Leveraging co-operatives to boost market access for smallholders
There are over 1.2 million agricultural co-ops around the world working to ensure the welfare of farmers and their families.
According to the Food and Agriculture Organisation of the United Nations (FAO), 80 percent of the farmlands in sub-Saharan Africa and Asia are managed by smallholder farmers. These are farmers working on ten hectares of land or less. Hence, 80 percent of the food supply in developing countries comes from smallholder farmers. Sadly, most of these farmers, especially those in rural areas who form the majority, are extremely poor and living below the poverty line.
In fact, a 2016 estimate by the World Bank shows that 500 million smallholder farming households worldwide constitute a large number of the world's poor living on less than $2 per day. This is so because smallholders are extremely vulnerable to agricultural risks. Several factors are responsible for their hardship. These include unpredictable weather and environmental conditions, which can deprive farmers of good harvest; outbreak of pests and diseases; inability to access modern machineries and processing equipment; a shortage of social amenities and infrastructures; a lack of financial support; among other factors that limit their access to markets.
Based on my work with farmers through private practice, I understand that apart from the above challenges, smallholders are often limited also by the size of their production or output. For instance, a foreign company needed a large and consistent supply of cocoa beans from Nigeria and an Italian friend of mine contacted me to help in linking them up with farmers in the Southwest region of Nigeria. So, I began the search and I visited many cocoa farming communities in the region.
Unfortunately, I found that most of the farmers cultivated on very small pieces of land. The harvests were so small that each household could spread their entire proceeds of cocoa beans on mats and ripped sacs in front of their homes. Sadly, the foreign buyer wanted a good estimate of the number of tonnes of cocoa beans that we could get from a particular farmland or farming community. The company also wanted specifics for the cocoa beans in terms of nutrient components and their quantities in the presented seeds, but the farmers couldn't account for this.
Another problem was that the cocoa beans available were unsorted, thereby containing unwanted materials, which contributed to their unpleasant appearance. They were poorly processed, too. The outcome of this search was shocking to me because it was almost unbelievable that we could not get the desired quantity from these communities for export despite Nigeria being the fourth largest producer of cocoa globally.
The problem created by not producing enough to meet industrial demands may also affect food supply. Many times, for the sake of homogeneity, it is more convenient for potential buyers of agricultural products to get all they need from one source. Smallholders are often unable to meet this need. The glaring truth here is that for farmers to be really productive in poor- or low-income countries, they need to farm on large expanses of land. To be sure, modern-day technology has made it possible to maximise outputs even on small areas of land, but this technology is still inaccessible to poor rural farmers.
One thought that readily comes to mind is for the government to make loans available for smallholders to be able to scale up their farming activities. But an alternative idea would be to harness co-operative farming.
Co-operative farming refers to a group of farmers coming together to form a co-operative society (co-op) to meet their common economic, social and cultural needs. This group of farmers pool their resources voluntarily for more efficient and profitable farming. In some cases, individual farmers register to become members of a co-op, while in other cases intended farmers come together in a group of 10 to 20 people to jointly own large hectares of land in a single location. Individuals in this latter situation can own equal portions of the land. Interestingly, there are over 1.2 million agricultural co-ops around the world working to ensure the welfare of farmers and their families.
Farmers who belong to a co-op are not only in charge of their individual portions. They also share ownership in the operations of the entire co-operative business. Small-scale farmers in rural areas in developing countries, with Nigeria as a case study, can improve their productivity and reduce the cost of production by joining co-ops.
Joining or forming a co-op will help poor farmers access technologies that may be too expensive for them to procure individually for use on their small pieces of land. When farmers come together to manage a large expanse of land, it is a lot cheaper to hire tractors and other farm machineries.
More so, such co-ops can have huge harvests and farmers will be able to market their products together. This will certainly boost their bargaining power and give them better access to direct markets. It will also be easier for industries to locate them and work with them. Marketing together may also guarantee the sale of their products and scale up their access to consumers. Hence, through co-ops, smallholder farmers can pool their assets together to overcome market barriers and other constraints that hinder their ability to make decisions and get all the profit for their hard work instead of losing them to middlemen.
Buying supplies and services together can also help members of a co-op to drive down the cost of farming, thus saving them money and also providing them access to farm inputs and services that may not be available to them individually. They can jointly process their harvests and operate improved post-harvest storage capacities to prevent or reduce losses.
Another very crucial benefit of encouraging farmers to form or join a co-op is the ease of accessing funds, loans and support from government and external agencies. According to Ooreofe Babalola, a member of a farmers' group in Ekiti State involved in the cultivation and processing of cassava whom I interviewed, co-ops can get up to 60 percent discount on the cost of land rent. She also told me that registered co-ops can also get quick access to opportunities available for farmers, including financial aids, seeds and fertilizer.
More importantly, through co-ops, smallholders pool their assets together and support members to access links with internal and external actors, such as private businesses, research communities, governmental and non-governmental support agencies. With co-operative societies, it is easier for farmers to properly document their outputs and make information readily available for investors, potential buyers and other stakeholders.
I must mention that co-ops may not be 100 percent efficient due to some challenges that are mainly human-created. Jocelyn Agbo, a co-op coordinator in the northern region of Nigeria mentioned some of these shortcomings to me. She said: “Some co-ops fail because sometimes founders of these co-ops may lose interest as a result of unmet expectations. Some farmers' co-operatives are registered just to access funds from government and after that they disappear. But genuine co-ops are working well, and the farmers are making their profit. There are also instances of co-op leaders parting away with farmers' contributed funds. Some divert co-op funds and benefits for personal use.”
However, several things can be done to ensure co-ops work well in developing countries. For example, government agencies involved in the registration of co-ops should monitor their activities and give quick responses to reports of co-op defrauders. Farmers should also ensure that a co-op is duly registered before joining it. It is also important to enforce transparency in the issuance of funds and support for co-ops. And every member of a cooperative should benefit from the larger cooperative business when profit is shared. That way, small-scale farmers can be lifted out of poverty and get fair pay for the food we all rely on.
Financial Nigeria Columnist, Mojisola Karigidi, is a Nigerian biochemist and the founder and product developer at Moepelorse Bio Resources, is a Global Innovation Through Science and Technology (GIST) awardee, and an Aspen New Voices fellow.
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