MEKDELA AMBA UNIVERSITY

COLLAGE OF AGRICULTURE AND NATURAL RESOURCE

DEPARTMENT OF RURAL DEVELOPMENT ANDAGRICULTURA

EXTENSION

REVIEWER; SEMINAR ON CONTRIBUTION OF

AGRICULTURAL COOPERATIVE FOR SOCIO-ECONOMIC
DEVELOPMENT IN ETHIOPIA

Prepared b

NAME ID NO

1. TAMIRU MIHRE………………………… MAUR/ 1201208 /12

2. MANAYSHE BAYE…………………...... MAUR /1200867 /12

3. YSHENAT ENDALKACHEW………... MAUR /1201371 /12

Advisor: Mulugeta Amsalu (M.Sc.)

Submitted Date: 19/05 / 2015

JUNUARY; 2023

Tulu Awalia, Ethiopia

II
 TABEL OF CONTENT

ACKNOWLEDGEMENT...................................................................................................................... 3
ACRONYMS AND ABBREVIATIONS............................................................................4
LIST OF TABLES...............................................................................................................5
ABSTRACT.........................................................................................................................6
1 INTRODUCTION..........................................................................................................7
Background of the seminar..................................................................................................7
1.2. Significance of the seminar ..........................................................................................8
1.3. Objective of the Seminar..............................................................................................9
1.3.1. General Objective...............................................................................................9
1.3.2. Specific Objectives.............................................................................................9
2. LITRATURE REVIEW..................................................................................................9
2.1. Theoretical Literature Review......................................................................................9
2.2 Concept and definitions of agricultural cooperative.....................................................9
2.2. 3 challenges of agricultural cooprative development in ethiopia........................11
2.2. 4 Empirical Literature Review.............................................................................12
2.2.5 The Contribution of Agricultural Co-operatives
2.2.6 Social Contribution............................................................................................12
2.2.7. Economic Contribution.....................................................................................18
3. CONCLUSION AND RECCOMMENDATION..........................................................23
3.1. Conclusion..................................................................................................................23
3.2. Recommendation........................................................................................................24
4. REFERENCES..............................................................................................................24

III
 ACKNOWLEDGEMENTS
First and foremost, we would like to thank the God for the opportunity and capacity gave
us to realize our aspirations. We would like to extend our thanks to our advisor mulugeta
amesalu who puts us in the right direction to do our seminar in the right way. All in all,
we would like to thank Mekdela Amba University that gives this golden chance to
develop our skill for related activities.

IV
ACRONYMS AND ABBREVIATIONS

AC Agricultural Cooperatives

ATA Agricultural Transformation Agency

ATA A griculture Transformation Agency

CSA Central Statistics Authority

FCA Federal Cooperative Agency

GDP Gross domestic product

ICA International Cooperative Alliance

ILO International Labor Organization

MOFED Ministry of Finance and Economic Development

MT Metric Ton

NGO Non-Governmental Organization

SNNPR Southern Nation Nationality People Region

USA United States of America

USD United States Dollar

V
 LIST OF TABLES
Table 1: Number of registered primary cooperatives and members by region, 2012-------------------------------

Table2: Estimated employment and related income in the cooperative movement----------------------------------

Table3: Yearly Fertilizer distributions by cooperatives in Tigray in quintals-----------------------------------------

Table4: Ways of creating Additional Income by agricultural cooperative--------------------------------------------

VI
 ABSTRACT

This seminar is based on the fact that Agricultural cooperative is an essential weapon for
development. As the general objective, this seminar reviewed the contribution of
agricultural cooperative for socio-economic development in Ethiopia).The specific
objective of this seminar is To review the social contribution of agricultural cooperatives
in Ethiopia. To review economic contributions of agricultural cooperatives in Ethiopia
and To review the challenge of agricultural cooperative development in Ethiopia.( It
played an important role to provide market access; providing competitive returns for
independent farmers; facilitating the market power of producers ; marketing of
agricultural inputs to the members primarily and the non-members; provision of
agricultural credit to the members; improve production and marketing of seeds and
seedlings; Processing of produces particularly coffee and oilseeds; provision of storage
facilities; marketing of members’ agricultural produces; supply of consumer goods;
operating a flourmill for grinding of food grains and other spices for both members and
non-members; improve women participation, enhance innovation, increase food
security, employment creation ,income generation, improve production and productivity
and to facilitate agricultural financing. The contribution of agricultural cooperative for
socio-economic development is not satisfactory like developed countries; as a result, the
bodies should participate to increase the role of agricultural cooperatives. Such as:
potential members of agricultural cooperative, farmers, researchers and consumers.

