Producer Organisations: Chris Penrose-Buckley
Producer Organisations: Chris Penrose-Buckley
Producer Organisations: Chris Penrose-Buckley
Chris Penrose-Buckley
Producer Organisations
A Guide to Developing Collective
Rural Enterprises
Producer Organisations:
A Guide to Developing Collective
Rural Enterprises
Oxfam GB
Oxfam GB, founded in 1942, is a development, humanitarian, and campaigning agency
dedicated to finding lasting solutions to poverty and suffering around the world. Oxfam
believes that every human being is entitled to a life of dignity and opportunity, and it works
with others worldwide to make this become a reality.
From its base in Oxford in the United Kingdom, Oxfam GB publishes and distributes a
wide range of books and other resource materials for development and relief workers,
researchers and campaigners, schools and colleges, and the general public, as part of its
programme of advocacy, education, and communications.
Oxfam GB is a member of Oxfam International, a confederation of 13 agencies of diverse
cultures and languages, which share a commitment to working for an end to injustice and
poverty both in long-term development work and at times of crisis.
For further information about Oxfams publishing, and online ordering, visit
www.oxfam.org.uk/publications
For information about Oxfams development, advocacy, and humanitarian relief work around
the world, visit www.oxfam.org.uk
v
List of case studies
1. Agrolempa, El Salvador 32
2. Clam Clubs, Viet Nam 38
3. National Smallholder Farmers Association of Malawi (NASFAM),
Malawi 43
4. Union of Peasants and Associations of Southern Niassa
(UCASN), Mozambique 46
5. Olive-oil Co-operatives, Palestine 54
6. Zadrima Co-operative, Albania 56
7. Oorvi Agricultural Products, India 60
8. Asprepata, Colombia 69
9. Kiwi Growers Co-operative, Georgia 92
10. Aprainores, El Salvador 94
vi
About the guide
This guide was produced as part of an initiative to share Oxfam GBs knowledge
and experience of supporting producer organisations. This initiative was managed
by Oxfam GB Programme Advisers, David Bright and Annabel Wilson.
The content of the book builds on discussions between Oxfam GB programme
staff and partners that took place at a workshop on producer organisations
in March 2006. Case studies included in the guide were contributed by:
Caroline Abu-Sada, Sally Baden, Craig Castro, Manuela Mece, Aida Pesquera,
Nguyen Quang Quynh, Eliso Tkhadaia, Carlos Vargas, and Amit Vatsyayan.
The guide was edited by David Bright and Annabel Wilson.
Acknowledgements
In addition to the important contributions from Oxfam GB staff, this book
draws on research findings, lessons, and insights from individuals and
organisations and these sources have been acknowledged wherever possible in
the text and in the bibliography. The theoretical framework on producer
organisations and markets that has informed part of this guide owes much to
Andrew Dorward, Jonathan Kydd, and Colin Poulter at Wye College, Imperial
College London. Special thanks to Ian Barney, Alison Griffith, Eila Penrose,
Amit Vatsyayan, Malcolm Fleming, Craig Castro, Emily Jones, Antonio Hill,
Luqman Leckie, Lea Borkenhagen, Manuela Mece, and Joss Saunders for
reading and offering useful comments on the manuscript. Finally, I am
particularly indebted to my wife, Joanna Penrose-Buckley, for her patience,
moral support, and detailed comments on many drafts.
Chris Penrose-Buckley
August 2007
vii
Introduction
The context
In the past, rural development projects have often tried to improve the
lives of small-scale producers by helping them to increase their
production. In some cases, this approach delivered real benefits, but often
the benefits were short-lived, as there was no market for the produce, or
prices collapsed because of overproduction. Over the last decade, lessons
from these failures and awareness of the new challenges presented by
global markets have forced a rethink in rural development projects. Today,
it is no longer enough to promote increased production: small-scale
producers have to adopt a market-oriented approach if they want to
compete in and benefit from local, regional, and global markets.
Small-scale producers face many opportunities but also huge
challenges in todays markets. Market liberalisation since the 1980s has
cut back the support services provided by the state, and forced producers
to face the risks of often weak and volatile markets. With the withdrawal of
state services and an end to guaranteed markets, most producers have had
to produce and market their produce without access to reliable or
affordable input, financial, or transport services. Meanwhile, the rapid
globalisation of agricultural trade has forced many small-scale producers
to compete with large commercial producers around the world and to
meet tough quality and safety standards demanded by buyers.
Furthermore, those who are able to access markets often find themselves
at the mercy of buyers who can take advantage of small-scale producers
weak bargaining position.
This guide focuses on one important strategy that small-scale
producers can and, in many cases, have to adopt in order to access,
compete in and influence markets. This strategy is collective action
among producers in the form of producer organisations (POs). POs come
viii
in many different forms, including co-operatives, farmer associations,
and informal groups of producers. A more detailed definition of POs is
provided in Part I of the guide but for now we will treat a PO as an
organisation of producers formed to market their produce.
Of course promoting collective action among producers is not a new
approach to rural development co-operatives have played an important
role in rural development in both industrialised and developing countries
for well over a century.1 Until the early 1980s, many governments
promoted rural co-operatives as a central element of their rural
development policy (and often as a political tool). From the early 1980s
there was less and less funding for such programmes, as the states role
and funding for agriculture were cut back, and the performance of many
state-led co-operative programmes was often disappointing. Since the end
of the 1990s, however, promoting POs has again become a fashionable
development strategy, as a growing number of governments, donors, and
non-government organisations (NGOs) have recognised the need for POs
to help small-scale producers compete in liberalised markets.2 The
problem is that small-scale producers, in particular women and other
marginalised producers, very often lack the skills and resources to develop
strong POs that can provide the services required by their members,
influence policy decisions that affect their future, and compete in the
market. To succeed, POs need a wide range of support services and that is
what this guide is about.
The actors
There are many different actors and organisations that provide business
services and other kinds of support to POs. Figure 1 identifies various
organisations that have a specific interest or mandate in developing the
capacity of POs (i.e. not just in doing business with POs). Government
ministries and agencies, donors, development NGOs, and specialist
support agencies may all provide special support to POs as a means of
achieving rural development objectives, while buyers, such as exporters
and alternative trading organisations, may also provide special support to
POs to improve the capacity of producers to supply the products they want
to buy.
Introduction ix
Figure 1: Actors and organisations supporting producer
organisations
Government ministries
and agencies
Producer
organisations
Alternative trading
organisations
A word of caution
For many people, collective action is an obvious solution to the problems
faced by small-scale producers, and this view is reflected in the huge
amount of recent interest in POs. However, it is important to emphasise
from the very start that POs are not a universal solution to all the problems
small-scale producers face.
Firstly, POs cannot fill all the gaps in the agricultural service market left
by the state and which have not been filled by the private sector, after
market liberalisation. POs may be able to narrow the gap and POs can
make it easier and cheaper for the state and other actors to provide services
to small-scale producers, but in many cases there are more fundamental
constraints to market access and market development that POs alone
Introduction xi
cannot solve. While it is important for development NGOs to understand
how best to operate in rural contexts where essential services are missing,
it is also important not to expect too much of POs when operating in weak
rural markets.
Secondly, POs tend to reflect the social context they operate in and may
therefore exclude women or other marginalised groups from partici-
pating in the PO or from positions of power within the PO. Women may
also be unable to participate in POs as the demands of household caring
duties constrain their time and resources. POs may therefore provide
limited if any benefits to poorer, marginalised producers.
Lastly, it is important to recognise that supporting POs is not always the
best starting point for organisations wanting to help small-scale
producers access markets. This is because there are often very basic legal,
economic, or political problems preventing POs from developing
successfully, and unless these problems are addressed first there is little
point in investing significant resources to support POs. For example, if
the laws in a country do not provide a suitable legal framework for POs to
conduct their business successfully, it may be better to invest resources to
help producers advocate for changes to these laws, before providing direct
support to POs.
Introduction xiii
support activities, most of the guidance will also be relevant to non-
agricultural, urban-based POs, and possibly even to workers
organisations.
Orienting questions
What are the defining characteristics of POs?
What challenges and opportunities do small-scale producers face in
todays global markets?
How can POs help small-scale producers to overcome these challenges?
Can POs help all small-scale producers?
1
1 | Defining features of producer
organisations
2
of the POs we will encounter in this guide provide social services to their
members and the wider community. For example, COMUCAP, an
association of women producers in Honduras, came together to improve
awareness about womens rights. The point is that for POs to succeed, the
business cannot be led by social objectives even if social objectives provide
the main motivation for the organisation. If social objectives are placed
before business priorities, the business is likely to fail and no one will
receive either economic or social benefits.
5
world markets fall far short of the efficient and effective means of
exchange discussed in economic textbooks. Markets are often not
competitive and are frequently dominated by a few powerful players. In
poor rural economies, markets are often weak or they fail altogether
because the cost and risks of participating in the market are too high.
However, while there are clearly significant problems in many markets
and problems with the global system of trade, avoiding markets is not a
viable livelihood strategy for the majority of small-scale producers.
Instead the challenge is to create a more level playing field for small-scale
producers, i.e. to enable them to compete on a more equal basis, and to
help them become more powerful market actors, by developing their
capacity to compete in the market and by advocating for fairer trade
systems and market structures that are not biased against small-scale
producers in developing countries.
The market challenges presented below involve obvious examples of
market failure but also challenges created by highly competitive markets
in which small-scale producers are disadvantaged by their size, lack of
resources, and isolation. These generic disadvantages include:
limited land and capital and difficult environmental conditions that
constrain production;
geographical dispersion;
low levels of literacy, poor health, and social and political
marginalisation;
weak transport and communications infrastructure that raises costs
and lowers the prices received by producers;
social and cultural constraints regarding acceptable gender roles and
behaviour.
These challenges are described in detail in other material and we will not
discuss them further here. However, it is important to keep these generic
challenges in mind throughout this guide.
Below, we will consider the challenges posed by three different
developments in global markets: market liberalisation; trends in local and
global food markets; and changes in market chains (see Box 2.1 for an
explanation of market or supply chains).
Producers Wholesale
Traders Processors Retailers Consumers
market
Market liberalisation4
Until the 1980s, the state in many developing countries intervened in
rural markets to stabilise market prices, subsidise agricultural inputs, and
provide agricultural marketing services. To achieve this, many states
created marketing boards and rural co-operatives to co-ordinate
agricultural production and control important markets. One of the main
aims of these policies was to transfer resources from the agricultural
sector to support industrialisation, and many states therefore imposed
heavy taxes on agriculture despite the services they were providing to
producers. The impact of these policies was mixed: in some countries the
interventions were associated with very significant agricultural growth, as
in parts of Asia where agricultural growth was faster than population
growth and led to a dramatic fall in poverty. In many other regions the
policies contributed little to growth and in sub-Saharan Africa, for
example, per capita agricultural production declined by around 1 per cent
between 1960 and 1980.5
By the early 1980s, a fundamental change in economic and
development policy had taken place in the North. Evidence of poor
economic performance in many developing countries, the rising costs of
marketing boards (made worse by the oil shocks in the 1970s), and the rise
of neo-liberalism, which saw state intervention as an enemy of growth, all
led to a new drive for market-oriented growth and trade liberalisation. 6
State intervention in rural markets was now seen as a barrier to growth,
and over the next two decades, market reform imposed by donors led to
the closure of many marketing boards and the withdrawal of most
agricultural marketing services provided by the state. Many donors reduced
their support for agricultural services and between 1987 and 1998, for
example, the total value of aid to agriculture fell by almost 70 per cent.7
Supermarkets28
As noted above, in most industrialised countries, food retail markets are
dominated by a small number of large supermarket chains. For example,
in the UK, the top four supermarkets accounted for almost 75 per cent of
food sales in 2000.29 This has had a significant effect on global fruit and
vegetable market chains, as supermarkets account for a large share of
fresh produce sold in many industrialised countries and increasingly also
in many developing countries. Initially, the supermarkets bought fresh
fruit and vegetables from wholesalers, but these wholesalers were not able
to satisfy the supermarkets growing demand for products that met their
quality, food-safety, and traceability standards (traceability is the ability to
identify exactly where, e.g. from which farm, a product has come from).
Supermarkets therefore began to develop longer-term contracts with a
Contract farming33
In value chains, suppliers and processing companies increasingly make
contractual agreements with producers in order to reduce their risks and
guarantee that the produce meets the necessary standards. In a contract
farming arrangement, exporters or processing companies make an
advance contract with producers in which they agree to supply a specified
quantity and quality of produce at harvest time, for an agreed price. An
outgrower scheme is a similar system set up by a commercial farm to get
small-scale producers to supply additional products to the farm. Both
these schemes generally work through groups of farmers, which are often
set up by the commercial farm or company to reduce its transaction costs.
If they are confident that the producers will honour the contract, farms or
companies often provide inputs on credit and extension services to the
producers and then deduct the cost of these services from their payment
for the crop. Contract farming schemes can provide a valuable marketing
channel for small-scale producers and improve their access to important
agricultural services that can also be used on their food crops.
