The
cooperative movement while undergoing a resurgence in recent years is
staggering along for lack of proper management compromising the
movement's poverty alleviation potential, a report out last week said.
The
report, "The cooperative movement and the challenge of development",
singled out
defunct boards, poor leadership, riddled with corruption and poor foundation as the main problems bedeviling the movement....
The
cooperative movement used to be a force for good in the 1960s and
early 1970s. Bringing farmers, businessmen and savers together to pool
their resources and benefit from economies of scale in accessing markets
and credit.
The
dismantling of the produce marketing boards in the 1990s dealt a body
blow to some of the cooperative societies whose inefficiencies were
exposed when they came up against private sector competition.
Under
the marketing boards government was the sole buyer of produce, setting
prices -- often a miserable fraction of world prices, and paying farmers
at leisure.
"Once this monopoly was broken and farmers were free to sell their produce to anyone, the cooperatives, to whom government inefficiencies had been transmitted, didn't have a chance....
The
recent study however shows that some of the bigger more credible
cooperatives continue to thrive or at least exist, despite the
tribulations of the last three decades.
About 3,000 cooperatives exist according to the trade ministry.
In
fact the savings cooperatives are experiencing a comeback with savings
up to sh280b. They still have a way to go when compared to collections
of sh2.3b in the 1960s, about sh500b in today's prices...
The Kenyan savings cooperatives, which have suffered relatively little upheavals, have at least $2b in savings.
As
part of the recommendations the reports authors suggest that government
should intervene in the cooperatives to set interest rates and oversee
governance issues so as to prevent the coops takeover by powerful
individuals.
The researchers are right and wrong.
Right
that government should, must, is obligated to strengthen its regulatory
function, ensuring that the cooperatives are run according to the act
and therefore preventing the capture of these groups by greedy
individuals.
In
addition government will do well to help these cooperatives improve
their capacity to manage themselves -- proper book keeping has to be top
of the agenda.
The
high interest rates some of the cooperatives are offering are more a
function of poor business acumen than outright extortion, but the way to
bring them under control is not via government control.
"Interest rates should be left to the devices of the market, governments are not sensitive to these forces and by controlling them would only serve to accentuate the inefficiencies in the movement...
For
example during the recent inflationary spike for political reasons
government may have kept interest rates low. This would have been
disastrous because the likely reaction of the market would be to borrow
more, increasing money in circulation and making an already bad
inflationary situation worse. And that is only one probable negative
effect of politically set interest rates.
Maybe
as a way to prompt the market to lower interest rates is to find a way
to encourage better managed cooperatives to set up or to expand into
areas where mismanaged cooperatives exists. The competition will do the
needful.
The importance of a robust cooperative movement can not be overemphasized.
"As a mechanism for growing productivity in the rural areas a well run cooperative that will provide, inputs on credit, a ready market and the benefit of a collective bargaining power, there is little around to match it....
In
addition it can provide a spring board for the greater
commercialisation of agriculture, raising agriculture's share in the
economic output of the country and by extension raise rural incomes.
Yes
government should be involved in the cooperative movement but only as
far as creating an enabling environment for the movement to thrive.
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