How to build a cooperative in three not-so-simple steps

Two farmers are stronger than one and a cooperative of farmers is strong enough to benefit whole communities. But how do you go from a group of individual farmers to a cooperative that functions as one unit?

The answer to that question can hardly be fitted into one article. A cooperative based on and run by a group of members is a complex organism that it takes time to develop. Nonetheless, we have tried to boil our experience down to three general steps that Danish Forestry Extension uses when supporting local farmer groups to become functioning cooperatives that provide their members with market access, technical advice, and representation to the authorities.

Right now, we are doing just that in Vietnam and Nepal. In Nepal, we are focusing on sustainable cultivation of medicinal/herbal plants in community forests that can be processed into essential oil and sold to a private company. In Vietnam, we have been collaborating with farmer unions for years. Here we have helped local farmers organize small-scale acacia tree plantations and assisted them in improving access to technical knowledge to manage their trees and use high quality seedlings to improve their small plantations. During the past years, residents in 106 Vietnamese villages have benefitted from more effective forest management and access to three cooperatives from where they can access forestry services and sell their wood. In Nepal, the benefits are similar. In close collaboration with our partner organization Wildlife Conservation Nepal, Danish Forestry Extension has established seven women groups that enable more than 200 women to produce and sell essential oil obtained from plants in community forests. This has made it possible for the women to become more economically and socially independent in their local communities and made them appreciate the value of their local community forests more.

Besides socio-economic and environmental gains, the two projects have one other thing in common. None of them can be considered fully completed yet. Making lasting change through establishing cooperatives is not done overnight and if a quick fix to poverty and deforestation exists, cooperatives is not it. However, the long timeline and patient support and development required has a substantial upside: If you succeed, you might well have empowered whole communities in ways that will benefit humans and nature far beyond the end date of your project. Not because of the establishment of the cooperative itself but because of the benefits it facilitates in the long run and the capacity to work as an organized unit.

Therefore, without further ado: Our simplistic introduction to Danish Forestry Extension’s approach to building cooperatives:

1.    1. Identifying the commercial potential and building internal trust

A cooperative needs one or more commercial products. If the context you operate in is already characterized by farmers with technical capabilities and some sort of organization, you might be able to jump to step two in this article. If not, then you start here – with the identification of a product with a commercial value and an existing local market demand.

In Nepal, where group work is a common approach to problem solving, our women groups cultivate lemongrass and other plants and sell them to a company that uses the oil from the plants for cosmetic products. The plants are the products that unite the women and their efforts. When identifying the commercial potential it is important to investigate the local market and its possibilities. The reason our cooperatives in Nepal sell essential oils is that there was a local company willing to buy the product. In Vietnam, a long-lasting government encouragement for planting acacia trees and an increasing international demand for wooden furniture and other acacia related commodities made it meaningful to focus on acacia tree plantations. The commercial potential needs to be feasible on a market level and a practical level. You need demand and a buyer but also the technical equipment and knowhow necessary available to the farmers. For example, you cannot make fruit plantations if the farmers do not have access to the storage and electricity necessary to keep the fruit fresh.

Having identified the commercial potential in collaboration with the local partners and the farmers who know the local context, you are now ready to get more locals interested in the project. This happens when they see the potential benefits of collaboration and it is a process that always starts with education and trust building. At Danish Forestry Extension, we train our partners and the farmers in both technical and organizational elements based on our experience with cooperatives and forest management which we have been involved with in Denmark for over a century.

Based on this technical and organizational foundation you can start laying the bricks for establishing the cooperative. This often starts with the motivation of farmers to form smaller working groups where they can share knowledge and exchange labor to ease the work. These small groups are essential for creating the internal trust that your cooperative will rely on in the future, and once this initial trust and faith in the economic possibilities of the local work has been developed you’re ready for the next step towards forming the cooperative.

1.    2. Establishing the cooperative as a local organization

Are your small groups of farmers working well now? Then it is time to present to them the range of opportunities reachable through setting up a cooperative and being part of a stronger business unit. At this point, you have laid the first base of trust necessary for an organization to form and now it is time to set it up and prove its trustworthiness.

