Selected Governance Issues of Agricultural Cooperatives in Georgia

Cooperatives are increasingly being recognized as an effective form of social entrepreneurship. A traditional cooperative is an organisation formed by a group of people who meet voluntarily to fulfil mutual economic and social... [ view full abstract ]

Cooperatives are increasingly being recognized as an effective form of social entrepreneurship. A traditional cooperative is an organisation formed by a group of people who meet voluntarily to fulfil mutual economic and social needs through running a democratically controlled enterprise such that the benefits achieved through cooperation are greater than the benefits achieved individually. Some analysts argue that cooperatives have significant potential to contribute towards reducing poverty, enhancing empowerment and creating employment. Correspondingly, they are often in the focus of donor policies. During the Soviet era, the agricultural sector in Georgia was characterized by complete state ownership of all agricultural land and commercial processing. Primary agricultural production was concentrated on large-scale collective and soviet farms. After the breakup of Soviet Union, a considerable share of government-owned land was distributed to rural households as a part of country-wide privatization of state property. Georgian farmers are small farmers, cultivating around 1 hectare of land. There is a potential for agricultural cooperatives to improve agricultural productivity and reduce rural poverty in Georgia. The Government of Georgia is encouraging farmers to set up cooperatives providing legislative incentives and benefits. But the literature suggests that there is strong psychological resistance to cooperation in transition economies, due to years of abuse of the concept of ‘cooperation’ prior to transition. The paper investigates governance factors that characterise smallholder agricultural cooperatives in Georgia and which affect their economic, as well as social performance. The aim of the research is to gain a better understanding of the characteristics of smallholder agricultural cooperatives in Georgia and to identify cooperative governance constraints affecting their performance and sustainability. Data collection took place within the ENPARD project aimed at promoting cooperatives in Georgia and was done in cooperation with the Department of Monitoring and Evaluation of People in Need. A structured interview questionnaire was used as a basic tool of data collection.