ROLE OF AGRICULTURAL

COOPERATIVES ON IMPROVING THE LIVELIHOOD OF SMALL

HOLDER FARMERS; IN CASE OF WOLKITE DSTRICT

Research Proposal

Submitted to Wolkite University College of Agriculture and Natural resource

Department of Agricultural Economics

In Partial fulfillment of the requirments for B.Se degree in Agricultural

Economics

BY KelemuBerihun......195/10

Tirusew Melese......315/10

Advisor:-Tsegamariam Dula (MSc)

November 2019

Wolkite Ethiopia

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Contents
ACKNOWLEDGMENT........................................................................................................................I
LIST OF TABLE..................................................................................................................................II
LIST OF ABBREVIATION................................................................................................................III
CHAPTER ONE...................................................................................................................................1
1. INTRODUCTION.............................................................................................................................1
1.1 Background of the study.............................................................................................................1
1.2 STATEMENT OF THE PROBLEM..........................................................................................3
1.3 Objectives of the study................................................................................................................4
1.3.1 General objectives.................................................................................................................4
1.3.2 Specific objectives.................................................................................................................4
1.3.3. Research Question...............................................................................................................4
1.4 Significance of the study..............................................................................................................5
1.5 Scope and limitation of the study................................................................................................5
CHAPTER TWO..................................................................................................................................6
2. LITERATURE REVIEW.................................................................................................................6
2.1. Theoretical literature.................................................................................................................6
2.1.1 Basic concept.........................................................................................................................6
2.1.2. Definition.............................................................................................................................6
2.1.3. Principles of Cooperatives...................................................................................................7
2.1.4. Role of cooperatives.............................................................................................................8
2.1.5 Agricultural cooperatives.....................................................................................................8
2.1.6 The importance of agricultural cooperatives.......................................................................9
2.1.7 Agricultural cooperatives and their types.....................................................................9
2.1.9 Difference between cooperatives and business organization..............................................10
2.2. Empirical Studies.....................................................................................................................11
2.3 Conceptual framework...............................................................................................................12
CHAPTER THREE............................................................................................................................13
3. Methodology....................................................................................................................................13
3.1 Description of Study Area.............................................................................................................13
3.4. Source and Methods of data collection.....................................................................................15
3.5.2 Regression Analysis............................................................................................................15

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4 WORK PLAN……………………………………………………………………………………………………………………………………….20

5 BUDGET..........................................................................................................................................21
6. REFEREN.......................................................................................................................................22

ACKNOWLEDGMENT
First of all, we would like to thank GOD for his miraculous time to let us accomplish everything
we start and also for his help to go through every event successfully up to this minuteWe convey

III
our deepest thanks to our advisor, Mesfen M (M.Sc). The completion of this work may not have
been possible without his generous devotion to the design of the research proposal. Thus, we
thank him for his genuine and energeticencouragement, suggestion; insight and guidance to
complete this research proposal.We further extend our gratitude to Wolkite university faculty of
agriculture in providing computer services and other facilities for the accomplishment of our
research proposal preparation work.

LIST OF TABLE
Table 1: Work Plan....................................................................................................................................19
Table 2: Budget.........................................................................................................................................20

IV
LIST OF ABBREVIATION

ACE Agricultural cooperative in Ethiopia

CSA Central statistics Agency

V
FCA Federal Cooperative Agency

FCC Federal Cooperative Commission

GTP Growth and Transformation Plan
ICA International Cooperative Alliance

ILO International Labor Organization

MDGs Millennium Development Goal

NCPC National Cooperation`s Promotion Commission

TLSH Total Livestock Holding

USA United State of America

USDA United State Department of Agriculture

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 CHAPTER ONE

1. INTRODUCTION
1.1 Background of the study
Cooperatives have existed in some form for thousands of years. Hunting wild animals for food
called for collective effort primitive man lived. The history of cooperation dominated by rural
examples, probably because the nature of rural life. The history of modern cooperation traced to
the impact of industrial revolution that brought immense wealth to the capitalists and poverty to
unorganized labor. The first man to conceive of an economic association for the benefit of the
members wills P.C.Plock boy, a Dutchman, living in England (Kebebew, 2004). He encouraged
agriculturalists, artisans and other professionals to form their own associations to which they
were to contribute capital and work. Dr. William King wills also another pioneer in the field of
cooperatives, stressed on self-help as opposed to patronage from the rich.

