ISET

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A blog about economics in the South Caucasus.

Farmer Groups: Why We Love Them, Why We Do Them and Why They Fail

As Georgia embarks on an ambitious program to develop farmer organizations, it is worth considering both the positive and negative lessons from the experience of similar initiatives, both in Georgia and elsewhere in the developing/transition context. The piece by Tim Stewart, originally published on www.springfieldcentre.com, identifies some of the main reasons for the failure of start-up farmer organizations. The challenge for Georgia is to learn from these mistakes in planning and implementation, and ensure improved coordination among the many cooks involved (the newly created Agency for the Development of Agricultural Cooperatives, the Ministry of Agriculture, international donors, NGOs, and farmer associations).

In the future, we will publish in this column a summary of the policy suggestions that have emerged from a debate on the future of farmer organizations in Georgia, which was hosted by ISET on March 27th, 2014.

Someone once told me that I couldn’t be a real agriculturalist until I had at least one failed chicken project under my belt, illustrating both their ubiquity and propensity to flop. The same can be said of projects that seek to establish farmer groups (farmer organisations, cooperatives etc.) and for much the same reasons – although I believe we should learn from failure, not repeat patterns that lead to it.

Conventional programmes working in agricultural markets often include a component of forming and supporting farmer groups in their various guises. Their justification for this is the perceived benefits to small farmers that can accrue from economies of scale of production (assets, labour and inputs), marketing (reduced transaction costs and bigger volumes) and voice (representation to government etc.). My concern is that farmer group formation and support is frequently a waste of effort and money because they overwhelmingly fail, and there is little honest recognition of, let alone learning from, that awkward reality.

Literature drawn mainly from projects supports farmer group formation and strengthening as a panacea for agricultural advancement, and often backs up the case for intense external resourcing. It suggests that farmers in groups are more likely to adopt technologies than those who aren’t, or are more likely to grow project-supported crops. Proponents also highlight their significance to the supply of inputs into food production and of food to the market. Indeed, the FAO estimates that nearly 40% of Brazil’s agricultural GDP is produced through cooperatives while in Europe, 60% of agricultural produce and 50% of inputs are marketed through one.

However a glance at the 2012 “Exploring the Cooperative Economy” report from the World Cooperative Monitor, reveals an almost total cooperative vacuum in Africa and, to a lesser degree, Asia. More directly, in my work I am frequently confronted with the reality of failed farmer groups that evaporate once the project ends, with unused equipment rusting in the corner of a field, an image, which has become a cliché of dysfunctional development in the popular press. And for many people engaged in development, farmer groups are a byword for failure.

Yet as far as I can establish (and I have searched), there have been few honest and objective ex-post reviews of farmer group formation components of projects to look at failure and the reasons for failure. (If I’m wrong and there are real data on groups’ success and sustainability, please send it to me!) Failures, if reported, are attributed to external “unforeseen challenges” and written up as “lessons learned”. Farmers groups have become a prime example of the development industry’s “emperor’s new clothes syndrome”, where official views are positive and glowing and formal research and evidence are at odds with what we know to be common (naked!) reality. So, in that context, I would argue that farmer group formation is a poor way to improve the lot of farmers positively and sustainably. How much more money needs to be spent; how many more pet Farmer Field School projects do we need to implement; how many more constitutions do we need to write; how many MOUs do we need to sign or how many ‘Farming as a Business’ trainings do we need to subject farmers to, before we understand that this form of development is not working?

The factors leading to the failure of farmer groups (rapid decline post-project) are numerous, but broadly they fail because they were formed for the wrong reasons, by the wrong people and/or in the wrong way.


THE WRONG REASONS TO FORM FARMER GROUPS

Agencies often form farmer groups because it helps them – the agency – achieve economies of scale of delivering services, assets or grants to them. In addition some may feel more comfortable ethically with the transfer of expensive assets or technical assistance to a group rather than an individual. The ethos of communal ownership to cosiness of the collective is pervasive in certain quarters of the development industry, even in the face of the common observation of poorly managed group-owned assets. Farmer group membership is also too often a pre-condition for farmers to receive giveaways from agencies. Groups therefore become entities built on artificial incentives created by agencies wanting an easy repository for their resources and buying short-term transitory impact.

Clearly then, ill-conceived or self-serving reasons are the wrong ones for forming farmer groups.


THE WRONG PEOPLE TO FORM FARMER GROUPS

Agribusinesses often face problems interfacing with small farmers because of high transaction costs, small transaction sizes, poor organisation and communications and a general lack of understanding of them. Farmers are often observed to face challenges finding markets for their products or face poor terms of trade. The absence of institutions (like groups) and services which would help them overcome these challenges (supporting group formation) is often justification enough for agencies to intervene impulsively by stepping in on behalf of small farmers – telling and selling the narrative of the “farmer being exploited by the middleman”.

