WIST
and Tyczyn Telecommunications Cooperatives
in Poland
With the election
of Lech Walesa in 1989, the Solidarity-led government launched a grassroots
effort to rectify 40 years of neglect in bringing telephone services to
rural areas. At the time, rural areas of Poland had fewer than 2.4 phones
per 100. The case study by the National Telecommunications Cooperative
Association (NTCA) describes the development of two highly successful
telecommunications cooperatives. The cooperatives in southeastern Poland
were built through organizing numerous village-based telephone committees,
leveraging leadership from locally elected mayors to effect regulatory
change, garnering support from NTCA volunteers, collaborating with Nortel
Networks and working with various banks that provided initial capital.
Within three years, the cooperatives were profitable and today serve 18,000
rural residents and business. These model cooperatives were the first
independent telecommunications cooperatives in Poland and led the way
for the development of 44 independent systems.
This retrospective
study describes the development process and the difficulties faced in
dealing with TPSA, the monopoly provider. It demonstrates the importance
of working for policy reforms while, as the same time, developing model
cooperatives that tested and forced interconnection and revenue sharing
arrangements as they pioneered sector reform. The 46-page study details
how the structure and governance of the cooperatives, created with the
U.S. experience as a model, were adapted to Poland’s old style cooperative
legislation.
The study discusses
their significance to community building, business formation and job creation.
They serve over 500 businesses including large rural enterprises such
as a dairy cooperative, meat plant and bottling facility. They serve over
100 public sector organizations such as schools, policy, mayors and a
regional airport. As a direct result of the project, substantial investments
were made in each service area and an association of local governments
created to promote their region, based on cooperative organizing principles.
In financial analysis,
one of the cooperatives demonstrated an impressive ability to generate
liquid funds. The degree of financial leverage (conversely solvency) is
strikingly low, indicating a high degree of leeway for expansion. Profitability
is low which may indicated that there is no incentive to maintain high
margins and the tax regime appears to encourage sheltering of revenue.
Key lessons learned
are distilled into three overarching principles that can guide those working
to create community-based telecom systems: (1) Promote policy and a legal
framework that is hospitable to universal access, technology neutral and
allows for cooperative business models, (2) Changing telecommunications
technologies and varying business conditions means that no single model
of cooperatives works in all cases (e.g. in some cases, customer-owned
rural/small town cooperatives will be a realistic alternative; in others,
community/business oriented telecenters may be more feasible), and (3)
Provide training and visits to third country or U.S. telecommunications
cooperatives for hands-on demonstrations on how universal access policy
can enable cooperatives to flourish, and how telecommunications cooperatives
can be designed and run successfully.
To read the study,
click on the following links:
Cooperativa
Café Timor and Cooperativas Café Organico
in East Timor
The case study describes
the East Timor coffee cooperatives, which have a national federation and
16 local cooperatives, as well as an organic cooperative federation with
500 organized farmer groups. With assistance from the National Cooperative
Business Association, these cooperatives have built a network of 20,000
small-scale farm families reaching approximately 120,000 rural people.
The focus of the cooperatives is the production and processing of high
value specialty coffees for the export market, including through fair
trade and organic organizations. The cooperatives have become the new
country’s largest private sector income generating activity, employer
and exporter as well as the largest network of primary health care services.
Cooperative Café Timor sales during 2002 reached $US 2,613,037
and the average annual cash income per farmer member was $US 128, a substantial
amount where the average rural income is $US 102. In 2003 the cooperatives
employed 300-full-time employees and provided short-term work to 4,000
workers.
The study provides
details on project implementation including dealing with the civil conflicts
in 1999 and 2000 where a number of the cooperative facilities were vandalized
along with other infrastructure and assets, which resulted in the displacement
of one-third of the country. The project staff had to be evacuated due
to the violence, and cooperative structures totally rebuilt when East
Timor became independent and local leaders took over the functions of
the former Indonesian parastatal. The cooperative made a major contribution
to the rehabilitation of the country’s economy despite historically
low prices for coffee. A major challenge discussed in the study was the
establishment of a rural health network since the cooperatives were the
only organizations available to take on these responsibilities. The analysis
details the cooperatives’ organization and governance and business
activities including financial data on Cooperativa Café Timor as
basically a start-up business since all the previous records were destroyed.
