Why is transformation needed in this program area?

A strengthened cooperative sector can play an instrumental role in agricultural transformation through effective input delivery to smallholder farmers. At the same time, coops can create an organized outlet for surplus agricultural produce by acting as an agent of aggregation, market orientation and commercialization.

Many countries with vibrant agriculture sectors clearly illustrate the role that farmer organizations and cooperatives can play to support farmers in earning a greater share of their final produce through collective marketing and economies of scale. In countries such as the Republic of Korea, The Netherlands, India and Thailand, value addition and marketing of a significant percentage of smallholder farmer production has been done through cooperatives. In countries that have undergone rapid agricultural transformation, the total output marketing share of cooperatives was relatively high in their takeoff phase to accelerate development.

In Ethiopia, farmers’ cooperatives currently account for the primary channel through which agricultural inputs reach farmers. However, many studies and diagnostics have determined that cooperatives could undertake this function more effectively. The opportunity on the output marketing side is even greater. Although farmers’ cooperatives in Ethiopia currently account for less than 20% of the marketed outputs, their members tend to achieve a higher premium price of nearly 10%.

Despite these opportunities, the cooperatives sector as a whole is very far from the level of performance necessary to provide the expected contribution to transformation of the country’s agricultural system. Aside from cooperatives in certain cash crops, there is much to be done to improve the operational competency on basic input distribution and output marketing functions of many cooperatives around the country.

What are the objectives of this program area during GTP II?

The objective of this program during GTP II is to create a well-functioning cooperative sector that helps smallholder farmers and agro pastoralists to increase their yields and incomes by: 1) transforming cooperatives into competitive and efficient business oriented entities, and 2) enhancing cooperatives’ human, institutional and infrastructure capacity.

What are the focus areas of this program?

Based on its objectives, the Cooperatives Development program area has planned to focus on two main deliverables during the GTP II period.

1. Enhance the cooperative promotion sector’s capacity in order to transform cooperatives into market oriented entities. Currently in Ethiopia, the main role of cooperatives is to address input distribution, with only minimal focus on output marketing. Transforming cooperatives into market-oriented entities can be achieved by enhancing institutional capacity for promotion sector HR, raising awareness of the benefits of cooperatives output marketing to the public, development partners and senior policy makers, enhancing the organizational and management capabilities of cooperatives at all levels, supporting cooperatives to increase the proportion of women and youth as both members and in leadership positions, and expanding commission-based output marketing to enhance the role of cooperatives in output marketing. It is also important to develop mechanisms to ensure access to finance, in order for cooperatives to engage in input and output marketing and value addition.

2. Expand cooperatives’ human, institutional and infrastructure capacity. Although cooperatives often have ample marketable output, many lack important infrastructure (like storage and value addition facilities) to effectively market smallholder farmers’ produce. To address this issue, the Cooperatives Storage project plans to improve cooperative marketing infrastructure through the construction of warehouses and cold stores, the use of effective storage practices and technologies, improved logistics, and enhanced marketing centers. This will also be supported by activities to build the human capacity and systems necessary to effectively manage and take full advantage of these infrastructure enhancements.