The problem here is not only do agencies avoid addressing the root causes of the problem that lies beyond the farmer-trader interface, but in stepping into this space by performing “farmer group services” they undermine the possibility that it will ever be solved. Rather than solutions cemented firmly and sustainably in the market system, emerging “farmer group services” are seen as a development agency space. Thus it becomes a self-fulfilling prophecy: farmers are disadvantaged in markets because of weak vertical and horizontal linkages and there are no services to address this market failure: justification enough for agencies to step in and undermine the market further…

Development agencies are also the wrong people to offer farmer group services because, typically, they are poor at business:

-  They are not market based, they are subsidised and non-commercial and their success/failure isn’t dependent on a viable offer but on continued support from their donor.

-  Their incentives are therefore aligned to the agendas of the donor and their own HQ, not the market.

-  They are not cost-effective, indeed they are prohibitively expensive if the true cost of delivery is taken into account (drivers, cooks, HQ fund-raising etc.).

Development agencies are therefore the wrong people to form farmer groups because they are not long-term players in the market, undermine legitimate market players if they attempt to do so, and, put simply, are usually bad at business.


THE WRONG WAY TO FORM FARMER GROUPS

Agencies form farmer groups on the basis of an abstract, theoretical notion of potential benefits, or experience in distant contexts of limited relevance. Seldom do they ask the more grounded starting question: if groups are such an obviously “good thing”, why aren’t farmers forming groups already? Understanding the answer to this question would lead to understanding and addressing systemic problems in the market, or simply not wasting resources by attempting to do something that would be unsuccessful. The reasons that farmers don’t form groups are many, but often related to a lack of incentives or capacity.

Incentives: It may be that additional income does not accrue by aggregation, or that which is created may not be sufficient to overcome other issues such as distrust of others in financial matters. Other actors may be able to provide incentives that induce group formation such as a commodity buyer that provides inputs on credit. There may also be disincentives related to the wider political economy such as additional tax or administrative burdens to formal groups.

Capacity: There may be other obstacles to forming groups such as inefficient business registration procedures, weak advisory services, or a lack of adequately available information that would allow farmers to make an informed decision to form a group. This shouldn’t be seen as an open justification for agency intervention to address these directly for example through business services and setting up one-stop-shops for business registration etc. Rather it should lead to enquiry into who could and should be delivering these and why they are not.

The wrong way to form farmer groups is therefore to do it without understanding the central market failures that prevent farmers from forming them.


WHAT TO DO ABOUT IT

The problem for an agriculturalist and development practitioner like myself, is that working with farmers is fun and endlessly fascinating: it’s one of the things I got into the business for! However instead of being drawn to act impulsively on behalf of the small farmer, I think agencies would serve them better by doing more of the following three things.

Firstly, go in with their eyes and minds open, conducting ex-ante market analysis rather than making unsubstantiated assumptions about what farmers need. Don’t arrive with a farmer group solution pre-prepared and engineer an analysis to justify this. Establish the reasons that farmers are not cohesive, what incentives are shaping their behaviour and what capacities may be lacking. Get a valid answer to the key question: why isn’t the market system working?

Secondly, build and don’t undermine. Guided by the above analysis, work with relevant, long-term market players (private and public) to address the issues underlying farmers’ poor performance and low incomes.

Thirdly, be honest about and learn from failure. This is not especially difficult or time consuming to do, but I suspect is a place where many fear to tread.

My argument is not that farmer groups cannot be beneficial to farmers. Rather, by adopting a systemic approach aimed at fostering the conditions for self-organisation among market players, agencies have a far better chance of supporting small farmers – which may or may not involve farmer groups.


 

Tim Stewart is a Senior Consultant with The Springfield Centre who specialize in pro-poor market systems approaches.  Tim began his career in farming, transitioning to overseas development around 15 years ago.  Since then he has worked across Africa, Asia and Eastern Europe in varied management and advisory roles centred on the development of pro-poor market systems.

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Guest - NP on Friday, 28 March 2014 20:10

Great piece! :)

Great piece! :)
Guest - Adam on Saturday, 29 March 2014 00:04

This is a great piece, indeed. Very thought-provoking, particularly when it comes to assessing the reasons for failures in previous attempts at supporting farmer groups.

That being said, as a skeptic of aid and aid critics alike, I'm curious about the evidence base upon which the article relies.

For instance, it's written that "farmer group formation and support is frequently a waste of effort and money because they overwhelmingly fail."

Do any comprehensive studies suggest this is the case?

Even if so, I'd also be somewhat skeptical of such a study, given that the contexts vary so substantially across countries (or even over time within one country--consider that in Georgia, for example, the tax and legal environment was not at all favorable for cooperative formation until just recently).

If anyone has seen any rigorous impact evaluations (or even ex-post project follow-ups), this would be a great place to share such resources.

This is a great piece, indeed. Very thought-provoking, particularly when it comes to assessing the reasons for failures in previous attempts at supporting farmer groups. That being said, as a skeptic of aid and aid critics alike, I'm curious about the evidence base upon which the article relies. For instance, it's written that "farmer group formation and support is frequently a waste of effort and money because they overwhelmingly fail." Do any comprehensive studies suggest this is the case? Even if so, I'd also be somewhat skeptical of such a study, given that the contexts vary so substantially across countries (or even over time within one country--consider that in Georgia, for example, the tax and legal environment was not at all favorable for cooperative formation until just recently). If anyone has seen any rigorous impact evaluations (or even ex-post project follow-ups), this would be a great place to share such resources.
Guest - Juan Echanove on Saturday, 29 March 2014 02:42

Very fancy article. And quite dogmatic too,despite the cooll lingo.

