Cooperative Agencies Distinct from Cooperative Sector




Dear Editors,

This letter comes as a response to your recent viewpoint published on February 19, 2017 headlined “Change from Farming to Industry Herculean Task” [Volume 14, Number 877]. The viewpoint presented in the article misunderstands the relationship between cooperative agencies and the cooperative sector. The intent of this letter is to clarify the relationship between the cooperative agencies and the cooperative sector.

In the article it was stated that “the cooperative agencies and unions are buyers of agricultural products from each member farmers.”

It does not make clear the existing mandate, ownership boundary and relationship of the cooperative agencies and the cooperative sector.

The cooperative agency is a government body established with a mandate to promote, and register cooperatives as service provider member owned economic institutions, build the cooperative sector service rendering capacity and regulate the sector based on the national cooperative proclamation, directives and International Cooperative Principles (ICP).

The cooperative sector provides the farmers input-output marketing through its own structure, the primary farmers’ cooperatives receive agricultural input from the cooperative unions top farmers to supply to its members and aggregate agricultural output from its members to supply to the cooperative union top farmers and to create economics of scale to bargain in the market.

Therefore, the primary cooperatives and top farmers’ cooperative unions are the ones doing the entire commodity transactions and the agencies are supporting the sector to make them an efficient and cost effective service provider to the economically powerless communities in the market.

The cooperative sector is a private sector which belongs to member shareholders, such as farmers in rural areas or consumers in urban areas. In the cooperative sector, members are owner investors, ultimate decision makers and users of the cooperative services, so the government (Cooperative Agencies) has no stake in ownership and cannot make such transactions.

What makes the cooperative sector different from the profit oriented private businesses is that they are not for profit maximization, but provide fairly priced services and investment dividend to its user members not to outside investors.

We would like to make clear the misunderstanding and create the correct understanding of the Cooperative Sector.

Getachew Mergia: Cooperative Development Expert



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