Key words: contribution, cooperative, development, social and economic.

VII
 1 INTRODUCTION

Background of the seminar

Historically, agricultural cooperatives played an important role all over the world in
providing market access, credit and information to producers. In particular, agricultural
cooperatives in the United States and Western Europe played an important economic role
in providing competitive returns for independent farmers (Chaddadet al, 2005).
Agricultural cooperatives in those countries established as service providers and
primarily aimed at facilitating the market power of producers’, trading partners,
preservation of market options and reduction of risk through team. They have also been
accorded with a range of public policy supports that has encouraged their market
coordination role in agri-business.

In Ethiopia, however, the tradition of agricultural cooperatives was completely different

from the western type of agricultural cooperatives from the initial days of establishment
to the socialist regime. During the imperial regime, a period during which cooperatives
were started, agricultural cooperatives were setup in the form of cooperative production
or agricultural collectives to jointly produce commercial and industrial crops (i.e., coffee,
tea and spices). They were not in a position to operate efficiently due to unenforceability
of efforts, unfair incentives, higher agency costs, and slow and centralized decision-
making, which are natural problems of collective production. Farmers’ cooperatives and
unions are the most significant private sector force emerging in Ethiopia’s innovation
system. Agricultural cooperatives carries out the following activities effectively;
marketing of agricultural inputs to the members primarily and the non-members;
provision of agricultural credit to the members; production and marketing of seeds and
seedlings; processing of produces particularly coffee and oilseeds; provision of storage
facilities; supply of consumer goods like sugar, coffee, kerosene and other basic
necessities; operating a flourmill for grinding of food grains and other spices for both
members and non-members; mining of sand and stone, manufacturing hollow blocks
(Bernard T. Tafese A.Gebre Medhin E. 2008). The challenges of agricultural coopratives

1
in the development of cooperative society are; lack of efficient marketing
system,inadequate budget allocation, inadequate trained man power and no man power of
educated in implementing cooperative law and policies, due to low organization, low
technical support

1.2. Significance of the seminar

This seminar effectively reviewed different research articles and journals about the
contribution of agricultural cooperative for socio-economic development. This seminar
gives information for individuals to be members of agricultural cooperative, policy
makers, supporting agencies and consumer to get different service. The effective
performance of this paper describes the contribution of agricultural cooperative for socio-
economic development and helps the government bodies who are responsible to promote
cooperative, to fill gap, to provide appropriate support and to give attention for further
expansion of agricultural cooperative. Nowadays, developed country expanded
agricultural cooperatives in order to achieve their goal, to fulfill needs of citizens, to fully
achieve women participation in all aspects, to provide agricultural inputs at a reasonable
price, to create employment, to develop good relation among members; therefore, this
activity provides good condition for their development. Agricultural cooperative play a
crucial role in different countries, but it is limited in our country. Agricultural cooperative
is used for facilitation of marketing, improve women participation, enhance innovation,
increase food security, employment creation, improve production and productivity,
generate income for individuals and nations, facilitate agricultural financing etc.

1.3. Objective of the Seminar

1.3.1. General Objective

The general objective is to review the contribution of agricultural cooperatives for Socio-
economic development in Ethiopia

1.3.2. Specific Objectives

The specific objectives of this seminar are;

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 • To review the social contribution of agricultural cooperatives in Ethiopia

• To review economic contributions of agricultural cooperatives in Ethiopia

• To review the challenge of agricultural cooperative development in Ethiopia

2. LITRATURE Review

2.1. Theoretical Literature Review

2.2 Concept and definitions of agricultural cooperative

An agricultural cooperative, also known as a farmers' co-op, is a cooperative in
which farmers pool their resources in certain areas of activity. A broad typology of
agricultural cooperatives distinguishes between agricultural service cooperatives, which
provide various services to their individually-farming members, and agricultural
production cooperatives in which production resources (land, machinery) are pooled and
members farm jointly. Examples of agricultural production cooperatives
include collective farms in former socialist countries, the kibbutzim in Israel,
collectively-governed community shared agriculture, Longo Mai, Costa Rica".
Sonador.info. Archived from the original on 15 April 2012. Retrieved 27 December 201.