POs can help small-scale producers improve their position in the market
and overcome at least some of the challenges identified in the previous
chapter in four basic ways:
1. Increased scale: POs bring together the business activities of many
individual small-scale producers and thereby increase the overall scale
of their joint business activities. This increased scale can lower small-
scale producers business costs, enable them to supply the quantity,
quality, and consistency demanded by buyers, and increase their
bargaining power and influence in the market. However, POs may
have to reach a certain minimum size before the scale of their
marketing activities gives them real bargaining power and enables
them to compete with large, commercial producers.
2. Intermediation: POs act as an intermediary or link between individual
producers, on the one hand, and buyers or service providers, on the other.
Instead of having to do business with many individual and dispersed
producers, buyers or service providers can deal with a single organisation
and thereby reduce their transaction costs. However, co-operation within
a PO also creates additional management costs and if a PO is not
managed efficiently these costs may be greater than the benefits.
3. Specialisation: POs enable small-scale producers to pool their
resources and then divide their labour between the different tasks
involved in the business. This specialisation can enable POs to use
their labour more efficiently, develop expertise in key areas, and free
up members time for other things.
4. Co-operation: the very process of working together can create solidarity
and develop confidence among small-scale producers, enabling them
to face the risks and challenges of the market and increase their
influence on local policies and practices that affect their markets.
18
POs may have limited benefits if there are more fundamental problems
with the way markets are structured. For example, POs alone can do little
to redress the market power of supermarkets or overcome market failures
in thin markets. POs are increasingly necessary for small-scale producers
to have a chance of competing in and benefiting from the market, but POs
are not always sufficient to achieve these aims. We will return to these
important constraints after considering the main benefits of POs in the
next section.
Increased influence
Large POs can provide the platform for producers to promote their
interests and influence policies in the local, national, and even
international environment that affect their business and livelihood. For
example, NASFAM, an association of smallholder farmers in Malawi, has
successfully lobbied the government for tax concessions on smallholder
tobacco sales while the Guyana Rice Producers Association persuaded
millers and exporters to provide timely payments to producers. Collective
action through a PO can also mobilise producers to do something about
other problems that affect the wider community. When members of the
Guyana Rice Producers Association were affected by a natural disaster,
the association mobilised resources to provide relief to the whole
community.
Free riding
To achieve economies of scale most POs combine the produce of their
members for processing or marketing. Although this process is essential
for the success of the PO it also involves potential risks and losses for
individual members. For example, some members of the vine growers co-
operative in Albania were reluctant to switch to collective wine processing
because they feared that the quality of the wine would be reduced by
poorer quality grapes supplied by other members. They even feared that a
collective processing system could encourage some members to invest
less time in managing their vines because they could reap the benefits
from the higher quality grapes supplied by other members. This type of
Increased profile
As formal or informal organisations of producers, POs raise the profile of
producers in the market and in the political arena. While this can bring
many benefits in terms of improved access to services, the increased
profile can also create problems and increase business costs. For example,
the association Agrolempa in El Salvador is formally registered as a
business and therefore has to pay taxes. Many of its competitors, however,
are informal traders who do not pay taxes and therefore can offer attractive
prices to Agrolempas members. In some regions, such as parts of sub-
Saharan Africa, where there is a history of political control of co-
operatives, successful POs may attract unwanted attention from the
authorities that may threaten their business.
26
unable to produce a reliable surplus. This conclusion is supported by
research findings and historical evidence that suggest that POs are usually
set up by better-off small-scale producers.36 But there are further reasons
why it is often difficult for poorer small-scale producers to participate in
POs. These are:
1. Poorer small-scale producers with few assets, limited skills, and
unfavourable environmental conditions will find it difficult to produce
the quantities of low-value staples required for a PO to compete in a
volume market but, equally, will struggle to produce high-value
products, such as fruit and vegetables, that consistently meet the
quality required for a PO to compete in high-value product markets.
2. The demands of household caring duties mean women are usually
time-poor and may therefore not have the time to participate in a PO.
Women may also be excluded from participation in POs due to
cultural constraints or because they have limited access to cash
income, which may limit their ability to pay membership fees and
invest in the business.
3. Occasional market sales can provide a means for poor producers to
diversify their income and spread their risk but this is different from
marketing a surplus as part of a market-oriented business. To succeed
in the market POs often have to take risks that many poorer small-
scale producers may be unable or unwilling to take.
4. It often takes a number of years before a PO breaks even and is able to
pay its members prices that are higher than those offered by other
traders. Until it reaches this point, members may have to make
additional investments in the PO without receiving any benefits but
poorer small-scale producers often do not have the resources to make
this kind of sacrifice.
5. Many POs do not pay members immediately for their produce but
poorer small-scale producers often need cash immediately and this
may prevent them from participating in a PO. For example, when a
co-operative in Albania began producing and marketing wine
collectively, some poorer producers left the organisation, as they could
not afford to wait additional weeks until the co-operative could pay
them for its sales.
6. PO membership involves different types of cost, including
membership fees or share purchases. These costs may often be too
high for small-scale producers, especially women producers, with
limited cash. For example, poor coffee producers in Uganda were
unable to join a coffee co-operative that could offer them better prices
because they could not afford to pay the membership fee and buy
shares in the co-operative.
Orienting questions
What do POs do?
What legal forms do POs have and how are they structured internally?
How are POs managed and governed?
What types of business activities do POs get involved in?
What types of relationships can POs have with buyers or suppliers?
How do POs access market services?
What can POs do to influence their environment?
How do POs develop over time?
31
5 | Producer organisation activities
and services
When producers come together to form a PO, often the initial aim is to
work together and collectively perform the tasks individual members
previously undertook on their own. As POs grow, these tasks are
increasingly performed by employees working for the PO, as a service to
the POs members. A good place to begin our investigation into POs is to
consider what POs actually do. Below we will provide a brief summary of
some of the main activities and services provided by POs to their
members, looking first at those activities and services that are directly
connected with the POs business before considering two other types of
PO services. First, we will introduce our first case study of an association
in El Salvador.
32
outside the region who are committed to the objectives of the association.
Each year the board decides what to do with any trading profits made by the
company. In 2005, the board decided to distribute 80 per cent of profits to
members, based on how much produce they had supplied to the company, and
the remaining 20 per cent of profits was distributed equally to all members.
Agrolempa has become one of only three agricultural trading companies
supplying the major institutional markets and the retail and catering trade in
El Salvador. It has achieved this by focusing heavily on improving the quality
of its members fruit and vegetable production and by developing a quality-
management system. To achieve the volume of supply and offer the range of
produce demanded by hospital and supermarket contracts, Agrolempa has
become a trading company, buying produce from members and from suppliers
who are not members in the region and even in neighbouring countries.
Although Agrolempa has developed a strong position in the market, the scale
of its current business is still insufficient to cover all its costs. The association-
owned company pays normal commercial tax rates while most of the informal
traders it competes with do not. For these reasons, it has not always been able
to pay its members better prices than the traders, who have frequently raised
their prices to persuade members to sell to them. However, the associations
members are very committed to Agrolempa and accept that it may take some
years until the company is able to break even (without receiving external
support) and reward their commitment with considerably better prices
and dividends.
Other services
POs can provide additional services to their members that are not directly
connected to their business. For example, Asprepata, a Colombian PO
described in Case Study 8, was established by producers who were
campaigning against a planned sugar mill that threatened their
livelihood. In Chapter 10 we will look at how POs try to defend and
promote their members interests in more detail.
Many POs also provide social services to their members and the wider
community. For example, the womens association COMUCAP in
Honduras was set up to raise awareness among women about their rights
and address the problem of domestic violence. Over the last ten years, its
members have established a number of successful enterprises, including
organic coffee production and producing soap from aloe vera.
COMUCAP continues to provide social services to women alongside its
market services, but it has recently taken the difficult decision to manage
the social and business activities under two separate structures. Although
its social objectives have informed and driven all its activities, the
management believe it is important to separate the two to prevent social
concerns undermining the sustainability of its business activities.
As the example of COMUCAP illustrates, POs (and NGOs working
with POs) often find it difficult to get the right balance between social and
business objectives. In the long term, a PO can only provide services to its
members, whether business or social services, if they develop a successful
business that is financially sustainable and can generate the resources
necessary to support both social and market services. As many POs even
struggle to cover the costs of their market services, it is important to be
realistic about their capacity to provide social services, unless these are
funded by external grants. However, as COMUCAPs experience
highlights, mixing grant-funded social activities and profit-oriented
business activities within the same organisation can also create
difficulties, and POs need to develop appropriate structures to manage
these activities effectively.
Legal structure
The legal structure or status of a PO describes what type of organisation it
is according to the law. Sooner or later, most POs have to register their
organisation with the authorities and at this point they can usually decide
between different types of legal structure. This choice is important
because the legal structure determines many important things in an
organisation. The following is a list of ten critical issues, which are
affected by the choice of legal structure:
Ownership: can anyone own shares in the PO and can owners buy as
many shares as they like?
Membership: can anyone join the PO, including women and minority
groups, or are there restrictions on membership? Is membership
assigned to individual members or does it include other family
members?
Voting rights: who can make decisions within the PO and how are
these decisions made?
Distribution of profits: can business profits be distributed to members
and, if yes, according to what principle?
Risk: what happens if the business goes bankrupt? Who is liable for
the business debts?
Regulation: how much freedom does the PO want to have to make its
own rules and manage its affairs independently, without outside
interference or useful external controls?
37
Credibility: how much credibility will the PO have in the eyes of
potential lenders, investors, and business partners?
Taxation: how will the business be taxed?
Investment incentives: what incentives will the PO provide to new and
existing members to invest their resources in the business?
Share transfer: can existing members sell their shares when they exit
the organisation or are the POs shares not tradable?
The most common legal structures that we will consider in this chapter
are: informal organisations, associations, co-operatives, hybrid structures,
and private companies. These structures are not defined in exactly the
same way in every country and some structures may not exist at all in
some countries. They are, however, the most common types of legal
structure used by POs and the main features are likely to be similar in
most countries. The individual characteristics of these five structures are
listed in detail in Annex 4, with particular reference to the ten critical
issues listed above. Below we will briefly summarise the main features
and advantages and disadvantages of these five different structures but
first we will introduce another case study about three Clam Clubs in
southern Viet Nam.
Clams are not farmed but are raised in open coastal waters and therefore
require supervision to prevent damage or theft before they are harvested.
Since 2003, three Clam Clubs have been established in the coastal district of
Tra Vinh province in southern Viet Nam. These were not the first attempts at
collective clam-raising in the area. A group of well-off households had
previously attempted to raise clams but had failed because the whole
community did not support the initiative and so the participants were unable
to prevent other people harvesting their clams.
In collaboration with the local authorities, Oxfam GB organised a series of
meetings with local farmers to set up a collective clam-raising initiative.
The clubs were established in three communities and all members had to
contribute money to purchase baby clams. Poor members were able to borrow
money for their contribution from a revolving fund set up by Oxfam GB. When
the clams are sold the members repay their loan with a small amount of interest
and the following season another group of poor members are able to borrow
money from the fund. Initially, club members took turns to guard the clams but
soon they decided to pay members from poor households to work as permanent
guards. Oxfam GB also provided technical and management training for the
clubs on how to organise and manage the clubs activities. Exposure visits were
organised to baby-clam suppliers, clam co-operatives, and local markets. There
is strong demand for the clams and a lot of competition between the buyers, so
the clubs are able to negotiate a good price. For this reason, the clubs do not
Informal organisations
Informal organisations, according to this guide, are POs that are not
formally registered and therefore do not have legal rights as an
organisation. Like the Clam Clubs, many new POs start off as informal
organisations and only register once the benefits of registration are
greater than the additional costs and effort associated with registration. In
some countries the laws governing POs are poorly defined or only permit
certain types of structure that are not appropriate for small-scale
producers and in such cases it may be easier for a PO to operate
informally. In Viet Nam, co-operatives are the only legal structure for
collective business but co-operatives have a lot of rules and regulations
that are not suitable for a small clam-raising enterprise. If a PO is
competing in an informal market without effective regulation, then a
formally registered PO will often be at a disadvantage compared with
informal traders and buyers, as in the case of Agrolempa in El Salvador
(Case Study 1). However, informal organisations also have many
disadvantages, including problems accessing market services, such as
credit or technical assistance, and reduced credibility in the eyes of
potential business partners.
Associations
An association is a membership organisation in which members
participate to receive certain services and benefits. Many NGOs and
community-based organisations are registered as associations but it is
also a common legal structure for POs. For example, NASFAM, in Malawi
(Case Study 3), is an association of smallholder farmers. The main
advantages of associations are their independence, freedom, and
flexibility. As the members of an association can decide how to structure
and manage the organisation, they can create the structure and rules that
suit their needs and circumstances. In many countries this independence
is a critical factor: NASFAM, for example, chose to register as an
Co-operatives
Co-operatives have a long history and are probably the most widely
recognised form of PO. There is an internationally recognised, traditional
form of co-operative regulated by the International Co-operative Alliance
(ICA). The main purpose of traditional co-operatives is to provide services
to their members at a competitive price. Their most distinctive feature is a
democratic form of ownership and control: all members have equal
shares in the business, decision-making is based on the principle one
member, one vote, and profits are distributed according to patronage, i.e.
how much members use the co-operatives services. These features
distinguish co-operatives from private companies where ownership,
decision-making, and profit distribution is proportional to each members
investment in the business. The Palestinian olive-oil co-operatives,
described in Case Study 5, are an example of a traditional co-operative.