The first modern cooperative, the Rockdale society, will establish in England in 1844 (Chukwu,
2003). It started with twenty eight members who purchase one share of stock. The members
consisted of craftsmen such as weavers or shoemakers. The members decide to join forces to
work together, sell their products under one roof, and use a part of earnings to purchase supplies
in quantity at economical price, another portion of the earnings would be reinvested in growth of
the society, and the remainder would be return to the individual member in the form of refunds.

Cooperative movement in Germany evolves in response to the economic crisis. Both farmers and
town dwellers were on the verge of starvations in 1846 (Kebebew, 2004). In agricultural area of
western Germany the disastrous year of 1846, inspired Fredrick Wilhelm Raiffeisan, to take
some action to alleviate the problem of hunger. He believed that farmers could improve their
condition by eliminating moneylenders and middlemen. The government formed a local
committee in wolkite‘s district that is responsible for the initiation of an agricultural credit
society.

In Ethiopia, the formation of cultural and traditional associations (e.g.`Edir`, `Ekub`, `Debbo`,
etc) was dated many years ago. The peasants long realized the value of cooperation for improved

1
productivity and for the task that require collective effort. For example, ‘Debbo’ is one of the
traditional self-help organizations prevailing in agricultural communities of Ethiopia. The people
living in a given particular geographical boundary help one another in pouching, weeding,
harvesting, house construction etc. It was after 1960 that those modern cooperatives societies
came to birth (MoRD, 2002). These cooperatives were established during the Feudal regime
(1960 to 1975), Derg regime (1975 to 1990) and now after 1990. It was unfortunate that those
cooperatives that were established during the previous two governments were not successful
because they were used as political tools and member’s willingness was not given priority it
deserves. It is even very difficult to get rid of those bad images of cooperatives printed in the
minds of farmers for the establishment of similar voluntary associations such as cooperative
societies in order to enhance bargaining power, raise sales and purchase, transaction volumes and
so on.

The study conducted by Tesfaye (2007) on producers’ cooperatives confirmed the above idea.
Cooperatives failed in the past because of some predictable and controllable factors. The Derg
regime formed these organizations in a hurry without any sufficient preparation and feasibility
study. The regime violated the very basic principle of cooperation (open and voluntary
membership). Farmers were forced both directly and indirectly to join cooperatives without their
interest. In addition, the regime had intervened in their affairs and used them for its own political
ends. Agricultural cooperatives have been used for implementing agricultural development
policies directed specifically towards smallholders of the country as smallholders’ agriculture is
an important component of the rural sector and its contribution has a significant place in the
national economy of the country. These cooperatives are introduced as the major rural
institutions to increase efficiency of the marketing system and to promote agricultural
development in the rural sector of the country’s economy. They are also organized to render
economic benefits such as economies of scale, market power, risk pooling, coordination of
demand and supply and guaranteed access to input and output markets to these smallholders.
And all these allow farmers to extend their economic power beyond the farm gate.

Agricultural cooperatives enable farmers to own and democratically control their business.
Farmers are organized to help themselves rather than rely on the government. And this allows
them to determine services and operations that will maximize their profits. They increase the

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income of the farmers by raising the general price level through increasing bargaining power for
the products sold and by lowering the costs of supplies of purchased input. They also increase
the farm income of the farmers by reducing per unit handling costs (economies of size), by
distributing the net savings made in handling, processing and selling operations, by up grading
the quality of supplies or farm products and by developing new markets for products.

Agricultural cooperatives provide a kind of farm supplies that will maximize returns and market
farm products of the farmers based on grades and standards for quality. They are dependable
source of reasonably priced supplies especially important during periods of shortage.
Agricultural cooperatives introduce desirable competition that raises market prices for the
farmers’ products. They also expand and capture a greater share of the existing market by
pooling specified grade or quality and this helps to meet the needs of large scale buyers.

Currently, there is a strong assertion in Ethiopia about the potential role that cooperatives could
play in terms of smallholder commercialization and poverty reduction. Some success stories
already achieved include direct export of coffee, oilseeds and vegetables to markets in Europe
and the USA by cooperative unions in which smallholder farmers are represented as members
through primary cooperatives. However, empirical evidence on the livelihood development and
poverty reduction impact of cooperatives is yet to be established. As an important instrument for
the implementation of the national agricultural development policy and strategy as well as the
recently launched growth and transformation (GTP) plan, Currently agricultural cooperatives in
Ethiopia are assumed to play significant role of producers organization that are mainly able to
insure the benefits of the member farming rural community through effective value chain
development and market linkage. In general, this study intends to identify different problems on
the role of agricultural cooperative on improving the livelihood of the household in the study
area.

