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Organizing Small Producers and Entrepreneurs for Business

Norges Vels international partnerships mainly focus on promoting entrepreneurship and strengthening the capacity of various producer organizations. A key role of producer organizations is linking small scale entrepreneurial producers and agri-business partners. Producer organizations provide economic and other services to members and organize transactions with buyers. In this context, entrepreneurial producers are extremely important. 

We define entrepreneurial producers as rural households and producer organizations engaged in farming as a business. They typically hold cultivated land for subsistence agriculture and they produce a surplus for the market. They exhibit high production potential, but their assets are normally very limited. These farmers have growth potential, but constraints in capacity, legal status, marketing, infrastructure and credit hinder their growth and full participation in the market. Our experience and proven results demonstrates that a robust organization could effectively alter this situation for the benefit of the producers and their communities. Collective action by organized farmers reduces transaction costs in markets, mitigates risks and builds up market power.

In 2012, the UN International Year of Cooperatives boosted the attention for producer organizations internationally. A producer organization is a special kind of social enterprise. They not only provide members with economic opportunities. In addition, many are offering their members a variety of services such as access to natural resources, information, communication, input and output markets as well as technologies and training. They also facilitate their participation in decision making-processes. Through practices like group purchasing and marketing, farmers gain market power and get better prices on agricultural inputs and other necessities. 

Other arrangements, such as input companies (for collectively purchasing/production of inputs) and warehouse receipt systems (for collective access to credit), have increased producers’ access to markets and productive assets, while reducing high transaction costs. Cooperatives and producer organizations are central in building small producers’ skills, providing them with appropriate information and knowledge, helping them to innovate and adapt to changing markets. Some enable farmers to build their capacity to analyze their production systems, identify their problems, test possible solutions and eventually adopt the practices and technologies best suited to their farming systems. 

Another powerful contribution of cooperatives and producer organizations is their ability to help small producers voice their concerns and interests – and ultimately increase their negotiating power and influence policy-making processes. “Multi-stakeholder platforms” and consultative fora are examples of where small producers discuss the design and implementation of public policies. Hence, a cooperative is a democratically controlled structure where generating profit is only part of the story. Ultimately, it’s a social enterprise that promotes democracy and contributes effectively to strengthen the civil society. 

Norges Vel is well aware of, and very cautious about, the negative history of cooperatives in many developing countries, particularly in Africa. Cooperatives were introduced in Africa as a foreign model specifically designed for colonial purposes. During that period, cooperatives in Africa were effectively used by the colonial powers as a strategic tool to group rural producers into clusters, so that essential export commodities such as coffee, cocoa and cotton, could be collected more cost-effectively. After independence, the governments of the now sovereign states accorded an essential role to cooperatives, in particular for the development of rural areas. Cooperatives enjoyed preferential treatment and were granted supply and marketing monopolies, which protected them from competition. They paid for these privileges with the total loss of autonomy, democratic control and business efficiency. 

Cooperatives degenerated into tools of government, or mass organizations of the ruling party. The advent of the liberalization of the economy in the early 1990s provided a new momentum and a new opportunity for producers organizations to become the genuine owners of their cooperative businesses. A third generation of African cooperatives appeared: authentic self-help organizations began emerging from the grassroots, being rooted in local communities, giving voice to local producers, and building strength and social capital in local economies and communities. 

Today, these organizations are the main strategic partners and target groups in Norges Vels program portfolio. It is important to underscore that producer organizations range from small scale farmer groups and associations to cooperatives and apex organizations. 

 

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Organizing Small Producers and Entrepreneurs for Business