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Rethinking rural co-operatives in development:
introduction to the policy arena
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How to cite:
Johnson, Hazel and Shaw, Linda (2014). Rethinking rural co-operatives in development: introduction to the
policy arena. Journal of International Development, 26(5) pp. 668–682.
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2014 John Wiley Sons, Ltd.
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1
Rethinking rural co-operatives in development: introduction to the policy arena
Hazel Johnson, Development Policy and Practice, The Open University
Email: hazel.johnson@open.ac.uk
Linda Shaw, The Co-operative College
Email: linda@co-op.ac.uk
Abstract
The global resurgence of co-operatives has given rise to debate about their role in
development. What challenges do they offer to current models of social and economic
organisation in the light of crisis? Can co-operatives go beyond their mixed history and
create opportunities for new thinking, policy and practice? This Introduction examines some
aspects of the history of the co-operative movement in development and identifies
contemporary themes, particularly with respect to rural co-operatives. It outlines how the
articles in the Policy Arena address some of the key questions in current policy debates.
Key words: rural co-operatives, co-operative history, co-operative policy, human
development, governance, capabilities.
1. Introduction
The UN International Year of Co-operatives (IYC) in 2012 provided a valuable opportunity for
rethinking co-operatives and their changing relationship to development policy and practice.
For many years, co-operatives in the developing world have struggled with a legacy of
government intervention from both the colonial and post-colonial period. This legacy has had
an impact on their performance and limited their effectiveness. Many co-operatives
functioned as para-statals and were frequently captured by local elites. Liberalisation and
structural adjustment further weakened co-operatives that were previously dependent on the
state. As a result, co-operatives have been ‘off the radar’ for development policy and
research until relatively recently. They have frequently been dismissed as a ‘failed’ model of
social and economic organisation for development.
Today, a different narrative is emerging for a number of reasons. In recent decades, there
has been a renewed search for a different kind of development. In part, this search has
come from critique of capitalist growth models of development, their impact on low income
populations, on the environment, on social justice and their ethical basis (for example,
Gibson-Graham, 2003; Korten, 1995/2001). More recently, since the financial crisis in
Europe and North America, there is a resurgence of interest in alternative forms of social
and economic organisation (for example, Castells et al., 2012; Lipietz, 2013; Stiglitz, 2009),
which include co-operative models. Co-operative resilience in the wake of the global crisis
has also helped to change perceptions (Birchall and Ketilson, 2009; ILO, 2010; Birchall,
2013). In turn, new co-operative models that are both values-based and market-oriented
have emerged, for example, as part of the current resurgence of co-operatives in Africa,
including new forms such as the integrated model for co-operatives in Uganda, which
combines production, marketing, storage and finance (Kwapong and Korugyendo, 2010a;
Kwapong, 2012)
1
.
The potential of co-operatives to promote economic and social development for low income
people has therefore returned to development agendas (DFID, 2010; UN, 2009). In
particular, the increasing emphasis on the need for a sustainable agricultural sector is
drawing attention to the potential of co-operatives as important rural institutions, which is the
focus of this Policy Arena.
1
The Uganda co-operative model is now being investigated by Canadian researchers with
support from IDRC;
http://archive.constantcontact.com/fs181/1102316589700/archive/1112907205831.html
2
Co-operatives employ 100 million people globally and have over 1 billion individual members
(ILO, 2010). In Africa, co-operatives remain one of the most common village institutions in
many countries and their numbers are increasing (Pollet, 2009). Some countries, such as
Uganda, have witnessed a twenty-fold increase in the number of co-operatives during the
past decade, largely independently of government support. In BRIC countries (particularly
Brazil, India and China), co-operatives play an important role in agriculture with co-
operatives accounting for almost 40% of the Brazilian agricultural GDP
2
.
Co-operatives in agriculture and related services have been attracting attention because of
their potential role in providing market access for smallholders, food security provision, and
also in relation to climate change challenges for rural areas (Herbel et al., 2013). As a result,
there is growing demand for evidence on the nature of successful co-operative development,
as well as on its shortcomings. Current literature includes the role of collective action in
development; co-operatives as sites of learning, community participation and
democratisation; co-operatives’ potential to contribute to food security; their involvement in
value chains, Fair Trade, and different types of innovation; and, relatedly, the possibility of
increasing employment and income through new business opportunities and access to new
markets.