Back in 2008,Mike Albu, one of the ''M4P sect' gurus already recognised that…

'From a sustainable livelihoods perspective, the main concern with an approach grounded in a market-systems framework is that it is insufficiently people-centred. This means that, despite use of rhetoric about poverty-reduction, it is feared that the principal objective of making market systems work better (i.e. more efficiently, productively, competitively) tends to dominate M4P in practice. Meanwhile the roles of social institutions in shaping market outcomes for poor people may be badly downplayed. In the worst scenario, it is feared that M4P in practice may actually mean ‘making markets work better, even if the poor suffer (at least for a while)!'

Making Markets Work for Poor. Comparing M4P and SLA frameworks: Complementarities, divergences and synergies
http://www.bdsknowledge.org/dyn/bds/docs/687/sp0803.pdf

Very fancy article. And quite dogmatic too,despite the cooll lingo. Back in 2008,Mike Albu, one of the ''M4P sect' gurus already recognised that… 'From a sustainable livelihoods perspective, the main concern with an approach grounded in a market-systems framework is that it is insufficiently people-centred. This means that, despite use of rhetoric about poverty-reduction, it is feared that the principal objective of making market systems work better (i.e. more efficiently, productively, competitively) tends to dominate M4P in practice. Meanwhile the roles of social institutions in shaping market outcomes for poor people may be badly downplayed. In the worst scenario, it is feared that M4P in practice may actually mean ‘making markets work better, even if the poor suffer (at least for a while)!' Making Markets Work for Poor. Comparing M4P and SLA frameworks: Complementarities, divergences and synergies http://www.bdsknowledge.org/dyn/bds/docs/687/sp0803.pdf
Guest - Juan Echanove on Saturday, 29 March 2014 02:50

Groups can be beneficial to farmers if they are really business oriented an if the iniative is coming from the farmers -not from the donors.
Excellent. ...and obvious. Not a big discovery, anyhow.

What about the role of policy making and the other milliard of interventions needed for a market to be pro-poor oriented beyond the open-minded filed-practitioner attitude that the author claims to have ? M4P is a nice tool to try to deal with some of the pieces of the complex reality of agriculture and poverty, but it lacks the flexibily and multidimensional perspective to cope with the big picture.

Groups can be beneficial to farmers if they are really business oriented an if the iniative is coming from the farmers -not from the donors. Excellent. ...and obvious. Not a big discovery, anyhow. What about the role of policy making and the other milliard of interventions needed for a market to be pro-poor oriented beyond the open-minded filed-practitioner attitude that the author claims to have ? M4P is a nice tool to try to deal with some of the pieces of the complex reality of agriculture and poverty, but it lacks the flexibily and multidimensional perspective to cope with the big picture.
Guest - Simon Appleby on Monday, 31 March 2014 14:02

I have been working with farmer groups and co-operatives in developing countries since the late 1980's, predominantly within the commercial sector. I have seen a lot of failures and quite a few successes.

Tim's analysis of the wrong reasons for forming such groups is very worthwhile, but could be expanded. There is tremendous temptation for well-educated urban government officials, frequently of a benevolent character, to believe that they know farmers' businesses better than the farmers do, and that government should play an active role in business activity as well as regulation. Ignoring the negative implications of this conflict of interest, it is a natural human failing that interventionist government will seek to expand its role until funding resources are exhausted, and then taxes must be raised to support further intervention. This diverts economic resources away from productive ventures towards much less competitive activities. My namesake Sir Humphrey Appleby explains very ably the motivation of government officials in expanding government activities in civil society, of which farmer groups are a part

https://www.youtube.com/watch?v=gmOvEwtDycs

In countries with weak governance, government or QUANGO administration of farmer groups is fertile ground for embezzlement, fraud, and corruption, as many co-op members are poorly literate and have little financial acumen, and are easily exploited by bent co-op administrators. I have witnessed many bloody riots in Asia triggered by administrative embezzlement from farmer co-ops, resulting in land seizure by a hitherto unknown mortgage holder. I have consequently seen the substantial damage to government and private property, and numerous civilian fatalities in the following security crackdowns. Given that the Devil is always hard at work looking for administrators to tempt, it is unreasonable to assume that this can't happen here unless great care is taken. If farmer groups and co-ops are to be financially successful, and if social stability in the countryside is to be maintained, government needs to maintain a light touch and ensure that they remain controlled by the members, who are more capable of exercising financial and ethical control over their administrators through traditional structures than a remote ministry can.