The default meaning of agricultural cooperative in English is usually an agricultural

service cooperative, the numerically dominant form in the world. There are two primary
types of agricultural service cooperatives: supply cooperatives and marketing
cooperatives. Supply cooperatives supply their members with inputs for agricultural
production, including seeds, fertilizers, fuel, and machinery services. Marketing
cooperatives are established by farmers to undertake transportation, packaging, pricing,
distribution, sales and promotion of farm products (both crop and livestock). Farmers also
widely rely on credit cooperatives as a source of financing for both working capital and
investments.Cooperatives as a form of business organization are distinct from the more
common investor-owned firms (IOFs)..

3
Both are organized as corporations, but IOFs pursue profit maximization objectives,
whereas cooperatives strive to maximize the benefits they generate for their members
(which usually involves zero-profit operation). Agricultural cooperatives are therefore
created in situations where farmers cannot obtain essential services from IOFs (because
the provision of these services is judged to be unprofitable by the IOFs), or when IOFs
provide the services at disadvantageous terms to the farmers (i.e., the services are
available, but the profit-motivated prices are too high for the farmers). The former
situations are characterized in economic theory as market failure or missing services
motive. The latter drive the creation of cooperatives as a competitive yardstick or as a
means of allowing farmers to build countervailing market power to oppose the IOFs. The
concept of competitive yardstick implies that farmers, faced with unsatisfactory
performance by IOFs, may form a cooperative firm whose purpose is to force the IOFs,
through competition, to improve their service to farmers.( John M. Staatz in 2020 ),
2. 2.2 Agricultural co-operatives in Ethiopia
In Ethiopia Agriculture accounts for 84 percent of Ethiopia’s labor force, and because of
the country’s fertile land, available water resources and large labor pool, agriculture holds
significant potential to improve incomes and food security, especially in rural areas. Yet,
at a learning consultation in earlier this year, Increasing Women’s Participation in
Cooperatives in Ethiopia, sponsored by and the Ethiopia Agriculture Transformation
Agency (ATA), stakeholders agreed that Ethiopia cannot realize its potential if it does not
more fully engage women in agricultural development activities and decision making.
These co-operatives look at ways of incorporating women in productive activities. the
government of Ethiopia is creating more common interest groups similar to self-help
groups, with between 15 and 20 members—to support and improve women’s
involvement in various agricultural enterprisesbecause of low equity participation; they
have not had a sufficient commitment to the organization . Another effect of the above
has been the cooperative inexperience in effectively representing the interests of the small
cooperatives members. The major external factor that undermine democratic control
relate to the substantial role of government in the promotion, direction and operations of
the cooperative.

4
 Role of agriculture Co-operatives
Cooperatives have also played an important role in rural communities, where they are an
integral part of the social fabric. They encourage democratic decision making processes,
leadership development and education (Prakash, 2000). Agricultural cooperatives have
played an important role in the Ethiopian rural landscape for decades, and have become
an integral part of its social structure. Cooperatives have contributed greatly to the
development of modern national and systematized agricultural production-base, helped
enhance self-sufficiency of major staple foods, and strengthened farmers’ household
economy by facilitating market access and competitiveness, adapting their operations to
agricultural technological innovations and encouraging democratic decision-making
processes, leadership development and education (Hermida, 2008). An agricultural
cooperative is considered as one of the important economic and social organizations in
rural societies. It plays an important role in the agricultural development through
providing the farmers with production inputs, such as fertilizers, seeds and chemical
substances, etc. In general, cooperatives are playing an increasingly important role in
economic growth, poverty reduction and democratization in Ethiopia. The justification
provided by Emana & Nigussie (2011) presumed that through distributing agricultural
inputs, providing improved technologies, and encouraging farmers to produce high value
crops, cooperatives in Ethiopia have been creating immense socio-economic benefits to both members
and outsiders. Besides, cooperatives are taking part in the distribution of improved seeds, farm
implements (such as water pumps), pesticides and herbicides, modern beehives and other agricultural
inputs. Agricultural cooperatives facilitate small producer’s access to Natural resources
such as land and water Information, knowledge and extension services. Markets, food,
and productive assets such as seeds and tools. Policy and decision making

