Ethiopia has a rich tradition of cooperatives such as Iqub and Idir. Iqub is a collection of peoples in the form of association having common goals in mobilizing resources, especially financial savings and distribute it to members on a rotating basis.
It has vital roles in mobilizing resources, developing social integration and saving culture. Idir, on the other hand, is an association of people that have the objective of providing social and economic insurance for the members in the circumstances of death, accident, and negotiations in case of conflict among others.
In the case of a funeral, Idir serves as insurance where community members elect their leaders, contribute resources either in kind or in cash and support the sorrowing member. In modern development discourse, the role of cooperatives is receiving due recognition.
Particularly, in developing countries like Ethiopia, whose economic basis is the agriculture sector and who has such traditions such as equb and idir, cooperative associations could play a key role in development mobilization. With the goals of improving the lives of the people, formal cooperative associations were established in Ethiopia in the early 1960s, when the first cooperatives’ directive was enacted.
This is despite the fact that their role in fostering economic development has been limited for long. But recently, there have been widespread efforts to alter this reality. According to the Central Statistics Agency, cooperatives’ contribution to the GDP has reached 35 percent. Currently, there are 82,000 cooperatives, 381 cooperative unions and three federations in the country who have a registered capital of over 722 USD, said the Ethiopian Cooperatives Agency.
One of the effective ways through which cooperatives support the country’s agriculture is by providing credit to farmers. The cooperatives also provide farmers with fertilizers, seeds, insecticides, pesticides by fair market price. In the past six months, cooperatives associations, unions, and federations have supplied 269,193.05 tons of agricultural inputs to the national market.
In this regard, by meeting demands, they have been able to play a key role in stabilizing the national market. All in all, the farmers acquire 98 percent of agricultural inputs from cooperatives.
In addition, cooperative associations have also supplied 34,341.18 and 3239.63 tonnes of top seed and chemicals as insecticides and pesticides respectively in the first six months of the fiscal year. Abedu Adembuser, Agency Planning Project and Information Directorate Director told The Ethiopian Herald that cooperative associations and unions have earned some 14 million USD from the export of agricultural products such as coffee, grain, vegetables, fruit, and spice. Some 27 cooperative unions and two federations have also taken part in the export.
According to Abedu, the cooperatives have not been successful in achieving their six-month export target which stood at 70 million USD. The Cooperatives have managed to earn only 14 million USD during this time, achieving only 20 percent of the plan due to the low level of commitment, weak structural linkage/ integration, instability in some parts of the country and inflation.
The agency has also provided 6.8 million Birr as a loan to 1,043 cooperatives to support their activities. It has also made available 3.33 billion Birr loan for expanding and create cooperatives market linkage, build their capacity and encourage value addition. As to him, 878 Cooperatives have been trying to get involved in various value addition schemes in agro-processing.
However, while the cooperatives have the plan to build 21 factories in the past six months, Wongi union molasses factory was the only one to be successful and be completed and enter operation. Berhanu Dufera, Agency Financial Cooperative Development Directorate Director on his part said the overall capital of the cooperatives has increased by one billion Birr over the six month period. Members of the Cooperatives have also opened saving accounts in the name of 100 thousand children and saved 2.8 million Birr. The cooperatives’ auditors’ have also been provided with training on International Finance Reporting Standards (IFRS), which has enabled them to prepare financial reports that meet international standards.
The agency has also conducted a financial inspection and auditing on 13,922 cooperatives as per cooperatives law proclamation number 9/85/2009 to make sure that they are financially stable. The agency has finalized the preparation of the draft cooperatives policy and roadmap which awaits approval. So far, the cooperatives have created 37 thousand temporary and seven thousand permanent jobs.
The 82,000 cooperatives, 381 cooperative unions and 3 federations have currently more than 722 million USD capital. Considering the performance of the cooperatives and Ethiopians’ strong attachment to similar associations such as eqib and idir, if the right strategies are put in place to integrate the modern concept of cooperatives and that of the traditional ones, cooperatives would be able to play a critical role in boosting the country’s economic performance.
Heald March 21/2019
BY MULATU BELACHEW