Lessons learned include (1) the difficulty of collaboration in such conflict
situations, (2) need for strong cooperative management in business operations,
(3) access to capital for the cooperatives to carry out export activities,
and (4) significance of quality, quantity and reliability by the cooperative
to be successful.
To view the full
study, click here.
Tadu
Dairy Cooperative Society in Cameroon
The Tadu Dairy Cooperative
in Cameroon was designed to assist Fulani cattle raisers through organizing
them for higher quality production and value added processing. Formed
in 1992 with assistance from Land O’Lakes, the cooperative today
has about 500 members with 12,500 animals located in four distinct areas.
Fulani’s are traditional nomadic cattle herders that subsist on
deteriorating pasturelands and have ongoing conflicts with pastoral farmers.
They have not adopted modern hygiene milking practices, nor acquired strong
business and market skills.
The case study describes
the cooperatives successful artificial insemination program, but how broader
project objectives failed. The analysis details the problems from too
much control by the cooperative manager, and weaknesses in the grassroots
governance practices. It suggests that men who dominate the cooperative
focused its activities on their traditional breeding roles, rather than
emphasize quality milking and processing which women do. Financial data
about the cooperative had to be reconstructed from hand records since
no formal financial accounting existed. Over 11 years, the cooperative
had four years of negative operating margins and assets as high as $83,000
with member equity at about $17,500 in 2002.
Various recommendations
are offered to improve the cooperative as well as lessons learned, in
particular the difficulty with self-financing, weak cooperative structures,
and a lack of milk marketing and processing skills that could stimulate
local milk production. The fundamental issue is that cooperative has not
operated as a successful group-based business, and does not have a clear
business or financial plans. The result is that the cooperative does very
little commercial activities.
To read the study,
click on the following links:
Democratic
Condominium Associations in Poland
This case study examines
the development of two model condominium associations in Sopot, Poland
to address home improvement and capital renovation. The goal was to expand
the capacity of newly formed condominium associations to manage their
aging housing stock and borrow funds for renovations through the application
of cooperative principles. Two smaller condo associations were selected
with 13 and 9 residents each. Respectively, internal procedures and loans
were analyzed for roof renovation, insulation, restoration of common areas
and other improvements. As a result of the loans, average price per sq.
meter increased by about one third (e.g. $800 to $1,100).
The program involves
a public-private partnership with the local municipal government and banks
to establish lending programs through “learning by doing,”
as well as training NGOs in fee for service to assist other newly formed
apartment associations. While Poland’s unit ownership law provides
a legal framework for the creation of the condos, it did not address fifty
years of deferred maintenance, nor permit the associations to accept group
loans, thus, each owner has to qualify individually to cover capital needs
for the entire building and his/her own apartment. The condos were successful
in arranging for these loans, carried out major renovations and increased
the value of the housing stock. Members of the association were trained
in the roles and responsibilities of self-management and sound financial
practices.
Lessons learned include:
(1) the importance of public-private partnerships in dealing with affordable
quality housing in post-communist settings, (2) the selection of model
sites should be representative so that they have potential for wide replication,
(3) democratic practices successfully moved local associations from dependence
on the municipality to self-management, and (4) the limited project timeframe
made institutionalization of the results difficult. CHF International
found strong evidence that cooperative methodologies can be “incubators”
for democratic leaders and a participatory culture.
To read the study,
click on the following links:
Cooperativa
Rural de Electrificacion (CRE) in Bolivia
& Comilla I Palli Bidyut Samity in Bangladesh
This comparative
case study by the National Rural Electric Cooperative Association contrasts
the self-help development of the CRE electric cooperative in Santa Cruz,
Bolivia, with a more government-dominated Comilla cooperative that is
located outside of Dhaka, Bangladesh. As one of the largest electric cooperatives
in the world, CRE has about 100,000 members and, along with other cooperatives
in Santa Cruz, they provide telecommunication and wastewater services
to this urban community. Formed in the early 1960s, CRE had to overcome
initial government opposition to a cooperative structured utility and
was one of the first to receive funding from USAID.
