THE ROLE OF AGRICULTURAL COOPERATIVE IN IMPROVING

THE LIVELIHOOD OF HOUSEHOLD ; THE CASE OF ALEM TEFERI

WOREDA IN KELEM WOLLEGA ZONE OROMIA REGION,
ETHIOPIA.
A SENIOR RESEARCH REPORT
BY:
ZARIHUN GIRMA

BURIE, ETHIOPI

APRIL; 2013

i
THE ROLE OF AGRICULTURAL COOPERATIVE IN IMPROVING
THE LIVELIHOOD OF HOUSEHOLD ; THE CASE OF ALEM TEFERI
WOREDA IN KELEM WOLLEGA ZONE OROMIA
REGION,ETHIOPIA.

A SENIOR RESEARCH REPORT SUBMITED TO DEBREMARKOS

UNIVERSITY, BURIE CAMPUS DEPARTMENT OF AGRIBUSINESS
AND VALUE CHAIN MANAGEMENT

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE

DEGREE OF BACHELOR SCIENCE IN AGRIBUSINESS AND VALUE
CHAIN MANAGMENT

BY:

ZARIHUN GIRMA

IDNO; AGR/1109/11

ADVISOR; CHERNET.W (MSC)

BURIE ETHIOPIA

APRIL; 2013

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AKNWOLEDGEMENT
First of all, I would like to thank God who give me health, strength, and support to accomplish
everything successfully . Next I would like to thank my advisor Chernet.W (MSc) with his
unlimited and continuous advice, guidance, provision and contribution of different materials
which help me to accomplish this task. I also extend my deepest gratitude to my respected
parents who have played the crucial role in terms of providing the financial services and other
related services throughout my education life.

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 ABBREVIATIONS AND ACRONYM

ACDI Agricultural cooperative development international

ACE Agricultural cooperative of Ethiopia
CSA central statistical Authority
FDRE Federal democratic republic of Ethiopia
GDP Gross domestic price
ICA International cooperative alliance
ILO International labor organization
NCPC National Cooperative promotion commission
NCR National Cooperative reform
US United States

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Table of Contents

AKNWOLEDGEMENT····································································································································2
ABBREVATIONS······································································································································3
LIST OF TABLES·······································································································································6
LIST OF FIGURES·····································································································································7
1. INTRODUCTION··································································································································9
1.1. Background of the study·················································································································9
1.2. Statement of the Problem··················································································································9
1.3. Objectives of the study····················································································································11
1.4. Research questions··························································································································11
1.5. Significance of the study·················································································································11
1.6. Scope and limitation of studies·······································································································12
1.6.1. Scope of the studies·················································································································12
1.6.2. Limitation of the studies··········································································································12
2. LITERATURE REVIEW······················································································································14
2.1. Basic concept of cooperative definitions·························································································14
2.2. Role of cooperatives·······················································································································14
2.3. Principle of cooperatives·················································································································15
2.4. Agricultural cooperatives················································································································16
2.5. The importance of Agricultural cooperatives··················································································16
2.6. Types of Agricultural cooperatives·································································································17
2.7. Agricultural Cooperative in Ethiopia······························································································17

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 2.8. Difference between cooperatives and business organizations·························································18
3. METHODOLOGY································································································································20
3.1. Description of the study area··········································································································20
3.2. Data sources and method of date collection····················································································20
3.2.1. Data sources·····························································································································20
3.2.2. Method of date collection.········································································································20
3.2.3. Sampling techniques and sample size······················································································20
3.3. Method of data analysis··················································································································21
4. RESULTS AND DISCUSSION············································································································22
4.1. Age, sex and marital status of respondents·····················································································22
4.2. Responsibility of respondents in their respective agricultural cooperatives····································23
4.3. Agricultural production system·······································································································23
4.3.1 Production and use of agricultural products··············································································24
4.4. Cooperative role in living condition of cooperative members·························································25
4.4.1. Impact on building better house·······························································································25
4.4.3. Impact on agricultural input expenditure·················································································26
4.4.4. Impact on household assets······································································································26
4.4.5. Impact on household savings···································································································27
4.5. Factors that limit the development of agricultural cooperatives in the study··································27
4.5.1. Educational status of respondents····························································································27
4.5.2. Lack of awareness····················································································································28
4.5.3 Shortage of farm land················································································································29
4.5.4. Lack of improved seed·············································································································29
4.5.5.Lack of fertilizer·······················································································································30
4.5.6. Lack of adequate training·········································································································31
4.5.7. Credit constraints·····················································································································31
4.4.8 Poor saving habit······················································································································33
4.4.9. Weak culture of working together····························································································34
4.4.10. Lack of commitment··············································································································34
5. CONCLUSION AND RECOMENDATION·························································································34
6. REFERENCE········································································································································36

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LIST OF TABLES

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LIST OF FIGURES

Figures Pages
Figure 1: Educationallevelof respondents…………………………………………..... 16
Figure Limitations related with access of credit………………………………......... 21

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 ABSTRACT

The study was conducts in Alem teferi woreda kelem wollega zone oromia region Ethiopia. The
study aim at conducting the role of agriculture cooperative improving the livelihood of the
household in Alem teferi woreda kelem wollega zone Ethiopia. The general objective of this
research is to analyze the role of agricultural cooperatives in improving the livelihood of the
households and Specific objectives of the study were to compare the role of cooperative on
livelihood of farmers and. To identify factors limiting the development of agricultural
cooperatives in the study area. For this study both primary and secondary data will be used.
Primary data source will be from members and worker of cooperative directly. A sampling
techniques will be employed to select sample household this study has planned to be completed
within forum in the 2021 starting from February.

