Limitations and challenges of cooperatives

As with many other businesses, cooperatives have their own limitations, obstacles, and challenges, which could relate to biophysical, socio-economic, institutional, communication, governance, and management issues. Lack of irrigation, productive lands and lack of roads or power supply may well be limitations for agricultural production cooperatives whereas outmigration of the rural population or disappearance of family farms could be an obstacle.

The competitiveness of cooperatives can be enhanced through capacity-building, vertical integration with private companies, marketing networks, and corporate businesses; product diversification, and collaboration with other businesses.

Sheer competition with private companies for product marketing, labor shortages, and lack of necessary capital for operation and maintenance could be another set of problems for the development of a cooperative. Increasing prices for inputs such as fertilizers, fuels, pesticides, rising labor wages, governmental regulations, unfavorable global trade, and environmental regulations may add an additional burden on cooperatives.

Cooperatives may lose their regional, national, and international competitiveness if their production environment, support system, demand conditions, and availability of infrastructure and access to new technology is not assured. The competitiveness of cooperatives can be enhanced through capacity-building, vertical integration with private companies, marketing networks, and corporate businesses; product diversification, and collaboration with other businesses.

It is critical that the cooperative develop its own brand and identity for successful marketing. This means cooperatives should have a great deal of professionalism in their operation, record keeping, communication, product quality, and competitive prices. Many cooperatives are unable to access and utilize science and technologies that the Government of Nepal has already developed and is available for public use. Finally, the establishment of clear communication among its members is a major challenge for cooperatives. Cooperative purchasing of inputs such as seeds, fertilizers, pesticides, and other farm supplies will be beneficial to members and will save them money. The importance of good leadership in cooperative management and development cannot be overemphasized.

Therefore, regional and national marketing initiatives need to be undertaken by corporate or private businesses, corporations, or other joint venture entities who can invest in the necessary logistics, transportation, storage, and human resources.

Cooperatives should fully utilize government services in their development and operation. The government of Nepal has an extensive array of agencies and institutions dedicated to the development of cooperatives in the country. They include: the Department of Cooperatives, the Ministry of Agriculture and Cooperatives, the Central Cooperative Training Center, the National Cooperative Development Board, the Nepal Central Consumer Cooperative Federation Ltd., the Nepal Federation of Savings and Credit Central Cooperative Union Ltd.,  the National Cooperative Bank, Ltd., and the Central Dairy Cooperative Association Limited, Nepal. It is extremely important to establish a high level of coordination, communication, and collaboration among these agencies and cooperatives for the success of cooperatives in Nepal.

Vertical Integration of Cooperatives

Supply chain management always has been a major challenge for efficient production and marketing of agricultural commodities. Many farmers are struggling for better prices for their produce, governmental support, and marketing of their commodities. On the other hand, the rising urban population is resulting in an increasing demand for food and other commodities.

Small cooperatives formed in rural areas are not capable of undertaking bigger roles in processing, packaging, storage, and marketing of agricultural products primarily due to their limitations on capital and human resources, a smaller volume of production, lack of knowledge, and lack of necessary infrastructures. Therefore, regional and national marketing initiatives need to be undertaken by corporate or private businesses, corporations, or other joint venture entities who can invest in the necessary logistics, transportation, storage, and human resources. This brings an opportunity for vertical integration of cooperatives with corporate or private businesses, corporations, and similar other companies in the agricultural supply chain. The formulation of appropriate policies, rules and regulations, and guidelines are necessary for this integration.

(To be continued…)