5
 2.2. 4 Empirical Literature Review
2.2.5 The Contribution of Agricultural Co-operatives
While the institutional embeddedness and the historical development of co-operatives in
Ethiopia illustrate the recent growth of agricultural co-operatives, the question of their
impact on agricultural transformation and poverty reduction remains to be answered. In
the preceding texts, we have distinguished two main pathways of impact:(Volamen:
2009)

(1) Providing inputs and services to enhance farm productivity, and

(2) Marketing farm products. As agricultural transformation policies promote both

increased productivity and enhanced market access, we will now review the empirical
literature on how co-operatives perform on these functions.

2.2.6 Social Contribution

 Facilitation of Marketing

The present paper contributes to the growing literature on the role of agricultural
cooperatives in three major directions.

First, we provide insights into the determinants of agricultural cooperative membership.

Therefore, this study allows us to draw implications on cooperative inclusiveness.
Second, we evaluate the impact of agricultural cooperatives on the welfare of smallholder
farmers quantitatively.

Third, in our evaluation of these impacts, we examine if agricultural cooperative

membership has a heterogeneous impact on wellbeing among its members. Examining
the heterogeneous treatment effects of cooperative membership allows to understand how
cooperatives can be more effective in improving the wellbeing of rural community
(Verhofstadt and Maertens 2014).

• Improve Women Participation

6
In Ethiopia, women’s participation in agricultural cooperatives was only 8% in 2004 and
16% in the total urban and rural cooperatives in 2007.Agricultural cooperatives promoted
the participation of women in economic production, which, in turn helps in food
production and rural development. Through cooperatives, women are able to unite in
solidarity and provide a network of mutual support to overcome cultural restrictions to
pursuing commercial or economic activities. Agricultural cooperatives was an effective
means to empower women in rural areas and help them to overcome the constraints they
face in accessing education, knowledge and information, as well as productive assets.
(USAID, 2005)

Agricultural cooperative also improved the social role of the cooperatives themselves,
creates a safe environment for women to increase their self-confidence, bargaining power
and income, and enables women to exercise political leadership. Finding out the reason
for the low participation of women is the first step in improving women’s participation in
agricultural cooperatives.

It is generally assumed that women’s participation in agricultural cooperatives is

important for sustainable cooperative development. The involvement of more women in
economic activities has been found to result in a more integrated production process of
both food and cash crops (ICA 2001 as cited in Thomas and Fanaye, 2012).

The relationship between women and their cooperatives in the context of gender
integration can be summarized as under: A cooperative being a social development
agency played an active role in advocating for gender equality. Since women have been
active in development work, they should play central role in development;

• The cooperative can be a place to improve women’s social status and economic
conditions; and

• Thus cooperatives should promote women’s empowerment by integrating gender

concerns and formulating a strategy that would address gender issues. In terms of
the ratio of membership of women in agricultural cooperatives, the percentage is
rather low, but they have a strong influence on them through the heads of the
household (ICA, 2001 as cited in Thomas and Fanaye, 2012).

7
While the national figure on the proportion of female members in all primary
cooperatives is 21.5 percent (Table1). The actual percentage of female members in the
agricultural cooperatives in the ATA baseline study was 12 percent. The involvement of
females in agricultural cooperatives is higher in Tigray than in the other three regions.
Note, however, that membership is often defined at the household-level, as such, more
women may be involved in the activities of agricultural cooperatives than is indicated by
these statistics (Tanguy et al, 2013).

