Memorandum submitted by the Co-operative
College
THE CO-OPERATIVE
COLLEGE
1. The Co-operative College works to support
the education and research needs of the co-operative movement
in the UK and internationally. It is the lead agency in a consortium
of co-operative enterprises and agencies working with DFID under
a Strategic Grant Agreement (SGA). The aims are twofold: to work
within the UK co-operative sector to promote awareness of the
MDGs and to build the capacity of the co operative sector to deliver
appropriate and effective help to co-operatives in the south.
2. Our evidence draws on the work done under
the SGA and our enhanced understanding of the role co-operatives
can play in international development. It is based on two main
contentions:
— That co-operative enterprises and
the co-operative movement should be perceived as being situated
within the private sector.
— Co-operatives have a proven track
record in poverty alleviation and, if properly supported, have
the potential to make a more significant contribution in the future.
CO-OPERATIVES—A
GLOBAL PRESENCE
3. Globally co-operatives provide employment
for more people than multinationals—providing over 100 million
jobs. At the same time it is estimated that the livelihood of
three billion people is made more secure by co-operatives. Over
800 million people worldwide are members of co-operatives of which
140 million can be found within the European Union.
4. Co-operatives can be any kind of business
and operate in most sectors of economic activity. They can deliver
services and products at any size. The growth of the private sector,
and co-operatives as an important element in this, provide one
of the important motors for growth and development.
5. It is generally acknowledged that co-operatives
generally have strong local roots. This has not prevented them
from expanding their activities beyond national borders. UK consumer
co-operatives, for example, source their products from globalised
supply chains and even smaller worker co-operatives (eg Delta
T) will supply products for global markets. Co-operatives can
also have strong social and environmental practices.
6. It is important to note that while co-operatives
operate as individual enterprises, they also benefit from being
part of a wider movement with membership of sectoral, regional,
national, and international co operative institutions. We agree
with the International Labour Organisation (ILO) that:
"the promotion of co-operatives should be
considered one of the main pillars of economic and social development."
DEFINING THE
PRIVATE SECTOR
7. It is our key submission that co-operatives
should be perceived as belonging to the private sector. The globally
agreed definition of a co operative states this unambiguously:
"A co-operative is an autonomous association
of persons united voluntarily to meet their common economic, social
and cultural needs and aspirations through a jointly owned and
democratically controlled enterprise."
8. This has important implications for development
policies and practices. Governments and donor agencies need to
recognise co-operatives as a form of collective entrepreneurship
in their work to promote SMEs for example. There has been an assumption
in business advice services aimed at SMEs, that the archetypal
SME is the individual entrepreneur. The concept of collective
entrepreneurship has not been grasped by most donor agencies.
9. Support and guidance for enterprise development
needs to make adequate provision for the specific developmental
needs of co-operatives.
10. When planning for public sector reform,
a role for co-operative enterprise should be accorded similar
levels of support and scrutiny as the traditional PLC models normally
utilised. Co-operatives, for example, can provide an effective
vehicle for the large-scale provision of electricity and water.
This is beginning to be recognised by DFID with its support for
rural electricity co-operatives in Bangladesh but much more could
be done. When options are being considered for privatisation policies,
it is important to include co-operative enterprises among the
private sector options.
11. A common misconception about the role
of co-operative enterprise is that it is best suited to the establishment
of smaller rural enterprises but not for the development of globally
competitive and large scale enterprises. It is often argued that
co-operatives should be seen as a "stepping stone" and
playing a temporary role preceding larger scale enterprise growth
and development. This is very far from the truth. Ongoing research
into the global top 300 co-operative enterprises reveals a combined
annual turnover of $750 billion pounds with many over 50 years
old (preliminary estimates).
AN ENABLING
ENVIRONMENT
12. In the past, governments and development
agencies have promoted co-operatives that were not member owned
and controlled and which were subject to distorting state supervisory
regimes. A legacy of state control and supervision in many developing
countries has resulted in a disabling environment where co-operatives
are still used as vehicles for political initiatives and hence
vulnerable to distorted incentives, capture by elites and corruption.
