Revitalise farmers’ cooperatives to grow incomes

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Revitalise farmers’ cooperatives to grow incomes

Friday, 14 February 2020 | Moin Qazi

Associations can grow as viable, member-controlled, self-sustaining businesses if they constantly work on reshaping the interaction of their members with themselves

Small farmers are the key to ending poverty and hunger and promoting sustainable development. But they are among the most underserved population and are highly susceptible to food and nutrition insecurity. They often lack basic tools and new technologies and don’t have networks to access them, the financial services to afford them, or the markets to profit from investments in them. They are plagued by low productivity and lack access to quality farm inputs such as good seeds and fertilisers, training and capital and technology and knowledge that can make their enterprises commercially viable.

Fragmentation of land holdings has left growers with shrinking farms that are too small to be remunerative. They have poor access to credit and irrigation, which makes it difficult for them to make their scanty land yield a decent income. A tenth of our farmers are landless. They are forced to contend with a cycle of low investment, poor productivity, low value- addition, weak market orientation and depressed margins.

The last few decades have witnessed shrinking of employment in rural India. Rural-to-urban migration is an inevitable socio-economic reality, especially for those unable to generate a meaningful livelihood from rural resources.  Rural areas typically face several developmental impediments: Small land holdings, low savings and capital formation, limited market access, low levels of human development and a young population alienated from farming and other rural occupations. They need solutions tailored to their needs and problems.   

One of the ways to mitigate rural distress and promote a farm revolution is to design a livelihood and development strategy that entails collectivising and strengthening primary producers among small farmers through Food Producer Organisations (FPOs) and integrating them into an inclusive value chain to provide end-to-end support. This mutual aid organisation, whose members pool their expertise and part of their savings, helps the members achieve more together than they can alone and becomes self-propagating in the course of time. It confers greater bargaining power, better market and price discovery, access to credit and insurance and sharing of assets and costs. The FPOs are owned and governed by shareholder farmers and administered by professional managers. They adopt all the good principles of cooperatives and the efficient business practices of companies and seek to address the inadequacies of the cooperative structure. The best way for these organisations to leverage their collective strength is through a full value chain from the farm to the fork. The underlying principle that the value chain follows is similar to that of the full stack approach. This approach makes the sponsor, catalyst or promoter responsible for every part of the experience. In the context of agriculture, the full stack approach includes helping farmers identify what to grow and how to grow it, what technology to use and when and where to sell at what price. The farm-to-market initiative encourages smallholder farmers to use technology to collectively transport and sell their produce. Collectivising significantly reduces transportation costs, saves farmers from having to travel to the market and consolidates their selling power. Moreover, the whole value chain needs to have a business approach in order to make it viable.

Agricultural business companies, private sector financial institutions, primary producer organisations and other stakeholders need to collaborate to structure such functional full value chains to make greater benefits accrue to individual members. It is a sustainable, market-based approach to systematically and incrementally address the barriers that prevent individuals from accessing necessary services. Small producers need to reach the scale necessary for sourcing inputs and services. Apart from the collective strength that group synergy generates, the support structures help in building the capacities of producers to deal with input suppliers, buyers, bankers, technical service providers, development promoting agencies and the Government (for their entitlements), among others. The sponsor of the value chain provides a gateway for primary producers to access resources, information and markets. One of its important roles is linking them to reliable and affordable sources of financing to meet their working capital, infrastructure, development and other needs. The collective works to reorient the development and funding ecosystem to make it more responsive and relevant to the needs of small producers. It also works towards strengthening an enabling environment by influencing and orienting policies in this direction.

The extension services include lengthening farmer capacity through agricultural best practices for enhanced productivity, agronomic advice, fostering connections to local farm financial services, training on methods of application of bio-fertilisers and pesticides, modern harvesting techniques, appropriate integrated pest management, integrated nutrient management and access to optimal environmental practices and regionally-appropriate crops for planting. The key benefit is the marketing support that links producers to mainstream markets through aggregation of subsistence-level produce into economic lots that can significantly raise the share that peasants get of the money people pay for their food. The success of a collective hinges on many actors: The technical support it receives, its institutional base, composition, land access and cropping patterns of members and adaptation of the model to the local context. The elite farmers are significantly more likely to participate than the less privileged. Moreover, the better-off often become administrative members and use services substantially more to them than to rank-and-file members. The collectives, therefore, positively affect household welfare for elite members but impact is lower for rank-and-file members. It is, thus, necessary to strengthen democratic processes in these institutions.

Evelyn Huang, a celebrated design thinking trainer in American financial sector, who believed in “reimagining the way 60 million people interact with their money”, implicitly suggested that the design of cooperative enterprises should be about constantly reimagining how thousands of potential members interact with their cooperative so that the process  imparts strength and vitality to the latter. It found that the failure of cooperatives is often rooted in the inability of their promoters to understand this interaction.

While FPOs remain the most trusted allies for farmers, they need to be revitalised by infusing modern design features without diluting their traditional ethos and philosophy. In the light of our learning, we need to revisit the model and harness the basics; tweak designs of traditional structures instead of reinventing the wheel. Experience tells us that continuous training, capacity-building and member-awareness programmes can reinforce the design features and help solidify the relationship between members, field staff, professional managers, financial institutions and directors and build a strong bond that can equip the collectives with the will to fight adversities and exploit opportunities.

FPCs can grow as viable, member-controlled, self-sustaining farmer businesses if they constantly work on reshaping the interaction of their members with themselves. A self-regulatory body designed to protect the interest of FPOs and farmer members can serve a useful purpose. We don’t have to throw the baby out with the bathwater.

(The writer is a well-known development expert)

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