In the 1970s, Comilla
was created as a model cooperative to begin implement area wide rural
electric coverage in Bangladesh. It has the heavy strings of government
through REB, the rural electric funding agency, including selection of
managers and strong oversight. A positive outcome is the requirement that
all cooperatives had a “lady advisor” on their board, not
likely through democratic elections. Unlike CRE, Comilla is part of a
25-year on-going effort to bring electricity to all rural areas. Financial
analyses of both cooperatives indicate that each is very strong in liquidity,
solvency and profitability based on US standard ratios.
The history and organization
of these different cooperatives is provided in some detail including their
operations, governance and structures. The two cooperatives have resulted
in dramatic economic development through bringing affordable and reliable
electricity to their communities. The impacts on rural people in the Camilla
service area is particularly significant in reducing poverty and generated
industrial and commercial development, and widespread improvements in
health, education and female empowerment.
Lessons learned are
drawn from both experiences including (1) the importance of local leadership,
(2) the generation of sufficient economic development to make the cooperatives
viable and (3) strong management and on-going staff training. In both
cases, cooperative members provided self-help assistance in construction,
but the high cost of capital-intensive infrastructure is a constraint
to cooperative formation and expansion. The study also discusses the role
of boards of directors and managers in cooperative success including the
avoidance of partisan politics. Financial data is provided on the cooperatives
including liquidity ratios, collection efficiency, and profitability.
The cooperatives have demonstrated consistently strong financial performance
over the years.
LaEquidad
Seguros Cooperativo (LaEquidad) in Colombia & Cooperativa Nacional
de Seguros (CoopSeguros) in the Dominican Republic
This case study of
cooperative insurance companies in Colombia and the Dominican Republic
discusses the importance of insurance as part of development and in reaching
low-income populations who face the greatest risks. Founded in 1970 with
a feasibility study funded by USAID, LaEquidad has become one of the most
successful insurance companies in Latin America, and reaches over 3 million
Colombians who are members of 3,574 cooperatives, 1,475 employee funds
and 172 associations. LaEquidad is currently expanding its services to
100 small poor communities outside of Bogotá, with customized products
and using its own agents for the first time, rather than relying on its
members for marketing.
When it started up
in 1993, CoopSeguros in the Dominican Republic had a rocky start with
some immediate losses. Several members of the Americas Association of
Cooperative/Mutual Insurance Societies (AAC/MIS) provided financial and
technical support including appointment of an outside director from a
successful Puerto Rico cooperative insurance company. CoopSeguros is owned
by 31 “active” members and reaches 22,855 cooperative members
with group life policies.
The case study describes
how AAC/MIS members provided critical start up and on-going technical
assistance, often using technical expertise from companies in the U.S.
and Canada and increasingly on a south-south basis. Lessons pointed out
are: (1) the importance of maintaining cooperative values to grow markets
among members of cooperatives and allied organizations, (2) strong insurance
knowledge by managers and boards of directors since insurance is a complicated
business, (3) focus on client needs rather than products developed by
other companies, and (4) operating independently, not as an arm of cooperatives,
with a branding strategy to differentiate products from more traditional
insurance companies that focus on higher-end markets.
- Full
Study
- La Equidad Balance
Sheets:
- Coop Seguros Balance
Sheets:
Model
Credit Unions in Southern Mindanao, Philippines
This case study discusses
how the World Council of Credit Unions changed its development methodologies
through a new “model credit union” approach. It emphasizes
savings that are as important as access to credit, creation of sound financial
intermediaries able to protect member deposits and not dependent on external
credit, and balancing the needs of net savers (safe and secure savings,
liquidly and return) and net-borrowers (access to loans, non-usurious
rates).