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1. INTRODUCTION

1.1. Background of the study

Ethiopia is predominantly an agricultural country with the vast majority of the population
directly involve in the production of crops and livestock. Agriculture accounts for half percent of
gross domestic production (GDP), 85% of the employment and over 90% of foreign exchange
income of the country (Belay, 2005). This indicates that the level of economic development of
the country is determined by the growth of agricultural sector (FAO, 2005).

The Growth of Agricultural Production in Ethiopia hasn’t been able to keep with that of demand,
because of the huge agricultural potential (Lemma,2004). According to Tesfaye 1995, the most
important obstacles to the development of Ethiopia’s agriculture are limited to access of
agricultural credit, in efficient input delivery system, low price of agriculture production and
poor infrastructure.

In environment like this, economic collective action is one strategy used by small farmers tomeet
direct economic need and it’s called agricultural cooperatives (Abebaw Haile, 2013,Speil man
2008). They are based on the values of self-help, self-direct, self-responsibility equality, equity
and solidarity. The specific objective of agricultural cooperatives will be increasing production
though acquisition of modern means of production and facilitating sale of their produce and
raising their income (ICA, 1995).

Cooperatives are significantly contributed to economic growth throughout the world. The United
Nation estimated in 1994 that the livelihood of nearly three billion people or half of the world’s
population will made secure by cooperative enterprises they account for an estimated 100 million
jobs and economically significantin large number of countries providing food staffs, housing
financial and a wide a wide a verity of consumer ( ILO, 2001 ).

1.2. Statement of the Problem

The major obstacles of the development of cooperatives in less development countries include
misconception among policy makers and planners of what cooperatives are and how they work;

1
unrealistic expectation of what cooperative can actually accomplish. The establishment of
cooperatives irrespective of whether or not the minimum requirements for successful cooperative
development. Notable also countries like Ethiopia our agricultural cooperatives will be an
integral part of political system. A means of employing agricultural labor and distributing
consumer goods, but the current privatization of these countries reaches beyond the land reform
(ILO, 2001).

The main problem that hamper for the development of agricultural cooperatives in the study area
production system both in cropping and livestock production system, lack of cooperation, lack
of sufficient capital, lack of skilled man power and low access to agricultural extension services
(Thomas Werkeneh and FanayeTufere, 2012). The study highly intended to identify the above
factors, how it affects the cooperative development 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 households in Ethiopia. The opportunity for increasing
income, employment, and improving food nutritional security of rural households through
cooperative development 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.

Identifying different factors that hinder productivity of cooperative is essential in designing

strategies and coordinating effort to improve performances and members’ participation in
cooperatives. The need for the establishment cooperatives helps to bring the required
productivity, bring farmers live betters and food self-sufficiency. In this study, cooperative
approach to the development of Ethiopian agriculture, underlined strongly on the importance of
agricultural cooperatives to the development of the sector (Ahmed et al., 2004; cited by Eshetu,
2008).

Farmers may have several specific reasons for starting anagricultural cooperative: to mobilize
more resources than they can individually supply, tocreate attractive alternatives for purchasing
goods and services, to operate a business moreefficiently that can be done on an individual basis,
because they recognize that the benefitsoutweigh the duties of membership and because they

2
recognize that as members of a cooperative they are part owners and not only clients. By
becoming a member of acooperative, each farmer can make use of the advantages of the
cooperative. And also cooperatives performance should be continuously checked against the
level of members’ satisfaction to make it viable.In general, this study would enable the
household to check whether they are on the right track and measure to be taken to correct any
undesirable courses of development.

1.3. Objectives of the study

The general objective of this research is to analyze the role of agricultural cooperatives in
improving the livelihood of the small households.

Specific objectives of the study were:

 To analyze role of cooperative on livelihood of farmers.

 To identify factors limiting the development of agricultural cooperatives in the study
area.

1.4. Research questions

 What are the role of cooperatives in the livelihood of the farmer?

 What are the factors that limit the development of agricultural cooperatives in the study?

1.5. Significance of the study

Information on the research paper dominantly concerning to analyze the role of agricultural
cooperatives on the livelihood of household that enable to develop understanding of the object.
Pave the way for future research and development by different researcher’s extension agent,
policy makers and also to the outcome of the study by the woreda agriculture office and other
interested governmental and non – government organization.

In addition to this, study will suggest a better alternatives to household by comparing and
contrasting the benefit of cooperatives for members and its aimed to increase the participation of
household to join agriculture cooperative.

3
1.6. Scope and limitation of studies

1.6.1. Scope of the studies

Even if studying agricultural cooperative is very broad and covers multidimensional point in
larger area the scope of this study is limited to only on the Alem teferi woreda. The study focuses
only on analyzing the role of agricultural cooperative, particularly,on improving the living
condition of household.

1.6.2. Limitation of the studies

Even though the study is really important to commence at wider scale in all of Ethiopia and
required involvement of majority of sample household respondents, due to the limited
availability of resource and time, it is limited to Alem teferi and its surrounding area only.