1.2 STATEMENT OF THE PROBLEM

The main problem that hamper for the role of agricultural cooperatives in the study area
production system both in cropping and livestock production system, lack of livestock, lack
fertilizer credit, lack of skilled man power and low access to agricultural extension services
(Thomas W and Fan aye T, 2012). The study highly intended to identify the above factors, how it

3
affects the cooperative role and income of cooperative members in study area and supposed to
identify the cause of problems. Regardless of the challenges outlined above, cooperative is still
one of the promising avenues to improve member’s income and livelihood of small holder
farmers in Ethiopia. The opportunity for increasing income, employment, and improving food
nutritional security of rural households through cooperative arises from some factors. Like, the
availability of technological and institutional options to deal with agricultural cooperative and
the opportunities provided by the policy and institutional reforms being implemented to the
development of cooperative policy.

Farmers may have several specific reasons for starting an agricultural cooperative: to mobilize
more resources than they can individually supply, to create attractive alternatives for purchasing
goods and services, to operate a business more efficiently than can be done on an individual
basis, because they recognize that the benefits outweigh the duties of membership and because
they recognize that as members of a cooperative they are part owners and not only clients. By
becoming a member of a cooperative, each farmer can make use of the advantages of the
cooperative.

1.3 Objectives of the study

1.3.1 General objectives

The general objective of this study is to analysis the role of agricultural cooperatives on
improving the livelihood of small holder farmers in case of Wolkite Woreda Adiss hiwot kebele

1.3.2 Specific objectives

a. To describe the role of agricultural cooperatives in improving income, food security and
standard of living of small holder farmers in the area.
b. To compare living condition of cooperatives members with the non cooperative members.
c. To identify factors affecting cooperative membership income in the study area.

1.3.3. Research Question

1. Do agricultural cooperatives improve income, food security and standard of life of cooperative
members in the study area?

2. What are the deference living standards between members and non-members cooperatives?

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3. What are the factors that affect cooperative member income in the study area?

1.4 Significance of the study

When the issue of economic growth and development of the country is raised, one has to take
into account the performance of the smallholders. Reducing the challenges they are facing and
utilizing their potentials can help to accelerate the agriculture sector and economic development
the livelihood of smallholder farmers. More than four million farm households are the members
of these cooperatives (FCC, 2005a). The production and income of the farmers are mainly
dependent on the role of the cooperatives in which they are member.

Agricultural cooperatives have been organized to render economic benefits to their farmers. One
of the aims of establishing agricultural cooperatives in the rural area is to increase efficiency of
the marketing system, to provide fertilizer and improved seed, and finally to promote agricultural
development in the rural sector of the country’s economy. Hence, identifying those factors that
influence the role of agricultural cooperatives and the income of the farmers who are members of
cooperatives will also provide beneficial information to the managers and other stakeholders to
know the role of cooperatives in the income of small holders.

1.5 Scope and limitation of the study

Even if, studies agricultural cooperatives is very broad and cover multi-dimensional point in
large area the scope of this study will be limited to only Wolkite zuria woreda by selecting one
kebele. The study will be carried out by surveying a sample of 80 randomly selected farm
households from the study area. The study only focuses on evaluate the role of agricultural
cooperatives particularly on improving the livelihood of small holder farmers because of limited
resources and time to complete the study.

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 CHAPTER TWO

2. LITERATURE REVIEW
2.1. Theoretical literature
As far as the review of literature is concerned; definition of some terms and concepts,
approaches to define the concept, characteristics of, principles, theorists view and empirical
studies reviewed in abroad and country side.

2.1.1 Basic concept

As cited by Alemu (2008), cooperation has been the very basis of human civilization. The inter-
dependent and the mutual help among human beings have been the basis of social life. It is the
lesson of universal social history that man cannot live by himself and for himself alone. Since the
beginning of human society, individuals have found advantage in working together and helping
one another in all over the world. In Ethiopia too, it is common for people to be inter-dependent
in mutual help and self help activities in their day-to-day socio-economic conditions. The
traditional cooperatives like edir, equb, debo and senbete are traditional form of associations,
which should be basis to modern form of cooperatives in Ethiopia.

