GLOBAL BRIDGE COLLEGE

DEPARTMENT OF AGRICULTURAL ECONOMICS

THE ROLE OF AGRICALTURAL COMPARATIVE ON IMPROVING

THE LIVELYHOOD OF SMALL1 HOLDER FARMERS; WOLAITA
ZONE IN CAUSE OF HUMBO WOREDA.

NAME: MESFIN MENGISTU

MIHRET E(MSc)

FEB, 2023

WOLAITA SODO, ETHIOPIA

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Table Contents page
ABSTRACT..................................................................................................................................................II
CHAPTER ONE..............................................................................................................................................1
1. INTRODUCTION...................................................................................................................................1
1.1 Background of the study....................................................................................................................1
1.2 Statement of the problem...................................................................................................................2
1.3 Objectives of the study......................................................................................................................3
1.3.1 General objectives......................................................................................................................3
1.3.2 Specific objectives......................................................................................................................3
1.3.3. Research Question.....................................................................................................................3
1.4 Significance of the study...................................................................................................................3
1.5 Scope and limitation of the study.......................................................................................................3
CHAPTER TWO.........................................................................................................................................4
2. LITERATURE REVIEW........................................................................................................................4
2.1. Theoretical literature.........................................................................................................................4
2.1.1 Basic concept..............................................................................................................................4
2.1.2.Definition....................................................................................................................................4
2.1.3. Principles of cooperatives..........................................................................................................5
2.1.4. Role of cooperatives..................................................................................................................5
2.1.5 Agricultural cooperatives............................................................................................................6
2.1.6 The importance of agricultural cooperatives...............................................................................7
2.1.7 Agricultural cooperatives and their types....................................................................................7
2.1.8 Agricultural cooperatives in Ethiopia.........................................................................................8
2.1.9 Difference between cooperatives and business organization......................................................8
2.2. Empirical Studies..............................................................................................................................8
CHAPTER THREE.....................................................................................................................................9
3. METHODOLOGY..................................................................................................................................9
3.1 Description of Study Area.................................................................................................................9
3.2Sampling Techniques and Size Determination...................................................................................9
3.3 Source and Methods of data collection..............................................................................................9
3.4 Methods of data analysis...................................................................................................................9
4. Budget schedule....................................................................................................................................10
5. Time Schedule.......................................................................................................................................11
6. REFERENCE........................................................................................................................................12

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 ABSTRACT
Agricultural cooperatives are important rural organizations supporting livelihood development
and poverty reduction. In recognition of such roles of cooperatives, Ethiopia showed a renewed
interest in recent years in promoting cooperative sector development. However, there is lack of a
wider and systematic analysis to produce sufficient empirical evidence on the livelihood
development and poverty reduction impacts of cooperatives in the country. Cooperatives are
needed to consolidate the efforts of small producers to provide processing and transport
facilities on a large scale. This study was undertaken to explore the role of agricultural
cooperatives on improving the livelihood of small holder farmers in case ofHumbowereda.

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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 was P.C.Plockboy, 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 was also another pioneer in the field of
cooperatives, stressed on self-help as opposed to patronage from the rich.

The first modern cooperative, the Rochdale society, was established in England in 1844
(Chukwu, 2003). It started with twenty eight members who purchased one share of stock. The
members consisted of craftsmen such as weavers or shoemakers. The members decided 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 returned to the individual member in the form
of refunds.

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
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 ploughing, weeding,
harvesting, house construction etc.

It was after 2007 that those modern cooperatives societies came to birth (MoRD, 2002). These
cooperatives were established during the Feudal regime (2005 to 2008), Derg regime (2008 to
2010) and now after 2009. It was unfortunate that those cooperatives that were established

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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.

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
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.

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 Fanaye T, 2012). The study highly intended to identify the above factors, how it
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 cooperativearises 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.

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1.3 Objectives of the study

1.3.1 General objectives

The general objective of this study will be to evaluate the role of agricultural cooperatives on
improving the livelihood of small holder farmers in case ofWolaita Zone Humboworeda.

1.3.2 Specific objectives

a. To describe the role ofagriculturalcooperatives in improving income, food securityand

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 member 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?
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
of the country as a whole. Agricultural cooperatives are an ideal means for the improvement of
the livelihood of smallholder farmers. More than four million farm households are the members
of these cooperatives (FCC, 2005a).

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 were limited to only Humboweredaby selecting one kebele.
The study was 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 (2004) “cooperative isbusiness

organization of agricultural producer’s development, owned and control by member patrons and
designed to performneeded services to the people.”

As ICA 2006 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.”

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Another widely accepted cooperative definition is the one adopted by the USDA in 2005. “A
cooperative is a user-owned, user-controlledbusiness 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).

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.

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

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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 worlds poorest and disadvantaged face social exclusion, lack of access to
opportunities and growing economic inequality (cited by yehulashetA.Argaw, 2008)

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 cooperatives themselves, creates a safe environment for women to increase
their self confidence, bargaining power and income, and enables women to exercise political
leadership.

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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

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2.1.8 Agricultural cooperatives in Ethiopia

However, the history of formal cooperatives in Ethiopia dates back to 2006, 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.44/2001,
Proclamation No.241/2003; Proclamation No.138/2005, Proclamation No. 85/2007,
Proclamation No. 147/2009, and Amendment act No. 402/2010. The first decree member
44/2008 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).

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.

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 favour 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.

