OCDC Members' Case Studies:
Currently, OCDC members are creating 11 case studies of cooperatives in different regions throughout the world. OCDC will be compiling these case studies together to give a brief summary and synposis of each study. These case studies will be featured and sent out on the listserver. A brief summary of the case studies can be found by clicking on the links below. Click here for the executive summary and framework for the case studies.
WIST and Tyczyn Telecommunications Cooperatives in Poland
Cooperativa Café Timor and Cooperativas Café Organico in East Timor
Tadu Dairy Cooperative Society in Cameroon
Democratic Condominium Associations in Poland
Cooperativa Rural de Electrificacion (CRE) in Bolivia & Comilla I Palli Bidyut Samity in Bangladesh
Model Credit Unions in Southern Mindanao, Philippines
Market-Oriented Agricultural Cooperatives in Ethiopia
Policy and Legal Reform of Brazilian Cooperatives
Framework for Cooperative Development and Executive Summary
Framework for Cooperative Development Modified by Land O'Lakes
If you would like the full version of any of the case studies not featured, please email coopdevelopmentcenter@nreca.coop.
Cooperative Assessment Tool for Land O’Lakes-Assisted Coops
Land O’Lakes, Inc. modified the OCDC Cooperative Development Framework, changed some of the measures to fit dairy cooperatives, and carried out six cooperative assessments in Kenya, Tanzania, Uganda and Guatemala including lessons learned. Land O’Lakes also proposes to add a financial assessment tool that examines the lending and business environment in developing countries. To view the analysis and modified framework, click here.
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:
- Full Study
- Chopina Framework
- Czyzewskiego Framework
- Activities & Results Table
- Loan Portfolio Analysis
- Financials 1
- Financials 2
- Financials 3
- Financials 4
- Adapted Ratios
- Condo Budgets 2002 for Sopot
- Bibliography
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
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.
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