2.1.2. Definition

The US department of agricultural farmer’s service definition (1971) “cooperative is business

organization of agricultural producer’s development, owned and control by member patrons and
designed to perform needed services to the people. As ICA 1995 definition “Cooperative is an
autonomous association of a person united voluntary to meet their common economic, social,
and cultural needs and desperation through a jointly owned and democratically controlled
enterprises.”Also ILO define “cooperative is an association of a person usually of a limited
means, who have voluntary joined together to achieve a common economic ends through the
formation of democratically controlled business organization making equitable distribution to the
capital required accepting a fair share as a risk and benefit under taking. Another widely
accepted cooperative definition is the one adopted by the USDA in 1987. “A cooperative is a
user-owned, user-controlled business that distributes benefits on the basis of use.”This definition
captures what are generally considered the three primary cooperative principles such as user
ownership, user control and proportional distribution of benefits (Alema w, 2008).

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2.1.3. Principles of Cooperatives
According to ICA (1995, cited by Eshetu T, 2008), any cooperative should pass through the
following guiding principles:
A: Voluntarily and Open Membership. Co-operative societies are voluntary organizations open
to all persons able to use their services and willing to accept the responsibilities of membership
without gender, social, racial, political or religious discrimination.

B: Democratic Member Control. Co-operative societies are democratic organizations controlled

by their members who actively participate in setting their policies and making decisions. Every
member has equal voting rights and accordingly one member shall have one vote.C: Member
Economic Participation. Members contribute equitably to, and democratically control, the capital
of their cooperative. At least part of that capital is usually the common property of the
cooperative. Members usually receive limited compensation, if any, on capital subscribed as a
condition of membership. Members allocate surpluses for any or all of the following purposes:
developing their cooperative, possibly by setting up reserves, part of which at least would be
indivisible; benefiting members in proportion to their transactions with the cooperative; and
supporting other activities approved by the membership.
D: Autonomy and Independence. Cooperatives are autonomous, self-help organizations
controlled by their members. If they enter into agreements with other organizations, including
governments, or raise capital from external sources, they do so on terms that ensure democratic
control by their members and maintain their cooperative autonomy.

E: Education, Training, and Information. Cooperatives provide education and training for their
members, elected representatives, managers, and employees so they can contribute effectively to
the development of their cooperatives. They inform the public - particularly young people and
opinion leaders - about the nature and benefits of cooperation.
F: Cooperation among Cooperatives. Cooperatives serve their members most effectively and
strengthen the cooperative movement by working together through local, national, regional, and
international structures.
G: Concern for Community. Cooperatives work for the sustainable development of their
communities through policies approved by their members.

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2.1.4. Role of cooperatives
Currently, cooperatives are recognized as an important instrument for socio-economic
improvement of the community. This importance is recognized in their definition, which
considers cooperatives to be: An association of persons who have voluntarily joined together to a
common end through the formation of a democratically controlled organization, making
equitable contribution to the capital required and accepting a fair share of the risks and benefits
of the undertaking, in which the members actively participate (FCA, 2007c: 1, cited by
Yehulashet A).
Cooperatives are economic associations; they provide the opportunity for poor people to raise
their incomes. Because they are democracies with each member having one vote, they empower
people to own their own solutions, and because they pool risks at the level of the enterprise and
offer micro-insurance they increase security.In addition, there is increasing evidence indicating
that cooperatives also contribute directly and indirectly to meeting several of the other MDGs,
such as primary education for children, gender equality and reducing child mortality. The
cooperative enterprise also presents an important model as many of the world’s poorest and
disadvantaged face social exclusion, lack of access to opportunities and growing economic
inequality (cited by yehulashetA Argaw, 2008)A cooperative is made up of a group of individual
who have come together to pool resources to specific purpose and can play a significant role on
economic development. The objective is mostly economic in nature (Berdegue, 2001).
Cooperatives are those which have direct effect on the economic life of members. According to
(Berdegue, 2001), member join cooperatives because it`s promises to be the most effective
instrument towards gaining improved income. As cited by Yehulashet (2007),

2.1.5 Agricultural cooperatives

An agricultural cooperative of farmer cooperative does what all other cooperative do. But it does
so in a way that is specific to farmer. This may include pooling of resource to buy seed, sell grain
or even help with marketing efforts. According to Berdegue (2001) to achieve this: securing
higher price of their product, lowering input cost, achieves higher production level and/have
large profit margins, employing their members, introducing innovation. Agricultural
cooperatives can also be an effective means to empower women in rural areas and help them to
overcome the constraints they face in accessing education, knowledge and information, as well
as productive assets (FAO 2010, cited by Thomas w). It also improves the social role of the
8
cooperatives themselves, creates a safe environment for women to increase their self confidence,
bargaining power and income, and enables women to exercise political leadership.