13. Getting the enabling environment right
for co-operatives to flourish needs to be a key priority for DFID.
This matches with the co-operative sector's own desire to obtain
a level playing field, without government favour or interference,
so as to succeed as businesses that benefit the wider community.
14. The ILO is the lead agency in the UN
system for co-operatives and its 2002 Recommendation 193 on the
Promotion of Co-operatives provides a revised and effective policy
framework. It rejects state sponsored and managed co-operatives
and emphasises that they are enterprises. More support to governments
to enable them to adopt and implement Recommendation 193 is needed.
CO-OPERATING
OUT OF
POVERTY
15. Co-operatives are set up to meet their
members' needs and like other businesses are not framed around
an agenda for poverty alleviation. However they have contributed,
and continue to do so, to meeting the MDGs. We have listed some
of the key examples.
16. In many countries co-operatives provide
a mechanism enabling small producers to access markets and capture
more of the value chain. They have played this vital role for
the vast majority of small producers who now benefit from access
to Fair Trade markets.
17. Financial co-operatives in the form
of Savings and Credit Unions have proven successful in enabling
poor people to access financial services. Micro-insurance provision,
essential for reducing vulnerability, is best served by co-operatives.
The role of micro-insurance in encouraging risk taking, which
is essential in the development of vibrant small scale enterprises
has been little understood, and often ignored, as it is technically
more difficult than micro-credit. A particularly important point
is that for strict Muslim communities, conventional profit taking
financial services are haram, but co-operative and Takaful (a
form of co operative) institutions are halal.
18. Co-operatives also provide schools for
democracy and ways of enabling local leaders to emerge while remaining
accountable to democratic institutions. Their ownership and accountability
structures provide proven ways for ensuring increased equity.
19. Co-operatives provide an effective way
of enabling informal sector workers to organise for self help
and sustainability. For poor women co operatives can provide a
vital mechanism for self help and sustainable solutions.
20. A recent research programme exploring
the contribution of the co operative sector in four European countries
has explored its vital contribution to the development of Fairtrade
markets in Europe. Consumer co-operatives in both the UK and Italy
have led the way in ensuring minimum labour standards are operational
throughout their supply chains. Ethical trading practices can
provide effective business led responses to poverty alleviation
and as member based organisations, co-operatives can bring a dimension
to the CSR agenda that is absent from other private sector business
approaches.
AID INSTRUMENTS
21. While DFID has provided some challenge
funds for the private sector, these have lacked the long-term
consistency of schemes such as the Civil Society Challenge Fund.
A well-funded Private Sector Challenge Fund should be established
and run for at least five years. The private sector needs to be
involved in drawing up funding criteria. We would prefer such
a scheme to be managed in-house. If the management of these schemes
were to be out sourced as has happened in the past, organisations
should be selected that have a proven understanding of the wide
variety of forms the private sector can take, including co-operatives
and other forms of social enterprise. There should be proper consultation
on such a scheme.
22. DFID makes no specific arrangements
to support co-operatives. In May 2005, DFID did prepare a policy
statement in its How To series, How to leverage the co-operative
movement for poverty reduction. By way of contrast, we would
point out that in the US Congress has made provision in the Foreign
Aid Bill for a US$10 million annual programme—the Cooperative
Development Programme.
23. DFID has a partnership agreement with
the ILO, the lead UN agency for co-operatives, which is currently
under review. The Co-operative SGA consortium has submitted a
memorandum urging that DFID budgetary support should include funds
allocated specifically for co-operative development. We would
submit that DFID could promote this co-operative focus in its
work with other partners and donors including the European Union
and World Bank. In addition, a co-operative perspective could
also be included within DFID funded research programmes which
would help to develop further the evidential base on co-operatives
and their contribution to private sector development.
February 2006
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