Conversely, if development agencies are the "wrong" people to be involved in farmer groups and co-ops, who are the "right" players to be involved? While it may be jarring to the collectivist sensibilities of some, it is worth looking at corporations as enablers and incubators of co-ops. Much of my work in the past 17 years has been in developing robust, self-sustaining supply chain relationships between smallholders and large food processors. In some cases, governments compel food processors to engage in such relationships, in other cases government provides very attractive financial incentives such as tax holidays to encourage processors to take smallholders on as supply chain partners. Usually companies provide finance, physical and technical inputs, training, a standard QA and food safety template, and guaranteed forward contracts as part of the package. Such arrangements are made between companies and mid-sized individual farmers, as well as with co-ops that form spontaneously in response to the corporation approaching the community with its broad proposal.

Such co-ops usually involve 3-5 families (including spouses and children) providing labour and some land. In general, these co-ops are formed by close blood relatives in response to the business opportunity, and there are no government officials involved in the "government" of these small groups. Traditional clan or family governance systems tend to keep malfeasance in check, and the corporation usually provides some simple bookkeeping systems and training to help their suppliers manage finances.

In East Asia, there are hundreds of large and mid-sized companies engaged in this model of business, in almost every food industry subsector. It is hard work to develop and it requires industrious and ethical corporate staff to gain the trust of smallholders, as well as solid technical competence on the part of the corporation. I have been involved in setting up such systems in aquaculture, beef, dairy, potato, vegetables, cut flowers and pigs over the years, and have been pleased at the very low default rate due to production shortfalls on supply contracts; if realistic targets are set and technical support is robust, a great deal of the risk is abated. Crop Failure/Livestock Mortality Insurance also protects both parties in such arrangements and are attractive if premiums can be kept at a realistic level.

Few Georgian farmers or industrialists, or indeed government officials, have ever seen such a system at work, so it is hard to convince them of the opportunities it provides. Modest study tour grants may be of use in this regard.

It is often argued that local co-ops will be able to form their own food processing ventures and so they will not need to cooperate with private food processing ventures. This is excessively optimistic. Given that food processing is very capital intensive and requires highly trained operators and very experienced management, co-op owned food factories are unlikely to be a major feature of the business landscape here in the short to medium term. It is not reasonable that taxpayers be on the hook should such plants fail (it is unfair if farmers can capitalise their gains and socialise their losses), but factory failure can result in co-op members losing their land and their savings and whole communities being devastated. It is important that farmer groups focus on their core competencies and not stray into sectors where they have no prospect of establishing a sustainable competitive advantage. Diversification of co-op activities tends to follow a natural course from basic post-harvest treatment, storage, and logistics, to deep processing, foodstuffs trading and financial services, but this process may naturally take many decades and rushing the process carries huge operational and financial risks.

I have been working with farmer groups and co-operatives in developing countries since the late 1980's, predominantly within the commercial sector. I have seen a lot of failures and quite a few successes. Tim's analysis of the wrong reasons for forming such groups is very worthwhile, but could be expanded. There is tremendous temptation for well-educated urban government officials, frequently of a benevolent character, to believe that they know farmers' businesses better than the farmers do, and that government should play an active role in business activity as well as regulation. Ignoring the negative implications of this conflict of interest, it is a natural human failing that interventionist government will seek to expand its role until funding resources are exhausted, and then taxes must be raised to support further intervention. This diverts economic resources away from productive ventures towards much less competitive activities. My namesake Sir Humphrey Appleby explains very ably the motivation of government officials in expanding government activities in civil society, of which farmer groups are a part https://www.youtube.com/watch?v=gmOvEwtDycs In countries with weak governance, government or QUANGO administration of farmer groups is fertile ground for embezzlement, fraud, and corruption, as many co-op members are poorly literate and have little financial acumen, and are easily exploited by bent co-op administrators. I have witnessed many bloody riots in Asia triggered by administrative embezzlement from farmer co-ops, resulting in land seizure by a hitherto unknown mortgage holder. I have consequently seen the substantial damage to government and private property, and numerous civilian fatalities in the following security crackdowns. Given that the Devil is always hard at work looking for administrators to tempt, it is unreasonable to assume that this can't happen here unless great care is taken. If farmer groups and co-ops are to be financially successful, and if social stability in the countryside is to be maintained, government needs to maintain a light touch and ensure that they remain controlled by the members, who are more capable of exercising financial and ethical control over their administrators through traditional structures than a remote ministry can. Conversely, if development agencies are the "wrong" people to be involved in farmer groups and co-ops, who are the "right" players to be involved? While it may be jarring to the collectivist sensibilities of some, it is worth looking at corporations as enablers and incubators of co-ops. Much of my work in the past 17 years has been in developing robust, self-sustaining supply chain relationships between smallholders and large food processors. In some cases, governments compel food processors to engage in such relationships, in other cases government provides very attractive financial incentives such as tax holidays to encourage processors to take smallholders on as supply chain partners. Usually companies provide finance, physical and technical inputs, training, a standard QA and food safety template, and guaranteed forward contracts as part of the package. Such arrangements are made between companies and mid-sized individual farmers, as well as with co-ops that form spontaneously in response to the corporation approaching the community with its broad proposal. Such co-ops usually involve 3-5 families (including spouses and children) providing labour and some land. In general, these co-ops are formed by close blood relatives in response to the business opportunity, and there are no government officials involved in the "government" of these small groups. Traditional clan or family governance systems tend to keep malfeasance in check, and the corporation usually provides some simple bookkeeping systems and training to help their suppliers manage finances. In East Asia, there are hundreds of large and mid-sized companies engaged in this model of business, in almost every food industry subsector. It is hard work to develop and it requires industrious and ethical corporate staff to gain the trust of smallholders, as well as solid technical competence on the part of the corporation. I have been involved in setting up such systems in aquaculture, beef, dairy, potato, vegetables, cut flowers and pigs over the years, and have been pleased at the very low default rate due to production shortfalls on supply contracts; if realistic targets are set and technical support is robust, a great deal of the risk is abated. Crop Failure/Livestock Mortality Insurance also protects both parties in such arrangements and are attractive if premiums can be kept at a realistic level. Few Georgian farmers or industrialists, or indeed government officials, have ever seen such a system at work, so it is hard to convince them of the opportunities it provides. Modest study tour grants may be of use in this regard. It is often argued that local co-ops will be able to form their own food processing ventures and so they will not need to cooperate with private food processing ventures. This is excessively optimistic. Given that food processing is very capital intensive and requires highly trained operators and very experienced management, co-op owned food factories are unlikely to be a major feature of the business landscape here in the short to medium term. It is not reasonable that taxpayers be on the hook should such plants fail (it is unfair if farmers can capitalise their gains and socialise their losses), but factory failure can result in co-op members losing their land and their savings and whole communities being devastated. It is important that farmer groups focus on their core competencies and not stray into sectors where they have no prospect of establishing a sustainable competitive advantage. Diversification of co-op activities tends to follow a natural course from basic post-harvest treatment, storage, and logistics, to deep processing, foodstuffs trading and financial services, but this process may naturally take many decades and rushing the process carries huge operational and financial risks.
Guest - Eric on Monday, 31 March 2014 16:59