2.1.6 The importance of agricultural cooperatives

Agriculture is the dominant sector of Ethiopian economy. The level and speed of economic
development are determined by the growth of agricultural sector. In agrarian countries the first
step in the process of economic development is getting agricultural moving (TIMMER, 2006).to
achieve this agricultural cooperatives have been advocated strongly its many authors (tesfaye,
2007); markle, 2007, berdegue2001).all are concluded that cooperatives helps to bring the
required productivity, bring farmers live betters and food self sufficiency. Tesfayes, (2007.p.82).
In this study of cooperative approach to the development of Ethiopian agriculture, underlined
strongly on the importance of agricultural cooperatives to the development of the sector

Besides the Ethiopia center the existence of reliable and effective agricultural cooperatives is
vital to reorganize the problems that have been identified as the major obstacles to the
development of Ethiopians agriculture” (Tesfaye,2007). Internal experience shows that
cooperatives have significantly contributed to economic growth through the world. The united
nation estimated in 1994 that the livelihood of nearly 3 billion people or half of the world
population made secure by cooperatives enterprises. Nearly 800 million people are member of
cooperatives today. Compared with 184 million in 1960 they account 100 million jobs and
economically significant in large number of countries (ILO, 2001).

2.1.7 Agricultural cooperatives and their types

All over the world, farmers have formed cooperatives than provide them with services that can
be more efficiently produced on a scale beyond the site of the individual farm. On the basis of
the activities carried out by the cooperatives, NCR (2003) distinguishes four different types of
formal cooperatives which are found commons in the rural areas of the developing countries.
These are: Marketing cooperative, Services cooperatives for serving members in such things like
acquisition inputs, credit providing scale services like school, clinic, Production cooperatives,
Multipurpose cooperatives

2.1.8 Agricultural cooperatives in Ethiopia

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However, the history of formal cooperatives in Ethiopia dates back to 1960, when the first
directive of cooperatives was enacted. Since the introduction of the cooperative directive,
Ethiopia has enacted four new proclamations and an amendment act: Directive No.44/1960,
Proclamation No.241/1966; Proclamation No.138/1978, Proclamation No. 85/1995,
Proclamation No. 147/1998, and Amendment act No. 402/2004. The first decree member
44/1960 has declared the condition to farm the form worker.

The latest proclamation ensures that cooperative policy is fully consistent with the Universal
Cooperative Principles and the ILO’s Promotion of Cooperatives Recommendation 193 (2002).
The history of cooperative movement in Ethiopia shows that cooperative play an important role
in the country’s economic development. Cooperatives currently there are 4052 agricultural
cooperatives with the membership of 4.5 million (Walton, 2001). The Cooperative Proclamation
No. 147/1998 identified clear goals and authorities, which supported a more conducive legal environment
for the formation of Ethiopian cooperatives. The goals include social, economic and other
motives that require joint actions for attaining a common target. Aside from enacting
cooperatives proclamations, Ethiopia has formulated a five year cooperative development
program. This demonstrates that the federal and regional governments have realized the
contribution of cooperatives to economic and social development, food security and poverty
reduction in Ethiopia (Yehulasew A, 2008).

2.1.9 Difference between cooperatives and business organization

The difference between cooperatives and business organization are primary in the relation
between the owner and their organization and the way net surplus are distributed. According to
Burton,2005) major difference between the two is that cooperatives attempt to correct
imperfection in the system to make it function more effectively for the member owner and they
have service motto that means cooperative society is organized primarily with the objective of
rendering maximum service to its members in a certain field. Whereas their institutions are less
concerned about eradicating of inequality and other short comings than in profit earned.In many
respects, a cooperatives is the same as any others business. It is proprietary in the sense that it is
a legal entity owned by its members and is operated privately as opposed to being a public
institution. It seeks increase the economic well being of its owner (Fredrick, 2004).

10
2.2. Empirical Studies

According to Tiegist (2008), grain producers’ cooperatives played an important role in providing
Ethiopian farmers with better prices by reducing seasonal price fluctuations and by stabilizing
the local grain markets in favors of the producers. Francesconi and Ruben (2007) found that
dairy farmers in Ethiopia perform better under cooperatives than otherwise in terms of
quantitative indicators such as herd size, productivity and market access. Based on a case study
on the coffee farmers’ cooperatives, Myers (2004) concluded that cooperatives helped to
successfully position Ethiopian smallholder farmers in the international coffee market.