Traditional co-operatives also have some disadvantages: like
associations, co-operatives often have difficulties raising money for
investment from their members. As all members have equal ownership
and voting rights and the co-operatives profits are distributed according
to patronage, there is little motivation for members to invest their own
funds in the co-operatives business. While this is of little concern for
many co-operatives, whose members do not have any surplus money to
invest in the business, it can be a problem for more advanced
organisations. Co-operatives are also quite heavy structures, i.e. they have
many rules and regulations, which do not allow for much flexibility, and
create additional internal administration costs. In many parts of the world
producers are very suspicious of co-operatives because of negative
experiences in the past with state-led co-operative-promotion
programmes. As we saw from the example of NASFAM, many states still
take a close interest in how co-operatives are run, which can lead to
unwelcome government interference. In practice, governments may
define any of these structures in ways that enable them to maintain some
level of control over PO activities, which can weaken POs ability to operate
freely and independently.
Private companies
The main purpose of a private company is to make a profit on the money
invested by its owners, i.e. the companys shareholders and members. The
main advantage of a private company is that its legal structure is designed
for business activities and encourages investment by members and
external investors. Private companies also have the advantage that they
can have members and shareholders who are not active, i.e. who are not
producers, in the case of POs. This option can provide an important
means of raising funds, as investors are more likely to invest in a business
if they also gain some control over how the business is run. However, this
arrangement could cause problems for our definition of POs in Part I,
which suggested that POs should be owned and controlled by small-scale
producers. However, if this is only a temporary arrangement designed to
overcome specific financial or management constraints, it need not
conflict with our definition. Private companies also have a number of
disadvantages, which can make them an unsuitable structure for
collective businesses run by small-scale producers. As decision-making is
based on ownership, private companies are usually run according to the
interests of the wealthiest members, which may disadvantage poorer
Third-level
organisation (eg. NASFAM)
Second-level Second-level
organisation (eg. NASFAM organisation (eg. NASFAM
associations) associations)
Board of Directors
Private
trading company
owned by the
association
Association Agrolempa
Summary: PO structure
There is no ideal legal structure for POs as each of the five types has
advantages and disadvantages that need to be considered carefully.
Multi-level organisations should be developed gradually and
organically, according to the needs of the business and the
management capacity of the POs members.
Mixed PO structures provide a means of combining various benefits
of different legal structures.
46
UCASN promotes access to high-value markets and negotiates advance
contracts with companies for products such as white sesame and soya. These
companies often provide seeds and the association gets higher prices by
cutting out informal traders. Some associations also try to market maize but
they have had difficulties competing with informal traders who are very
efficient and operate with low margins.
As a result of rapid growth of the Union from 2000, with the creation of new
associations and second-level unions, some grassroots members do not have a
strong sense of ownership of the organisation. Another factor has been
frequent delays in payments to members and the lack of a clear payment system
that is understood by all members. Oxfam GB is supporting UCASN with the
development of a new strategic plan, which will seek to address some of these
problems. Despite these challenges, UCASN has enabled many of its members to
access higher value markets and has made some progress in recent years
towards financial sustainability.
Board of Directors
Professional managers
appointed by the board
Grassroots ownership
A strong sense of ownership and trust of the leadership among grassroots
members is critical for POs to function effectively. When this is missing,
POs face real difficulties. For example, although UFP, the Union of Fruit
Producers in West Africa, has a formal governance structure that gives
members the ability to participate in decision-making, it has faced
considerable difficulties in recent years because some grassroots
members have lost trust in their elected leaders and no longer felt that the
PO was serving their interests. As a result some members left their
associations or refused to pay their membership fees. The experience of
UFP and some of the other POs described in our case studies provides
useful insights into some common governance and management
challenges that POs face as they expand and develop:
Independent initiative: some of UFPs first- and second-level associations
were established very quickly under a donor-funded programme
managed by Oxfam GB. Although the new organisations responded to
real problems producers faced in the market, the new associations were
driven primarily by external initiative and as a result some members saw
the PO as a means of accessing external support rather than as their own
initiative. While many POs are established with external involvement,
what is important is that, in some way, the PO is the idea of the producers
and they see it as their effort to address their problems in the market
rather than as someone elses solution to their problem.
Managing profits
For many POs, deciding what to do with business profits is a difficult task.
This is because there is often a conflict between the short-term interests of
members and the long-term sustainability of the business. For example, a
coffee co-operative in Central America had a confrontation between the
members and the leaders: the members wanted the co-operative to pay out
all the profits to them as their rightful dividend on their share of the
business; the leaders, however, were thinking about the long-term needs
of the business and they proposed to withhold most of the profits to
increase the POs working capital. This is a common struggle within POs
and it is often most acute during the early years of development, when
members have limited understanding of the POs business, or when there
is a lack of trust and confidence in the leadership.
This tension is particularly challenging because many POs face
difficulties raising money for investments. Even though Agrolempa is
now a recognised trading company in El Salvador, so far it has not been
able to access competitive financing from commercial banks because of
the nature of its business, working with small-scale agricultural
producers. As the members of most POs have very limited assets, POs
cannot usually turn to their owners for investment and so trading profits
often represent the only source of investment capital.
This difficulty highlights the importance of the system of ownership
and the principle used to allocate profits. POs tend to distribute profits to
members based on one of the following two principles:
1. Profits are distributed according to members share of ownership, i.e.
how much money each member has invested in the business. For
example, the Clam Clubs in Viet Nam distributed the profits to each
member according to how much they had invested in clam
production at the beginning of the season.
2. Profits are distributed based on patronage, i.e. how much each
member has sold or bought through the PO. In UCASN, for example,
profits are distributed according to the value of produce each member
has sold to their association.
These principles affect members incentives and motivation to invest in
the PO or use the POs services, so the choice of principle is important.
The members of the Clam Clubs, for example, have a strong motivation to
53
maize market. Although the PO managed to cut out the traders who came
to the farm gate and paid low prices, the PO was unable to compete with
traders in the district wholesale market, as the traders experience and
networks enabled them to operate at lower cost than the PO.
These examples show how important it is for PO services to be based on
a careful analysis of the market and the real costs of doing business. Below
we will look at the most common business strategies adopted by POs to
raise their profits, either by increasing their business income or by
lowering their costs. We will then consider how POs increase their
bargaining power and lower their risks. First we will introduce another
case study of a group of co-operatives in Palestine.
Palestinian farmers have cultivated olives for many centuries. In the 1960s
many olive-oil co-operatives were established in the West Bank, and
Palestinian olive oil was exported to many Arab countries. However, olive-oil
production and export suffered heavily as a result of the occupation and
uprisings in the following decades, and Palestinian olive oil lost its position in
these markets. Since 2000, a number of Palestinian and international NGOs
have begun to revitalise many of the old co-operatives and promote export
production. Palestinian olives can produce high-quality olive oil, and as the
production and marketing costs in Palestine are relatively high, the best
strategy is to improve the quality of the olive oil and target high-value markets
in the West rather than compete in local markets, where volume is more
important than quality.
The Palestinian Farmers Union (PFU) has been working with a number of old co-
operatives but has often found it easier to develop new co-operatives out of
informal groups than to revive the old structures. The opportunity of accessing
export markets has encouraged co-operation and unless farmers work together
they are unable to gather enough olives to operate the oil presses on a daily
basis. Daily pressing is critical to ensure the olive oil meets the required quality
standards. Accessing European markets also requires the producers to meet very
demanding traceability and certification requirements, which individual farmers
cannot afford. These incentives have encouraged the small-scale producers to
unite and change their practices despite their initial doubts about co-
operation.
The co-operatives supported by PFU, Oxfam GB, and other support
organisations have a traditional co-operative structure, with a board of
directors elected by the general assembly and operational managers appointed
by the board. Within the co-operatives, traditional leaders often control
decision-making and, so far, marginalised members of the community,
especially women, have limited influence. An important focus of PFUs work
with the co-operatives is to develop a second-level organisation which can
promote and defend the interests of small-scale producers in the Palestinian
Raising volume
A basic strategy for POs to increase their business income is to increase
the volume of sales, i.e. to produce and sell more of the same product. One
market option for the Palestinian olive-oil co-operatives was to enter the
domestic olive-oil market. This market deals with low-quality oil that is
traded at low prices and so producers have to sell large quantities to make
a profit. The co-operatives realised that it would be difficult for them to
compete with large commercial farms that could produce large quantities
at much lower cost and so they turned their attention to the export market
where competition is based on quality. This situation is not unique as POs
often find it difficult, if not impossible, to compete in low-value markets
where competition is based on driving down costs. Even if a PO can
successfully increase volumes without increasing their costs, the low
profit margins will rarely generate attractive incomes for individual
members.
Adding value
Adding value can involve three different strategies: improving quality,
processing, or differentiation:
Improving quality: another strategy to increase income is to obtain
higher prices by improving the quality of an existing product.
Agrolempa, for example, has been able to obtain higher prices by
improving the quality of its members fruit and vegetable production
and targeting markets that pay a premium for good quality. Quality
improvements can involve relatively simple investments in sorting,
grading, or cleaning a product or more costly investments in better
inputs and production equipment and improved storage and handling
facilities. NASFAM, for example, has had to invest in an internal
quality-control system to ensure that the groundnuts it exports to
Europe meet strict European Union food-safety standards, while
Grapes have been cultivated in the Shkoder area of northern Albania for
centuries, but the vineyards were neglected in the agricultural policies of the
socialist era. Since the transition to a market economy began in the early
1990s, many farmers have struggled to make a living. The old vineyards in
Shkoder did not receive much attention as they required significant investment
and many of the skills had been lost. However, some of the younger men in the
village worked on vineyards in Italy as labour migrants and when they returned
they persuaded others in the village to gather the grapes from their individual
vineyards and produce wine together.
In 2003, a group of ten farmers from Shkoder asked Oxfam GB to help with
purchasing basic wine-making equipment and rehabilitating their cantina, the
building where the wine is produced. Oxfam GB agreed and also provided
training for the group, in business and organisational management, and paid
for a wine specialist to help the producers improve the production process.
The group was formally registered in 2003 as the Zadrima association and
received further grants from Oxfam GB in the following years for vineyard
equipment and storage tanks. The tanks were an important investment as they
enabled the PO to access more valuable markets by improving the quality and
consistency of the wine.
At the beginning the members of the group produced their wine separately and
sold it in recycled plastic bottles to local cafes. Following the investment in
improved production equipment the group took the important step to combine
their grapes and produce and market their wine collectively. The association
now began marketing their wine in improved plastic containers with a simple
label. In 2005, the group sold their wine for the first time in proper glass
bottles with a good-quality label at a national trade fair.
In the same year the association decided it was time to register their business
as a co-operative, to establish itself as a proper business structure and to
improve its credibility. Although the co-operative has made significant progress
over the last few years, it is operating in a very competitive market and is also
facing internal challenges. The most important factor that determines the
quality of the wine is the quality of the grapes and this can create tensions
because not all members of the co-operative make the same effort in
production and some produce better quality grapes than others. However, all
members receive the same price for their grapes and so there is little incentive
for individual members to invest their own money and effort in improving the
quality of grapes. The co-operative will have to develop a way to reward and
therefore encourage investments in quality or it will not be able to compete in
the national market in the long term.
Market development
POs can also increase their income by influencing the perceptions and
attitudes of buyers and consumers and thereby increasing the demand for
their produce. For example, the four co-operatives in St Lucia mentioned
above have encouraged consumers to buy locally produced fruit and
vegetables sold through national supermarkets. With the help of Oxfam
GB the co-operatives have also succeeded in changing perceptions within
the hotel sector towards local producers. As a result the co-operatives have
negotiated long-term supply contracts with a number of hotels that
represent a valuable new market for producers while also lowering the
hotels procurement costs.
Scale economies
In Chapter 3 we highlighted the importance of economies of scale in
helping POs to lower their costs. Most of the POs in our case studies have
lowered each members marketing costs considerably by bulking their
produce and marketing it collectively. These economies of scale provide
immediate benefits for members but to compete with large commercial
producers POs will often have to find additional ways of lowering their
costs. NASFAM, for example, is providing inputs at lower costs to its
members by purchasing seeds and fertilisers in bulk. By managing
processing more carefully, the co-operatives in Palestine have been able to
lower their processing costs while also improving the quality of the olive
oil. POs can also achieve important scale economies in accessing market
services, such as market information, extension, or transport services.
Net margin
C$ 8,000
Asprepatas Impact
Association of
producers Panela Panela
Asprepata Wholesale
market
C$ 17,000 C$ 18,000
Net margin
C$ 1,000
Processing
Over the last decade, small-scale cotton farmers in India have been hit hard by
economic liberalisation, which has led to rising costs of production and cheap
cotton imports. Small-scale farmers usually have very little bargaining power
and have faced growing exploitation from buyers and input suppliers.