Simon, many thanks for providing a bit of light at the end of the tunnel (which I found somewhat lacking in Tim's article).

The practical question to ask is whether or not there is still an opportunity to restructure some of the current donor programs in a way that would allow private sector actors -- food processors, packagers, retailers -- to step in and develop "robust, self-sustaining supply chain relationships" with smallholders.

To the best of my knowledge, all NGOs currently involved in the ENPARD projects are expected to "facilitate private sector linkages". However, I am deeply concerned with the manner in which these NGO-led projects are going to be implemented. For instance, I don't see how sustainable private sector linkages could emerge through "community mobilization" and "capacity building" efforts that do not involve relevant private sector actors right from the very beginning. Community mobilizers will be hired by NGOs to solicit a certain number of proposals by a certain deadline. Whether or not these proposals will lead to sustainable outcomes 5 years down the road is a totally different matter, for which "community mobilizers" are not going to be held accountable.

BUSINESS PARTNERS. Instead of relying on professional "community mobilizers" (many of whom, I am afraid, may be incompetent, and still worse, corrupt), NGOs could be working with businesses interested in developing "self-sustaining supply chain relationships" with groups of smallholder farmers. It would be then up to the businesses to identify communities that could supply them with the products the need. Donor and government funds would be used to provide financial incentives for the private sector to build the capacity of fledgling farmer organizations, provide them with necessary know-how and equipment (implements, storage, packaging), enforce quality standards, etc. By entering long-term contractual relationships with private sector partners, farmer organizations would acquire the incentives to adjust business practices and learn new tricks.

INCUBATION. The answer to Tim's question: "if groups are such an obviously “good thing”, why aren’t farmers forming groups already?" is quite obvious. Forming groups is a long process, involving a lot of learning along the way. Ex ante, the benefits of cooperation are not clear, while the risks failure are quite real. Thus, to provide tangible benefits to its members and become sustainable, farmer groups have to be "incubated".

MANAGEMENT FOR THE POOR. To be viable, farmer organizations need strong private sector partners ensuring their access to markets. At the same time, I strongly disagree with the overly restrictive, almost religious interpretation of the M4P ("markets four poor") approach to development assistance. The "M" in M4P should NOT be only about developing "market systems" (consulting, veterinary services, artificial insemination, machinery, storage, packaging, processing, etc.). It should also be about helping rural communities to get better organized and MANAGED in order to gain access to, and capitalize on improved "market systems".