Table 1: Number of registered primary cooperatives and members by region, 2012

Region Total Membership Total Totaln no of

primary agricultural
Male Female
cooperative cooperatives

Tigray 3746 441600 171000 612600 1927

Amhara 7050 2006800 438600 2445400 2599

Oromia 11321 1414400 304400 1718800 4734

BenishangulGumz 309 18100 5900 24000 130

SNNPR 7905 1016300 193000 1209300 1388

Harari 448 9900 4700 14600 41

Gambela 238 4800 4000 8800 124

Afar 365 10600 5900 16500 180

AddisAbeba 9482 183200 253900 437100 -

Dire dawa 1060 23300 14000 37000 64

Somali 1060 24200 18100 42300 265

Source: FCA, 2008

• Enhance Innovation

8
According to FARA (2007), the concept of innovation refers to the search for,
development, adaptation, imitation and use of technologies, approaches and
methodologies that are new to a specific context. Innovation is a combined social and
technical process involving multiple sources of ideas and technologies. For the
innovation process to be successful, many players need to pull in the same direction.
Stakeholders, including market agents, farmers, NGO and researchers need to understand
their mutual challenges and how they can contribute the solutions which present
opportunities for learning. This means engaging in real dialogue and looking for
situations where joint actions can have significant impact. Farm cooperatives contributed
considerably to the process of research and development transference, diffusion and
adoption of technology.

A new technology or new business organization form only complete its innovation
process when applied into the production process or business organization and
management. Cooperative and its tied relations with members are one of the great
competitive advantages to fill an important role in the agro-food industry innovation
system and in the contextual innovation process. Member showed and selection, technical
assistance, member organization and contracting are important cooperative abilities
which are difficult to imitate, and therefore, imply great advantages to research
institutions to consider agricultural cooperatives as potential partners for a research and
development program (USAID, 2005).

A. Technological Innovation “Ada’a”dairy cooperative introduced technological

innovations starting from its beginning time till the present to its members. The role
played by the cooperative to introduce milk processing technologies and milk handling
equipment’s as part of technological innovation. One of the technological innovations
introduced by the cooperative was the introduction of centralized processing of milk in to
milk products after separating the cream using the butter mixing machine. The
cooperative was using electrical cream separator and butter mixerfor milk processing.
Refrigerator was being used as preservation practice after processing. The cream
separator separate 300 liter of milk within an hour. In addition to the previously used
processing equipments the cooperative established the pasteurized milk, butter, cheese

9
and yogurt. Unlike plastic devices which is susceptible for microorganisms and which
was adopted by allmembers before, the cooperative introduced an aluminum cane for the
handling, storing and supplying of milk.. All members of the cooperative were using
these aluminum cans for milk handling and transportation after they got advice from their
cooperative; at the same time all members area ware of milk hygiene and quality
standards of the cooperative( FARA (2007).

B, Institutional Innovation “Ada’a” dairy cooperative enhanced marketing activities

and provision of dairy inputs for the dairy producers. Many farmers never considered
dairy as a business before they joined the cooperative; but they sold their milk to
individual consumers, hotels and cafeterias which all did not provide them a sustainable
market for their product. This time almost all members of the cooperative who have the
dairy cows wereselling their milk exclusively to the cooperative, but there were some
farmers who were selling their milk to both the cooperative and other buyers or milk
processing industries. On the other hand, the cooperative provided dairy inputs which
may include artificial insemination service, concentrate feed, fodder seed, milk and milk
products marketing, man-power and organizational structure of the cooperative, financial
and facility perspective of the cooperative and animal health services to its
members(Chambo.S , Mwangi .M and Oloo. O (2007)).

C, Organizational Innovation “Ada’a” dairy cooperative has different types of

external relation with a huge number of actors from governmental, non-governmental and
private organizations as well as other cooperatives and dairy associations to achieve its
specified objectives. On the other hand, the cooperative developed its internal linkage
with members, by which members are the major entities to support the specified goals
and objectives of the cooperative.

• Increase Food Security

Food security on the other hand means avoiding hunger for all. As a global phenomenon,
food security for all is the best indicator of food security for the world. This assures food
security for national access on a broad average. But this form of assurance of access of
food for the world is only an average and quantitative indicator of food security.

10
Qualitative measures of access would look into actual access indicators of food energy
requirement levels (Volamen: 2009).

Agricultural cooperatives also help in food security by giving incentives to small and
subsistence farmers to contribute in food production. Through economies of scale in
obtaining training, credit for farm inputs, and arranging for irrigation, cooperatives enable
these farmers to improve their productivities and raise output. With improved marketing,
cooperatives enable these farmers to obtain better prices in the market place, giving them
the right incentives to produce for surplus (Veerkumaran, 2007).