Cooperatives impact poverty reduction and food security results by allowing the possibility for
income generation from employment opportunities. The employment impacts could be direct and
indirect. Pollet (2009) provides an estimate of direct and indirect employment impact of
cooperatives in Ethiopia. Accordingly, cooperatives in Ethiopia created 81,651 direct
employment opportunities (4,695 by institutions and government and 76,956 by primary
cooperatives) and 115,079 indirect employment opportunities, which total to 196,730.

A study conducted by Alemayehu (2001) in Kembata and Hadiya on service cooperatives

revealed that most of the service cooperatives safeguarded the peasants against price exploitation
by private traders. However, he noted that cooperatives’ attempt to serve their members have
been hampered by the cooperative poor spatial organization which necessitated the re-
organization of some of the cooperatives based on physical geographic factors and on the size of
the PA membership.

A study conducted by Fassil (2003) showed that in spite of the several tasks bestowed upon
peasant service cooperative, they were mainly engaged in the supply of consumer goods to
members followed by grain purchase and sale activities. Even in the activities they engaged, they
have lower share compared to those of state and other bodies. The problems of the cooperatives
were manifested in the sphere of marketing and management, which includes the problems in the
supply of both consumer goods and agricultural inputs, participation in purchase and sale of
products especially grain, shortage of skilled manpower and financial management.

Tesfaye (2007) in his study of producers’ cooperatives found that these organizations failed in
the past not because of failure inherent in collective management but because of forced

11
membership without the interest of the farmers and formation of the cooperatives in hurry
without any sufficient preparation and feasibility study. The problem of intervention of the Derg
regime in the affairs of these organizations i.e. using them for its political ends and the largeness
and complexity of the organizations for the managerial capacity of the farmers were also a
reason for the failures of the cooperatives.

Following there mewed interest in cooperatives in Ethiopia, there is an expansion of cooperative

businesses activities in the country, especially of agricultural cooperatives with a main trust on
their role in terms of smallholder commercialization and rural livelihood development. However,
our understanding about the empirical impact of cooperatives on rural livelihoods in Ethiopia is
limited.

2.3 Conceptual framework

A cooperative is a type of business corporation with unique principles of “user ownership, user control
and user benefit” (Ortmann & King, 2007).In agriculture, cooperatives are regarded as away to support
farmers, particularly subsistence producers, in achieving wellbeing for the members as well as societal
goals (Allahdadi, 2011).An agricultural cooperative engages with a combination of inputs and changes
them into outputs. The inputs are acquired from within the society or the surrounding environment of
the community where members residing. The outputs are distributed and sold in the community in
order to obtain other resources which are reinvested to continue the cycle (Dlamini, 2010).A
cooperative is a type of business corporation with unique principles of “user ownership, user control
and user benefit” (Ortmann & King, 2007).In agriculture, cooperatives are regarded as away to support
farmers, particularly subsistence producers, in achieving wellbeing for the members as well as societal
goals (Allahdadi, 2011).An agricultural cooperative engages with a combination of inputs and changes
them into outputs. The inputs are acquired from within the society or the surrounding environment of
the community where members residing. The outputs are distributed and sold in the community in
order to obtain other resources which are reinvested to continue the cycle (Dlamini, 2010).

In dependant variable: age Dependant variable

 Family size, fertilizer credit Income

 educationlevel, farm size

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 CHAPTER THREE

3. Methodology

3.1 Description of Study Area

Wolkite town is located in the south western Ethiopia at a latitude of12°36′ N, and longitude of
37°28′E with an elevation of 2080 m. a. s. l. Wolkite town is located in the west of Wolkite
administrative zone which is far from 168 Km from Addis Ababa in the south west direction.
Wolkite has mid altitude climate and an average annual max temperature of 27 ℃ and minimum
temperature of 16 ℃ and mean annual rainfall of 1172 mm. This town administration has 12
urban and31 rural kebeles.

The study will be conducted in Adiss hiwot Kebele, Wolkite zuriya woreda in Gurage zone
of southern nation nationality and people Region, Ethiopia, which is located 22 km from
Wolkite town. The total population in this area was 4150, from this, 2069 male and 2081 female,
and had the household of 650 with the average family size of 5 to 6. The total population of
animal in this area was 12711 from this, 7235 of cattle, 552 equine, 1220 of sheep, 1430 goat,
2074 and 200 indigenous and exotic poultry respectively. The poultry production in this area was
less with backyard system. It has one Kebele administration, one primary school, 5 satellite
schools, and two churches. The total area coverage is 2019 hectare, which is used for cultivation
1554 hectare, 99 hectare for settlement of people, 179 hectare for irrigation, 150 for grazing and
37 hectare for forest activity. The topography is 18% hill, 34% of mountain, and 42% o, and the
type of soil include black, red and black red. The study area has on average altitude of 1800m-
2200m above sea level, and has the mean annual rainfall of 1450mm-1800mm. The farming
system practiced in the area is mixed farming system. Source FTC of Adiss hiwot Kebele, 2014.

