the cooperative. There were 10,524 different type were

rural cooperative.

However the government intervention was beyond the level of support, so there benefit were

making harmful effect and society become reluctant even to hear and talk about the cooperative.

Cooperative in this period suffered; because they were occurred to serve other political purpose

than the purpose they were established. In this respect, the farmer regard the primary society in

this part was manifested in damaging the property of cooperative by the member themselves at

as the existing type of cooperative were not meeting the interest of farmers. Because, of bad

reputation in the past and other factors, such as lack of proper training and capital. The

cooperative creditability was undermined and it made them vulnerable to mismanagement.

Nonetheless the cooperative failed to survive the collapse of military government. The farmer

was themselves largely viewed them as the creation of the government no genus and voluntary

participation by Farmers and an individual with closed association with the ruling party managed

the cooperative.

2.2 Empirical review literature

In World Bank estimate(2007) that food demand Wii double by 2036 as the world population by

another 2 billion on people. There is an agree need for development and agricultural

development has shown on solution to courage farmers to mobilize collection in production

processing and marketing of agricultural product and give them to assess to market.

Many researches on food security have carried out in depth. According to caver (2003) food

security is achieved they will people all time have physical and economic access to sufficient on

the other mean avoiding hunger for all from the research. It is evidence that recorded law figures

of food in security. In 2000 Uganda and Tanzania recorded 36.9% of food security. In 1997

Kenya had owned ratio of 43.9% from either conclude that there is a close correlation between

food security or the country with their long history and large size of agricultural cooperative.

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However, the mass made possible account that small farmer on account that small farmer’s

disposal cash income earned from activity.

In recent early time agricultural cooperative one of different cooperative which can help farmers

to let bitter better deal of various stages production on distribution in many country. Agricultural

farmer cooperative have significant role in great employment. It also the farm of agricultural

cooperative has role to increase the productivity.

According to (Holo Way et al 1999) it has been responsible for introducing the exchange

economic remote rural area. The agricultural cooperative provides ready market for farmer

production and crops. But also absorbs transaction cost would other way hinder smaller farmer

for market and production integration. There are farmer producer cooperative which supply input

s and market processing of product for farmer. Freshman and workers, they include same of the

business, same are agricultural cooperative of farmer struggling to service. Although market

where policy by support being cut. Merited walzar (2001) analyzed the new generation

cooperative is us where member contribution capital in production to the produce the intended to

supply to processing cooperative. The resulting share center at the market value and in returns

have aureate from the cooperative that all value from processing Bank to the farmer in 2002 the

federal agricultural farmer cooperative at national level.

Agricultural cooperative also provide market for commodity they represent model of economic

that agricultural cooperative high record agricultural for democratic human value (Barraket

2002). Generally agricultural cooperative maintain which level of income marketing small

farming able to contract decent house send their children to school and provide health insurance

to sustainable rural live hood.

The NCA (2005) also argue that cooperative are formed to strength bargaining power maintain

access to cooperative market, capitalized and new market opportunity obtained needed product

and service on completive basis improve income opportunities reduce cost and market risk.

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 CHAPTER THREE

METHODOLOGY OF THE STUDY

3.1 Description of the study area
This research will be conducted in Aira town which is located in Oromia Regional state, Ethiopia
which is 504KM from Finfine, capital city of Ethiopia. This woreda has two kebeles of sub town
and 26 rural kebeles.
The 2007 national census reported a total population for this town were 16,981. The majority of
the Inhabitants Protestantism, with 88.37% reporting that as their religion, while 6.96% observed
Ethiopian Orthodox Christianity and 4.42% is Islam. Out of this populations 87% of the
population in this town engaged in agriculture; while 12% were engaged in trade.
Geographically the town has altitude and longitude of 9 ̊5’59’’North 35 ̊ 23’59’’East with an
elevation of 1852 meters above sea level. It was separated from former Aira Guliso town in
1999. Additionally, the town is far from 504KM to west of Addis Ababa.

The main economic activity of the area is mixed farming which includes crop production and
animal husbandry. Both donkeys and horses are used to transport materials and human beings
(Negaso Gidada).
Aira town is bounded in north by Gulliso town, in south by Lalokile town, in west by Dalle sadi
town and in east by Yubdo town.

3.2 TYPES OF DATA AND SOURCES

To achieve the objective of the study, the researcher used both primary and secondary data.

