Cooperatives 101

What is a cooperative?
Simply, a cooperative (or co-op) is a democratically organized type of business owned by and operated for the benefit of those who use its services. Watch a video about the global impact of cooperatives: http://www.youtube.com/watch?feature=player_embedded&v=ecSMtMurwsI

There are records of cooperatives going back to 1770. Cooperatives were workers’ method of responding to the new pressures of industrialization. In Britain, a group of shop workers came together in 1844 to create a business entity based on the principles of cooperative organization. Watch a video about the Rochdale Pioneers, who organized the first cooperative in England. http://www.youtube.com/watch?v=KYPe5xJAm5w&feature=player_embedded

In this section you’ll learn about the:
Principles that define cooperatives
Types of co-ops
How OCDC’s members seek solutions through cooperatives
Why cooperative development works
Cooperative development in action

Cooperative principles
The International Cooperative Alliance has established seven principles that define co-ops as part of its Statement on the Co-operative Identity.

  • Voluntary and Open Membership. Cooperatives 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.
  • Democratic Member Control. Cooperatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary cooperatives, members have equal voting rights (one member, one vote.) Cooperatives at other levels also are organized in a democratic manner.
  • 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.
  • 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.
  • 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. They inform the public—particularly young people and opinion leaders—about the nature and benefits of co-operation.
  • Cooperation among Cooperatives. Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.
  • Concern for Community. Cooperatives work for the sustainable development of their communities through policies approved by their members.

Types of cooperatives
The two main types of cooperatives are consumer and producer. Consumer co-ops may be formed by individuals or businesses. Producer co-ops include both those formed by businesses (often called marketing co-ops) and individuals (often called worker co-ops). Some cooperatives are hybrids, combining elements of more than one type of co-op.

Familiar brands associated with producer co-ops are Land O’Lakes, SunKist, Ocean Spray, Welch’s and Riceland. Individual co-ops include telephone and rural electric cooperatives, credit unions, food and health care co-ops and retailer-owned cooperatives such as ACE Hardware and Carpet One. REI, the outdoor gear retailer, is the largest consumer cooperative in the U.S.

coop logos

Seeking solutions through cooperatives
OCDC believes the values of cooperative development can play a key role in laying the foundation for economic growth, food security and democracy in developing nations. Its members take a flexible, adaptable approach that focuses on the needs of their clients. Through cooperatives, OCDC members promote:

  • Democratic self-governance
  • Local control and ownership of assets
  • Transparent processes
  • Private sector-based, business approaches
  • Linkages to U.S. and overseas co-ops
  • Individuals' ability to drive and shape their own advancement

Our members apply sustainable, cooperative-driven approaches in a wide range of sectors including:

  • Agriculture
  • Community development & infrastructure
  • Disaster & reconstruction
  • Finance
  • Insurance
  • Local economic development
  • Natural resources
  • Public policy & advocacy
  • Rural electrification
  • Rural telecommunications & information technology
  • Small & medium enterprises (SMEs) & micro-businesses
  • Shelter & community building

Why cooperative development works
Cooperative development is a private-sector, sustainable solution combining humanitarian concern with a business discipline. It brings people together through democratically governed businesses to meet their mutual needs. Cooperative development also:

  • Creates community-based private enterprises, builds open markets, provides jobs, income and brings minorities, women and the poor into the mainstream economy.
  • Promotes grassroots democracy.
  • Alleviates poverty and enables people to realize lasting economic independence and prosperity.
  • Helps achieve social goals, including gender equality.

Cooperative development in action

Southern Sudan: NRECA International helps electric capacity
After a formal peace agreement ended a twenty year civil war in 2005, NRECA International initiated a new electrification project in the town of Yei through funding from USAID. The project installed street lighting, developed an integrated mini-grid and distribution system that currently provides reliable electric power to homes and businesses in the town.

South Sudan pole raisingIn 2008, NRECA International began electrification of two market towns — Kapoeta and Maridi — that are integral to the development of their regions in Southern Sudan. Each town will follow the Yei template and will include power plants lines serving about 18,000 people. In addition to installation, NRECA International provides management and technical training for contractors, utility workers and boards of directors. Learn more about this project… (http://www.nrecainternational.coop/Projects/Sudan/Pages/default.aspx)

Uganda: Health cooperative strives to control malaria
Following strategies developed by the Ugandan Ministry of Health’s National Malaria Control Program HealthPartners Uganda Health Cooperative/Malaria Communities Program (UHC/MCP) is reaching more than 30,000 men, women children — including the poorest of the poor — to help control this chronic and debilitating disease.

Ugandan nurse setting up malaria controlUnited Health Cooperative helps develop networks linking district health teams, health workers and village health team volunteers. The objectives of the program are to build sustainable, local  capacity to reduce malaria, including increasing the proportion of pregnant women and children under five sleeping under insecticide-treated bed nets, pregnant women receiving two or more doses of an anti-malarial drug and children under five getting treatment for suspected malaria within 24 hours of the onset of symptoms.

Ethiopia: Fighting food insecurity with a feed mill
ethiopia dairy coopEthiopia has long fought the twin challenges of hunger and food insecurity. Development of the country’s livestock sector has been hampered by a lack of quality manufactured animal feed. In 2010, ACDI/VOCA partnered with the Selale Dairy Producers Cooperative Union, which is made up of 27 cooperative associations with members from 2,000 households, to build a feed-processing plant, as well as a dairy-processing plant. Together, the plants will help improve food security for poorer households and drive local economic growth.