The major economic activity of the area is mixed farming system mainly crop production and
livestock raring. The most commonly cultivated annual crop in the area is wheat, Teff, Maize,
Sorghum, Tomato, chickpea and others. Their annual crops are cultivated by subsistence farming

in the study area. We selected the area because of its accessibility, access to information and
proximity to the cam

13
3.1.1 Fig Wolkite Zuria woreda map 2010

3.2. RESEARCH DESIGN

The study concerned with describing role of agricultural cooperatives on improving the
livelihood of small holder farmers in Wolkite zuria woreda. A cross-sectional study was made to
role of agricultural cooperatives on improving the livelihood of small holder farmers investigate
the by collected data from respondent. Cross-sectional survey design was selected to collect data
from the sample population at specific point in time and based on the results to make
generalizations

3.3. Sampling Techniques and Size Determination

14
A simple random sampling procedure will be used to select sample households. In the first stage,
Adiss hiwot kebele is selected purposively due to proximity to the campus, financial problem,
access to information and time. Then, 80 households will be selected for cooperative members
and non members; random sampling will be used as an appropriate technique. This study will
apply a simplified formula as used by Yamane, (1967) to determine the required sample size at
95% confidence level, degree of variability = 0.5 and level of precision =9 %.

N
n = 1  N (e) = 4150/1+1450(0.0081)=4150/34.615=120
2

Where n is the sample size, N is the population size, and e is the level of precision.

3.4. Source and Methods of data collection

To achieve the objectives of the study, combination of suitable qualitative and quantitative data
will be collected. For this study both primary and secondary data sources will be used. The
primary data will be collected from primary sources. That means from members and non-
members of cooperatives, from the community directly, using interview, focus group discussion
and key informal interviews. As the same time secondary data will be collected from secondary
sources; - socio-economic survey of the area, woreda agricultural cooperative office and by
reviewing different document.

3.5. Methods of data analysis

3.5.1 Descriptive analysis

Descriptive analysis will be used to reduce the data in to a summary format by tabulation (the
data arranged in a table format) and measure of central tendency (mean and standard deviation).
The reason for using descriptive statistics is to compare the different factors. Qualitative data
obtained through focused group and key informants discussion will be summarized, interpreted
and narrated.

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3.5.2 Regression Analysis

3.5.2.1 Linear Regression Analysis

Linear regression is a method of estimating or predicting a value on some dependent variable

given the values of one or more independent variables. Like correlations, statistical regression
examines the association or relationship between variables. Unlike correlations, however, the
primary purpose of regression is prediction (Geoffrey M. et al., 2005:224-225). In this study
multiple regressions will be employed. Multiple regression analysis takes into account the inter-
correlations among all variables involved.

Regression Functions

The equation of regressions on this study is generally built around two sets of variables, namely
dependent variable (income) and independent variables (age, educational status, family size,
farm size , total livestock holding ,number of years of membership, additional benefit, fertilizer
credit). The basic objective of using regression equation on this study is to make the study more
effective at describing, understanding and predicting the stated variables

Regress income on Selected Variables

Yi = β0+ β1X1 + β2X2 + β3 X3 + β4X4 + β5X5 + β6X6 + β7X7 + β8X8
Where:
Y is the response or dependent variable- income
X1=age, X2= educational status, X3= family size, X4= farm size, X5= total livestock holding,
X6 = number of years of membership, X7= additional benefit and X8= fertilizer credit are the
explanatory variables. β0 is the intercept term- constant which would be equal to the mean if all
slope coefficients are 0. β1, β2, β3, β4, β5, β6, β7 and β8 are the coefficients associated with
each independent variable which measures the change in the mean value of Y, per unit change in
their respective independent variables. Accordingly, this statistical technique will be used to
explain the following relationship. Regress income (as dependent variable) on the selected linear
combination of the independent variables using multiple regression.
Model Specification:

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The model is specified as Follows. Income =f (age, educational status, family size, farm size ,
total livestock holding ,number of years of membership, additional benefit, use of fertilizer
credit + e )

