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

INTRODUCTION Background of the Study

– Ethiopia's agricultural sector accounts for about 44percent of national GDP, 85 percent of employment(World Bank, 2011).

–Any improvement in the agriculture stimulateseconomic development at a national and regionallevel.

– The government of Ethiopia recognizes theimportance of rehabilitating agriculture and placed ahigh priority on it.

– Failure to develop the agricultural marketing systemis likely to go against most efforts to increaseagricultural production and productivity.

–Consequently the government of Ethiopia ispromoting cooperatives to develop the agriculturalmarketing system (Tesfaye, 2005).

Background of the Study contd

• A large number of cooperatives in Ethiopia participatein 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 enablesmallholder farmers to deal with imperfect markets.

• But are these cooperatives playing the roles that arerequired from them? Are they facing any challenges inaccomplishing their tasks?

• In line with above realities, the purpose of this study isto examine the performance of the Sidama Elto union,identify the problems and suggest remedial measures.

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.

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.

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.

Objective of the Study

General Objective

• 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

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

Data Management and Analysis

• Percentages, mean, frequency, marketing margins

and ratios were used to summarize and analyze the

data.

3. DATA ANALYSIS AND INTERPRETATION

3.1. Overview of the Background and of Current

status of SEFCUItems At start Currently

Member primary cooperatives 7 71

Individual members of the Member primary cooperatives 1190 13099

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 1183 12231

Capital 67,100 14.6 million

Own Warehouse No Yes, on 4300m2

Employment NA 15

3.2 Performance of SEFCU in agricultural input and output marketing

3.2.1. Performance of SEFCU in agricultural Input marketing

3.2.1.1 Fertilizer Marketing

• Determining who takes the fertilizer loan, and recovering thesame 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 purchaseit with full payment and for those who have good record inrepayment.

• The KI from SEFCU said that the screeners of the deserversof the loan, i.e. bureau of agriculture officers, didn’t give therequired care parallel with the risk, and this results in highdefault for which the union is responsible in paying back tothe financers. That is why the SEFCU decided to limit its roleto facilitation only so as to avoid such uncontrollable risk ofdefault.

Year Fertilizer (in quintal) Yearly %ge change

2006 22730 -

2007 36000 158

2008 55034 153

2009 28730 -48

2010 67041 233

2011 150000 224

2012 - -

2013 - -

3.2.1.1 Fertilizer Marketing

3.2.1.2 Seed Marketing

• Among the primary cooperatives which are the members ofthe union, there are 3 cooperatives engaged in seedmultiplication.

• Unlike other zones in SNNPRS, the Sidama zone bureau ofagriculture still handles the seed marketing despite the stress itposes on the infrastructure of the government and time takingactivity which would have been exerted on other productiveactivities. The SEFCU is engaged only in haricot bean seedmarketing activity.

• Despite this motivating performance from SEFCU, as theyearly bureau of agriculture reports shows, the supply of seedis much below the required even less than that of fertilizer.Therefore all stakeholders need to come together to solve theseed shortage. In addition to solving the shortage problems,the current high seed prices and uneven distribution could besolved through the engagement of the cooperative sector inseed marketing, as they (cooperatives) already showed theirability to stabilize market in fertilizer marketing.

Year Seed (in quintal) Yearly %ge change

2006 975 -

2007 167 -83

2008 2689 1600

2009 834 -69

2010 2023 242

2011 1100 -46

2012 1500 36

2013 3250 116

seed marketing by the SEFCU

3.2.2. Performance of SEFCU in Output marketing

3.2.2.1 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.

Year Plan Actual %ge change between actual and

plan

%ge change in actual marketed

grain

2006 15000 2026 -86 -

2007 17000 3005 -82 48

2008 20000 5032 -75 67

2009 20000 7015 -65 39

2010 30000 29000 -3.3 313

2011 50000 16000 -68 -44

2012 55000 20000 -63 25

2013 NA NA - -

Trends in agricultural output marketing

3.2.2.2 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%

3.2.2.4 Sustainability of the SEFCU Marketing Linkages

• From interviews with the KI, The marketing linkagesthat the union has created so far are unsustainable.

• WFP has been the major partner since 2010 through thetemporary p4p program.

• Even Before arrival of the WFP, the union basicallyused 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 notsustainable by their nature as they saturate overtime.

• The most sustainable marketing linkage that the unioncan create is to link itself with consumer cooperativesso as to sell its processed/raw agricultural productswithout fear of saturation.

Year (In E.C) Total Debt Total Asset Profit or loss D-A ratio ROA ratio

1997 0 250,025 99,814 0 39.9

1999 1,428,886 1,755,491 -108,691 81.3 6.1

2000 1,506,602 2,326,504 263,323 64.7 11.3

2001 1,609,767 2,804,098 331,032 57.4 11.8

2002 3,545,838 5,462,235 695,259 64.9 12.7

2003 10,281,105 14,886,672 1,925,631 69.1 12.9

2004 5,286,685 12,134,581 1,264,322 43.5 10.4

2005 6,011,832 15,283,719 3,259,117 39.3 21.3

3.3 Financial Performance of SEFCU: Ratio

analysis

3.4. Performance of SEFCU in creating access to loan to the member cooperatives

• Financial institutions are mostly reluctant to provide loan tofarmers due to lack of collateral and fear of default (Amha, 2010).

• That is why Cooperatives unions are entrusted by the governmentto provide fertilizer loan and also collect the same at the maturity.

• As the KI informants revealed, such fertilizer loan defaults are notonly because of inability of the farmers to payback, But alsobecause of the hoarding of money at each level of the cooperativestier.

• In addition to facilitating the provision of fertilizer loan, SEFCUdirectly provides loan to the primary cooperatives which helpsthem to purchase the members agricultural products and sell it backto itself.

• SEFCU itself acquires the loan from the banks. Documents in theunion show that only 10-20% of the requested loans were approvedby the financial institutions which show their reluctance to provideloan for the union.

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

5. RECOMMENDATION

• Credit facilitation

– 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

THANK YOU!!!