The intensive use of agro-chemicals has led to a fall in production levels as
soil quality has deteriorated. The result has been a sharp increase in rural
poverty and a disturbing number of cases of suicide of destitute farmers who
have lost hope.
To compete in the cotton market and create more sustainable farming
practices, four farmer co-operatives, supported by Oxfam GB and other
organisations, have switched to organic cotton production using locally
available inputs. This has reduced their cost of production by up to 60 per cent
and will enable members to obtain a premium for organic cotton. To address
farmers weak position in the local cotton market, the co-operatives supported
the creation of a private trading company, OAPI, in 2006, that will buy seed
cotton from small-scale farmers through existing and new farmer co-operatives.
The company will sub-contract the ginning process to an independent
processing company and then sell the processed cotton to the weaving industry
(see Figure 8.1). In this way farmers will control the processing stage and will
be able to receive a share of the higher price of processed cotton.
Although the aim is for the farmers to own and control the company, the
existing co-operatives have not yet developed the capacity to control and
manage the company effectively. There were also concerns that stronger
members would dominate the company and that the interests of new or
weaker members would be ignored. It would have taken a number of years for
the co-operative to develop the necessary management capacity but urgent
action is needed to improve the position of small-scale cotton farmers and
prevent further destitution. Oxfam GB therefore decided to finance the business
and, initially, will be the largest shareholder. The plan is for Oxfam GB gradually
to transfer all its shares to the farmer co-operatives over the coming years.
OAPI is registered as a private limited company as the nature of the cotton
business demands a structure that can respond quickly to a dynamic market and
changing financial needs. The private limited company structure also provides a
better control framework for Oxfam GB, who, as the majority shareholder, can
ensure skilled and knowledgeable managers are employed to manage the
business until the co-operatives have developed the necessary capacity to run
the trading company. See Figure 8.2 which shows how OAPI fits into the
market chain.
Disadvantages PO members take on all the POs have to stick to the contract
for POs business risk. even if they would be able to
Prices and income are uncertain receive better terms or prices
and it can be difficult to plan from other buyers.
production and investments if If individual members or
income from sales is associations break the contract
unpredictable. (side-selling) the whole PO may
lose future business.
To conduct their trade and develop their business, POs, like any other
business, need to access different types of market services. These market
services are illustrated in Figure 9.1, and fall into two main categories:
1. Market services that are required by any type of business in order to
conduct their trade, e.g. production, financial, market information, or
transport services.
2. Market services aimed at developing the general capacity of the PO,
e.g. organisational development or management training.
Development
Private NGO
Company
Funding &
Support Seeds & Technical
Certification Advice
Fertiliser
Input Export
PO Supermarket Consumers
Supplier Company
Credit
Transport Services
Rural Bank Management Haulage
Training & Extension
Services Company
Marketing Support
Specialist Ministry of
Support Agency Agriculture
64
As suggested in Figure 9.1, these services can be provided by many
different kinds of organisations, including commercial companies,
specialist agencies, development NGOs, government agencies, and POs
themselves. There are six main ways in which these market services are
provided:
1. Embedded market services: embedded services are market services that
are provided as part of another business transaction and are therefore
embedded within that transaction. For example, UCASN association
receive paprika seeds on credit as part of their supply contract with the
export company.
2. Independent commercial market services: many market services are
provided by independent commercial service providers. For example,
transport and financial services are provided independently by
commercial companies and financial institutions. NGOs and
specialist support agencies can often play a useful role linking POs to
independent service providers. In Mozambique, for example, CLUSA
negotiated a service agreement between a rural bank and a PO for the
bank to offer small loans to the POs members.
3. Government market services: government ministries sometimes
provide important market services, such as extension training for
farmers and market information services. Many developing-country
governments that want to promote POs need to play a critical role in
supporting the provision of market services. Asprepata, for example
(Case Study 8), received support from a state vocational training
college to develop the skills of its members.
4. Externally funded, non-commercial market services: specialist support
agencies, such as ACDI/VOCA which worked with NASFAM, or
development NGOs, provide market services to POs with funds from
donors or private donations. These organisations often provide
substantial grant funding to help POs set up their business and invest
in capital assets. In Part III we will take a closer look at the role of
development NGOs in providing these services.
5. PO services: sometimes POs decide to operate their own market
services for the organisation and its members. For example,
Agrolempa provides extension services to its members and NASFAM
has set up its own farm supply shops where members can purchase
inputs on credit. In Mozambique, a large PO supported by CLUSA
has recently set up Business and Support Services Centres known as
CAN (Centros de Apoio e de Negcios) under a small group of second-
level associations. The CAN are responsible for quality control, raising
productivity through extension to increase volumes and achieve
economies of scale, input supply, and providing access to information
67
68
Figure 10.1: The market environment
Market Environment
Market/Supply chain
Consumers
Exporters/
Producers Traders Processors Retailers International
Importers
National
Local
The production of panela, a brown sugar loaf made from sugar-cane that is used
as a low-cost sweetener, is the main source of income for the rural population in
the Pata region in western Colombia. A small amount of panela is produced
industrially, but most production is based in small family-run units. In 2002, a
group of private sugar mills applied for a licence to construct a very large panela
mill in the Pata region. Although the proposed mill may have opened up new
markets for panela produced in the region, its size was a threat to small-scale
producers who risked being pushed out of the market. In response, a peasant
farmer organisation, CIMA, mobilised small-scale producers to protest against the
plan and defend their livelihoods. With the help of CIMA, an informal association
of panela producers was formed to conduct the campaign and later in the year,
the Ministry of Environment accepted the demands of the panela producers and
rejected the plan to construct the mill.
The campaign against the panela mill prompted the producers involved in the
informal association to address their weak position in the market chain. Their
idea was to establish their own trading organisation that would trade directly
with the panela wholesale markets. Asprepata, the Association of Panela
Producers of the Pata Region (Asociacin de Paneleros de la Regin del Pata),
was formally registered as a non-profit association in 2004 and began trading
with funds from a loan and member contributions. The aim of the organisation
was to control the market price for panela by buying a large share of panela
produced in the region. At the beginning, the association had difficulties buying
enough panela because wholesalers often delayed their payments and many
small-scale producers were not aware of the higher prices offered by the
association. But with additional trading funds provided by Oxfam GB, Asprepata
was gradually able to increase its share of the market and has raised the market
price paid to producers by over 30 per cent, while offering very competitive
prices to wholesalers. At present the scale of the operation and the associations
small profit margin is not big enough to cover its operational costs, which are
funded by an Oxfam GB grant. It is anticipated that continued growth in the
business will enable Asprepata to cover its costs in three years time, and offer
much higher prices to producers on a competitive and sustainable basis.
Asprepata has also successfully campaigned for the sector to adopt a
standardised measurement unit for panela to ensure producers are paid fairly
according to the actual weight. In the future it plans to increase the prices paid
to small-scale producers further through organic certification and marketing
panela to niche organic markets in the urban centres.
As the above case studies have shown, POs are dynamic organisations that
evolve over time, and in that process often change their structure,
activities, and strategy. In this final chapter of Part II, we will consider
whether all POs share a common development path and therefore
whether they should all be aiming towards an ideal form or a common
goal, in terms of their structure, business activities, and strategy. We will
suggest that this is not a helpful way to approach a POs development and
instead identify a small set of universal capacities and characteristics
which all POs need to pursue to become strong and sustainable POs, as
defined in this guide.
A development model
Figure 11.1 presents a PO development path, starting with an informal,
first-level organisation at an early stage of development and ending with
a three-level, national organisation, at an advanced stage of development.
This development path also involves a progression, from simple
marketing activities of low-value commodities in local markets, to
demanding processing and branding activities involving high-value
products aimed at export markets.
While some POs do follow this path of development, it does not reflect
the experience of many others, who see no reason to develop three levels
of organisation and do not aim to enter export markets. Indeed, there are
good reasons why many POs do not follow this path. For example:
Many POs do not begin marketing low-value commodities and then
diversify into high-value products. POs usually start by marketing
whatever cash crop is produced by their members. In fact, the higher
margins on high-value products can sometimes help POs establish
their business at an early stage.
72
The ideal size of a PO and its structure will depend on the needs of the
business and the markets the PO is accessing. Big POs with complex
structures are not necessarily more advanced than a small, single-level
organisation. Agrolempa, for example, has remained a first-level
association but achieves volume through the trading activities of the
association-owned company.
It is not possible or advantageous for all POs to get involved in
processing and product branding as this depends on the nature of the
product and the market the PO is targeting.
Not all POs can undertake advocacy work as this will depend on the
resources and capacity of the PO, the nature of the market
environment, and whether other organisations are engaged in such
activities.
An important principle for POs development that emerges from these
examples is the need for POs to find the right fit. POs need to develop and
adapt their structure, size, services, and strategy to find the best fit with
their priorities and capacity, target market, and market environment. As
the environment, markets, and priorities and capacity of POs change and
evolve over time, POs need to constantly adapt to maintain a good fit
between these factors. For example, Zadrima in Albania started off as an
informal group of wine producers, who decided to help each other
produce wine. Later, the group decided to establish a formal association in
order to access the investment they needed to improve their processing
- informal organisation
- local, first-level organisation
Early Stage or
- bulking and marketing activities
'Undeveloped'
- local markets
- low-value commodities
Advanced Stage
Intermediate Stage
Early Stage
Advanced Stage
Intermediate Stage
(A) Business does not cover its costs and PO relies on external grants
(B) Business depends on single product, market or marketing channel
(C) Business depends on grant-funded market services
(D) PO does not have capacity or market position to influence prices
(E) PO has weak relationships with other actors in value chain
(F) PO has no capacity to influence the market environment
Early Stage
Part I of the guide provided a background to POs and the rationale for
POs. Part II provided an overview of POs, what they look like, and how
they operate, and in this final chapter we have begun to consider PO
development issues: how POs need to develop to become strong
organisations and businesses. In Part III, we turn to the role of
development NGOs and how they can enable POs to develop into strong
businesses and organisations which empower small-scale producers in
the market.
77
The aim of Part III is to provide a general overview of the main steps,
methods, and challenges involved in facilitating the development of POs,
and to identify when development NGOs need to draw on specialist
expertise and support. This part aims to be practical but it does not provide
step-by-step, technical guidance as it is directed at staff of development
NGOs whose main role will be facilitating, funding, or co-ordinating the
support process rather than directly implementing support activities. For
more detailed technical guidance on issues such as marketing,
accounting, or business development, the reader will need to consult
specialist agencies or one of the many existing manuals and guidebooks
on these topics. The guidance and insights in Part III draw on lessons
from the case studies presented in Part II of the guide, as well as on a wide
range of other materials and contributions.39
Below, we will first consider the role and approach of development
NGOs, before looking at basic issues that need to be addressed before
beginning to work with POs. The following three chapters take a closer
look at the process of developing PO capacity, paying particular attention
to the issues and challenges development NGOs need to consider at each
stage of the process.
79
The support provided by government agencies is critical for POs
because their authority, reach, and resources can enable them to
address fundamental problems in the market and market
environment. However, government agencies are rarely able to
respond to the particular needs and priorities of individual POs and
are often driven by the interests of more influential business groups.
3. Private companies and Alternative Trading Organisations (ATOs):
exporters, processing companies, and ATOs, such as Twin Trading
(UK) or GEPA (Germany), sometimes provide specific support to POs
in their supply chains to ensure they have the capacity to supply the
required quantity and quality of products. ATOs, in particular, often
invest in this type of support and some even have special PO support
units. As companies, these actors have a first-hand understanding of
market demands and business-development priorities and ATOs
usually also have expertise in developing the capacity of POs. However
ATOs and, in particular, exporters tend to limit their support to POs
that are already participating in an export supply chain or have the
potential to supply new products demanded by export markets.
4. Donors: many international donors, such as the International Fund for
Agricultural Development (IFAD) or the United States Agency for
International Development (USAID), provide support either directly
to POs or, more commonly, to specialist support agencies working
with POs, sometimes via government agencies. CLUSAs PO support
programme in Mozambique, for example, is funded by USAID.
Donors often have considerable resources for PO support activities
although, like development NGOs, their funding priorities can
change quickly.
Scope of support
Many NGOs focus their support on individual POs and help the PO access
markets and existing service providers. If the market system (i.e. the
system involving the market or value chain, market services, and the
market environment) that the PO is accessing is working well and there
are no problems in the market environment, this approach may be
adequate. However, as we have noted earlier in the guide, POs often face
fundamental market problems. These include buyer-driven value chains,
exploitative traders, unfair competition through partially liberalised trade
policies, unfavourable legal frameworks, and a lack of essential
government services. Development NGOs will need to explore ways of
addressing these wider problems, through complementary activities, if
they really want to help PO members benefit from market access.
Before beginning any work with POs, facilitating agencies (FAs) need to
conduct a careful assessment of producers, existing POs, markets, the
market environment and their own capacity in order to decide how best to
support POs. In particular, FAs will need to make the following important
decisions:
1. If some of the minimum conditions for PO development are not
present, whether to focus first on alternative activities to create the
necessary conditions for successful PO development, rather than
supporting POs directly, e.g. lobbying for a supportive legal
framework.