In Ethiopia currently 2007 the Cooperatives are playing a crucial role in attaining food
security through;

• The provision of agriculture input and output marketing;

• Facilitating irrigation for crop production;
• Value addition;
• Creation of employment and
• Through establishment of small and micro enterprises.
• Employment Creation

On the basis of available data from grain marketing co-operatives and coffee farmers’ co-
operative unions in Ethiopia, Lemma (2007) estimates that over 21,000 people are
employed for casual labor services in co-operatives every year.

Agricultural cooperatives can effectively create and maintain employment (both direct/
salaried/ employment, and self-employment) in both urban and rural areas. Co-operatives
create employment opportunities in three different ways. First, they offer direct wage
employment to people who work in primary and secondary co-operatives as well as in
governmental co-operative support institutions (e.g. ministries, departments, co-operative
colleges, etc). Secondly, co-operatives offer self-employment to members, whose
participation in the economic activities that they make possible substantially guarantees a
civilized income. Thirdly, co-operatives also indirectly employ through the overflow
effects of their activities on non-members whose income generating activities are only

11
viable through the transactions they have with, as well as opportunities created by, co-
operative ventures (United Nation, 2009).

On the other hand, agricultural cooperatives can create enormous direct or salaried
employment opportunities by engaging themselves in various sectors of the economy
such as production, marketing, processing and so on. (Woldu, 2007).

Table 2: Estimated employment and related income in the cooperative movement

Employment Variable Union Primary cooperative Total

Self-employed 115,079 115,079

Permanent employees 2,860 57,918 60778

Casual employees 643,500 6,950,100 7593600

Permanent employment income 71,500,000 347,505,000 419,005,000

Casual employment income 9,652,500 104,251,500 113,904,000

Source: FCA (2008)

2.2.7. Economic Contribution

• Improve Production and Productivity

Agricultural cooperatives could engage in any of the following operations:

 Supplying of artificial fertilizers, selected improved seeds or plants, chemicals

tools and technical equipments, lubricating oil and other similar products and
animal feed;
 Provision of financial means trough credit, supply of other needs goods etc, and
the arrangements for their repayment;

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  Consultation on agricultural problems with respect to choice of crops, selection of
proper cultivation methods;
 Produce storage on farms and in the corporative establishment; and
 Marketing of cash crops by exportation and of minor crops (vegetables, citrus,
fruits, etc, within the nation or outside (Alemu, 2011).

Farmer cooperatives in Ethiopia have found a clear position in the production of high-
value export crops such as coffee (ACDI/VOCA, 2005).t agricultural co-operatives in
developing countries have positive effects on smallholder commercialization especially
in the case of high-value crops such as horticultural crops (Barrett, 2008; Narrod et al.,
2009; Verhofstadt & Maertens, 2014b). Coffee co-operatives in Ethiopia are considered
as fast growing agribusiness co-operatives and have become more market-oriented
(Ruben & Heras, 2012; Meskela & Teshome, 2014). The latter studies also indicated that
coffee co-operatives have provided higher profits to members and that they are
economically viable. However, Bernard, Gabre-Madhin, and Taffese (2007) suggest that
even though the number of marketing co-operatives is growing in Ethiopia, the majority
of

Table 3: Yearly Fertilizer distributions by cooperatives in Tigray in quintals

Type 1998 1999 2000 2001 2002 2003 2004 2005 2006
of
fertiliz
er

DAP 1054 1254 34472 43771 34551 62438 25485 33195 50860
6

Urea 1171 9432 28132 37793 30180 26572 21764 25438 38634

Total 2225 2197 62604 81564 64731 89010 47249 58633 89494
8

% 100.0 988.0 2814.0 2909.0 3666.0 4000.0 2124.0 2635.0 4022.0

13
 change 00 0 0 0 0 0 0 0 0
to 1998

Source: Tigray Cooperative Promotion Office and Enderta Cooperative Union 2006

• Income Generation

The impact of co-operatives on employment creation and income-generation was more

evident in the self-employment area. A significant proportion of farmers and their
households sell their produce to earn an income through their co-operatives in 2004 (Wan
yama, 2008).

Agricultural co-operatives, maintain higher levels of income, making small farmers able
to construct respectable houses, send their children to school and provide health
insurance to sustain rural livelihoods (Chambo, et al, 2007).Cooperatives created
additional income for their members and regarding the way how cooperatives created
additional income, again all mentioned by securing higher price for their products as
shown in the table below, 20.39% by providing training to increase productivity, 14.81%
by lowering input costs, 9.24% introducing new and efficient technologies and 18.52%
by creating employment opportunities and other categories each (Alemu, 2011).

