Education and training take on greater importance the present period of government retrenchment and sea-changes for cooperatives. In order for cooperatives to successfully fill the vacuum left by government withdrawal while retaining their special character, democracy must be introduced into their operations. Education and training are essential tools of empowerment of the members through knowledge.
Education is required to transform mentalities at all levels and for all those who have been concerned with cooperative development and management throughout the “interventionist” period:
Ministers, civil servants and appointed managers must be “de-educated” and re-learn that cooperatives are private and voluntary in nature and can make a great contribution to national development, provided they are given freedom to operate efficiently.
Cooperative managers, finding themselves in a completely new context, must be trained to acquire appropriate skills enabling them to manage rather than simply execute orders handed down from above and to take initiatives aimed at strengthening the cooperative. Training should cover business skills, accounting, and raising more investment capital from internal and member sources and rather than counting on external (usually government) sources, and looking to the members and the Board for guidance. Managers will also have to learn that they are working for the member-owners of the cooperative and not directing docile peasants. All managers will eventually have to be reconfirmed by the membership.
Board members, especially if used to trumped-up elections, will have to learn democracy and respect for the membership. They will also need to learn how to deal with the managers.
Members used to education and training aimed at indoctrinating them must now be taught cooperative principles, theory and practice, and business skills, providing them with the knowledge which will allow them to participate effectively in running their society's affairs. Members accustomed to playing a passive rôle in cooperative affairs, and prospective members, must understand that the cooperative is theirs and that they have the right to decide how it operates, whether it should diversify and how to do so, how the surplus should be distributed and much more.
Training will be all the more effective if it places more stress on improving business efficiency and member services and if trainees have a say in determining the content of programmes, and in assessing the trainers. This would make trainers more accountable to trainees and more sensitive to their self-defined education needs. A system of bonuses could possibly be instituted to reward satisfactory performance.
Traditional non-formal and more participatory methods of education may be a more effective means of getting the message across than formal methods which illiterate members find difficult to follow and absorb. The contents of the courses must be made more appealing and relevant.
Unfortunately, the necessary corps of trainers and educators is simply not currently available in adequate numbers in the South. Such training as is dispensed is increasingly out of touch with reality. Moreover, “there is often excessive emphasis on legislation rather than on the many other aspects of cooperation which would better prepare members for democratic and participatory management”11. While progress is still slow, important strides in improving training and management through MATCOM and AMSAC. ILO's Materials and Techniques for Cooperative Managerial Training is now used in 60 countries and has been adapted for application to most types of cooperative economic activity. For its part, FAO has developed an Appropriate Management System for Small Farmer Cooperatives (AMSAC). In the United Kingdom, the cooperative movement has recently an Institute of Directors to boost the capacity of directors in cooperative management.
Movement-to-movement collaboration has been expanding and is proving an effective way of making developing country cooperatives more efficient. Some developed country movements, especially in the Nordic countries, have established special assistance units. One example is the Swedish Cooperative Centre. France's National Confederation of Agricultural Cooperatives runs programmes with West African cooperatives. Adapting training methods and the techniques transferred to the capacities of recipient cooperatives, and financing such collaboration have proved major problems in implementing and expanding movement-to-movement collaboration. Donors could and have provided funding for such collaboration but this goes against the very objective of making the movement autonomous.
Such collaboration has many advantages. It strengthens the independence of the cooperative movement, facilitates transfer of business management knowledge, can contribute to changing attitudes of cooperative leaders in the South by exposing them to member-owned and controlled businesses, is usually a more efficient means of technology transfer, involves the recipients in identification, planning and implementation, and can lead to steady commercial relations between the collaboration parties.
All this being said, and despite recognition of the urgent need to improve cooperative management skills at all levels, the question can still be asked: is improving member education and training really necessary? What if members do not understand the cooperative principles, what is going on, why they receive a dividend?.
“If it is free, it is valueless”. This sums up the situation of many cooperatives with compulsory membership where the purchase of a share was either dispensed with, or in others where member share contributions are minimal. Past neglect of member equity in Poland led to a situation where in 1987, it amounted to just 0.73 per cent of all cooperative assets, while in savings and loan cooperatives it was just 0.36 per cent of assets12. John Rouse has suggested that inadequate member stake in capital funds is “one of the main causes of failure of cooperatives” and is a particular weakness of agricultural service cooperatives. He adds that cooperatives which place greater reliance on internal and member sources for financing their activities are able to act more independently in the market and to cope with market risk.13 Indeed, in the light of increasing restriction on finance, FAO has recommended that “credit policy concentrate on savings mobilisation, with minimal reliance on external sources and… a savings/deposit led approach as opposed to the past supply-led strategy”. This is born out by the experience of the unfortunately small number of success stories in third world cooperatives - savings clubs in Zimbabwe, Samakya multipurpose societies in India for instance - whose common thread appears to be their emphasis on financing growth with member capital14.
A recent FAO-sponsored COPAC workshop or cooperative capital formation has shown that the relationship is less simple. Basing discussions essentially on three case studies, participants at the Technical Meeting on Capital Formation in Agricultural Cooperatives in Developing Countries, at Rome in November 1995, concluded that patronage, quality of service, and the importance of the cooperative for the members' own business were more important factors in developing member commitment than the amount of member capital invested in the society. The environment in which a cooperative evolves (greater or lesser freedom to operate in a market context, for instance) has a considerable influence on the role of capital, as does the structure of a society's capital base. The meeting felt, however, that the greater the exposure to market forces, the more importance member capital will take on.
