ASSESSMENT OF PERFORMANCE OF SIDAMA ELTO COOPERATIVE UNION. By: Bantyergu Engida

Transcription

1 ASSESSMENT OF PERFORMANCE OF SIDAMA ELTO COOPERATIVE UNION Research Report presented on National Conference on Cooperatives Development organized by Hawassa University HU VP-RTT and Federal Cooperative Agency By: Bantyergu Engida

2 INTRODUCTION Background of the Study Ethiopia's agricultural sector accounts for about 44 percent of national GDP, 85 percent of employment (World Bank, 2011). Any improvement in the agriculture stimulates economic development at a national and regional level. The government of Ethiopia recognizes the importance of rehabilitating agriculture and placed a high priority on it. Failure to develop the agricultural marketing system is likely to go against most efforts to increase agricultural production and productivity. Consequently the government of Ethiopia is promoting cooperatives to develop the agricultural marketing system (Tesfaye, 2005).

3 Background of the Study contd A large number of cooperatives in Ethiopia participate in the marketing of agricultural inputs and produce (Bernard et.al, 2007). By providing a ready market for farmer s crops, reducing transaction costs, winning better price, integrating small farmers to the broader economy, agricultural cooperatives are required to enable smallholder farmers to deal with imperfect markets. But are these cooperatives playing the roles that are required from them? Are they facing any challenges in accomplishing their tasks? In line with above realities, the purpose of this study is to examine the performance of the Sidama Elto union, identify the problems and suggest remedial measures.

4 Statement of the problem small holder farmers, who comprise the majority of the rural poor, need effective production support and marketing services to facilitate production and sales of their produce. Gebremeskel et.al (1998) recognized that the scattered and small quantity production of the smallholder needs to be collected and assembled, graded, and transported from one market level to another.

5 Statement of the problem contd Tanguy et.al (2005) revealed that many smallholders are rarely able to exploit the potential gains from the commercialization. There is a need for mechanisms to cope with the marketing constraints Bezabih (2009) concluded co-operatives are playing a strong role in the economies of local communities. Through voicing of common goals, enhancing participation in value chains and protection of producers from unfair pricing, cooperatives promote the living standards of members.

6 Statement of the problem contd Reports show that the cooperatives union is suffering from lack of infrastructures and capital. The study answers whether the Sidama Elto Union is doing what it is supposed to do or not? And it suggests remedial measures.

7 General Objective Objective of the Study The overall objective is to study the performance of the Sidama Elto Union. Specific objectives to examine the performance of SEFCU in agricultural input and output marketing to assess the financial performance of the SEFCU to evaluate the role of SEFCU in creating access to loan to the member cooperatives to identify the constraints that Sidama Elto Union face

8 Study Methodology Source of Data The sources of the data for this research were both primary and secondary. Primary data was collected from officers, and key informants from the Union, and various governmental offices etc. In addition, annual reports of the Union, the cooperative bureaus, published and unpublished documents were sources of data. Method of Data Collection Semi structured interviews were used for data collection from key informants in the Union to get more insight to identify the problems

9 Data Management and Analysis Percentages, mean, frequency, marketing margins and ratios were used to summarize and analyze the data.

10 3. DATA ANALYSIS AND INTERPRETATION 3.1. Overview of the Background and of Current status of SEFCU Items At start Currently Member primary cooperatives 7 71 Individual members of the Member primary cooperatives woredas in which the Member primary cooperatives operate 4 15 female individual members of the member primary cooperatives `7 868 Male individual members of the member primary cooperatives Capital 67, million Own Warehouse No Yes, on 4300m 2 Employment NA 15

11 3.2 Performance of SEFCU in agricultural input and output marketing Performance of SEFCU in agricultural Input marketing Fertilizer Marketing Determining who takes the fertilizer loan, and recovering the same is among the most difficult activities it requires great care in screening of deservers of the loan. Normally, the fertilizer loan is given those who can t purchase it with full payment and for those who have good record in repayment. The KI from SEFCU said that the screeners of the deservers of the loan, i.e. bureau of agriculture officers, didn t give the required care parallel with the risk, and this results in high default for which the union is responsible in paying back to the financers. That is why the SEFCU decided to limit its role to facilitation only so as to avoid such uncontrollable risk of default.