A cooperative that is run and owned by members is typically set up with a board representing the members, a manager who runs the cooperative on a daily base, and a common set of rules and bylaws. In communities where the technical, financial and organizational experience among the farmers is limited, the project-owner will have an important role as facilitator to make sure that the elected members are aware of the qualifications and skills necessary in their official roles in order for the organization to prosper. Often awareness is not enough, substantial training and follow up is required.

Context is also important when setting up the organization. Knowing the history, vulnerability and risk willingness of the people you set out to organize is vital to your efforts and unawareness of previous efforts and challenges can endanger the success of your organizational setup. This is an important reason for our close collaboration with national partners in the countries we work in as the idea of a cooperative can be received differently depending on the country’s culture and history.

The setup with a manager overseen by the board and a general assembly governing the board is an effective way to ensure checks and balances in the system, but a common set of rules and bylaws do not only serve an administrational purpose. Actually, the formulation of these documents can prove crucial to the future of the cooperative. The reason is that the rules should address the issue of profit sharing and other membership advantages of the cooperative. We have mentioned the importance of building trust and faith in the opportunities of the cooperative earlier on. Making fair, sensible rules at this point in the process will increase the transparency of the cooperative to external actors and increase trust among them. At the same time, sensible rules make it easier to solve the problems that inevitably will appear during the process of setting up an operational cooperative.

1.    3. Professionalization and building external trust

At this point the cooperative is formed. If the cooperative is now facilitating the cultivation and sale of the members’ products making them better off than before, then you have succeeded in making a change for the people involved. Now it is time to make sure that the change will be lasting. It is time for the few pioneers who entered the project to prove the sustainability of their success to the many sceptics whose support they will need in the long run.

This is the part of the process that takes time and where small, incremental improvements count as important victories. Budgets need to be specified and fine-tuned, responsibilities of the different roles in the organization need to be itemized, and the quality of the products and services offered/sold needs to be refined.

To achieve this, education is needed. Therefore, as a project-owner, you need to invest in this training and the following re-trainings in topics such as organizational management, financial analysis, budget planning, sales and marketing, contract negotiation etc. These trainings will need to be gradually introduced and mixed with a fair amount of learning by doing to gain local experience and build confidence within the cooperative management unit. As a project owner you must motivate and guide them to make wise decisions. They will grow with their experience and responsibility, but you must be patient.

Polishing budgets and role specifications and investing in training may seem excessive for a small cooperative but at this stage, it is not. First of all, these initiatives are necessary to achieve a cooperative run as a democratic business that is able to provide high quality services to its members and thereby provide them with an economic and social return. Secondly, this will lead to trust towards the cooperative externally and more members will join.  A smooth-running organization is necessary to optimize earnings for the members, and at the same time these activities boost the expertise within the organization – both factors that greatly influence the surrounding community’s trust in the cooperative’s future. The trust you will need to ensure that the change you have made becomes lasting.

We make change by sharing our experience

Setting up a cooperative is like buying a car. The difficult part is not to make the purchase in itself, but to figure out which type is best suited for the locality where you’ll be using it. Making the right choice and learning how to drive the car right is not done easily or with the help of a three-step-guide. It requires a great amount of experience and effort. But as mentioned earlier these efforts also mean that you have helped forming an independent small-scale business unit which foster local democracy, market access, improved business management and increased income generation among marginalized local communities.

Danish Forestry Extension was founded to make an impact in the world by making the technical and organizational experience of Danish forest owners available. Our examples from Nepal and Vietnam show how we can support farmers to tap into local value chains in order to sell their forest related products and continue that activity after the projects end.

Private companies who wish to work with small holding farmers do not always have the time and experience to support that process and we therefore play an important role in merging producers and the private sector while securing that the forest and environment benefit at the same time. If you found our three-step-teaser interesting, feel free to contact us with your questions about building cooperatives. We are happy to share our knowhow with whomever wishing to make an impact.