Table 4: Ways of creating Additional Income by agricultural cooperatives

Ways of creating Additional income Percentage

Lowering input cost 14.81%

Securing high price for our product 37.04%

Providing training to increase productivity 20.39%

Introducing new and efficient technology 9.24%

Creating employment opportunity 18.52%

Source: Alemu (2011)

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 Success full agricultural cooperatives enable their members generate more income by
improving the member productivity or the productivity of the member enterprises; and by
improving market position of the members as producers, consumers, and employees.
Besides, they can enhance income generating capacity of members by improving their
access to material and non-material resources; and by helping them sustaining their
income, production level and prices. Furthermore, by improving the local communities
(members) overall living condition through provision of social and physical
infrastructures, and by improving their knowledge (i.e. through formal and informal
education and training), and by enhancing their standard of information, this cooperatives
can encourage local resource mobilization and income diversification, and there by
promote local economic development.

 Poverty Alleviation
Cooperatives are also expected to play an important role in providing different products
and services as well as improving the income and lively hood of their members. When
cooperatives provide good services and/or products, it is obvious that, members will be
benefited more. To this effect, the findings of the result are presented in Table4show that
the members’ benefits are immense as the majority of the respondents (from 45.1% to
92.1%) have agreed or strongly agreed for the above stated benefits. Hence, both the
cooperatives and their members shared the same feeling that members of the cooperatives
are really receives several benefits in most of the benefits expected. However, in some of
the benefits (considering both Strongly Disagree and Disagree), such as: have better toilet
(29.6%), able to buy better farm equipment (36.2%), have possessed better house
(30.3%), have better livestock (36.0%), have better communication tools (30.7%) and
access to clean water (34.6%), almost one-third of the members showed their level of
dissatisfaction.

 Facilitate Agricultural Financing

Access to agricultural credit was one of the challenges to agricultural production.

Historically, agricultural financing is provided by cooperative banks rather than
agricultural cooperatives (Veerakumaran, 2007).

15
Agricultural cooperatives enable members to meet their needs for financial services, such
as savings and credit, at low-cost and with easy access through the pooling of limited
capital. The members’ mandatory purchase of ownership shares in the cooperative and
their deposit/savings accounts serve as the funding base to enable the cooperative to
extend credit to members.

Agricultural cooperatives provide access to credit for members who might not typically
have access to saving and commercial banks. This is significant in markets where
financial providers are absent owing to poor revenue prospects, high risks, or high
transaction costs. Because of their low cost structure and low profit targets, agricultural
cooperatives are able to offer credit facilities at attractive rates, thereby providing
alternatives to predatory lending and reducing the vulnerability of the poor to
exploitation. Loan products offered by agricultural cooperatives include salary advances,
agricultural input loans, working capital loans and equipment purchase (Lemma, 2007).

• Co-operatives in Supporting Agricultural Production

Several empirical studies confirmed that co-operatives in Ethiopia have a positive effect
on smallholder agricultural performance. Improving smallholder agriculture productivity
is important for enhancing farmer livelihood, reducing rural poverty and increasing food
security. Through co-operatives, smallholders may obtain inputs, adopt new agricultural
technologies and access technical assistance. Co-operatives can also provide credit
services to member farmers which ease production constraints. This all has led to the
claim that co-operatives have a positive impact on farm incomes in particular and on food
security in general (e.g. Shiferaw et al., 2011).

Contributions to Ethiopian GDP

As of the report of Ethiopian National Accounting Statistics (2005), the amount of money
generated from the goods and services from cooperatives would be considered and
aggregated as a value added to the GDP provided that, the intermediaries are deducted
accordingly.In the product or value added approach, goods and services are counted in
gross domestic product (GDP) at their market values/price. According to this approach,
the value addition of cooperatives (union and primary) would be considered from the

16
gross sales generated yearly. This is akin to the national Gross Domestic Product (GDP)
measure without considering depreciation of capital goods. Since cooperatives are
randomly selected in each region, the point estimation was used in the GDP inference.
The finding also shows that the value added to GDP of the country is increased from the
year 1993 to the year 2001. On the average the value added to the GDP for the last ten
years is 8.01%.