2. LITERATURE REVIEW

2.1. Basic concept of cooperative definitions

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 idir, iqub, debo and senbete are traditional form of associations,
which should be basis tomodern form of cooperatives in Ethiopia.

4
Definition
According to the US department of agriculture’s farmers service definition (1971),“cooperatives
are business organizations of agricultural producers development, owned and controlled by
member patrons and designed to perform needed services to the people.”

According to the ICA (1995), Definition:

“A Cooperative is an autonomous association of person united voluntarily to meets their

Common economic, social and cultural needs and desperations through a jointly owned and
democratically controlled enterprise.”

According to the ILO (1995) Definition:

“A Cooperative is an association of persons usually of 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 fair share of
risk and benefit of undertaking.

2.2. 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). A cooperative is made
up of a group of individual who have come together to pool resource for a specific purpose and
can play a significant role on economic development. The objective is mostly economic in nature
(Berdegv’e 2001). Ruben ( 1997) in his study of land reform cooperatives in Honduras “
cooperative form is first and for most economic organization that should contribute to the
satisfaction member objective” under the condition of his study the cooperative will response to
labor and commodity failures, protect small household farmers from risk, and improve the
productivity of farmer member.A means of employing agricultural labor and distributing

5
consumer’sgoods. But the current privatization of these counties reaches beyond the land
reforms (ILO, 2001).

According the government of FDRE has established a national cooperative promotion

commission (NCPC) by the year 1994. A national cooperative promotion commission has
established for the purpose of sustainable development and viable agricultural cooperatives in the
country (Tiegist, 2008) .Follow the establishment of a national cooperative promotion
commission by the proclamation No/34/94, the southern nationality and people’s agricultural
cooperative promotion commission has established to extend support to regional and
woredalevel (FCA, 2004).

2.3. Agricultural cooperatives

Agricultural cooperatives carry out what all other cooperatives carry out. But perform so in away
that is specific to farmers. This may include pooling of resources to buy seed, sell grain store or
even help with marketing efforts. According to Berdegue ( 2001) to achieve this; securing higher
price of their product, lowering in put cost achieve higher production level and have large profit
margins, employing their members, introducing their innovations are the most important.

2.4. The importance of Agricultural cooperatives

Agriculture is the dominant sector of Ethiopia economy. The level and speed of development is
determined by the growth of agricultural sector in agrarian countries the first step in the process
of economic development is getting agricultural moving (timer 1988). To achieve this agriculture
cooperative has been advocated strongly its many authors (Tesafaye, 1995); Markie
1995;Berdegue, 2001). All are concluded that cooperatives helps to bring the required
productivity, bring farmers life betters and food self-sufficiency. Tesfaye, in this study (1995),
cooperative approach to the development of Ethiopia to the development of the sector,underlined
strong on the importance of agricultural cooperatives to the development of the sectors.Besides
the Ethiopia center the existence of authentic and effective agricultural cooperative in
indispensable to ameliorate the problems that will have been identifies as the major obstacles to
the development of Ethiopia agriculture (Tesfaye, 1995). Internal experience shows that
cooperatives have significantly contributed to economic growth.

6
2.5. Types of Agricultural cooperatives

All over the world, farmers have formed cooperatives that provide efficient production on a scale
beyond the site of the individual farm. On the basis of the actives carried out by the cooperatives,
NCR (1993) distinguishes four different types of formal cooperatives which are found commons
in the rural areas of the developing countries.There are:- Marketing cooperatives,Services
cooperatives for serving members in such things like school, clinic, and construction of dams,
Production cooperatives, Multipurpose cooperative, Multipurpose cooperatives.

2.6. Agricultural Cooperative in Ethiopia

The history of cooperatives government in Ethiopia shows that cooperative play an important
role in the country’s economic development. Modern forms of cooperatives have promoted in
Ethiopia since 1960 markie, 1975). The firs decree member 44/1960 has declared the condition
to form the farm worker. Cooperative, currently there are 4052 agricultural cooperatives with the
memberships of 4.5 million (Walton, 2001). Approximately there are 10,000 agricultural
cooperatives in Ethiopia, from these 300 focuses on irrigation, while the majority of the
remaining 7000 multipurpose cooperatives concentrate primarily on agriculture. In total it is
estimated that about 7million Ethiopia are members of cooperatives (FCA, 2004).

2.7. Difference between cooperatives and business organizations

The differences between cooperative and business organization are primary in the relation
between the owner and their organization and the way net surplus are distributed. According to
Barton, 1989) major difference between the two is that cooperatives attempt to correct
imperfection in the system to make it function more effectively for their member owner.
Whereas their institution are less concerned about eradicating inequality and other short coming
than in profit earned in many respects, a cooperatives is the same as any other 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).