The analysis details
the developmental experience of 23 credit unions in Mindanao that were
able to go from technical insolvency to profitability, positive asset
growth and restructured balance sheets while greatly increasing scale
and outreach. This was achieved through intensive and targeted technical
assistance, training and application of the PEARLS monitoring system to
provide objective measures of credit union performance. The analysis indicates
that the credit unions have a membership of over 233,000 members, three
quarters of whom are women. As a result of the project, they saved US$21.5
million and had nearly 100,000 loans of US$28.1 million. Beneficiaries
were evenly divided between urban and rural and 70 to 80% of them were
self-employed. The direct project impact reached over one million Filipinos,
more than 5% of the population of Mindanao.
The case study highlights
the viability of the cooperative financial model in which credit unions
quadrupled in outreach, achieved financial discipline (e.g., writing off
loans, rigorous collection and better credit analysis) and savings relative
to assets nearly doubled. Using average savings and shares as proxy for
household wealth, the analysis indicates that the credit unions not only
reached more people, but also much poorer members. The study discusses
the democratic structures of the credit unions including leadership, member
participation and outreach, especially to low-income women. It also provides
detailed financial analysis of the credit unions.
Lessons learned for
model credit union methodology includes: (1) a commitment to self-sustainability,
voluntary savings (instead of non-withdrawable member shares or external
capital), (2) appropriate pricing of savings and lending, and (3) application
of diagnostics, business plan, participation agreement, implementation,
monitoring and evaluation. Unresolved issues include: achieving better
legal and regulatory framework usually as part of existing bank laws,
increased competitiveness and system integration to achieve scales of
economy, improved governance to avoid borrowers from dominating boards
of directors, and new tools based on best principles including ways to
modify governance structures to emphasize business and service driven
networks.
Full
Study
Balance Sheets
Income
PEARLS Financial
Ratios
Bansalan Cooperative
Society Balance Sheet
Bansalan Cooperative
Society Income
Bansalan Cooperative
Society PEARLS Financial Ratios
Market-Oriented
Agricultural Cooperatives in Ethiopia
This case study illustrates
how to convert top-down and centralized cooperatives to market-oriented
and member-owned cooperatives. Since 1997, ACDI/VOCA has been assisting
Ethiopian coops with the transition from a socialist orientation under
the repressive Derge regime to a free market, business-driven cooperative
approach. The case study compares the growth and progress of the Lumme
Farmers’ Cooperative Union and the Kolba Primary Cooperative. Through
a participatory methodology, the study involved interviews at national,
regional and local levels including with government officials and outside
experts, farmer members, board members and management groups of the union
and primary cooperatives.
Through giving ownership
of the project to the cooperatives, the Cooperative Promotion Bureau (COPB)
and ACDI/VOCA promoted sustainability. The growth and profitability of
cooperatives has removed the negative stigma of co-ops as an extension
of the government’s political machinery. Cooperatives are now seen
as essential in a free market economy and democratic society where members
choose their leaders democratically without government intervention.
Key lessons learned
include: (1) critical organizational changes were required in which professional
managers, who are not members of the cooperatives, manage the unions,
board members and managers must learn their duties, and auditors, who
earlier were considered “fault finders”, need a prominent
role in the cooperatives with regular audits; (2) the cooperatives learned
to operate as businesses in which membership is voluntary and based on
profits and incentives such as patronage dividends. Annual business plans
are now required at both the union and primary cooperative levels; (3)
the cooperatives must become creditworthy as evidenced by the Commercial
Bank of Ethiopia (CBE) which is providing inventory credit (before coops
were isolated and none of their assets acceptable as collateral); and
(4) savings and credit services need to be institutionalized through establishment
of rural SACCOs – so that local savings mobilization is built up;
and, primary cooperatives as members of SACCOs can borrow working capital
for grain purchases, which is a major breakthrough in rural finance.
Additional work remains.
