Transformation of Agricultural Co-ooperatives in Ethiopia: Recent developments and impact

TOPIC24 - STAGE4 - MESO/MACRO Transformation of smallholder agriculture to increase food security and reduce poverty requires strong institutions that facilitate farmers access to input and output markets. Agricultural... [ view full abstract ]

TOPIC24 - STAGE4 - MESO/MACRO
Transformation of smallholder agriculture to increase food security and reduce poverty requires strong institutions that facilitate farmers access to input and output markets. Agricultural co-operatives as collective action organisations can strengthen rural development in Sub-Sahara Africa . This paper focuses on one country – Ethiopia – to get a better insight in co-operative development, role of the institutional environment, and impact of co-operative membership on improving smallholder agriculture.
This paper has two objectives. First, to provide an overview of co-operative development in rural Ethiopia. Second, to review the academic literature on the impact of co-operatives on improving farm performance, distinguishing between productivity enhancement and market access.
Our analysis shows that over a period of 60 years, Ethiopian co-operative development has been strongly influenced by various political regimes. During the Imperial and Derg regimes co-operative movement was hampered by compulsory membership. Mismanagement and excessive state interference resulted in inefficiencies. Since the early 1990s the co-operative movement in Ethiopia is growing under a series of policy reforms.
Our study shows that co-operatives play a significant role in the various sectors of the rural economy of Ethiopia. In the agricultural sector, they are actively engaged in the supply of agricultural inputs such as credit, improved seeds, and fertilizers. In output markets, co-operative are now facing more demanding food markets. This drives co-operatives to strengthen their commercialization activities, which in turn requires changes in the internal governance and leadership. As a result, Ethiopian co-operatives are in a process of restructuring towards more market-orientation.
Our review indicated a rapid increase in empirical studies on agricultural co-operatives in Ethiopia. Most of the recent empirical evidence reveals that co-operative membership has a positive impact on productivity growth and on farmer rate of commercialization. However, this evidence regarding the impact of membership on efficiency gains and output marketing is still inconclusive. Another important issue is member commitment to the co-operative. We found that demographic and economic factors determine farmers’ motivation to participate in co-operatives. Large landholding, better farm resources, and higher education increase the likelihood of participation. This means that the issue of inclusion of the poorest farmers is still unresolved.