7
 3. METHODOLOGY

3.1. Description of the study area

The study will conduct in Alem teferi woreda kelem wollega zone which is locate510KM from
Addis Ababa. The woreda is geographically located 6.47' 29' 59.99''N latitude and 38' 24' 59
99''E longitude. the total 186,349 out of these 91,585 are male and 94,764 are female(CSA
2015).The area receives anannual maximum and minimum rainfall of 1.450 and 1800 mm
respectively ;which of 70% precipitations is in summer (may-September).The mean maximum
and minimum daily temperatures are 27 and20oc respectively,(J WARD office,2017).The total
area of the woreda is 27000 hectares

3.2. types and sources of data

For this study both quantitative (expres in numerical form)and qualitative (expressed in the form
of verbal description) types of data are used, and primary and secondary sources of data were
used. Primary data source was from members and worker of cooperative directly. In addition,
secondary data sources such as report from socio economic survey of the area, Books and
woreda agricultural cooperative promotion office. This information was used to provide further
insight to the research and additional back ground to support the conclusions and
recommendation of the study.

8
3.3. Method of date collection.

Primary data were collected by using questionnaire, interview, and personal observation On the
other hand, secondary data were collect from report document of the woreda agricultural
promotion office and by survey different related literate review.

3.4.Sampling techniques and sample size

A sampling techniques can be employed to select sample household in the peasant association
(agriculture cooperatives were situated) will be selected Households, in the selected peasant are
member of cooperative in the study. In the sampling, simple random sampling based on
probability proportional to sample size sampling technique will be used to select respondents
from each of the household. 80 household were selected. According to the (Yamane formula)
the sample size had been determined at 90% confidence interval from 385 population size house
hold using the following formulas.

n=N/1+N(e)2
n=385/1+385 (0.1)2
n=80
Where: n = statistically acceptable sample size
N = Total size of target population
e = level of precision (error level) at 90% confidence level (0.1).

3.5. Method of data analysis

After undertaking the household survey and collecting the secondary data, the data were analyses
by using descriptive statistics such as frequency distribution and percentage were employed to
describe similarities and different between groups of respondents. By applying descriptive statics
one can describe, compare and contrast categories of sample unit (members of cooperative and
non-members with respect to the descried characteristics).

9
4. RESULTS AND DISCUSSION

4.1. Age, sex and marital status of respondents

In the survey, data on sex, age, material status, educational background, and responsibility of
respondents in their cooperatives were collected. Some basic demographic characteristics of
respondents in different agricultural cooperatives are presented in table 2. About 25 % and 20 %
of the respondents in the study area were under the age category of 36-45 and 46-55 years,
respectively. Thus, larger amount were adults who are expected to be more productive. As
shown in table 2, the majority of respondents were males who account 75% and the rest 25%
were females. This is mainly because most of the time males have the tendency to be organized
and form cooperatives than females; the later spend most of their time by conducting household
activities rather than conducting business activities outside their home (Esubalew, 2011). Most of
the sample respondents were married (77.5%). On the contrary, divorced respondents consisted
of 6.25% followed by unmarried (single) that covered 16.25%.
Table 2. Age, Sex and Marital Status of Respondents

Participants
Variables N Percentage
Age (%)
26-35 30 37.5

10
 36-45 20 25
46-55 16 20
>55 14 17.5
Total 80 100
Sex (%)
Male 60 75
Female 20 25
Total 80 100
Marital status (%)
Single 13 16.25
Married 62 77.5
Divorced 5 6.25
Total 80 100
N = number of respondent, % = percentage.

4.2. Responsibility of respondents in their respective agricultural cooperatives

Members should carry different responsibilities, as per the rules and regulations of cooperatives.
It was stated that all members have equal rights and responsibilities to share every position term
by term. Therefore, this research attempts to identify the responsibilities of respondents in their
respective cooperatives.

Table 3. Responsibility of the respondents in their respective cooperatives

Responsibility of
Number of respondents Percentage
Respondents
Committee members 10 12.5
Members (ordinary) 70 87.5
Total 80 100

Table 3 shows that the majority of sample respondents were simply members of the cooperatives
without having specific responsibilities. They accounted 87.5% of the total percentage. The rest
12.5% of respondents have a position in different committees. This agrees with the report of
responsibility of cooperative participant farmers by Esubalew (2011). During the interview with
the woreda cooperative expert, it was possible to know that majority of the members were not
able to participate in different activities due to lack of awareness about cooperative definition,
values and principles (Alemu, 2008). It is also clearly understood from the table above that most

11
of the members have little exposure to know about the definition, principles and values of
cooperatives.

4.3. Agricultural production system

In the study area, different agricultural production systems are carried out by the respondents,
including crop and livestock production. However, the most common is crop production system.
According to the survey result, 81.25 % of the sample respondents were engaged in both crop
and livestock production. A variety of cereal crops are also grown in the study area. The most
common ones are maise, and wheat. This is because they are highly demanded for food
consumption.

Table 4. Percentage of respondents by type of farming activity

Type of agricultural Number of respondents Percentage (%)
production system
Cereal production 12 15
Livestock production 3 3.75
Both cereal and livestock production 65 81.25
Total 80 100

4.3.1 Production and use of agricultural products

Table 5 presents the yield and use of agricultural products in one season. As larger proportion
(37.5%) of the sampled households reported, the annual production lied within the range of 1-15
quintals per year and about 31.25% of the respondents reported the annual production 16-30
quintals per year, while 18.75% and 12.5% produced 31-45 and above 45 quintals per year,
respectively.

The study also shows that 7.5% of the respondents used their total production for home
consumption, while 35% of the respondents use half of their production for home consumption
and the remaining was supplied for market. The rest 57.5% of respondents supplied major
portion of their production for market.