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 CHAPTER THREE
3. METHODOLOGY
3.1 Description of Study Area
Humbo Woreda is one of the woredas Wolaita Zone in the SNNP Region of Ethiopia, named
after two older districts which occupy the area this woreda currently covers. Bordered at abala
Abaya woreda at south of and at the east of Sodo zuria.

3.2Sampling Techniques and Size Determination

A simple random sampling procedure will be used to select sample households. In the first stage,
Humbo woreda 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. The above formula
required a minimum of 103 responses but because the limitations mentioned above this study
were carried out on 80 respondents.

3.3 Source and Methods of data collection

To achieve the objectives of the study, combination of suitable qualitative and quantitative data
were 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.

3.4 Methods of data 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 was summarized, interpreted and
narrated.

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4. Budget schedule
No Items Unit Amount Unit cost Total Unit
In birr Coin Cost In birr Coin
1 Pen Number 6 5 00 30 00
2 Paper pack 2 90 00 180 00
3 Binding Number 2 9 00 18 00
4 Printing page 80 2 00 160 00
5 Copy page 32 0 50 16 00
 Sub Total Cost 404 00

 Distribution of questionnaires and collection 200 50

 Transportation 100 33

 Contingency 200 00

Total cost to complete this study 904 88

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5. Time Schedule

Item/activity feb- march- apri- may- aug- sep- oct-

2023 2023 2023 2023 2023 2023 2023
Selection of title 
Approval of the title by 
adviser
Preparation of 
introductory portion
Review of related 
literature
Research methodology 
Submission of proposal 
project
Distribution of 
questionnaires
Re collection of written
responds
Data analysis and
interpretation 
Data Summarization and 
recommendation
Submission final research 

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 6. REFERENCE

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

Marketing in Southern Zone of Tigray, Ethiopia.

Alemayehu Lerenso,2001. State commerce and service cooperative in Kembata and Hadiya: an
economic geography analysis.M.Sc. Thesis, Addis Ababa University, Ethiopia. pp. 40-44.

Barton, D.G., T.C. Schroeder and A.M. Featherstone,2005. Evaluating the feasibility of local
cooperatives consolidation: a case study. Agribusiness. 9 (3): 281-294.

Black, W.E. and R.D. Knutson,2007. Attitudes and opinions of Texas agricultural cooperative members.
Report B-1483. Texas Agricultural Extension Service. USA.

Cain, J.L., U.C. Toensmeyer and S. Ramsey,2008. Cooperative and proprietary firm performance as
viewed by their customers. Journal of Agricultural Cooperation 4: 81-89.

Chukwu, S.K.,2003. Economics of the Cooperative Business Enterprise. Marburg, Germany.

Eshetu T, (2008). The Role of Dairy Cooperatives in Stimulating Innovation and Market Oriented
Smallholders Development
.
Fassil Teffera,2003. The Development of peasant service cooperatives in post revolutionary Ethiopia
(1974-1987). Institute of Ethiopian Studies. Addis Ababa University.

FCC (Federal Cooperative Commission), 2005. Annual report for the year 2004/2005. Unpublished
document, Addis Ababa, Ethiopia.

FRANCESCONI G. and HEERINK N., 2010, ‘Ethiopian agricultural cooperatives in

an era of global commodity exchange: does organizational form matter?’, Journal of
African Economies, 20(1), 1–25.

FRANCESCONI G. N. and RUBEN R., 2007, ‘Impacts of collective action on

smallholders’commercialization: evidence from dairy in Ethiopia,’ Paper prepared
forpresentation at the I Mediterranean Conference of Agro-Food Social Scientists.103rd EAAE
Seminar Adding Value to the Agro-Food Supply Chain in the FutureEuromediterranean Space,
Barcelona, Spain, April 23–25.

Frederick Donald, (2004) - Sample Legal Document for Cooperatives W.Department of Agricultural
Cooperative Services.
Geoffrey Marczyk, David DeMatteo and David Festinger. (2005). Essentials of ResearchDesign and
Methodology. Canada, John Wiley & Sons, Inc.

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Joshua Walton, (2001) - Agricultural Cooperatives in Ethiopia (ACE), Washington DC 2001(USA)
Kebebew Daka,2004. Cooperative movement in Ethiopia.M.Sc. Thesis, Addis Ababa University.

Kraenzle, C. A.,2004. Farmer cooperative: members and use. Agricultural Cooperative Society Research
Report 77. USDA, Washington, D.C., U.S.A.

MORD (Ministry of Rural Development), 2002. Cooperative review, Addis Ababa, Ethiopia, 5p.

MYERS A., 2004, ‘Old Concepts Revisited: Are Cooperatives the Way Forward forSmallholder
Farmers to Engage in International Trade?’ London School of Economics& Political Science:
London.

POLLET I., 2009, ‘Cooperatives in Africa: the age of reconstruction – synthesis of asurvey in nine
African countries’, CoopAFRICA Working Paper No.7, ILO: Geneva.

TechaneAdugna, 2002. Determinants of fertilizer adoption in Ethiopia: the case of major cereal
producing areas, M.Sc. Thesis, Agricultural Economics, Alemaya University, Ethiopia.

Tesfaye Lemma,2007. An analysis of cooperativisation approach to agricultural development in

Ethiopia: with special attention to producers’ cooperatives. M.Sc. Thesis, University of Reading,
England.

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, WorldBank Institute, pp. 128–152.

YehulashetA.Argaw, (2008). The Role of Agricultural Cooperatives in Accessing Input and Output
Markets an Overview of Experiences of SRFCF, SNNPR, Ethiopia.

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