Tanzania: Women form dairy cooperative to improve incomes
In Tanzania, women earn money by tending dairy cows and selling the milk. In 1997, 98 women, half of whom were widows, formed the Mrukeni Women’s Cooperative. In 2001, the cooperative received dairy and cooperative management training from Land O’Lakes to improve and expand the organization. Mrukeni purchased a 1,400-liter milk cooking tank, allowing its members to milk their cows twice a day, which boosted the cooperative’s volume from 250 to more than 750 liters a day and greatly expand its members’ profits. This increased income not only improved members’ ability to feed their families, but also send their children to school.

Ethiopia: Cooperatives have impact on food security
Food security in Ethiopia depends largely on smallholder farmer agriculture. Ethiopia’s decision to revitalize cooperatives has established a framework for success for smallholders. One aspect of revitalization was the consolidation of primary cooperatives into unions, which increase the leverage and impact of their locally owned member organizations. ACDI/VOCA launched the Cooperative Union Project.

One of the first apex organizations formed — Lumme Farmers’ Cooperative Union — initiated a competitive bidding process. Through this process, the Union bought inputs directly from importers, saving cooperative members money that could be used to enhance their production in other ways.

There are now 37,647 primary cooperatives in the country; 245 cooperative unions; and total membership in cooperatives is 5.9 million. Cooperatives, in a number of sectors including agricultural production, coffee and finance, directly benefit 39 percent of the farmers in Ethiopia.

Zambia: Countering malnutrition through education, innovation
Working with members of the Masopo Dairy Cooperative, Land O’Lakes is helping counter malnutrition by parlaying the same techniques they use to care for their cattle to take care of themselves and their families. This endeavor is part of C-FAARM, a five-year initiative funded by USAID to diversify and increase agricultural livelihoods for vulnerable households.

zambia co-opDuring dairy training and farmer field days, project staff link lessons on proper hygiene practices for milk safety with the importance of good hygiene at home, calf-rearing with healthy ways to care for children and blending nutritious animal feed with using milk to prepare nutritious family meals. Land O’Lakes also addressed “the hunger months” when harvested crops run out, by introducing an inexpensive solar drying method that prevents food contamination. Smallholder farmers now can harvest vegetables when they’re plentiful and incorporate them into their diets year-round.

“We have rejuvenated ourselves due to the nutrition training,” says Charles Mungamero, a Masopo member. “We used to look and feel very old; now, you can see the physical difference good nutrition makes.”

Timor-Leste: Coffee cooperative gives economy, health care a lift
Following independence from Indonesia in 1999, coffee served as the take-off point for Timor-Leste’s economic rehabilitation. With support from USAID and the National Cooperative Business Association’s international arm CLUSA, Cooperativa Café Timor (CCT) was created and began processing and marketing certified organic arabica coffee. By exporting coffee to Starbucks, CCT opened new, more profitable markets, attracting large numbers of farmers who began to meet the project’s strict production and quality requirements.

CCT is now the largest single-source producer of organice coffee in the world and is Timor-Leste’s largest non-petroleum exporter. CCT exports reached $12 million in 2008. The largest employer in the country, CCT has 22,000 farmer families as members, 300 staff and up to 3,500 seasonal workers.

With profits from the coffee business, CCT members opened Clinic Café Timor health clinics and now serve over one-sixth of Timor-Leste’s population.

Mexico: Credit union serves banana growers
Five miles inland from the Pacific Ocean in Mexico's Michoacán state, banana plants stand thick and heavy with bunches of fruit ready to cut for processing and transport to market. World Council of Credit Unions, working with Caja Providencia, a local credit union, is developing a value chain financing program to assure that the growers harvesting the fruit get a fair market price for their crop to better support themselves and the local economy.

Mexico-banana growersValue chain financing provides financial infusion to farmers at key points within the planting, growing and harvesting cycle to make sure they have sufficient funds to operate their businesses. Acopiadors, or collection and processing agents, serve link the grower, buyer and credit union, through which funds are provided, to support the farming cycle. Farmers who are Caja Providencia members can become part of the value chain process, as well as gain access to additional credit union services.

Members participating in the program are expected to increase production, improve their livelihoods and offer better financial support to their communities. Currently, a cuadrilla, or team, of 15 workers spends entire days loading up to 1,300 boxes totaling 23 tons of bananas into semi-trailer trucks for transport to market. Thanks to the efforts of Caja Providencia and World Council, those workers one day soon will be earning a fair price for the efforts, which will help them better care for their families and support their credit union.

Mongolia: Encouraging cooperation to bolster incomes
CHF’s Enabling Market Integration through Rural Group Empowerment (EMIRGE) program develops, tests and disseminates cooperative approaches to economic development.

Mongolian farmer groupIn Mongolia, EMIRGE focuses efforts on farmers who have had no prior experience working together. Through value-chain analysis and an animal husbandry assessment, EMIRGE helped farmers identify opportunities to raise productivity and income. Training and exposure to improved practices have led to innovation and visible results, as well as created solidarity among farmers through the learning process. These new relationships have led to formation of producers’ groups which collaborate on joint production of fodder crops and silage, shared labor in shelter construction and lower-cost access to veterinary services.

Click on our areas of focus to see how OCDC members are building a better world through cooperatives:
Income Development
Food Security
Democracy Building