There are a number of policy related questions that have become apparent as a result of this
renewal of interest. They include:
1. How can co-operatives challenge the legacy of the past and create effective businesses
with an internal governance that promotes equity as well as economic benefits that
reduce poverty?
2. In particular, how can co-operatives promote the inclusion of women and youth,
historically often excluded from participation?
3. What kind of enabling environment is needed to support the renewal of co-operative
development?
The articles in this Policy Arena address these questions. They explore some key aspects
for co-operative development and their policy implications in two contrasting regions: East
Africa and Brazil. The terrain is primarily that of agricultural co-operatives, and the three
articles focus on: co-operatives’ potential in contributing to human development and well-
being, with a particular focus on gender (Questions 1 and 2; Brazil); the role of co-operative
governance in co-operatives’ contribution to poverty reduction (Question 1; Kenya); and how
youth have been enhancing their capabilities through their engagement in co-operatives
(Question 2; Uganda and Lesotho). All three articles contain reflections in answer to
Question 3.
This Introduction aims to provide the reader with a general orientation on the historical and
contemporary issues in rural co-operative development in Africa and South America (where
the studies reported on in the Policy Arena articles were carried out). It first provides a brief
history of co-operatives in an international context and the challenges that have typically
faced co-operatives, particularly in a rural setting. It then reviews some of the recent
literature about rural co-operatives’ contribution to development, cross-referencing to themes
raised by the articles in the Policy Arena. Finally, it discusses some of the current policy
challenges in relation to the questions posed above, and introduces the articles more fully.
2. A brief history of co-operatives in an international context
In-depth studies on co-operatives in developing countries and their histories are somewhat
fragmented despite their important roles in both colonial and post colonial societies in Africa
and South America (Birchall, 1997). In most countries in the developing world, co-operatives
2
http://www.fao.org/partnerships/fao-partnerships/producer-organizations-and-cooperatives/en/
3
have had a presence for more than a hundred years. In the African context, in particular,
limited access to archival materials, with much material still unprotected and in danger of
degradation
3
, means that carrying out research using primary rather than secondary sources
is challenging.
However there are some prior studies which have begun to unpack some of the richness
and complexity of co-operative histories. For example, Rhodes (2012) has provided a
valuable overview of the role that co-operatives played within the colonial development
policies of the British Empire. Kelemen (2007) has also explored one aspect of this in a
study of the UK post war labour government colonial development policies. Paakesen (2010)
has discussed the joint Nordic Co-operative Assistance Project in Tanzania set up in the
1970s and its later collusion with the Ujamaa (forced villagization) rural development policy
adopted by the Nyerere government in the 1970s. However, in general terms, although there
are specific studies of the co-operative movement in developing countries, particularly in
Africa (for example, Hyden, 1973; Münkner and Shah, 1993), co-operatives are largely
absent from the literature of the history of development. A notable example is Hodge’s
(2007) seminal study of the rise of the scientific expert in agrarian development within British
Colonialism, and, in spite of strong Swedish engagement with co-operatives, an overview of
the Swedish and Norwegian provision of development aid does not reference any co-
operative contribution (Engh, 2009).
Nonetheless, it is possible to identify some key phases within the history of co-operatives in
Africa and South America. African co-operatives have remained strongly marked by their
colonial legacies not only in terms of the legal and policy environment but also by the sectors
in which they have been active. In the case of East Africa, until recently, the dominant type
has been that of the agricultural marketing and inputs supply co-operative specialising in
export crops such as coffee, tea, sisal and cotton (Develtere et al., 2008).
In South America, agricultural co-operatives arrived with European settler groups at the
beginning of the twentieth century. They allowed such groups to recreate their own forms of
organisation while remaining detached from local populations and governments. Examples
include the agricultural co-operatives founded by the Mennonites in southern Brazil
(Vasquez-Leon, 2010). In the post-war period, the co-operative model became more
widespread often as a part of top down and large scale poverty alleviation programmes. Co-
operatives were often co-opted by political parties. In socialist countries they became
integrated into state dominated agricultural systems whilst, in other countries, many
agricultural co-operatives became dominated by big landowners and large scale farmers.
In both Africa and South America, small-scale financial co-operatives, such as credit unions,
developed later as relatively flexible and autonomous organisations largely separate from
the state (Vasquez-Leon, 2010). They drew on donor support from the 1970s onwards and,
by 2012, credit unions had a membership of 17.2 million in 17 South American countries
4
. In
Africa, their growth started more recently but is now accelerating with over 16 million
members in 23 countries
5
. A key feature has been the development of co-operative
networks, which have enabled them to exploit economies of scale and more effectively
manage risk and uncertainty (Cuevas and Fischer, 2006).