2. Whether to invest in complementary development activities,
alongside supporting POs, to assist their development and promote
wider access to the benefits of POs, e.g. developing the production
assets and skills of small-scale producers so they can produce a
reliable surplus.
3. Whether to postpone PO support activities, for example if they are not
likely to be economically viable or benefit small-scale producers,
directly or indirectly, for the foreseeable future (e.g. in very poor rural
areas with chronic food insecurity).
The different assessments described in this chapter are also important
because they enable FAs to judge what resources and time-commitment
are necessary to help POs develop into strong, producer-owned
organisations and financially sustainable businesses. For example, in a
region where markets are thin and there is a low level of entrepreneurial
initiative or managerial capacity among producers due to a history of relief
interventions, developing strong POs is likely to take much longer and
require far greater investments than in an area with relatively well-
developed markets and in which producers are already market-oriented.
88
Assessing minimum conditions
To develop into sustainable businesses and organisations POs require
certain minimum conditions in the market environment and within their
organisation. When these are not present, POs may need more support
and much more time to develop into strong, independent organisations.
This has implications for the role and resources of FAs. Some of the main
minimum conditions that FAs need to consider are identified below.
Market environment
Security: like any other business, POs need a minimum level of
security in order to operate effectively. Even low levels of conflict or
unrest can significantly increase the costs and risks of doing business
and reduce the profitability and competitiveness of the POs business.
The olive-oil co-operatives in Palestine, for example, have to cope with
considerable insecurity, including violent unrest and frequent border
closures that block access to international markets. To enable the co-
operatives to develop under these conditions, Oxfam GB and other
organisations have had to take on many of the business risks by
providing grants for investments and brokering marketing channels
for the co-operatives.
Economic stability: although economic instability affects all businesses,
the impact is likely to be greatest on small-scale producers operating in
poor rural markets or involved in export markets, especially during their
early stages of development. For example, high interest rates in Malawi
make it very difficult for businesses like NASFAM to compete against
foreign companies with access to cheap loans outside the country.
Political independence: as demonstrated by the failure of many state-led
co-operative-promotion programmes in the past, to succeed, POs
need to be able to operate without political interference in their
management. In Indonesia, many co-operatives were used by the
ruling party as a means of delivering rural services and are a long way
from being producer-owned businesses.
Suitable legal framework: POs need a supporting legal framework that
allows them to register easily and choose a legal structure that suits their
circumstances and offers some competitive advantages, such as lower tax
rates. For example, the development of the Clam Clubs in Viet Nam is
constrained by the lack of appropriate legal structures for the POs.
Minimal level of market development: when markets are very thin and the
cost of doing business and accessing markets is very high then it may be
very difficult, if not impossible, for POs to become financially sustainable
without large-scale investments by the state in infrastructure and rural
development. Food markets across sub-Saharan Africa, for example,
Initial steps and considerations 89
are often very weak because of poor infrastructure and dependence on
rain-fed production and POs alone will not overcome these
fundamental constraints.
Competitive market structure: producers are unlikely to benefit
significantly from POs if the markets they access are not competitive
and are fundamentally biased against small-scale producers. For
example, while NASFAM has enabled small-scale tobacco producers
in Malawi to cut out local traders and access auction prices directly,
these prices are heavily influenced by a handful of multinational
companies who control the global market.
Producers
Production capacity: many small-scale producers face fundamental
constraints that limit their ability to produce a reliable surplus,
including lack of land, labour, or irrigation. Unless these constraints
are addressed through a wide range of investments by the state and
other actors, POs offer few benefits to these producers.
Independent initiative: in Chapter 7 we looked at various factors that
affect the governance of POs including independent initiative.
Whether FAs are planning to support existing POs or facilitate the
development of new organisations, their long-term development is
likely to depend critically on the extent to which they are based on
producers initiatives.
Social capital: POs sustainability also depends on the level of trust and
understanding between members and elected leaders. POs with
limited social capital within the group will find it harder to cope with
difficult times and agree common objectives. FAs will need
considerable skills, patience, and resources to help the members
develop this trust and understanding over time.
Membership capacity: developing the capacity of PO members should
be an important priority for FAs but the support process will be much
more challenging if few or none of the producers have basic business
or management experience. For example, Oxfam GB in Albania has
had to invest considerable time and resources to help the members of
Zadrima to develop their wine business, as most of the members had
little previous business experience.
Exit strategies
To enable POs to become independent organisations and financially
sustainable businesses, FAs need to plan all their support work with a
clear exit strategy that is agreed and understood by both parties. In
practice, FAs often begin supporting POs without thinking about when or
how they will be able to withdraw their support, as Case Study 10
highlights.
Stage I (e.g. years 1-3) Stage II (e.g. years 3-6) Stage III (e.g. years 6-8)
The FA works with one or FA steps back from close FA focuses its work on
two POs in order to develop involvement with first-level developing the capacity of
the capacity of their first- POs and instead focuses on third-level POs and of
level organisations and facilitating market linkages specific business services
increase the FAs under- and access to service and improving the
standing of the local context providers and supporting efficiency of specific
and the needs of POs. second-level POs. market chains.
100
draw on examples of good practice and innovative approaches in each
area;
identify where the FA will need to bring in support from specialists or
mobilise additional resources.
Capacity Individual members need to have the knowledge, skills, time, and
confidence to exercise their rights and participate in decision-
making processes. For example, members may be illiterate and
therefore unable to read internal reports or future plans presented
by the leadership.
Cultural norms Cultural norms and expectations may constrain members ability to
use their skills and exercise their right to participate in decision-
making. For example, women may not be expected to participate
in decision-making processes or to take on leadership roles.
Formal structures These define members rights and the formal systems of decision-
and rules making and control, such as voting rights, for example.
Motivation and trust If individual members do not trust the POs decision-making
process or they are not satisfied with the benefits they receive
from the PO they may become disillusioned and withdraw from
active involvement in the PO.
Social capital
Formal structures and rules are important but effective governance and
leadership depends as much, if not more, on the level of social capital
within the PO. In Chapters 3 and 7, we emphasised the important role that
trust and commitment among members and trust in the leadership play
in the governance of POs. The example of Kuapa Kokoo, the cocoa co-
operative in Ghana, underlines the importance of social capital in
developing a strong business. Initially, the co-operative faced considerable
problems and a major crisis as it had to borrow money at high interest
rates to pay its members for their cocoa, and buyers did not pay the co-
operative until much later. However, after a few years, members had
developed sufficient trust and confidence in the co-operative that they
were willing to deliver their cocoa without immediate payment. This
deferred payment system meant that the co-operative no longer had to
borrow money to pay its members.
Social capital within POs depends on many things, including the extent
to which members share a common identity or background, and the
frequency of communication and interaction between the members of the
group. Here we will briefly consider what role FAs can play to help build
social capital within POs:
Improving communication: good internal communication within
groups and between different levels of the PO is critical and has to be
adapted to the needs and capacity of members. Written
communication is often inappropriate if only a few members can
read, and more time and resources may be needed to allow regular
open meetings. NASFAM, for example, has invested in various forms
of communication, including notice boards at its farm supply shops, a
quarterly magazine, and monthly radio broadcasts, which are all part-
funded by grants from donors.
Tolerating homogeneity: FAs may be tempted to push for more inclusive
POs that are more representative of the local community. However, as
Leadership
Strong leadership is critical to the success of any PO and can help smooth
tensions and build trust and confidence among members. Conversely,
weak leadership and leadership problems are a common cause of PO
failure and it is therefore important for FAs to help develop the capacity of
leaders. For example, in Uganda, many coffee co-operatives collapsed in
the 1990s due to the impact of liberalisation, but in many cases bad
management and dishonest leaders were as much to blame. There are
three main areas of leadership capacity that FAs need to consider:
Management skills: such skills are often taught through traditional
training workshops but FAs should also consider experience-based
learning methods, such as exposure visits, action learning,
mentoring, or secondments. Such methodologies are particularly
important to help leaders develop more advanced management skills,
Market research
Table 14.2 summarises some of the main steps involved in market
research.
Although FAs should ideally help facilitate the POs market research,
FAs often face the problem that donors expect funding proposals to be
based on market analysis to justify the application for funding. Where
possible, FAs should aim to involve POs in this initial research and should
also earmark funds within the funding proposal to facilitate the POs own
research, even where this may duplicate earlier research, as it represents
an important learning process for POs. Once the information has been
collected, POs need to analyse the information and identify a small
number of realistic marketing options.
Analysing existing POs can learn important lessons from an assessment of their
products and markets past marketing activities.
Conducting or managing PO staff may need basic training in marketing and market
the research research in order to conduct their own research or to manage
the specialist providing the service for them.
Existing information on markets collected by government
agencies or other organisations can be very useful, if it is
available and accurate, especially for more distant markets.
Existing Markets
1. Market Penetration 3. Product Development
New Markets
2. Market Development 4. Diversification
Business planning
Business planning is essential for POs to compete in the market, to
become financially sustainable, and to deliver real benefits to their
members. A core focus of business planning is developing a business
strategy that will deliver these objectives (see Chapter 8 for practical
examples). Developing a viable strategy demands skills and experience
and PO managers may require considerable training and support to
develop these skills, especially if they have to rely on existing members to
manage the business. Although it is not practical for all PO members to be
involved in the business-planning process, as the owners of the business,
members should be consulted about significant changes and required to
approve new plans to ensure their interests are taken into account.
Business planning is not primarily about writing a business plan
although the business plan is an important document. The important
thing is the process of analysing the business and its markets, developing
Cash-flow management
Even a very profitable PO will face severe difficulties if it runs out of cash
and is unable to pay its clients or members. Kuapa Kokoo in Ghana
almost collapsed because it did not have sufficient cash to buy cocoa from
its members even though its business was profitable. Some NASFAM
associations have lost business in the past because they were not able to
pay members immediately and so some members sold their produce to
local traders. Good cash-flow management is therefore essential,
especially for POs engaged in agricultural activities where timing is often
critical. FAs can help POs by developing the capacity of leaders and
managers to manage the POs cash flow, and by helping POs to access
sufficient operational funds.
Grant funding One of the most common ways for FAs to finance POs is to
provide a grant for operational funds, to provide investments, or
to cover running costs. FAs may also broker grant funding from
another donor. Grant funding is a simple solution in the short
term but is not sustainable in the long term and should therefore
be limited to specific, time-bound, phased contributions that are
properly accounted for in the business strategy.
Providing a guarantee One reason POs often cannot access loans from banks is
because they cannot offer any collateral. By providing a formal
or informal guarantee, FAs can sometimes help POs access
loans. However, if the bank is unwilling to make future loans
without the FAs guarantee, this strategy is also not
sustainable.
Providing a loan Some FAs may have the capacity and systems to offer loans to
POs either directly or through associated lending organisations.
In many cases such loans are soft loans, with much lower
interest rates than those offered by commercial lenders.
Equity investments In some cases, FAs may be able to raise funds for the POs
business by buying a share in the POs business (i.e. equity),
as in the case of OAPI (Case Study 7). However, according to
our definition in Chapter 1, this should only be a temporary
arrangement and the FA should gradually transfer its shares to
the PO. This strategy involves considerable risks and should
therefore only be considered in specific circumstances.
Co-ordinating production
Co-ordinating the production of individual members is important as it
enables POs to:
Meet supply contracts: POs often make advance contracts with buyers
to supply a certain amount, and POs have to co-ordinate members
Increasing output
Most POs have to find ways to increase their total output, i.e. the total
quantity they are able to market, in order to reduce their business costs
(per unit sold), or to increase their bargaining power with buyers. POs can
increase their output by:
Increasing the number of members: Asprepata, for example, increased
its bargaining power by attracting new members.
Increasing the productivity of individual members: NASFAM, for
example, provides extension training and input services to members,
and encourages competition between clubs, offering premiums and
prizes (sponsored by companies) to the most productive groups.
Buying produce from non-members: POs such as Agrolempa act as
portal companies, buying produce from members and non-members
to meet the quantities demanded by buyers.
FAs can play an important role helping POs to implement these strategies.
This may involve supporting membership growth at a sustainable rate with
the necessary investments in training new members and leaders. As few POs
have the resources to fund extension services, and government extension
services are often missing or weak, FAs can also help to mobilise the necessary
services from government agencies, research centres, technical colleges, other
NGOs, or private companies. FAs need to help POs pay particular attention to
the training needs of different members and especially the different needs of
men and women. Successful trading demands specialist skills and experience,
and POs may need temporary financial assistance to pay for professional
managers until the business has reached a profitable scale.
Independent certification
Supermarkets and their suppliers usually require a POs quality-
management system to be approved by an independent agency to ensure
it meets the necessary standard. The farmer co-operatives supplying
OAPI, for example, were certified by an accredited agency to prove their
products meet organic standards. To satisfy European Union food-safety
standards, NASFAM had to send samples of its groundnuts to an
accredited laboratory in South Africa to check aflatoxin levels, as there was
no accredited agency in Malawi. The Fairtrade Labelling Organisation
(FLO) also requires POs to be certified by FLO-Cert against FLO standards
before they can sell products under the Fairtrade system. As with quality-
management systems, certification usually involves considerable costs.