Measurement of dependent variable

Income: - will be approached from saving and expenditure side. This is because households are
assumed to reveal their true behavior when they are asked about their expenditure. Thinking that
they will be reluctant to reveal their actual income, their expenditure on both food and essential
non-food items are considered. And a monetary value is attached to each to have an aggregate
indicator. In this study, it is assumed to be used to know who is more expended would mean the
more income he/she has generated. (Demise Alamirew, 2011)

Definition of independent variables

The following demographic, socio-economic, and institutional factors were hypothesizing to

explain the dependent variable. These factors that affect income of cooperative members
include age, education level, family size, farm size , total livestock holding ,number of years of
membership, additional benefit, use of fertilizer credit(DemisAlamirew , 2011).
Age:
This variable is a continuous explanatory variable and refers to the age of household head. Age
shows a significance relation with an income but the relationship is negative indicating that the
increase in the age of operators affects income of them. Younger people are more energetic,
motivated and interested than older people and hence they might become successful in their
business (demise, 2011).So we expect that ages have a negative relationship with income.

Education level (EDUCATION):

Refers to the number of years of formal schooling the farmer attended. The higher the education
level, the better would be the knowledge of the farmer towards the cooperative and acquire news
and education about the benefits of the cooperative easily (Kraenzle, 2004; Klienet al.,2006). So
this variable is expected to influence the income positively
FAMILY SIZE:This variable is a continuous explanatory variable and refers to the total number
of family in the household. When family size increases, their income also increases. This could

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be due to the number workers increased in the business activities so that it adds value in to their
income increment (demise, 2011). So we expect family sizes with income and have positive
relationship.
Farm size (FARMSIZE):This variable is a continuous variable and it refers to the total area of
farmland that a farmer owns in hectare. It is assumed that the larger the total area of the farmland the
farmer owns, the higher would be the output. Farmers with higher level of output expected to have
higher income than those who have not. Therefore, it is expected that this variable would have
positive influence on the income of cooperative members.

Total livestock holding (TLSH):This variable is a continuous variable and refers to the total
number of livestock that the household own. It is assumed that household with larger lives took
have better economic strength and financial position (Techane, 2002; Teferi, 2003 Therefore,
this variable has positive association with income.

Number of years of membership (MEMBERSHIP):

This variable is a continuous variable and it refers to number of years since the farmer has been
the member of the cooperative. Farmers having longer years of membership are in a better
position to know the benefits of the cooperative than farmers with shorter years of membership
(Cain et al.,2008). In this study, this variable is hypothesized to influence income positively.

Additional benefit (PATREF): It is a continuous explanatory variable and refers to the amount
of money the farmer receives from the surplus the cooperative appropriate in proportion with
his/her use of the cooperative (patronage). It is assumed that farmers will be encouraged to
produce and market more of his products through the cooperative if there is surplus appropriation
in the form of patronage refund (Black and Knutson, 2007; Fulton and Adamowicz, 2009). Thus,
patronage refund assumed to influence the income positively.

Fertilizer credit (FERCREDIT):It is a continuous variable and refers to the amount of

fertilizer credit (in birr) the cooperative extended for the farmer. This credit is paid to the
cooperative in installment. Farmers are assumed to sell their product to the cooperative and pay
the credit they get for fertilizer there in the cooperative. Black and Knutson (2007) Texas survey
showed credit is one of the most important reasons for the cooperative patronage. Thus, fertilizer
credit is hypothesized to influence the income of cooperative members positively.

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 4 WORK PLAN
The research will be conducted during 2019 within four months, starting from March up to Jun

Table 1: Work Plan

N o Activities October November December

Literature review October
First draft proposal writing October
Preparing questioner October
Data collection October
Data coding and feeding November
Data analysis November
Writing thefirst draft report November

Revising the draft report November

Writing the final report December

Presenting the report December

5 BUDGET
Budget plan shows the budget estimated for the accomplishment of the research

Table 2: Budget

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 No I t e m U n i t Amount Unit price Total
1 Stationery P e n N o 8 4 3 2

p a p e r packet 1 8 0 8 0
Note book n o 3 7 2 1
r u l e r n o 1 6 6
binding n o 1 2 5 2 5
t o t a l 164

2 Communication Telephone Three month 150

3 O t h e r Internet 200
f l a s h n o 1 130 130
c o p y paper 5 5 0.40 2 2
t o t a l 502
4 Transportation students 100 150
Enumerator 150 150
t o t a l 300
5 contingency 100

6 T o t a l 1066

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