There are still substantial differences between the primary cooperative
and the cooperative union in the degree of business planning and management
sophistication. Literacy levels are low and, as a result, the level of
understanding of the concepts and principles of cooperatives at the primary
coop level is also low. Training has focused on cooperative managers,
accountants, board members and cooperative promoters, now needs to expanded
to reach farmer members to a greater extent. Input supply now constitutes
the major activity, which should be diversified into agro-processing (value-added
products) and increased technology transfer. Marketing needs additional
attention since several cooperatives have cereals (teff) and pulses in
their stores, while the country is facing a famine.
Full Study
Kolba Financials
Lumme Financials
Policy and
Legal Reform of Brazilian Cooperatives
The thrust of the
study is to analyze the impact of "self-management" of cooperatives
in a move away from strict federal control traditionally exercised by
the Instituto Nacional de Colonizacao e Reforma Agraria (INCRA) within
the Ministry of Agriculture. The change came about through lobbying by
the Brazilian cooperative movement and its national apex organization
- Organizacao das Cooperativas Brasileiras (OCB), thereby achieving the
inclusion of cooperative provisions in the country's new constitution
adopted in 1988.
During military governments
prior to 1988, INCRA control was total and invasive. INCRA could intervene
in cooperative businesses, force them into liquidation, remove their management,
and held the ultimate audit power. Military officers attended the annual
meetings of cooperatives. The first civilian government under Jose Sarney
worked with Brazilian cooperatives to introduce cooperative language in
the new constitution. The study details these historical developments,
but focuses more on the development of self-management cooperative systems
that resulted, especially software and business systems introduced at
the national level to assist local cooperatives in business planning and
operations.
The study presents
analysis of the current legal and regulatory system now in place in Brazil,
and the final package of cooperative reforms that are now in draft form
and are circulating in the Congress. OCB leadership is confident that
these draft provisions will become law because of the current Lula government's
support for the cooperatives in reaching low-income Brazilians and promoting
their "social inclusion."
The major lesson
drawn is the importance of cooperative legal reform in the removal of
invasive and inefficient government controls and how other countries can
succeed in unleashing cooperatives through providing them with the proper
legal standing as independent, member-owned businesses.
Full
Study
Farakala
Cooperative and the Ugoa in Mali
(Union des GIEs de l’Office de la Haute Vallée
du Niger et Associés)
This case study describes
and assesses two of the many continuing cooperative and group-based enterprises
established in Mali through development assistance provided by the National
Cooperative Business Association.
The Farakala Agro-Pastoral
Cooperative is a small, village-based business consisting of 27 members
that focuses on the marketing of cattle and cereals. From 1999 through
2001, individual members netted approximately $US 22,000 from their cattle
fattening and cereals marketing operations, while the cooperative earned
over $US 8,000, some of which has been reinvested in the cooperative’s
business operations. The cooperative’s financial ratios show strong
profitability (47% return on equity and 22% return on assets), and good
solvency (100% collection of payments due), but a relatively weak liquidity
situation (working capital represents only 3% of total operating costs
while a minimum of 10% is recommended).
The UGOA, or the
Upper Niger River Valley Union of Economic Enterprises, is a cooperative
alliance of nine secondary level economic interest groups involving some
eighty village-based associations and organizations designed to facilitate
access to, and lower the cost of agricultural inputs for all cooperating
members. Formed in 2002, the UGOA was selected for a portion of this study
because it is a “bottom-up” tertiary structure that was created
because its members saw it as a means of addressing their specific needs.
The participation of village associations, such as Farakala, in a secondary-level
organization, such as UGOA, has enabled many of them to gain profits on
their activities, accumulate capital and open accounts with savings groups
and banks. During its first year of operation UGOA had sales of $US 217,376.
Lessons learned include
(1) the importance of literacy, numeracy and basic management skills as
the foundation for successful group-based enterprises, as well as the
importance of a source for continuing advisory and consultative services
that can provide assistance with improving and sustaining these skills,
(2) the significance of internal capital mobilization as central to building
member commitment to the cooperative business, (3) the importance of building
and maintaining relationships with a variety of governmental actors, and
(4) the importance of addressing the broader economic policy issues that
affect cooperative businesses |