Certification fees are often high and POs may have to develop internal
management and monitoring systems so that the certifying agency can
certify the whole PO without having to check each individual member,
which can increase the costs dramatically.
POs often face difficulties accessing independent certification, as they
do not have the funds to pay certification fees or lack the resources and
expertise to invest in appropriate internal monitoring systems. For
example, producers usually have to use organic methods for three years
before they can obtain organic certification and sell products with an
organic label. This conversion period can create problems for many POs
as they may produce less during this period while also not receiving
higher prices. Where certification is a key part of a POs business strategy,
Legal structure
In Chapter 6, we emphasised that there is no ideal legal structure and that
POs need to adopt a legal structure that best fits their business needs and
organisational priorities. FAs can assist POs in this decision by helping
them to:
access advice from local legal experts;
consider the potential implications of different options, including both
short-term and long-term advantages and disadvantages;
negotiate the actual registration process.
FAs often expect POs to be legally registered before they provide any
assistance. However, as we saw in Chapter 6, when POs are competing
in informal markets, formal registration can create significant dis-
advantages and FAs should avoid pushing POs to register where this
Trade partner As a trade partner the FA buys produce from the PO and then
sells it on to further buyers or directly to consumers. For
example, until 2002, Oxfam GB used to import cashew nuts
from Aprainores and sell them to consumers through its shops
in the UK.
Few FAs have the capacity or networks to act as a trade partner or broker
for POs. However, even when FA staff have the necessary skills and
contacts they should think carefully before taking on such a role. As a
broker the FA can help new or weak POs access better deals thereby
generating immediate benefits, which may give the PO time to establish
itself and build the commitment of its members. But acting as a broker
can also encourage dependency on the FA and lead to unsustainable
marketing arrangements, especially if buyers only agree to do business
with POs because of guarantees provided by the FA. In Mozambique, for
example, an exporter was unwilling to negotiate sales contracts directly
with a PO even after repeated business transactions and would only deal
with the international NGO working with the PO. Acting as a broker for
POs can also weaken members sense of ownership and initiative as they
come to believe that the FA will resolve problems for them. FAs should
therefore avoid acting as a broker or trading partner, except for a limited
Market service The FA provides market services directly to POs, using its own
provider resources. In Viet Nam, Oxfam GB staff provided business
training to the leaders of the Clam Clubs.
Market service If some important market services are not available in the
developer or mobiliser local area, FAs may act as service developer to invest in the
capacity of new or existing service providers to offer these
services. FAs may also work with the PO and other
organisations to lobby the government to provide these
market services or offer incentives for private companies to
provide these services. Where appropriate, FAs may also help
POs develop the capacity to provide these market services
themselves.
FAs can play a strategic role as service provider, especially where they have
the necessary expertise to provide specific market services that are not
otherwise available. However, FAs should always pay careful attention to
the sustainability of their role and avoid providing market services directly
unless a realistic and sustainable strategy is in place to hand over service
provision to independent providers in the future. To become sustainable
businesses in the long run POs have to be able to:
access the necessary market services;
pay for essential market services;
identify and negotiate service contracts with any type of service
provider.
Processing
In Chapter 8, we noted that processing enables POs to add value to their
product and to avoid potentially exploitative buyers in the market for
unprocessed products. The vine growers co-operative in Albania, for
example, processes members grapes to make wine which it can sell at a
much higher price in the local market. OAPI, in India, buys and processes
members seed cotton in order to cut out exploitative traders in the local
market and sell processed cotton directly to the weaving industry.
Processing can therefore offer real benefits to producers but also involves
considerable challenges that POs need to consider carefully:
Minimum scale: investing in processing equipment or using
independent processing services (i.e. sub-contracting) is usually only
profitable above a certain minimum scale of activity. For example,
Aprainores in El Salvador invested in a large nut-processing plant, but
initially the members could only supply around a third of the quantity
of nuts needed to operate the plant at full capacity, lower the operating
costs, and make the processing activity competitive. To achieve the
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necessary scale, POs may need to expand their membership or buy
produce from non-members, which will increase their costs and
maybe also their business risks.
Business risk: processing involves considerable risks, especially if the
PO invests in its own processing equipment. Processing equipment is
often expensive and has to be used efficiently to reduce costs and
ensure the PO is competitive. In most cases, the equipment cannot be
used for other purposes, which makes the business vulnerable to
changes in the market and may weaken the POs bargaining power.
Financing: accessing affordable finance to pay for investments in
processing equipment is a major difficulty for POs as we noted in the
previous chapter. FAs and other donors can overcome this problem by
offering grants or guarantees for such investments. However, grants
can weaken the POs sense of ownership of the initiative and, without
the need to repay a loan or interest on the investment, the PO may not
have the commercial discipline to use the equipment as efficiently
and effectively as possible.
Management capacity: managing a processing business is much more
challenging and complex than simply collecting and marketing a
commodity, and POs require considerably more management
capacity to manage such a project successfully. Most POs will have to
hire professional managers to ensure the business is managed
effectively, but PO members still have to manage the managers, which
also requires skill and understanding.
Structure: in many cases POs will need a new structure to manage the
processing business effectively. It may be necessary to create a
separate, PO-owned company to manage the processing unit and, in
addition, to create a second- or third-level organisation to manage the
company and increase the scale of the business.
External barriers: as we noted in Chapter 2, many processed goods face
much higher import tariffs in industrialised countries, making it
difficult for POs to compete in export markets in the North.
Processing is therefore not a straightforward activity and the decision to
enter processing activities should be based on a thorough assessment of
the market, the viability of the business model, and the capacity of the PO.
For all but the simplest processing activities, this analysis should be
conducted by professionals who have an in-depth understanding of the
target market and the processing business. In Mozambique, for example,
an Oxfam GB project providing simple oil-pressing equipment to
producers failed because it was not based on a careful assessment of the
market and the economic viability of processing oilseed.
Creating a brand
By creating a brand for one or more of the POs products or creating a
recognisable identity for the whole business, POs may be able to increase
the perceived value of their products, in the eyes of buyers, and thereby
charge higher prices. With the necessary packaging and branding, POs
may also be able to access supermarkets and other retail markets and
receive a much higher share of the retail price for their products.
NASFAM, for example, sells packaged rice with the NASFAM logo in
supermarkets in Malawi. In most cases, the main benefit of a brand for
POs is to build buyers confidence in the PO and the quality of their
product. However, creating and maintaining a brand is a challenging and
risky strategy for POs. It involves considerable investments and risks
including:
Investing in product quality: branding only works if POs can
consistently produce products of the same quality and can
consistently satisfy the demands of buyers or consumers, in terms of
reliability, quantity, or quality. It may take a number of years for a PO
to achieve this consistency and reliability but only one bad delivery to
damage the POs reputation and its brand. POs therefore need to
make significant investments in production capacity, quality
management and, where necessary, in appropriate packaging to
preserve the quality of the product.
Investing in a brand and in brand promotion: POs need to create a
recognisable brand, in the form of an appropriate brand name or logo.
If they are selling directly into retail markets, POs will also need to
invest in appropriate labelling on their products as a means of
promoting their brand. Zadrima, for example, invested in proper wine
bottles and an attractive label in order to promote its product at a
national trade fair. POs may be able to use creative and low-cost
methods to advertise their product in domestic markets, but most do
not have the resources to advertise their products in domestic
markets, let alone export markets, unless they work in a partnership
with an existing company. Kuapa Kokoo, for example, owns a share in
Advocacy
Small-scale producers tend to lack the capacity to influence the market
environment and their interests are therefore frequently sidelined in the
investment priorities of governments and large companies. Advocacy can
enable small-scale producers to defend their rights and promote their
interests in the market environment. However, although advocacy is
important and can affect POs survival, we are treating advocacy as an
advanced activity because POs need considerable capacity and resources
to undertake advocacy work, beyond simple, local advocacy initiatives.
Some of the main challenges POs face in implementing effective advocacy
work are:
Scale: influence depends, at least in part, on the size of the organisation
and the number of small-scale producers that are represented. This
may require POs to expand, although growth driven by advocacy
priorities may not be good for the business. A better strategy to
increase scale is to join forces with other POs and organisations as
part of a coalition, network, or a formal representative organisation.
AProCA in West Africa, for example, operates as a representative
lobbying organisation on behalf of its national PO member
organisations.
Resources: POs need skilled staff, additional office resources, and
access to information networks to carry out research, develop policy
positions, and lobby on behalf of their members at a local, national, or
even international level. In practice, even large POs struggle to fund
advocacy work from their own business profits and instead rely on
grants to fund these activities. Individual members, especially
women, often do not have the time to attend meetings and participate
in lobbying activities and may need external financial support if they
are to participate in such initiatives. OCDIH (Organismo Cristiano de
Desarrollo Integral de Honduras), an FA in Honduras, has promoted
Lobbying for and Until POs have reached the scale and developed the capacity
with POs necessary to defend and promote their own interests, FAs may
need to lobby with or on behalf of POs when they face serious
challenges in the market environment. The Clam Clubs in
Viet Nam, for example, do not have the capacity to lobby for a
change in the laws governing POs, and rely on Oxfam GB and
other organisations to lobby on their behalf.
Advocacy funding As few POs generate sufficient income to fund their own
advocacy work, FAs may need to fund such activities.
However, FAs need to be aware of the challenges outlined
above and help POs develop the necessary structure and
internal accountability to ensure these activities are managed
effectively and do not weaken the POs business.
Capacity development FAs often have considerable advocacy skills and experience
within their organisation and can play an important role
developing the policy and advocacy skills of POs.
136
or cannot participate. The more freedom producers have in deciding
whom to work with, the more likely it is that the group will work well
together. However, without any conditions or criteria on membership,
new groups can be driven by the interests of powerful individuals
within the community, which may lead to the exclusion of women or
marginalised members of the community. In some cases, FAs may be
able to persuade new groups to include women and other excluded
community members without undermining trust and commitment
within the group. Where this is not possible, FAs will need to consider
alternative strategies, such as helping women establish their own
separate groups, or additional support activities to increase the
capacity of women and poorer members to participate effectively in
the new PO (see section 14.1 for other strategies).
Group size: group size should be kept small, ideally between 15 and 30
members, to facilitate good communication and regular interactions
between all group members.
First meetings: a new group needs to follow a simplified business-
planning process, starting with an assessment of market
opportunities before defining the groups objective and developing a
very simple marketing strategy. It is also important at this stage to
define how the group will divide any proceeds from their collective
activities.
Pilot activities: before the FA or individual members invest significant
resources in the group, it is a good idea for the group to gain
experience and test its marketing strategy through various pilot
activities. New POs should focus on very simple collective activities
and services for members, based on participants existing livelihood
activities. At this stage, FAs need to find the right balance between
allowing the new PO to learn from its own experience and failures,
and using its influence to help members avoid bad decisions that may
undermine their confidence.
Consolidation: if the pilot activities are successful, the group can begin
to invest and expand its activities and gradually develop a simple
decision-making structure. From the very start FAs need to help POs
to develop a market-oriented approach and to focus on financially
sustainable PO services and activities.
Financing: most new POs will depend on the FA for access to start-up
funding. Generally, it is better for FAs to provide access to loans rather
than offering grants, as grants can exaggerate the profitability of the
PO and undermine the members sense of responsibility. If the FA
does decide to offer a grant for operational funds or specific
investments, the timing is critical: if a grant is offered too soon, before
139
23 Humphrey 2005, p. 8.
24 This section draws on: Boselie and van de Kop 2005; DFID 2004; Humphrey
2005; Ponte 2001; Vorley 2001; Vorley and Fox 2004.
25 Ponte 2001, p.18.
26 See Dorward et al. 1998 for further discussion.
27 This section is based on Humphrey 2005 and Lundy et al. 2004.
28 This section draws on: Balsevich et al. 2003; Humphrey 2005; Reardon et al.
2001 and 2003; Vorley 2001; Vorley and Fox 2004; Weatherspoon and
Reardon 2003.
29 IFAD 2001, p. 184.
30 Reardon et al. 2003, p. 1142.
31 Reardon et al. 2003.
32 This section draws on: Balsevich et al. 2003; Giovannucci and Reardon
(no date), Reardon et al. 2001.
33 This section draws on: Boselie and van de Kop 2005; Coulter et al. 1999;
Dorward et al. 1998; Vorley and Fox 2004.
34 Cook and Iliopoulos 1999.
35 This estimate is based on findings in Devereux 2000; Jayne et al. 2005; and
Rosegrant et al. 2006.
36 See for example Chirwa et al. 2005; Koopmans 2004; Stringfellow et al. 1997.
37 The names of some of these POs have been changed.
38 For more details see: Cook and Iliopoulos 1999; Hendrikse and Veerman
2001; Knight et al. 2003; Roth and Lyne 2003.
39 The guidance and good practice outlined in Part III draw on the case studies
and examples cited throughout this guide, a workshop conducted in February
2006 with Oxfam staff working with POs, the authors own experience, and
the following materials: Batt 2004; Bingen et al. 2003; Braverman et al. 1991;
Chirwa et al. 2005; CLUSA no date; Coulter et al. 1999; Ellman et al. 2004;
Harper 1992; Harper and Roy 2000; Hellin and Higman 2002; Hughes 1994;
Koopmans 2004; Oxfam 2005; Robbins et al. 2004; Stringfellow et al. 1997.