12
The current result shows that most of the respondents (73.68 %) use agricultural products for
home consumption as well as income source (Tiegist, 2008). Respondents are mostly engaged in
the production of cereal crops for the sake of home consumption.

Table 5: Production yield and use of agricultural products by the respondents

Variables Number of respondents Percentage (%)

Production (quintals)
1-15 30 37.5
16-30 25 31.25
31-45 15 18.75
Above 45 10 12.5
Total 80 100
The use of agricultural products
All for home consumption 6 7.5
Half for consumption and half for market 28 35
Majority for market and the rest for
consumption 46 57.5

4.4. Cooperative role in living condition of cooperative members

The main livelihood sources of the members and non- members of cooperatives are livestock
rearing, crop production, small trading and daily labor. Crop production is the main livelihood
source for all members of the cooperative but not necessarily the sole source of their livelihood.
As the sampled households mentioned, they have on average of 1.05 hectare of land. Crop
production accounts for 60 % of their livelihood. The average total income of the cooperative
members which is obtained from the sale of crop, saving and miscellaneous income Birr
10,031.3 per year. The major evidence from a comparative descriptive analysis, using selected
livelihood indicators for cooperative members, cooperatives are of a positive impact on living

13
condition of farmers (Table 6). There has been a significant increase in the level of household
income, savings, consumption expenditure (food and miscellaneous) and ownership of more
productive assets such as land, oxen and cows among cooperative members.

4.4.1. Impact on building better house

The effect of cooperative service use on building better house is positive. As indicated in table
cooperatives members spent much money than non-cooperatives members in building better
house .This is probably due to better income generated by service users and saving. As a result
household can built better house and improve overall living condition. Fr this increment in total
income could be for cooperative members products and the encouraging extension services that
enable farmers to use improved seeds through cooperatives, thus better crop yield and revenue.
Crop income is considered as the sum of incomes generated from annual crops (maize, haricot
bean, wheat) and perennial crops (such as coffee) produced and sold to cooperatives.

4.4.3. Impact on agricultural input expenditure

In the majority of the cases, cooperative service use seems to result in reduced total agricultural
input expenditure. Since users’ expenditure for agriculture input tends to reduce due to purchase
through cooperatives at a reasonably low unit price compared to the case of input purchase from
private traders. Given a certain quantity of agricultural input, cooperatives tend to sell it to
service users at a low price compared to private traders .The possibility of a comparatively low
input expenditure among cooperative service users is expected since one of the objectives of
cooperatives is minimization of input costs through scale effects (low unit transaction cost) and
better negotiation power.

4.4.4. Impact on household assets

Major farm household assets considered in this study include farmland (used for both annual and
perennial crop production), oxen, milk cows and houses. Household preferences for fulfilling
basic needs such as food, clothing and school fees for children may shift investment away from
asset accumulation. This is reasonable for poor rural households whose propensity to income
consumption is generally high. Moreover, the proxy asset indicators used in this study such as
oxen and milk cows are highly dependent on the availability of land (Nega et al., 2009). In the

14
presence of land as a limiting factor and where land cannot be sold or purchased, asset
accumulation tends to be limited and cooperative service use may have no or only limited impact
on the accumulation of such assets. In terms of time required, asset creation and purchase needs a
longer time since it needs considerable income accumulation to purchase new assets and also it
needs making careful (rather than quick) decisions with regard to alternatives, choices within a
given alternative and risk analysis.

4.4.5. Impact on household savings

As shows in table 6 cooperatives promote saving habits, probably due to better income generated
by service users. Such improvement in the level of household saving is expected to reduce
financial constraints faced by farm households in their effort to adopt modern agricultural
technologies to improve their production activities. The evidence also encourages the trust on
cooperatives as effective institutions for mobilizing rural saving and credit activities.
Table: 6. Economic impact indicators of cooperatives on the livelihood of sample households

Participant (n = 80)
Impact indicator Mean SD
Build a better house (Birr) 5629.43 683.85
Saving (Birr) 1503.60 931.50
Crop income (Birr) 7852.40 3732.15
Miscellaneous income(Birr) 675.30 460.42
Food expenditure (Birr) 8329.63 2693.75
Miscellaneous expenditure (Birr) 729.43 183.85
Farm land size (ha) 0.75 0.25
Oxen (number) 1.5 1.2
Cows (number) 1.83 1.1
N=number; ha=hectare; SD= standard deviation.

4.5. Factors that limit the development of agricultural cooperatives in the study

4.5.1. Educational status of respondents

The survey result shows that many of the respondents (34.21%) were illiterate. It also
demonstrates that 23.68% of the respondents can write and read (Figure6). From the study, it can
be observed that majority of the respondents were illiterate and they do not actively participate in
the day to day activities of their cooperatives and also they have little information about the
performance of their cooperative societies because of their illiteracy. During the interview,

15
respondents said that they did not know about the performance of their cooperatives due to their
poor participation in the day to day activities of the cooperatives.

Figure 1: Educational status of sampled respondents (N=80).

4.5.2. Lack of awareness

Distribution of respondents based on their level of awareness about definition, principles and
values of agricultural cooperatives is presented in Table 6. About 56.25 % of the sampled
households mentioned that they had no awareness about the importance of agricultural
cooperatives. They became members of a cooperative without having awareness about the
principles, values and definition. As a result of this, most of the members had no ability to
participate in the day to day affairs of their cooperatives.