Primary data will be collected from respondents which will be selected randomly through

distributing questionnaires and interviewing. The questionnaire will include both close ended and

open ended questions so as to correct suggestions of respondents. The interview will be

unstructured which will help to get more information in detail and give freedom for interviewer

to question and gather the direct data.

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The secondary data will be collected from different source such as book, internet and other

published documents related to the topic like agriculture and rural development office of the

woreda. Generally farmers and cooperative office of the woreda are the main source of the study

containing the farmers’ cooperative in agricultural productivity of the woreda.

3.3 METHOD OF DATA COLLECTION

The researcher will use sample survey to collect the required information. Sampling is chosen

because, it can save time and cost and also can provide efficient accurate and wider information

regarding to obtain information from Farmer cooperative groups including in sample.

Questionnaire will be develop in both open and closed ended questions to get consistence

information and answer from respondents.

On other hand, secondary data will be obtained from various sources such as AOARD at

different level and essential source.

3.4 SAMPLING TECHNIQUE

Since, it is difficult to observe the entire target population. The respondents of questioner and

interview will be selected by taking the small proportion of the population. Stratified random

sampling procedure will be adopted for the selection of the sample respondents from the

agricultural cooperative of the woreda. Since there 8 groups which use the farmer's agricultural

cooperative in Aira woreda. The researchers would select 3 groups, which will be selected are;

Bondawo, Ketta, and Wayu Meni. The populations of those groups of house hold are, 65, 80, and

84 respectively. Consequently a total of 60 sample respondents will select. By using stratified

sampling formula (Agrestic, A and finally B 2008 statically option for social sciences, 4 the

edition) the sampled house hold can be collected for each group by strata.

Sample size =n * pi/ N. Where n: total sample size

N: total population of selected groups.

Pi: proportion of population in the groups.

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PROPORTIONAL DISTRIBUTION OF SAMPLE SIZE

No Name of Total no of house Total sample size

groups hold
1 Bondawo 65 17
2 Ketta 80 21
3 Wayu Meni 84 22
Total 3 229 60
Finally, the researchers would address 60 respondents to conduct the study.

3.5 METHOD OF DATA ANALYSIS

After data collected primly the process of editing, coding and classifying the data collected
would be done. This analysis extensively employed for the matter of easy understanding of the
interpretation. The study use statistical techniques such as percentage and table are used.

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 CHAPTER FOUR

WORK AND BUDGET PLAN

4.1 Work plan
No Activity 2021 2021
Dec. Ja Feb. Mar. Apr May JUN
n.
1 Topic Selection 
2 Preparation of proposal 
submission
3 Collection of useful material 

4 Data Collection  

5 Data Analysis and writing of   

final research
6 Submission of research 
7 Presentation of final research 
This study will be complete within seven month. This plan time include total work schedule
which couple the various research activities that will evolve with in time frame.

4.2 Budget plan

This is the expected cost to conduct the study.
.No Quantity Duration in day Cost per unit in Total birr
birr
Transportation cost - 6 10 60
personal cost - - - 1200
Equipment and supplies cost - - - 500
For secretary 1 - 200 200
Pen 5 - 10 50
Paper 1 - 200 200
Bindery 1 - 70 70
Contingency - - 200
Miscellaneous - - 970
Consultancies - 10 5 50
Questionnaires 10 - 20 200

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Flash 8GB - - 300
TOTAL - - - 4000

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 REFERENCE
 Barton. D (1998) what is agricultural cooperative in agricultural cooperative ed.o.cobial

1-20 New Jersey USA, prenficehallince.

 Barraket (2002) Sustainable Communities Cooperative Solution for rural renewal accora

report.

 Bershah 2003; ETV konso documentary August 2009.

 Chang Ken fun .C Menegilie (2011) performance evaluation indexes system construction

on farmer specialized cooperative.

 CAD Fijian LIU HULIN .G.HOA (2010) performance evaluation on spread cooperative

organization of farmer.

 Clover .J. Food security in sub-Saharan, Africa Security review voles 12, 213 cooperative

review 2008:

 Holloves .J Michislon co, egadoic agro industrialization cost cooperative international

food research Washington DC 1999.

 Jonat Bhutan kary (2000) Ethiopia rural development options.

 N.Gregaru, Manliw (2000) Macroeconomics 4th edition.

 USAID Coffee cooperative help small farmers let affair trade price through fair trade

other specifically coffee market Washington DC 2003.

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