40 This model is adapted from an exit strategy presented in Lundy et al. 2005b,
p.24.
41 See Bingen et al. 2003 for more details.
42 The use of the term market literacy is adapted here from Albu and Griffith
2005, p. 8.
43 See for example Harper and Roy 2000; Stringfellow et al. 1997.
44 Lundy et al. 2004, p.42.
45 This list is based on Hughes 1994.
46 See for example Stringfellow et al. 1997.
141
Chapter 14: Facilitating the producer organisation support process
Empowering grassroots members
Linking farmers to markets: different approaches to human capital
development, Bingen et al. (2003)
Skills and Literacy Training for Better Livelihoods: A Review of Approaches and
Experience, Oxenham et al. (2004)
Enhancing Farmers Financial Management Skills, Heney (2000)
The Oxfam Gender Training Manual, Williams et al. (1995)
Leadership Training Manuel for Women Leaders of Co-operatives, ILO (2005)
Advocacy
Power Tools: Handbook to Tools and Resources for Policy Influence in Natural
Resource Management, Vermeulen (2005)
1. Assessment process
Will the process consider and consult with a broad enough range of
stakeholders?
How will the targeted male and female producers participate in market
selection?
144
Current and potential activities
What different types of male and female small-scale producers
operate in the target area by production, socio-economic, market
engagement, and organisation levels?
What production and marketing activities are men and women
involved in, in the local area, and where are their products traded?
Is there sufficient demand in the existing markets producers are
engaged in to absorb the production of additional producers without
significantly affecting prices?
What different types of production are different categories of
producer (e.g. elite, large-scale, subsistence, men and women)
involved in within the region?
If a potential new crop or production method has been identified, will
male and female producers invest in this? What proportion of
producers income/time will be generated/required by this
product/market?
What proportion of income generated will benefit women directly or
indirectly?
What are the main issues and constraints facing local enterprises in
terms of:
- participating households ability to invest in the market,
incorporating social (include time constraints), political, and
economic limitations?
- challenges in the market chain?
- challenges in the market environment?
- access to affordable market services?*
What are the constraints, problems, and opportunities specific to
women producers?
How vulnerable are participating households to shocks, trends, and
seasonality insofar as this may affect production/marketing?
Collective capacity
What existing POs/enterprises are there in the local area and are they
involved in the potential markets identified? If not, which markets are
they involved in? Are they business-oriented? How effective are they at
what they do?
What proportion of the POs membership consists of women? Are
women in leadership roles in these POs? What opportunities are there
for women to enter these POs and gain leadership?
3. Regional overview
What value chain or market analysis already exists?
What are the key commodities, processed products, or semi-finished
goods demanded by major retailers or processing companies in
surrounding districts?
What are the main products traded in local markets and where do they
come from?
What activities could men and women be involved in?
What are the new activities that women could be involved in as
producers, as traders, or as value-adders/processors?
What local products are currently being traded in regional, national,
or even international markets, and which ones have a competitive
advantage** in these markets?
What are the main problems and constraints facing local enterprises
in terms of:
- the functioning of the market chain?
- the market environment?
4. National overview
Comparing results from the national level with those from the local level,
which markets have the greatest potential for project involvement for
target beneficiaries? This analysis should include:
Major markets by numbers of men and women engaged
Involvement of poor men, poor women (by market)
Role of women, type of work done (e.g. wage work/management /
ownership) by market
Markets which FA or FA partners have previous experience in
Overview of major trends in market constraints/opportunities
Existence of unacceptable working conditions for male and female
workers
Seasonality of demand by product, seasonality of supply by product
Which of these products/enterprises the target community or region
can produce or get involved in
This aim of this tool is to help facilitating agencies (FAs) and POs to assess
the capacity-development needs and priorities of POs.
Assessing a POs capacity is not a matter of ticking boxes. While a
simple checklist can help, there are some areas of capacity such as
grassroots ownership or business strategy, that cannot be assessed
meaningfully by ticking boxes or using a scoring system. There is also a
risk that FAs will use such checklists to conduct their assessment of the
PO, which may feel threatening to PO members and undermine their
trust and openness. This trust and openness is essential because effective
capacity development depends on the PO recognising where it needs to
develop its capacity it is not enough for the FA to recognise the POs
weaknesses. We suggest that this appraisal tool is used in one of the
following two ways:
1. As a guide/checklist to help FAs assess a POs capacity with PO staff
and to structure discussions with POs on development needs and
priorities.
2. As a guide for POs to assess their own capacity.
The appraisal tool is divided into nine sections. Each section starts with a
summary of the core capacities that POs generally need to develop to
become strong and sustainable businesses and organisations. Not all of
these core capacities will be relevant, so the tool should be adapted
according to the context. POs may find it useful to assess their own
capacity against each of these core capacities, using a scale of 1 to 5 where
1 is low and 5 is high. These core capacities are followed by a set of
questions to support further analysis.
148
1. Capacity of grassroots members
Core capacities Score 15
PO members/staff have basic understanding of the PO and feel
responsible for its success
Women and other marginalised groups are able to participate in decision-
making of the PO on an equal basis and are not constrained by limited
confidence, time, capacity, or other members attitudes
PO members have the necessary knowledge, skills, and confidence to
participate in decision-making
PO members see themselves as the owners of the organisation and feel
responsible for its success
Further analysis
Do women and men have the same opportunities in the PO
(skill development, promotion, participation in decision-making, etc.)?
Are the POs vision and mission known and understood by most people in
the PO?
Do members have the literacy, numeracy, and skills to understand the
POs constitution, financial reports, and business plans?
Do PO staff have the necessary skills to carry out their duties or, if not,
are adequate training plans in place?
Do members have the confidence to participate actively in management
and organisational meetings and at the POs annual general meeting?
Are all categories of members (e.g. men and women, members of
different social or ethnic groups) represented in the POs leadership, at
each level of the PO?
Do members make any voluntary contributions to their PO that may
indicate a sense of ownership?
How easy is it for members, in particular women or members of other
marginalised groups, to stand for election and become leaders?
3. PO structure Score 15
Core capacities
POs legal structure fits its business needs and organisational priorities
POs size, structure, and growth plans are based on business needs defined
in a business strategy
POs growth plans are sustainable and realistic in terms of existing level of
business income, management capacity, and social capital
Further analysis
Market research capacity
Does the PO have the resources to manage market research
independently?
Have staff undertaken shop and market visits?
Does the PO know who its competitors are in the target market(s)?
Can the PO assess different market opportunities and select options?
What were the POs approximate sales and costs (by percentage or in
hard currency value) in the last financial year and the number of
buyers for each market, e.g. local markets/traders, export markets,
processors?
Does the PO have access to up-to-date market information?
From where is market information on market demand, future trends,
competition, etc. obtained?
Marketing strategy
Does the POs marketing strategy reflect its competitive advantage and
the capacity of PO members and managers?
Is there someone in charge of marketing and sales?
Can the PO communicate in the language of target markets?
Does the PO have a strategy for increasing the number of customers?
Further analysis
Business planning
Does the PO have a business plan written by managers/leaders covering
several years?
Do PO leaders/managers have the capacity to develop business plans?
Is the POs strategy, outlined in the business plan, consistent with its
current activities and finances?
What investments, e.g. new equipment, will the PO require to achieve its
business targets?
Do the leaders/managers and members see the PO as an independent
business that has to become financially sustainable?
Do PO members value the services provided by the PO and is this reflected
in stable membership numbers or rising membership over preceding years?
Financial management
Are PO managers able to assess the profitability of the business based on
an assessment of actual and hidden costs?
Does the PO have access to long-term affordable financing to fund
operational and investment plans?
Has the PO ever received a bank loan?
Does the PO have an annual budget and does it produce regular financial
reports?
Is the POs payment system to members/staff transparent and understood
by all members?
Further analysis
Do managers understand buyers preferences and the standards
demanded by target markets?
Does the PO have specifications for its products?
Is the PO aware of legal regulations concerning its products,
e.g. food-safety regulations?
Does the product require special packaging? If so, is this done by the
PO?
Does the PO need to upgrade producers skills or make investment in
technology?
Further analysis
Do PO staff have the experience, confidence, and skills to negotiate
business deals independently?
What local, national, and international networks is the PO a member of?
What competitive advantage does the PO have in each marketing chain it
operates in, e.g. price, quality, scarcity of its product, its size, traditional
design etc.?
Can the PO identify new market opportunities and select options?
How often does it meet or discuss business with current buyers?
Does the PO keep a record of buyers and potential buyers?
Does the PO have confidence that member producers or suppliers will honour
advance contracts, even if they are offered better prices by other buyers?
Further analysis
Do leaders/managers have the capacity to assess what business service
the PO needs e.g. transport, insurance, production training?
Can the PO access and afford the business services it needs to conduct
and develop its business?
Does the PO have a strategy to access essential business services that
are currently unavailable?
Will the PO have the resources and capacity to access and afford
independent business services once the FA withdraws its support?
Further analysis
Do leaders/managers have the time, confidence, and skills to negotiate
or meet with other representative organisations and policy makers?
Does the PO have access to the research and policy resources and
networks necessary to conduct effective advocacy work?
How are members/staff compensated for giving up time to lobby external
organisations or attend meetings?
If the PO plans to do or is already engaged in advocacy work, whose
advocacy priorities and interests are driving this work?
Does the PO have the financial resources to fund existing or planned
advocacy activities and, if not, how will it fund these in the long run?
What steps will the PO take to ensure that any existing or planned
advocacy work does not divert essential resources away from the business?
156
Informal organisation Association Traditional co-operative New generation Private company
co-operative
Main purpose Competing in informal Providing services to Providing services for Providing service and Generating a profit for
markets members members generating a profit for shareholders on their
members investment
Membership rules Up to the members Open membership; non- Open membership; only Membership closed and Could be limited to
active members active members based on fixed supply maximum number
permitted (depends on contracts
rules of the association)
Voting rights Up to the members Flexible: depends on One member, one vote Based on value of Based on number of
rules of association; supply contracts shares
usually one vote per
person
Decision-making Up to the members Flexible: depends on Board of directors Board of directors Board of directors
structure rules of association elected by members elected by members/ elected by shareholders
shareholders
Principle for Up to the members Flexible or not Based on patronage Based on Based on
distributing profits permitted shares/investment shares/investment
Risk to members Participants personally Participants personally Members only liable for Members only liable for Shareholders only liable
157
158
Informal organisation Association Traditional co- New generation Private company
operative co-operative
Regulation: external None Minimal Financial statements, Financial statement and Financial statements;
reporting audit, and additional audit; may be audit depending on size
requirements report additional report of business
Costs of Depends on complexity Depends on complexity Depends on complexity Depends on complexity Depends on complexity
administration of activity of activity of activity but relatively of activity and size of of activity and size of
high for simple business business
collective activities
Access to financing None Poor access as May have access to Probably better than Usually better than co-
from banks association has low short-term loans but traditional co- operatives but depends
business credibility rarely to long-term operatives on nature of business
financing
Taxation Individual members Individual members Individual members Depends on structure; Both company and
and, usually, no taxes or could be both company individual shareholders
tax concessions on and individual
collective profits shareholders
Ability to transfer n/a n/a Only to co-operative Possible with approval Depends on companys
shares when members retire of other members constitution but often
from membership flexible
Potential exposure to Low Probably low but Can be high, depending Probably lower than Probably lower than co-
political interference depends on local on regulation. traditional co- operatives but depends
context Particular risks in operatives but depends on local context
countries with history on local context
of state interference in
co-operatives
Basic motivation Is the participants main motivation for forming or joining the
group the desire to solve their own marketing problems or to
access external assistance?
Do producers view group formation as a condition for accessing
external assistance or resources?
Can the producers provide a clear explanation of why collective
action is necessary and how it will improve their market access?
Do the producers have a shared experience of exploitation in the
market, which they want to overcome through collective action?
160
Building blocks Critical questions
162
certification Product certification is a process designed to ensure that
a product meets established product standards.
Certification is usually carried out by an independent
agency that has been authorised to test and certify
producers by the government or an association, or a
private company that has established the standard.
collateral Collateral is a type of guarantee provided by a borrower to
a lender in the form of property or other asset. If the
borrower is unable to repay the loan the lender can claim
the property or asset to recover the value of the loan. The
purpose of collateral is to reduce the risk to the lender.
commodities Commodities are products that are treated as if they always
have the same quality (i.e. as a homogenous product) and so
buyers and consumers are only interested in the quantity
bought or sold. In the past, most agricultural products were
traded as commodities and some, such as wheat, are still
sold as commodities today.
competitive A producer has a competitive advantage over other
advantage producers if he or she can sell a product at a sustainable
price which is lower than that of other producers, or if he
or she can offer a better product (or better benefits and
services with the product) that justifies a higher price.
co-ordination Co-ordination in a market is the process of facilitating
business transactions between buyers and sellers. In a
developed market, this process usually occurs
automatically as there are established mechanisms for
finding buyers or sellers and reducing transaction costs.