Table: 7. Distribution of respondents based on their level of awareness about definition,

principles and values agricultural cooperatives

Do You have awareness about cooperative Frequency Percentage (%)

definition, principles and values?
Yes 35 43.75
No 45 56.25

16
 Total 80 100

4.5.3 Shortage of farm land

Table 8 presents the percentage of respondents based on land size (hectare) in Alem teferi
Woreda. In the study area, there was a great shortage of land because of many factors. As
forwarded by many of the respondents, there is a serious problem in relation to rental land. In
order to increase production and productivity the cost to rental land for a season is expensive.
From the focus group discussion made with members of cooperatives, it has been founded that,
the cooperatives were not able to increase production because of shortage land. The study shows
that there are many factors for this, among which the major one is increment of population.

Table 8.Distribution of respondents by land size (hectares) per household.

Land size Number of respondents Percentage (%)
0.5-1 35 43.75
1.1-2 25 31.25
>2 20 25
Total 80 100

About 43.75% of the respondents had land size within range of 0.5 to 1 hectare, and 31.25% of
the respondents hold a land size of 1.1 to 2 hectare. According to the current result, the land size
most of the respondents lays between 1.1 to 2 hectares per household which agrees with the
national average per household (CSA, 2012). This result indicates that there is a serious problem
in relation to farm land.

4.5.4. Lack of improved seed

Due to the advancement of science and technology increasing production and productivity is
possible through the use of improved seeds. There are different species of plants which are
produced from agricultural research institutions that work to increase production. However, most
of the members of cooperatives in the study area were not able to benefit from the fruits of
science. 61.1% of the respondents said that they had no access to improved seed and they listed

17
two problems for that. The first one is related to cost and the other to supply. The cost of
improved seed is very expensive and the availability is not also enough to cover the demand.

Table :9. Distribution of respondents based on access to improved seed

Do you use improved seed? Number of respondent Percentage (%)
Yes 37 46.25
No 43 53.75
Total 80 100

4.5.5.Lack of fertilizer

Fertilizer improves the fertility of soil where by improving the productivity. However, both
farmers who participate in agricultural cooperatives in the study area were no able to get
fertilizer adequately. 75% of the respondents replied that they had no adequate access to fertilizer
out of which 62.5% were not able to get fertilizer adequately because of expensiveness, and 25%
of them because of its unavailability. Here, adequacy refers to the use of fertilizer according to
the scientifically recommended manner. From the survey result one can observe that most of the
respondents had adequate access to fertilizer and they were not in a position to apply
proportionate amount of fertilizer in their farmland which is recommended by professionals
Table :10. Responses on availability of fertilizer
Variables Frequency Percentage (%)

Do you get fertilizer adequately?

Yes 20 25
No 60 75
Total 80 100
The constraints of fertilizer
It is expensive 50 62.5
It is not easily available 30 37.5
Total 80 100

4.5.6. Lack of adequate training

In the study area, there is a department responsible to provide training on cooperative principles,
definition and values in order to expand the cooperative movement. It is common that when
people are organized under cooperatives they are trained by extension agents. Then the farmers

18
are left to undertake their business without contentious training to improve their capacity. As
indicated in the following table most of the farmers replied that they get training only once.

Table :11. Distribution of participant households based on their access to training

Have you ever get training on cooperatives? Frequency Percentage (%)

YES 13 31.58
NO 67 83.75
Total 80 100
If Yes, how often did you get?
Only ones 9 69.23
More than ones 4 30.77
Total 13 100

As the above table shows majority of the respondents (83.75%) got training. Out of the
respondents who got training 69.23% trained only once and the rest 30.77% got training for more
than ones. It can be seen from the table also that majority of the respondents did not get enough
training. During the focus group discussion with participants of FGDs, it was found that they
were not able to solve practical problems they faced in their business due to lack of skill and
knowledge about cooperatives.

4.5.7. Credit constraints

Cooperatives which are engaged in different activities need enough capital to conduct their day-
to- day activities. Most of the time members of cooperatives are poor individuals who aim to
reduce their problems through collective effort. As a result of this, cooperatives mobilize most of
their financial resources from financial institutions through loan. As table 11 shows 52.5% of
respondents borrowed money from different financial institutions to start and expand their
farming activities. The second group of respondents did not borrow money because they feared
risk related to repayment.

Table 12:The respondents attempt to borrow money

Did you borrow money to enhance your business? Participants
N %
YES 42 52.5

19
 NO 38 47.5
Total 80 100
N=number of respondents; %= percentage.

However, it does not mean that the cooperatives are free of any problem in having access to
credit. As the study shows that most of sampled respondents suffered from problems related to
access of credit. According to the current study, about 10.53% of the respondents said that there
was high interest rate, 28.95% replied the procedures followed by financial institutions are
complex, 36.84% claimed there is late delivery of money i.e. they did not get the money they
asked on time: and about 23.68% mentioned that lack of access to credit was one of major
constraints .