2.2.8 Challenges of agricultural cooperative development in

Ethiopia
During imperial period the factors of cooperatives developments in country faced various
problems in different economic system of the country. The major obstacles faced in the
development of cooperative society are; lack of efficient marketing system, inadequate
budget allocation, inadequate trained man power and no man power of educated in
implementing cooperative law and policies, due to low organization, low technical
support are the major problems .

There is also a problem during Derg period such as distorted training system for the
available man power, lack of coordination between cooperatives policies (principles) and
state policies and inadequate member support are the main ones . Board members have
often not adequately appreciated the need for member serving commercial operations
In spite of the some progress mentioned above, cooperative movement during the last 50
years of its existence is not inspiring. Empirical evidence reveals that the cooperative
movement in Ethiopia is facing several challenges. This sector is reliant on government
for various reasons. There are also continuous government interferences, governance
issues, accountability, legislative and policy support and new product development. The
great challenges of today and tomorrow are those of the internationalization of markets,
of innovation, of environmental conservation and of food security. In the context of trade
liberalization and globalization, the cooperative approach is regarded as one of the best
instrument of self-protection for small farmers mainly due to its self-help concept and
member’s participation. The major challenges are the following: Lack of adequate
budget, Lack of agricultural production requirements ( seeds – pesticides – fertilizers ) on
time , quantity and prices suitable for farmers, Disallowing cooperatives to contract

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directly to buy the requirements of production from agricultural companies and
factories, Lack of farmers trust in the agricultural cooperatives as a result of the low
quality of services provided Low participation of members and lack of awareness Lack
of Good Governance Weak Linkage of Cooperatives with Stakeholders Aref, F. (2011).

3. CONCLUSION AND RECCOMMENDATION

3.1. Conclusion

Our review on the contribution of agricultural cooperative revealed that:Farmers are

collectively able to negotiate better prices for inputs, obtained transport, processing and
storage facilities. Agricultural cooperatives could be an effective means to create a safe
environment for women to increase their self-confidence, bargaining power promote
gender equality and their income generating ability contributed considerably to the
process of transference, diffusion and adoption of technology. Agricultural cooperatives
played a crucial role in attaining food security through; the provision of agriculture input
and output marketing; facilitating irrigation for crop production and value addition.
Agricultural cooperatives can effectively create and maintain employment (both direct/
salaried/ employment, and self-employment) in both urban and rural areas. Farmer
cooperatives in Ethiopia have found a clear position in the production of high-value
export crops such as coffee. In Ethiopia, about 900,000 people in the agricultural sector
generate part or all of their income through their co-operatives. Agricultural cooperatives
are diversifying their activities into savings and credit provision at low interest rate .Co-
operatives may provide the bargaining power to ensure access to those inputs. In
addition, co-operatives can link farmers to agribusinesses that otherwise may not want to
invest in service provision to or procurement from individual smallholders. Market
failure and low institutional support lead to high transaction cost for smallholder farmers
in developing countries.major obstacles faced in the development of cooperative society
are; lack of efficient marketing system, inadequate budget allocation, inadequate trained
man power and no man power of educated in implementing cooperative law and policies,
due to low organization, low technical support.

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 3.2. Recommendation
Although there are different agricultural cooperatives in Ethiopia, their contribution to
economic and social development is not that much satisfactory because of different
problems in management, lack of capital, education and training skill. So the following
points should be recommended to upgrade the contribution of agricultural cooperative:
The members of agricultural cooperative should select an appropriate environment to
facilitate their activity easily. Different facility should be fulfilled like transportation
service, water, health service, electricity and market place. The farmers should be
members to agricultural cooperative in order to get different inputs at a reasonable price
and to sell their output at a good price. The farmers should purchase fertilizer, improved
seed varieties and other inputs from agricultural cooperative in order to save their money.
Members should use the income they generated from their cooperatives not only just to
meet their household consumption needs but also to enhance potential income generating
capacity together with investing on education and health care requirements. For this,
there should be continuous awareness creation system through education, training and
other means so as to enable them diversify income generation and Consumers should
invite agricultural cooperatives to get a quality and quantity of goods and services at low
price.

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