12 Fertilizer Marketing Year Fertilizer (in quintal) Yearly %ge change

13 Seed Marketing Among the primary cooperatives which are the members of the union, there are 3 cooperatives engaged in seed multiplication. Unlike other zones in SNNPRS, the Sidama zone bureau of agriculture still handles the seed marketing despite the stress it poses on the infrastructure of the government and time taking activity which would have been exerted on other productive activities. The SEFCU is engaged only in haricot bean seed marketing activity. Despite this motivating performance from SEFCU, as the yearly bureau of agriculture reports shows, the supply of seed is much below the required even less than that of fertilizer. Therefore all stakeholders need to come together to solve the seed shortage. In addition to solving the shortage problems, the current high seed prices and uneven distribution could be solved through the engagement of the cooperative sector in seed marketing, as they (cooperatives) already showed their ability to stabilize market in fertilizer marketing.

14 seed marketing by the SEFCU Year Seed (in quintal) Yearly %ge change

15 Performance of SEFCU in Output marketing Trends in agricultural output marketing The general trend in output marketing shows promising future. Although the union is far from meeting its yearly plan, the actual marketed grain has been increasing from time to time. But as compared to the total agricultural production in the zone, the role of SEFCU in output marketing is very low. SEFCU marketed only 1-2% of the total agricultural production of the zone.

16 Trends in agricultural output marketing Year Plan Actual %ge change between actual and plan %ge change in actual marketed grain NA NA - -

17 Marketing margin analysis: Gross marketing margin of the union (GMMu) A marketing margin is the percentage of the final weighted average selling price taken by each stage of the marketing chain. The total marketing margin is the difference between what the consumer pays and what the producer/farmer receives for his product. In other words, it is the difference between retail price and farm price (Crammers and Jensen, 1982). Union's Gross Marketing Margin (GMMu) is the portion of the price paid by the wholesaler/consumer that belongs to the cooperatives union for the service it rendered. GMMu==10.1%

18 Sustainability of the SEFCU Marketing Linkages From interviews with the KI, The marketing linkages that the union has created so far are unsustainable. WFP has been the major partner since 2010 through the temporary p4p program. Even Before arrival of the WFP, the union basically used to sell output to government for its re-settler s aid, and to various NGOs for their aid programs. Both the above mentioned partnerships are not sustainable by their nature as they saturate overtime. The most sustainable marketing linkage that the union can create is to link itself with consumer cooperatives so as to sell its processed/raw agricultural products without fear of saturation.

19 3.3 Financial Performance of SEFCU: Ratio analysis Year (In E.C) Total Debt Total Asset Profit or loss D-A ratio ROA ratio ,025 99, ,428,886 1,755, , ,506,602 2,326, , ,609,767 2,804, , ,545,838 5,462, , ,281,105 14,886,672 1,925, ,286,685 12,134,581 1,264, ,011,832 15,283,719 3,259,

20 3.4. Performance of SEFCU in creating access to loan to the member cooperatives Financial institutions are mostly reluctant to provide loan to farmers due to lack of collateral and fear of default (Amha, 2010). That is why Cooperatives unions are entrusted by the government to provide fertilizer loan and also collect the same at the maturity. As the KI informants revealed, such fertilizer loan defaults are not only because of inability of the farmers to payback, But also because of the hoarding of money at each level of the cooperatives tier. In addition to facilitating the provision of fertilizer loan, SEFCU directly provides loan to the primary cooperatives which helps them to purchase the members agricultural products and sell it back to itself. SEFCU itself acquires the loan from the banks. Documents in the union show that only 10-20% of the requested loans were approved by the financial institutions which show their reluctance to provide loan for the union.

21 3.5. Problems that affect the performance of SEFCU major the problems affecting the union in their order of importance are: Lack of adequate amount of credit Competition from private traders untimely release of credit Tendency to invest on union instead of investing at primaries Lack of trust of the union on the primaries Lack of adequate Follow up and support from government Infrastructural problems Embezzlement of funds in the primary cooperatives Lack trained man power at the primary cooperatives level

22 Credit facilitation 5. RECOMMENDATION GOs and NGOs have to extend their financial supports Marketing and cooperatives bureau of the woreda also has to play credit facilitation roles effectively. some level of member financing, Awareness Creation Strengthening the Support of stakeholders education and training, employment of skilled man power, provision of land, business infrastructure and equipments. Fighting Embezzlement in the cooperatives

23 THANK YOU!!!