Nevertheless, where members do have a financial stake, they are much less likely to be indifferent to how the society is run and will be ready with questions at meetings, keeping the Board on their toes and the management accountable, while making it more difficult for vested interests and large farmers to dominate. In other words, member equity involvement is, along with member training and education, an essential ingredient in cooperative democracy and participation.
The unrivalled sucess of credit unions the world over provides a telling illustration of this. Credit unions, or savings and loan societies, usually have a single main purpose: collecting member savings and providing members with loans using members' own money (which can also be a weakness if associated services such as management advice or marketing, are not offered). The French Crédit Agricole, a cooperative bank, began in the early 20th Century by making loans to poor farmers in outlying regions of the country where no-one else was willing to operate. In 1994, the Credit Agricole stood 85th in the Fortune 500 listings, along with other cooperative banks such as the Netherland's Rabobank (341st) and Germany's Genossenschaftsbank (376th).
When cooperative operations become more complex, raising capital to finance them can be problematic. The members can contribute to some degree, but in many areas of developing countries small farmers have precious little spare capital, and in the developed countries, many cooperatives' operations are outgrowing their members' capacity to finance them. It has been estimated that members of European farmer cooperatives are fast approaching the time when they will simply no longer be able to raise the necessary capital to retain full control of their businesses15. In Ireland, dairy cooperatives came up against this problem quite soon after their establishment and from the 1970s, found that the best road to expand their business was to establish private limited companies in which they were major shareholders in order to tap capital markets.
In the developing world, it is generally considered that despite the outflow of capital brought about in particular by unfavourable agricultural pricing policies, there are still considerable rural savings to be tapped for local development. For example, in Benin, the women's mutual savings and loan society of Aboisso and Bonoua, with its 420 members (traders, farmers and craftswomen), has amassed a revolving fund of 86 million CFA francs ($17 million) and given out 700 loans worth 600 million CFA francs ($120 million) since it began operations in 198916. The Grameen Bank in Bangladesh, which has been promoting a unique small group approach to savings mobilization amongst the rural poor, has achieved even more impressive results, providing strong evidence of the potential for rural savings mobilization, even among the poorest of the poor.17 Starting in 1976 by giving out $30 to 42 people, the Bank's capital has expanded not only through donor contributions but also through rural savings. In 1994, it disbursed $385 million in small loans while projected disbursements in 1995 exceeds $500 million. It is interesting to note that the Grameen Bank began giving credit in equal proportion to men and women; today, 94 per cent of its clients are women.
Some people believe the capital outflow from rural areas is explained by a lack of viable investment opportunities. But cooperatives can create those opportunities (in agricultural product processing and marketing, to mention but two examples). These opportunities lie not just in agriculture, but also in other complementary fields. The case of the US rural electric cooperatives should be mentioned here: by electrifying the countryside, they indirectly contributed to the establishment of many rural industries, thus creating rural employment at a time when agricultural labour needs were beginning to fall. Indeed, their impact has been such that rural electric cooperatives have now been established in many countries, usually with international financial and technical support.
| Software to Improve Credit Union Management |
| Through its management information systems, FAO is assisting cooperatives to upgrade their management with the aid of computers. |
| The MicroBanker System, for example, constitutes a powerful management aid for credit unions and savings and loan institutions. It is a low-cost software system designed to run on basic PC equipment. Its flexibility allows it to cater for single teller installations as well as multiple teller ones up to ten windows. Data are entered at the time of the transaction and the software can provide internal checks and management reports. |
| Available in English, French and Spanish, the software has been introduced widely in Asia and is now entering the African and Latin American cooperative markets. Initial test results show that the new system not only reduces financial management and bookkeeping costs but also leads to improved member financial services and higher member participation. Currently, the software is being adapted for a maximum set of conditions, making it unnecessary to tailor it to each specific institution. |
| An adapted version for use by credit unions is currently being developed in collaboration between FAO and the World Council of Credit Unions. |
Many productive rural investments require less capital than urban ones and there is, moreover, much scope for improving the use of available money. In any case, “investment” decisions by poor people are not always based on economic opportunity costs, but also on social and other factors often difficult for Western-educated development economists to appreciate18.
When sufficient capital cannot be mobilised from among the membership or from economic activities, particularly marketing, societies are faced with a serious dilemma. Either they forego the expansion or diversification plan, or they look outside and run the risk of conceding some decision-making powers to outsiders.
A discussion of member capital cannot end without mention of the rôle of cooperatives in assisting the very poor. Everyone has something to contribute to human endeavour, though not always capital. But a cooperative's first priority is to be economically viable. Though cooperatives have a social function for their membership, their rôle is not to run social programmes as such and they should not be expected to do so, either using their own funds, or on behalf of the government, unless negotiated, funded, and accepted by the membership.
15 Preben Scheel in Structural Adjustments in Cooperative Movements… op cit. page 87.
16 Problématique et Expérience… op cit.