But in poor rural markets high transaction costs may lead
to co-ordination failures, in which case external
intervention by the government or other agencies may be
necessary to facilitate transactions between buyers and
sellers.
developed country In this guide we use the term developed country to refer
to the over-developed, industrialised countries of the
world, e.g. North America, Europe, Australia, etc.
developing country In this guide we use the term developing country to
refer to the economically under-developed countries of
the world which have a low to moderate Human
Development Index, according to the UN Development
Programme.
Glossary 163
differentiation Product differentiation means changing a product to
make it different from the products sold by competitors
and more attractive in the target market.
diversification Producers can either diversify their products or their
markets or a combination of both. Product diversifi-
cation means producing a range of different products,
while market diversification is producing the same
product for different markets. Diversification is used to
reduce risks and/or to increase profits by producing a
higher value product or accessing a more profitable
market.
domestic food A domestic food market is the market for food products
markets in a producers own country.
economic actors Economic actors are the buyers and sellers of goods or
services who are active in the market.
economies of scale Economies of scale are reductions in costs for each unit
produced or marketed that result from increasing the
scale of an activity.
embedded services An embedded market service is a service that is provided
as part of a business transaction. For example, an
exporter may provide input services to farmers as part of
a contract to buy the farmers crop.
empowerment Empowerment means increasing the confidence and
capacity of an individual or group of people to influence
their circumstances or take control of their situation by
increasing their political, social, or economic strength.
extension services Extension services are training and advisory services
provided to farmers for crop cultivation or animal
husbandry.
facilitating agency FA is a term we introduce in Chapter 12 to describe a
(FA) development NGO in their role of facilitating support to
POs.
financially A financially sustainable PO is a PO that can cover all its
sustainable costs from its business income and generate satisfactory
benefits for its members without external subsidies,
such as grants.
fixed costs Fixed costs are business costs which do not change in
proportion to the scale or level of activity of a business.
Glossary 165
margin, profit A POs profit margin is the proportion of sales income
margin that the PO keeps as profits. It is usually expressed as a
percentage and is calculated by dividing net income (i.e.
profit) by revenues (i.e. sales income).
market chain Market chain linkages are the connections between each
linkages stage of the market chain and usually consist of business
transactions between buyers and sellers.
market chain A market chain is a chain of economic actors, including
producers, processors, traders, and retailers, who each
play a part in getting a product from the production stage
to the consumer. See the explanation and diagram in
Chapter 2 (p 7).
market Market concentration means that there are only a small
concentration number of companies operating at one particular stage
within a market chain. As a result these companies
usually have a degree of market power and can influence
the prices or terms of transactions.
market liberalisation Market liberalisation or economic liberalisation refers to
a set of economic policies which were introduced from
the early 1980s and replaced previous economic policies
that emphasised the role of the state in managing the
economy. In developing countries, market liberalisation
tried to limit the role of the state to supplying public
goods and providing a so-called enabling policy
environment.
market power Market power is the ability of a buyer or seller to
influence or dictate the price of the product they are
buying or selling. Market power usually occurs when a
company controls a large share of the market.
market services Market services are the services producers and other
actors in the market chain need to conduct their
business. They include production, finance, transport,
and business-development services, provided by the
public or private sector.
market structure Market structure usually refers to how competitive a
market is. If a market is dominated by a small number of
buyers who can influence prices then the structure is
uncompetitive. A competitive market structure occurs
when there are many buyers and sellers and no one can
dictate the price.
Glossary 167
portal company A portal company is a type of PO that provides services to
both members and non-members; for example, a trading
company owned by a PO that buys crops from members
and non-members.
processing Processing is the process of changing the form of a
product, usually into a more valuable form, e.g.
processing milk into cheese, or grapes into wine.
produce Produce is a general term for farm-produced goods.
scarcity, scarcity Scarcity means that something is in short supply relative
value to the demand, which results in the product having a
high value, or scarcity value.
second-level A second-level organisation is the second level within a
organisation multi-level PO.
side-selling If a producer makes an agreement to sell his or her
produce to one buyer but then breaks the agreement and
sells it to another instead, the producer is side-selling.
Side-selling among PO members can be very damaging
for a POs reputation and business.
social capital The term social capital is used in many different ways.
In this guide we use it to mean the mutual trust and
commitment between the different members of a PO.
speciality products Speciality products are products that have special
characteristics based on their quality, their origin, or how
the product is produced.
starting capital Starting capital is the money a business needs to start its
activities and begin trading.
subsistence A subsistence livelihood is a livelihood that is based on
meeting all household consumption needs from ones
own production.
tariffs A tariff is a type of tax that is charged on imports or
exports.
thin markets A thin market is a market with a low volume of trade or
a low number of transactions.
third-level A third-level organisation is the highest level within a
organisation multi-level PO. Another name for this organisation is an
apex or third-tier organisation.
Glossary 169
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Bibliography 177
Index
178
CAN (Centros de Apoio e de Negcios) developed countries 9, 10, 12, 14, 130, 163
656 developing countries 5, 7, 910, 11, 1415,
capacity building in producer 65, 163
organisations (POs) disadvantages of producer organisations
capacity appraisal 934, 978, 103, (POs) xixiii, 268
14855 Dominican Republic 103 see also Fedecares
grassroots capacity 501, 52, 84, 1014,
149 East Asia 15
management capacity 61, 11317, 14950 Eastern Africa 15
marketing capacity 64, 75, 81, 91, El Salvador 44 see also Agrolempa;
1512, 1545 Aprainores
membership capacity 501, 52, 90 Ethiopia 26, 29, 34
production capacity 90, 94, 112, 119,
125, 1312, 1534 facilitating agencies (FAs) and producer
structure relationship 43, 45, 50, 52, organisations (POs)
74, 76 assessing minimum conditions 8990
support organisations involvement business and social services provision
ixx, 43, 80 86, 93, 1023, 108, 1523
facilitating agencies 86, 91, 978, co-ordinated approach 86, 88, 91, 94
100, 1014, 11317, 125 defined 164
NGOs x, 61, 756, 78, 81, 82, 84 exit strategies 946, 98, 1245
for women 50, 102, 1034, 125 and failing businesses 87, 92
cashew nut production 94, 124 in formation of new POs 913, 1368
Central Africa 70, 85 gender issues 93, 94, 98, 1034, 107, 137
Central America 51 independence promotion 86, 89, 90
Clam Clubs, Viet Nam long-term approach 86, 88, 89
business strategies 62, 118, 125 and the market environment 87, 8990
financial issues 512, 11516 poverty issues 934, 98
NGO support 38, 84, 116, 125, 127, 134 rapid market and producer
structure 389, 43, 89 assessment 901, 98, 1447
CLUSA (Co-operative League of the USA) realistic expectations 87, 934
46, 51, 65, 66, 701, 79, 80, 102 support strategies
cocoa production 11, 58, 59, 106, 115, 1312 advocacy work 1324, 135
coffee production 11, 13, 27, 35, 51, 53, 58, assessing and implementing
107 support 968, 99
Common Market for Eastern and brand creation 1312, 135
Southern Africa (COMESA) 10 capacity building 86, 91, 978,
community-based organisations 2, 26, 39, 100, 1014, 11317, 125
136, 138 confidence-building strategies 102
competitiveness and producer financial support 11417, 1223,
organisations (POs) 3, 35, 389, 55, 89, 134, 1378
90, 110, 12930 gender issues 98, 1034, 107, 122,
COMUCAP, Honduras 3, 23, 28, 35, 49, 125
834 governance and leadership issues
cotton production 19, 22, 56, 5961, 70, 1049
82, 85, 129 market research and marketing
strategies 10913, 1512
Index 179
market services access 1268 gender issues 93, 94, 98, 1034, 107
ownership and control issues 101, see also women
1013, 104, 160 GEPA, Germany 80
processing strategies 12931, 135 Ghana 8, 66 see also Kuapa Kokoo
production strategies 11721 government agencies ix, 65, 7980, 84,
skills improvement strategies 102, 91, 110, 118, 146
103, 104, 125 grades and standards (G&S) 1516, 165
social-capital building 1067, 108, groundnut production 34, 55, 120
123, 161 Gumatindu, Uganda 53
structure support 1213 Guyana Rice Producers Association 23
support principles 867
tools see tools for support below Hazard Analysis Critical Control Points
trade linkages 1236 (HACCP) 16
tools for support
capacity appraisal 934, 978, 103, India 19, 81, 82
14855 Indonesia 89
formation of new POs 1601 industrialised countries see developed
legal structure overview 1569 countries
rapid assessment of markets and International Co-operative Alliance (ICA)
producers 1447 40
Fairtrade Labelling Organisation 16, 120 International Commodity Agreements 11,
Fairtrade products 1213, 16, 112, 120 165
Fedecares, Dominican Republic 501, 85,
105 Kenya 25
financial issues of producer organisations Kiwi Growers Co-operative, Georgia 923
(POs) 19, 27, 334 Kuapa Kokoo, Ghana 59, 106, 115, 1312
business cost management 11415
distribution of profits 37, 39, 40, 41, land issues and producer organisations
47, 512, 157 (POs) 32, 46, 67, 90, 112
financial risks 245, 623, 89, 92, 93, Latin America 9, 15
111, 12930, 157
financial support 69, 834, 89, 923, maize production 8, 10, 47, 534, 56, 60
11417, 1223, 134, 1378 Malawi 40, 89, 105, 112, 120 see also
investment issues 38, 40, 41, 512, NASFAM
11517, 130, 1312, 158 MAPRONET, Ghana 66, 134
sustainability issues 35, 47, 834, 86, the market
95, 98, 1223, 164 buyer-driven markets 21, 62, 67, 84
taxation 38, 39, 42, 158 global trends viii, 5, 1013, 17
see also transaction costs market access issues viii, xiixiii, 5, 8,
FLO-Cert 120 20, 21, 467, 67, 119
forming new producer organisations market chains 7, 1315, 21, 166
(POs) 913, 1368, 1601 market concentration 1314, 166
fruit and vegetable production 10, 14, 20, market liberalisation viii, 5, 78, 17,
29, 34, 44, 59, 123 67, 166
market linkages 623, 1545, 166
market services 646, 81, 84, 114,
1268, 166
Index 181
production and producer organisations small-scale producers
(POs) better-off producers xiii, 26, 27
cash-crop production 11, 72 cash-crop production 11, 72
collective production 3, 118, 146 commercial priorities viii, 23
high-value food production 1213, 27, competitiveness xii, 3, 90, 110
56, 58, 72, 112, 165 contract farming schemes 1617
improving production defined xiiixiv
certification schemes 1617, 56, 67, high-value food production 1213, 27,
1201 56, 58, 72, 112
co-ordinating output 11718, 121 land issues 26, 46, 67, 90, 112
diversification 11, 56, 58, 62, 164 and the market
food-safety issues 14, 15, 16, 34, 55, buyer-driven markets 21, 62, 67, 84
112, 119, 120, 165 economies of scale 1920, 21, 22, 58
increasing output 118, 121 global market trends viii, 5, 1013, 17
new product standards 1516 market access issues xiixiii, 5, 8,
production services 33, 34 20, 21, 67
quality management 14, 15, 34, market chains 1314, 21
556, 112, 11920, 121, 131 market liberalisation viii, 5, 8, 17, 67
traceability 14, 15 market services 646, 81, 84, 114,
production capacity 90, 94, 112, 119, 126
125, 1312, 1534 supermarket relationships 15, 19
staple food production 1011, 27 thin markets 810, 19, 28
see also specific crops in a market environment 6771, 87,
8990
regional trade agreements (RTAs) 10 NGO relationships 9, 28, 79, 81, 901,
risks and costs of producer organisations 94, 96, 112
(POs) 19, 235, 27, 45 poor producers xiii, 267, 28, 112
financial risks 245, 623, 89, 92, 93, and producer organisations (POs)
111, 12930, 157 benefits of viii, xiixiii, 1923, 25,
free riding 245 26, 28, 33
governance problems 24, 45, 47, 107, 108 collective marketing activities 3,
transaction cost increases 24, 59 26, 34, 70
trust issues 24, 42, 45, 50, 74, 90, 101, disadvantages ix, xixiii, 268,
107 412, 52
see also disadvantages of producer ownership and control issues 3, 41,
organisations 47, 4951, 52
rural businesses as producer risks and costs 19, 235, 27, 28, 45,
organisations (POs) 23, 4, 26, 67, 83 623, 92, 93
staple food production 1011, 27
services provided by producer transaction costs 19, 20, 22, 24, 27,
organisations (POs) 323, 36, 67 534, 589
advocacy work 43, 69, 701, 73, 85, SNV (Netherlands Development
1324, 135, 155, 169 Organisation) 79
business services 335, 36, 834, 125, 155 social capital in producer organisations
lobbying role 44, 69, 70, 85, 112, (POs) 24, 90, 1067, 108, 123, 161, 168
1323, 134 South Africa 15
social services 23, 29, 35, 834 South-East Asia 15
Index 183
vegetable production see fruit and
vegetable production
Viet Nam 39, 85 see also Clam Clubs