Simon, many thanks for providing a bit of light at the end of the tunnel (which I found somewhat lacking in Tim's article). The practical question to ask is whether or not there is still an opportunity to restructure some of the current donor programs in a way that would allow private sector actors -- food processors, packagers, retailers -- to step in and develop "robust, self-sustaining supply chain relationships" with smallholders. To the best of my knowledge, all NGOs currently involved in the ENPARD projects are expected to "facilitate private sector linkages". However, I am deeply concerned with the manner in which these NGO-led projects are going to be implemented. For instance, I don't see how sustainable private sector linkages could emerge through "community mobilization" and "capacity building" efforts that do not involve relevant private sector actors right from the very beginning. Community mobilizers will be hired by NGOs to solicit a certain number of proposals by a certain deadline. Whether or not these proposals will lead to sustainable outcomes 5 years down the road is a totally different matter, for which "community mobilizers" are not going to be held accountable. BUSINESS PARTNERS. Instead of relying on professional "community mobilizers" (many of whom, I am afraid, may be incompetent, and still worse, corrupt), NGOs could be working with businesses interested in developing "self-sustaining supply chain relationships" with groups of smallholder farmers. It would be then up to the businesses to identify communities that could supply them with the products the need. Donor and government funds would be used to provide financial incentives for the private sector to build the capacity of fledgling farmer organizations, provide them with necessary know-how and equipment (implements, storage, packaging), enforce quality standards, etc. By entering long-term contractual relationships with private sector partners, farmer organizations would acquire the incentives to adjust business practices and learn new tricks. INCUBATION. The answer to Tim's question: "if groups are such an obviously “good thing”, why aren’t farmers forming groups already?" is quite obvious. Forming groups is a long process, involving a lot of learning along the way. Ex ante, the benefits of cooperation are not clear, while the risks failure are quite real. Thus, to provide tangible benefits to its members and become sustainable, farmer groups have to be "incubated". MANAGEMENT FOR THE POOR. To be viable, farmer organizations need strong private sector partners ensuring their access to markets. At the same time, I strongly disagree with the overly restrictive, almost religious interpretation of the M4P ("markets four poor") approach to development assistance. The "M" in M4P should NOT be only about developing "market systems" (consulting, veterinary services, artificial insemination, machinery, storage, packaging, processing, etc.). It should also be about helping rural communities to get better organized and MANAGED in order to gain access to, and capitalize on improved "market systems".
Guest - Juan Echanove Echanove on Tuesday, 01 April 2014 03:23

Eric, i could not agree more with your comments.

A further response on the author 's rhetorical question on why coops are not flourishing if they are so good for farmers: In would have presume that before writing the article the author would have first make himself more informed of the Georgian context in this regard. Until 2013 legislation in Georgia was actually creating disincentives and barriers to coops due to, amongst other reasons, a double taxation regime and a extreme negative policy and political attitudes. Coops where not promoted by the State, but efectibl disregarded. Despite this, farmers were and are everywhere across the country establishing informal groups, and associations , in many cases without any external support and by their own initiative , often focus in a very narrow but functional up scalings of any kind.. Joint arrangements for pasture management and feeding /livestock management, collective work on plowing and vintage etc are some Examples of this existing reality of collaboration by farmers anywhere in Georgia. That is business oriented economies of scale, even if a very simple one, endeed.There is quite a good deal of data on the existing social capital structures in Georgian rural areas and how they operate. For some reason the author seems to ignore this reality.

The very thing Georgia does not need is easy-ready-made recipes that do not put things in context. We don't need to reinvent the wheel, but at least we have to know first what the factual context is. This is what I find so disappointing about this article.

Eric, i could not agree more with your comments. A further response on the author 's rhetorical question on why coops are not flourishing if they are so good for farmers: In would have presume that before writing the article the author would have first make himself more informed of the Georgian context in this regard. Until 2013 legislation in Georgia was actually creating disincentives and barriers to coops due to, amongst other reasons, a double taxation regime and a extreme negative policy and political attitudes. Coops where not promoted by the State, but efectibl disregarded. Despite this, farmers were and are everywhere across the country establishing informal groups, and associations , in many cases without any external support and by their own initiative , often focus in a very narrow but functional up scalings of any kind.. Joint arrangements for pasture management and feeding /livestock management, collective work on plowing and vintage etc are some Examples of this existing reality of collaboration by farmers anywhere in Georgia. That is business oriented economies of scale, even if a very simple one, endeed.There is quite a good deal of data on the existing social capital structures in Georgian rural areas and how they operate. For some reason the author seems to ignore this reality. The very thing Georgia does not need is easy-ready-made recipes that do not put things in context. We don't need to reinvent the wheel, but at least we have to know first what the factual context is. This is what I find so disappointing about this article.
Guest - Juan Echanove Echanove on Tuesday, 01 April 2014 06:32

On the issue on coops partnering with (other) business, that both Eric and Simon are highlighting. Indeed, I do agree that this is absolutely essential. In the case of ENPARD (which is a programme aiming at support farmers groups to gain economies of scale, via coops or whatever, coops is jut a tool not an aim itself, and to be more precise, a tool amongst many possible ones) this is actually a MUST , a requirement in the guidelines .

The issue requires actually some in-depth discussion, because on the context of ENPARD (and broadly in the context the coop legislation in Georgia) different kinds of farmers' groups for different purposes will be created, and perhaps only a fraction of them , at least at the beginning will be stablished for the purpose to sale production jointly to business (e.g traders, exporters, retailers...) which is the modality both Eric and Simon are mainly referring to. We need to do some "taxonomy" of different types of farmers groups....