Those agricultural co-operatives closely associated with the state, whether in South America
or Africa, inevitably suffered as a result of the withdrawal of state support and structural
adjustment policies from the 1980s onwards with many failing or considerably reducing their
activities. However, this has not been the end of the story as Develtere et al. (2008) reveal in
the African case and, indeed, is illustrated by the studies in this volume. Progress is slow
3
See http://eap.bl.uk/database/all_projects.a4d for details of the project Preserving East African Co-
operative Heritage funded under the British Library Endangered Archives Programme, which
identified co-operative archival materials at risk in Tanzania.
4
Figures from World Council of Credit Unions at http://www.woccu.org/about/intlcusystem?region=LA
5
http://www.woccu.org/about/intlcusystem?region=AF
4
and uneven but co-operative membership and numbers of co-operatives have been growing
during the last decade. In Africa, this has been characterised as a ‘co-operative renaissance’
(ibid).
Brazil provides a similar narrative of co-operative development during the past two decades
with the emergence of co-operatives as an important feature of the solidarity economy. With
support from local authorities and universities in some cases, as well as legal changes, a
growing number of ‘popular’ co-operatives have been formed among marginalised and
excluded populations in both urban and rural areas (Fonteneau et al. 2011). An example is
reflected in a new solid waste law passed in 2010, which mandates local authorities to offer
waste picker co-operatives opportunities to bid for the management of urban solid waste
6
.
At a broader level, a dominant theme in the discussion of co-operative history is that of the
impact of differing colonial legacies which is still evident today in current legal environment
for co-operatives, particularly in the African context. A study of contemporary co-operatives
in Africa published by the ILO (Develtere et al., 2008) argues that the British, Belgian and
French colonial regimes left behind distinct legal frameworks, which are still apparent today.
The British model has been characterised as a ‘unified model’, for example, with one law for
all types of co-operatives, a separate co-operatives ministry and a single national apex body.
The eventual aim was to encourage the development of self-reliant and economically viable
co-operatives. This is the case for three of the countries discussed in the articles in this
Policy Arena, Uganda, Lesotho and Kenya. By contrast, the French ‘sociétés indegènes de
prévoyance’ were centrally organised, of a semi-public status and required compulsory
membership (Schwettmann, 1997). The common feature of both these models was that of a
central role played by the colonial government.
Another strong theme in earlier co-operative literature on Africa concerns the relationship
between indigenous and imported co-operative models (Hedlund, 1988; Rondot and Collion,
2001). During the 1970s, findings from several large scale research programmes on co-
operatives contended that co-operatives should not be regarded as agents of social and
economic change (UNRISD, 1975; Birchall, 1993). Co-operatives were inefficient, too small,
lacked capacity and were prone to elite capture. These limitations undoubtedly existed, and
still do, for many co-operatives. According to Münkner (2012: 56), donor perception of co-
operatives changed from ‘overconfidence’ in their capacity to one of a deep rooted
scepticism.
In spite of these limitations, many donors utilised co-operatives as a vehicle to deliver
externally funded programmes for poverty alleviation. This often sat comfortably alongside
the continuation of the government led and controlled co-operative sector. A seminal World
Bank study of 1993 noted the existence of inappropriate policy frameworks and the
detrimental effect of too much government intervention (Hussi et al.1993). At the same time,
there were also an increasing number of voices from within the movement calling for more
market orientation and less government intervention for co-operatives (Münkner, 1992). This
shift was marked by the International Co-operative Alliance at their 1995 conference in
Manchester, when a Statement on the Co-operative Identity was adopted which firmly
situated co-operatives as member-owned, democratically run and autonomous enterprises
(MacPherson, 1995). At the same time, the liberalisation policies of the 1980s and 1990s
began to remove government support and subsidy from co-operatives in many countries
even if this was not immediately reflected in a change in the policy and legal environment.
This is beginning to change with ongoing reform and liberalisation of legal and policy now
gathering pace which in large part draws on ILO Recommendation 193 in 2002, which sets
the international framework for co-operative policy for all, not just developing, countries. It
incorporates the 1995 Co-operative Identity Statement and the Co-operative Values and
Principles. (Henry, 2012: iii; Birchall, 1994).
6
http://wiego.org/informal-economy/laws-policies-beneficial-waste-pickers