Figure 2: limitations related with access of credit. (N= 80)

4.4.8 Poor saving habit

The other source of working capital for cooperatives comes from the savings which are made by
members. Members’ saving habit highly influences the amount of working capital of
cooperatives. The survey result which was conducted on the bases of respondents saving habit
showed that, 58.75 % of the respondents had no saving habit, whereas, 41.25 % of the sampled
households had better saving habit than the rest of farmers (Table 12). From the current result, it

20
is possible to observe that majority of the members lead a subsistent life. In addition during focus
group discussion with members, they replied that, they had no extra money to save.

Table 13:The saving habit of respondents who participate in agricultural cooperatives

Did you save money? Frequency (%)

YES 33 41.25
NO 47 58.75
Total 80 100
%= percentage.

4.4.9. Weak culture of working together

There is a saying which confirms the above: “Ethiopians have the culture of eating together”.
However, this culture is not observed at commitment to work. In these days, government is
encouraging people to organize themselves under cooperatives in order to achieve a better result
through collective effort. But for people who have no habit of working together by mobilizing
their resources collectively to achieve a better result, it is difficult to exert their maximum effort
for the success of their cooperatives. Most of the time people wish to enjoy benefits at the
expense of few hard worker individuals. Most of the cooperative members do not participate in
the day-to-day affairs of cooperatives regularly and also they do not avail themselves on
meetings. This is confirmed by the Personnel of Cooperative Promotion Office who consults
agricultural cooperatives. He said that, usually only few individuals are convinced on the idea of
working together and exert their maximum effort for the success of their cooperatives.

4.4.10. Lack of commitment

The basic tool for the success of any kind of business is strong commitment of its members to
serve their business honestly (Daniel, 2006). Like other business institutions cooperatives
success is determined by its members’ loyalty in their organizations. But when we observe the
history of cooperative movement in Ethiopia there is a big shadow which was observed during
the military regime regarding to loyalty. At that time most of the members joined cooperatives
without their interesinterese simply members of cooperatives to get fertilizer and they did not

21
expect other benefits from their cooperatives, because at the end of the financial period there was
no surplus which is distributed to members.

5. SUMMARY,CONCLUSION AND RECOMENDATION

5.1 SUMMARY AND CONCLUSION

The purpose of this study was to evaluate the role of agricultural cooperatives in improving the
livelihood of the small households in Alem teferi woreda. According to the result of current
study, the major limitations of agricultural cooperatives were less education, lack of awareness
about cooperative, shortage of farm land, lack of improved seed and fertilizer, lack of adequate
training, credit constraints and poor saving habit, lack of commitment and weak culture of
working togetherThe major agricultural production systems in which the cooperatives engaged in
the woreda were identified. The majority of the members of cooperatives in the study area are
engaged in cereal and livestock production. This is mainly due to the area’s suitability for

22
production of cereal crops and livestock production, which are also the most common sources of
foods in the study area.One of the basic problems of cooperatives is shortage of land. It is
difficult for the cooperatives to be profitable by bringing more land under cultivations due to
shortage of land. Lack of improved agricultural inputs is a very serious problem that agricultural
cooperatives are suffering from. The main reason for lack of improved agricultural inputs is high
price of inputs. Lack of easy access to credit is the other serious problem that creates obstacles
on the performance of cooperatives, because cooperatives need adequate cash to conduct their
activities properly. Most of the respondents said that their respective cooperatives tried to expand
their business by taking credit, but borrowing money was not found to be easy. They mentioned
late delivery, complex procedure and high interest rate as the major difficulties to get credit.The
major evidence from the impact assessment results of this study is of a positive impact of
cooperatives on rural livelihoods. Cooperatives in the study area sell agricultural inputs
(fertilizers and improved seeds) to service users at relatively lower prices than the price at which
the private traders sell.

5.2 Recommendations

On the result of this study, the following policy implication is suggestedto be consider in the
future intervention strategies, which are aimed at the promotion cooperatives.The cooperative
management committee of the district should take the issue of the variability of input distribution
in to consideration and should give educational service in order to adopt the farmer to buy input
on cash.To improve productivity and profitability of the members the organization should have
reduce the price of DAP fertilizer and other pesticides.It is better if the government of the district
gives regular extension education to around societies to use modern farming system.To increase
the participation of members, extension of education should be given regularly to the members

23
by the management committee and government in order to aware the opportunity gained by
actively participating.To overcome the controversies 0f price increment of input and lack of
infrastructure, government of the district and NGO, of the district should take part to stabilize the
controversies by rising fund.

6. REFERENCE

Alemuwoldemariam A, (2008)-Analysis of the Role of Cooperatives in Agricultural Input and

Output Marketing in Southern Zone of Tigray, Ethiopia

Abebaw, 2013-Agricultural development and their role

Barton D: - what is cooperative? Cooperative in (prentice H, Ilinc, 1989).

Belay,kassa-1998 – structural problem of peasant agricultural in Ethiopia research report

Alamaya University.

Bredugea – JA, 2001 – Cooperative to comment associative peasant business fires in chill, PHD
theses wegenigen university, Nether Lands.

24
CSA, 2001 – Annual report legal document for cooperative.

CSA (Central Statistical Agency),2012. Agricultural Sample Survey Report on Land Utilization.
Statistical Bulletin 532, Addis Ababa, Ethiopia.