Some farmers ' business groups (coops or other kinds) will popup aiming to access to better and/or cheaper of inputs (fertilizers, seeds, fuel..) or services (mechanization, vet services, artificial insemination...)of for accessing services. In these cases the key businesses partners are not the buyers of the production, but the providers of the services and inputs. ENPARD Mercy Coops lead consortium foresees specific measures to ensure this links, including technical and financial assistance by the project not only to the farmers' groups but to the business too, building on the accumulated experience of MC doing this with EU and SDC funds int he past. It is worth mentioning that the Georgian service providers' associations is one member of this consortium and thus, partner of ENPARD too, the US funded REAP program, whose focus ins mainly in support to service providers, is in close coordination with ENPARD to further work in this direction.

The above is a quite straightforward model of partnership. The issue becomes much more tricky when we talk about farmers' groups that are aiming to sale jointly their primary production. Anyhow, amongst these, there are certain cases where actually there will be no need to link them with any new business in order to sale the production. This will probably be the case of some mandarins coops, who are already marketing their products to middlemen or exporters; they already have strong links with them. If these coop do the things the right way, they will have more production to sale, or same reduction but of better quality, but the buyers are already there, there will be not much need helping them in engaging with further buisiness..

Another case is that of coops that will sale production processed by the coop. As Simon says, there will be very few of this and, in any case, they are the least to be worry about in regarding of how to engage them with the buyers. a group of farmers have reached such degree of sophistication they is normally ready to establish strong linkages with retailers almost automatically with little extra support or advice.

Finally, there is the case of coops that will just continue placing their production in the local markets in an informal manner, and there is nothing particularly bad about that.. In many areas of Georgia there is no real access to markets other than the very local markets, but that is not to be disregarded. Producing more and at better prices for the simple village market is as such an improvement. We shall not only focus on the complex changes but look also in to the easy and realistic mprovements too.

We have to put a side all the various situations I described above of we really want to focus the support on those coops whose business will really require, to succeed, some strong support in linking them to business. This for instance what ACF is planing to do in engaging the coops they will assist with Carrefour, or what other ENPARD partners are already informally negotiating with Ferrero regarding hazelnuts

I would love the idea if Carfour and alike could be supply with fresh products from the farmers coops, but still, that is a tiny fraction of the Georgian market. Most of the fresh products market is informal, and coops might well continue marketing normally - but hopefully at lower production costs and in higher volumes.

The entry point, the factotum, the key, shall be the business plans of each coop. The business plans should tell us to which extend and how the groups should engage with the other businesses and other stakeholders across the value chain and what kind of partnerships they would require to buildup . No more, no less.

I do believe that iSET and institutions alike can provide and incredible important role in quality control of the business plans. And, overall, in all this issue of coops/companies partnerships.

On the issue on coops partnering with (other) business, that both Eric and Simon are highlighting. Indeed, I do agree that this is absolutely essential. In the case of ENPARD (which is a programme aiming at support farmers groups to gain economies of scale, via coops or whatever, coops is jut a tool not an aim itself, and to be more precise, a tool amongst many possible ones) this is actually a MUST , a requirement in the guidelines . The issue requires actually some in-depth discussion, because on the context of ENPARD (and broadly in the context the coop legislation in Georgia) different kinds of farmers' groups for different purposes will be created, and perhaps only a fraction of them , at least at the beginning will be stablished for the purpose to sale production jointly to business (e.g traders, exporters, retailers...) which is the modality both Eric and Simon are mainly referring to. We need to do some "taxonomy" of different types of farmers groups.... Some farmers ' business groups (coops or other kinds) will popup aiming to access to better and/or cheaper of inputs (fertilizers, seeds, fuel..) or services (mechanization, vet services, artificial insemination...)of for accessing services. In these cases the key businesses partners are not the buyers of the production, but the providers of the services and inputs. ENPARD Mercy Coops lead consortium foresees specific measures to ensure this links, including technical and financial assistance by the project not only to the farmers' groups but to the business too, building on the accumulated experience of MC doing this with EU and SDC funds int he past. It is worth mentioning that the Georgian service providers' associations is one member of this consortium and thus, partner of ENPARD too, the US funded REAP program, whose focus ins mainly in support to service providers, is in close coordination with ENPARD to further work in this direction. The above is a quite straightforward model of partnership. The issue becomes much more tricky when we talk about farmers' groups that are aiming to sale jointly their primary production. Anyhow, amongst these, there are certain cases where actually there will be no need to link them with any new business in order to sale the production. This will probably be the case of some mandarins coops, who are already marketing their products to middlemen or exporters; they already have strong links with them. If these coop do the things the right way, they will have more production to sale, or same reduction but of better quality, but the buyers are already there, there will be not much need helping them in engaging with further buisiness.. Another case is that of coops that will sale production processed by the coop. As Simon says, there will be very few of this and, in any case, they are the least to be worry about in regarding of how to engage them with the buyers. a group of farmers have reached such degree of sophistication they is normally ready to establish strong linkages with retailers almost automatically with little extra support or advice. Finally, there is the case of coops that will just continue placing their production in the local markets in an informal manner, and there is nothing particularly bad about that.. In many areas of Georgia there is no real access to markets other than the very local markets, but that is not to be disregarded. Producing more and at better prices for the simple village market is as such an improvement. We shall not only focus on the complex changes but look also in to the easy and realistic mprovements too. We have to put a side all the various situations I described above of we really want to focus the support on those coops whose business will really require, to succeed, some strong support in linking them to business. This for instance what ACF is planing to do in engaging the coops they will assist with Carrefour, or what other ENPARD partners are already informally negotiating with Ferrero regarding hazelnuts I would love the idea if Carfour and alike could be supply with fresh products from the farmers coops, but still, that is a tiny fraction of the Georgian market. Most of the fresh products market is informal, and coops might well continue marketing normally - but hopefully at lower production costs and in higher volumes. The entry point, the factotum, the key, shall be the business plans of each coop. The business plans should tell us to which extend and how the groups should engage with the other businesses and other stakeholders across the value chain and what kind of partnerships they would require to buildup . No more, no less. I do believe that iSET and institutions alike can provide and incredible important role in quality control of the business plans. And, overall, in all this issue of coops/companies partnerships.
Guest - Juan Echanove Echanove on Tuesday, 01 April 2014 07:23

