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Cooperative enterprises - paradox or panacea?

Attracting specialists to work with small businesses in remote areas is often difficult (© Tom Pietrasik/Oxfam)
Attracting specialists to work with small businesses in remote areas is often difficult
© Tom Pietrasik/Oxfam

For any enterprise to succeed there is need for clear leadership, strategic vision and management capacity. Top businesses attract highly skilled professionals by tempting them with incentives, including prime office locations in cosmopolitan cities. That's not difficult if the business is based in London or New York, but how to recruit business experts to work in rural Tanzania or Ethiopia, hundreds of miles from the capital, with no infrastructure or proximity to major markets? It is a challenge for rural cooperatives and small rural enterprises more generally, and is one of the issues that have faced Oxfam's Enterprise Development Programme (EDP) over the last four years. With a global programme of 17 projects in 15 countries, the organisation is constantly reflecting on how best to support cooperative enterprises in the face of political, economic and environmental challenges.

Cooperatives can ensure democratic participation and profit-sharing with farmers, and as such provide an ideal enterprise for Oxfam to support due to their potential for community-led development. The benefits are many, including increased sales and job creation, development of new products and links to large companies and lucrative markets. But this is not the whole picture: over the last four years Oxfam's EDP has encountered a number of challenges which have honed skills in dealing with this testing yet rewarding business environment.

Challenges - food for learning

Climate-related events and natural disasters have created major setbacks for enterprises supported by Oxfam. In Haiti, Oxfam's EDP has supported a dairy enterprise since 2008. However, the catastrophic 2010 earthquake destroyed the factory and curtailed milk production. Oxfam-supported enterprises in Pakistan, Colombia and Sri Lanka have also been affected by floods, and the communities and farmers they work with have required critical emergency support. This support, however, needs to be carefully thought through, as provision of grants - whether in emergency or development - can sometimes create market distortions and reduce enterprises' incentives to take on investment or exercise business discipline. Oxfam's EDP provides an intelligent mix of grants and loans: grants support the enterprise to achieve its social goals, such as reaching more women and marginalised farmers, while loans are the lifeline that every business needs to boost its operations.

Women from the Dadeldhura district of Western Nepal hold some of the products they have produced (© Jisu Mok/Oxfam)
Women from the Dadeldhura district of Western Nepal hold some of the products they have produced
© Jisu Mok/Oxfam

Government interventions can also have unfavourable impact. In Ethiopia, policy changes leading to cheaper imports of subsidised edible oil in early 2012, in response to food price hikes, created uneven competition for the high quality, organic vegetable oil produced by the Assosa Farmers' Enterprise. Sales of the local oil fell, affecting the business performance. In response, the programme is helping the enterprise to revise its marketing plan, with a focus on finding a niche market for its product.

The collective nature of cooperative enterprises can also conflict at times with the dynamism small and medium enterprises (SME) need to be successful. In enterprises owned and run by a union of cooperatives, decisions normally have to be approved by the union board, slowing decision making and potentially overruling management plans. Oxfam has learned to avoid interference with internal political dynamics while engaging with all parties and maintaining its focus on supporting the enterprise to grow and sell more. Strengthening the enterprise increases incomes and empowers the community, reinforcing commitment to a common goal.

What type of support?

When deciding how to support an SME, a thorough assessment of the organisation's business plan is essential. Market environment, product potential and management capacity are key areas, but for Oxfam's EDP, environmental risks and social attitudes, particularly towards women, play an equally important role. To enhance the participation and leadership of women, it is critical to identify markets, products and enterprises where opportunities for women are high and barriers low. In Rwanda, for example, the programme supports mushroom production, which requires limited space and time while having high market value. The programme also works with producer groups to create specific business plans for female participation, setting targets for the number of women suppliers, as well as females in the organisation workforce and the board of directors.

Women from Dola village, western Nepal, construct a pond to irrigate their vegetable gardens (© Tom Pietrasik/Oxfam)
Women from Dola village, western Nepal, construct a pond to irrigate their vegetable gardens
© Tom Pietrasik/Oxfam

Environmental assessments must also be completed before an investment can be approved. Analysis of climate risks and development of mitigation strategies are essential. In the Philippines, environmental assessments found that Moringa tree production would be unaffected by flooding if planted slightly higher than first planned. For a cooperative enterprise in Nepal, lack of water was identified as a likely threat, prompting an investment in irrigation. As a result of these types of assessments, systems and tools are now in place to understand and mitigate such risks.

Returning to the challenge of bringing management skills to remote areas, the programme supports the skill enhancement of the local workforce, providing customised training and support to people from local communities, as well as recruiting qualified individuals who are willing to live in places where the enterprises are based. Oxfam works with local mentors as well as international experts, in partnership with Challenges Worldwide, who provide technical assistance and expertise surrounding important business decisions. People with business experience and the right attitude can add a lot of value to the business potential.

As the single largest employer in the world, agriculture remains a critical sector for developing country economies. Agricultural cooperative enterprises in particular are critical for economic opportunities and social cohesion in rural communities. What is needed is the right type of support that will create an enabling environment for such institutions to flourish and play an increasingly important role in food security, rural development, economic growth and poverty eradication.

Written by: Maria Michalopoulou, Enterprise Development Programme Officer, Oxfam GB

Date published: November 2012


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Oxfam's EDP is doing excellent work. My only caution is tha... (posted by: Rupert Knowles)


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