Daniel Belay, 2006. Performance of Primary Agricultural Cooperatives and Determinants of

Members’ Decision to use as Marketing Agent in Jiga Districts, Ethiopia.
Esubalew Haile, 2011. Problems and Prospects of Agricultural Cooperatives in Amhara Region:
A Case of Jiga Multipurpose Farmers’ Cooperative Union, an M.Sc. Thesis. Addis Ababa
University.Pp. 47.
Frederick Donald, (2004) - Sample Legal Document For Cooperatives W.Department of
Agricultural Cooperative Services.
FAO,2005-Annual report document for cooperative.

FCA,2004-Federal cooperative agency.

ICA Report of the ICA commission on cooperative service(2004).

ILO- Cooperative management and administration (199, FDRE).

NCR,1993-National Cooperative alliance and assessment.

NCPC- National cooperative promotion commission(Rome,2001).

Ruben N.1997-Making cooperatives work contain choice and resource management with in land
reform in handures PHD thesis, urige university Nether lands

Tesfaye, L 1995-Analysis of Cooperative associationapproach to agricultural development in

Ethiopia

Tiegist, 2008-Performance of Primary Agricultural Cooperatives.

TIEGIST, L., 2008, ‘Growth without Structures: The cooperativemovement in Ethiopia’,in P.

Develtere, I. Pollet and F. Wanyama, eds, ‘Cooperating out of Poverty: theRenaissance
of the African Cooperative Movement’, International Labor Office, World Bank Institute,
pp. 128–152.
Timer B, 1988.Growth of agricultural cooperative in agrarian country.

25
Thomas W and Fanaye T, 2012).Women’s Participation in Agricultural Cooperatives in Ethiopia
YehulashetA.Argaw, (2008); the Role of Agricultural Cooperatives in Accessing Input and
Output Markets an Overview of Experiences of SRFCF, SNNPR, Ethiopia

Walton, 2001, http/www acdivoca-org/acdivoca?Acdiwez 2.Bsf/what wedo/Ethiopian.ace?

W. Department of agricultural cooperative service (2004).

Survey questionnaires

I. Household characteristics

1. Identification _____________

Name of the respondent ___________________________________

Types of respondents 1. Male headed 2. Female headed.

2. What is your house hold size?

Male ____________ 2.Female ___________ 3. Total _______

26
3. What is your educational level?

1. Illiterate _____________2.Able to read and write____3.Grade 1-6 ____________

4. Grade 7-8_____________5.Grade 9-12_____________6.Certeficate____________

4.What is your marital status?

1.Single 2.Married 3.Divorced

II. Farm resources characteristics

1 .what is your farming activity

1. Crop production 2. Livestock production 3. Both livestock and crop production

2. How much land do you have (ha)?______________

1. 0.5-1 2. 1.1-2 3.above

3. How much you produce from crop production (quintals)?

1. 1-15 2.16-30 3. 31-45 4.above 45

4. Use of agricultural products

1. All for home consumption 2. Half for consumption and half for market

3. Majority for market and the rest for consumption

5. How many livestock do have in numbers?

Oxen___________ Cow__________

27
III. Role cooperative in living condition of farmer.

1. What is your responsibility in your cooperative?

1.Committee members 2.members

2. How much spent in building a better house (Birr)?_______

3. Do you save money? 1. Yes 2. No

4. How much birr you saving?________________________

5. How much income you get from Crop sale (Birr)?_______

6. How much miscellaneous income get (Birr)?____________

7. How much your expense (Birr)?______________________

8. How much miscellaneous expenditure (Birr)____________

9.Do you have awareness about cooperative definition, principle and values

1. Yes 2. No

10. Why don’t you participate in cooperatives activity? Because

1. Cooperative activity is the work of minority groups__________

2. I get enough income from my business activity______________

3. Lack awareness about cooperatives _______ 4. Others (specify) ____

IV. What are Agricultural Cooperatives constraints in the study area.

1. Educational Status of Respondents______________

2. Lack of Awareness about Cooperatives____________

3. Shortage of Farm Land_______________________

4. Dou you use improvedseed ? 1.Yes 2.No

5. Do you use fertilizer adequately? 1.Yes 2.No

28
 6. The constraints of fertilizer 1. It is expensive 2.It is not easily available

7. Have you ever get training on cooperatives? 1.Yes 2.No

8.If yes, 1.only ones 2.More than ones

9. Did you borrow money to enhance your business? 1. Yes 2.No

10. Have you ever faced any problems in having to credit ? 1.Yes 2.No

11. Reason for constraints of credit?

1.High interest rate 2.complex procedure 3.Late deliver

12.Poor Saving Habit_____________________________

13.Weak culture of working together

14.Lack of Commitment of Members in their Cooperatives_____________

15. Leadership Problem_________________________________________

Appendix-4- Checklist for Focused Group Discussion Participants

1. Is there change in living condition between cooperative members and non member?

2. Do you have land to conduct production activities? If yes? Do you think that the land is

enough?

3. Where did you get the money to conduct production?

4. Where did you get agricultural inputs?

5. Are their rules and regulations that guide the activities of each member?

29
6. Do you think the rules are implemented to all members without discrimination?

7. What kind of problems do you observe from your leaders?

8. What kind of problems do you face in having access to credit from financialinstitutions?

9. What kind of problems do you see from institutions that are formed to assist you?

30