I promise this will be my last comment :-).

Maybe is worth recalling that amongst the activities that ENPARD is aiming and ready to assist are any "activities supporting buyers to formulate contractual agreements with the farmers' groups, working with them to standardize varieties, define clear specifications and standards for products and preparing joint codes of practice for commodity sectors, as well as iInnovative mechanisms that enable farmers groups to deliver their own support services under public/private partnership agreements" , as well as "establishment of buyer/producer clubs or inter-professional organizations to strengthen relations between producers and buyers and assist in solving bottlenecks in particular value chains" and that in ENPARD "the farmer groups to be assisted are expected to operate on a commercial basis similar to a private company. Without this crucial motivation farmers have little interest to participate in the activities and without corporate type of management, acquiring profits will be difficult to obtain". All these, which a indeed things that all the commentators here would agree on, are directly extracted from the grants guidelines . So, in other words, the program has been designed according to the principles that you have been mentioning in your posts. We have to make sure that such guiding ideas will really be translated into practice, but the flexibility that Eric was asking for in order to ensure sound engagement of the private sector are actually already in. Now the ball is int side of ISEt and the other 14 implement partners for this to happen.

I promise this will be my last comment :-). Maybe is worth recalling that amongst the activities that ENPARD is aiming and ready to assist are any "activities supporting buyers to formulate contractual agreements with the farmers' groups, working with them to standardize varieties, define clear specifications and standards for products and preparing joint codes of practice for commodity sectors, as well as iInnovative mechanisms that enable farmers groups to deliver their own support services under public/private partnership agreements" , as well as "establishment of buyer/producer clubs or inter-professional organizations to strengthen relations between producers and buyers and assist in solving bottlenecks in particular value chains" and that in ENPARD "the farmer groups to be assisted are expected to operate on a commercial basis similar to a private company. Without this crucial motivation farmers have little interest to participate in the activities and without corporate type of management, acquiring profits will be difficult to obtain". All these, which a indeed things that all the commentators here would agree on, are directly extracted from the grants guidelines . So, in other words, the program has been designed according to the principles that you have been mentioning in your posts. We have to make sure that such guiding ideas will really be translated into practice, but the flexibility that Eric was asking for in order to ensure sound engagement of the private sector are actually already in. Now the ball is int side of ISEt and the other 14 implement partners for this to happen.
Guest - Eric on Tuesday, 01 April 2014 07:40

Dear Juan, don't promise!!!

I know that the ball is in our court, there is a lot we (all 14 organizations) can do. Perhaps what I said follows from the fact that I am not directly involved in implementing the project. What I see at the moment is a lot of pressure to get the project started, raise farmers' awareness, mobilize groups, get proposals evaluated, etc. There is not enough time to think of connections, linkages, etc. I would much rather see the project implemented at a slower pace, making sure only reasonable proposals get supported. We will of course try to do what we can... Perhaps would be useful to talk to ACF, Mercycorps and REAP to see if there is something we can do together or benefit from each other's experience and connections.

Dear Juan, don't promise!!! I know that the ball is in our court, there is a lot we (all 14 organizations) can do. Perhaps what I said follows from the fact that I am not directly involved in implementing the project. What I see at the moment is a lot of pressure to get the project started, raise farmers' awareness, mobilize groups, get proposals evaluated, etc. There is not enough time to think of connections, linkages, etc. I would much rather see the project implemented at a slower pace, making sure only reasonable proposals get supported. We will of course try to do what we can... Perhaps would be useful to talk to ACF, Mercycorps and REAP to see if there is something we can do together or benefit from each other's experience and connections.
Guest - Florian on Tuesday, 01 April 2014 15:09

I like the pessimistic tone of the article, but the recommendations at the end are a bit disappointing. They are not much more concrete than saying "go in with eyes and minds open", "build and don’t undermine", and "be honest about and learn from failure". Who would disagree with such suggestions?

I like the pessimistic tone of the article, but the recommendations at the end are a bit disappointing. They are not much more concrete than saying "go in with eyes and minds open", "build and don’t undermine", and "be honest about and learn from failure". Who would disagree with such suggestions?
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