A Development Assistance Strategy for Co-operative Development (1994) - Part 1


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    This document has been made available in electronic format
         by the International Co-operative Alliance ICA 
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                         September, 1994


          (Source:  Report of a Study Commissioned by ICA
          Europe - Co-operative Adjustment in a Changing
          Environment in Sub-Saharan Africa - pp.61-72)

            ***************************************
               A Development Assistance Strategy
                 for Co-operative Development
            ***************************************            
            
Development assistance for co-operative development has to be
re-oriented to support adjustment and transformation of co-
operative organizations as discussed in Chapter II of this
report. The following basic principles should guide the way in
which such assistance is given.


3.1  Assistance on a Movement-to-Movement basis
************************************************

Donor assistance should be given on a movement to movement
basis. This means that agreements on cooperation and
channelling of development funds should be a bilateral
relationship between the co-operative movement in a donor
country and the co-operative movement in a recipient country.
Agreements should not be signed with the government in a
recipient country on behalf of the co-operative movement and
funds should not be channelled through government accounts.

Likewise, government funds for co-operative development in the
donor country should be placed at the disposal of the co-
operative movement in the donor country. In other words, a
movement to movement arrangement presupposes that the co-
operative movement in both ends are the key actors.

This principle has to be pursued with vigour. A government in
a recipient country which is not willing to accept a
movement-to- movement relationship is in all likelihood not
willing to provide the co-operatives with the autonomy we have
argued is a prerequisite for success in the adjustment
process. The failure to achieve a movement to movement
relationship due to government objection raises serious doubts
about how meaningful it is to provide assistance to the formal
co-operative movement in the country concerned. In all
circumstances it suggests a very careful assessment of the
preconditions before major commitments are made.

It should be noted that a government donor agency can play an
important and constructive role by lobbying with governments
for the disengagement of co-operative movements.


3.2  Partnership in co-operative development
********************************************

As far as possible cooperation between two movements should be
characterized by partnership and equality. However, we have to
admit and recognize that this ideal situation is seldom fully
possible to achieve for the inescapable reason that one
movement is the receiver of assistance given by another
movement. In such a situation there can never be equality. It
is hardly meaningful and constructive to ignore this fact. On
the contrary, there are good reasons to bring it out and
discuss its implications.

Successful cooperation for co-operative adjustment presupposes
shared concerns, shared objectives, shared perceptions of what
the problems are and what the remedial measures ought to be.
As an entry point and as a partner for cooperation, it is
particularly important that these perceptions are shared with
the apex body, where such a body exists.

In a situation of inequality that cannot be avoided, it is
indeed a subtle issue to determine to what extent commitment,
sense of crisis and urgency, perception of problems,
objectives, etc. are shared.

Deeds rather than words will be a valid indicator. Therefore,
a donor should enter into a dialogue with the apex
organization as a preliminary phase to a more substantive
involvement in a support programme. In this phase a context
specific strategy for co-operative transformation should be
elaborated jointly. This could mean a modification of the
strategy proposed here or some other strategy of a similar
nature.

In a subsequent phase the donor should take a wait and see
position in order to give the local organization time to
demonstrate its commitment to what has emerged in phase one in
practical measures. Alternatively the donor can base its
judgement on what the local organization has done in terms of
adjustment in the past. Depending upon the experience in this
phase the donor may decide to proceed or to withdraw.

In a situation where there already exists a support programme
which ought to be revised, this process should be initiated at
the time the current agreement comes to an end.


3.3  The donor as a supporter, the receiver as an executor
**********************************************************

The donors should not have an executive but a supportive role
in the formulation and implementation of a programme for co-
operative development. The executive function should rest with
the recipient co-operative organization.

While the leading role should rest with the recipient
organization also in the programme formulation phase, this
should preferably be a joint effort. This compromise on the
principle of the donor as the supporter and the recipient as
the executor is justified for the following reasons.

The policy dialogue between the two co-operating movements
suggested in the preceding section is attempted to bring about
a shared strategy or perspective on co-operative development.
Experience clearly shows that useful as such a dialogue is, it
always leaves unresolved policy issues, and more commonly,
leaves an impression of agreement where it may not exist. The
most common source of such disagreements in disguise is that
the specific meaning of concepts such as participation,
poverty focus, high priority, member interests, urgent,
important, etc. is not made clear. A Scandinavian donor agency
is generally giving a different meaning to the statement that
"gender issues have to be given high priority" than a
government or co-operative organization in a developing
country.

Such differences tend to surface when the principles of a
strategy are to be applied in the formulation of an
operational programme. As such differences ought to be
identified and thrashed out at an early stage, donor
involvement in the formulation of a programme is instrumental
in making this happen.

The role of a donor in the implementation phase of a programme
for co-operative development should be more strictly
supportive than during the preparation phase. The rationale
for this division of roles is simple and convincing. The key
task is to build strong local organizations which can
successfully perform their duties on a sustained basis. A
donor take-over of executive functions invariably becomes a
substitute for institution building. On this point experience
is conclusive. Furthermore, the psychological effects upon the
staff in a local organization from a partial donor take-over
are often negative for understandable reasons. Such a takeover
may cause more damage to the organization that what might be
gained in terms of implementation efficiency.

This does not mean that donors cannot provide technical
assistance. However, it means that such technical assistance
personnel reports to superiors in the local organization.
There should be no line of command between the donor and the
technical assistance staff.

The donor has a legitimate interest in monitoring the
performance of a joint programme. In this monitoring role lies
also a control function as it is legitimate for the donor to
make sure that what has been agreed upon is adhered to.
However, these are not executive functions.

What happens in a situation where the apex organization, which
is the logical entry point and co-operating organization for a
donor agency, is not an acceptable partner? Differences in
views on what the problems are, how serious they are and how
they should be addressed may be so profound that the base for
a joint programme for co-operative adjustment simply is too
weak. Yet, the "need" for an effort is there and the loyalty
of the donor should be with the members at grassroots level.

A tempting response by the donor may seem to be to set up
project organizations which by-pass the local (apex)
organization and implement a support programme for primary
society development. This is not a feasible strategy for
several reasons, however. Firstly, a donor cannot and would
never resume the long-term responsibility that would be
required to make a primary society development programme a
success. Secondly, a donor would hardly be able to launch a
programme of such a scope that would cover more than a
fraction of the primary societies. Thirdly, it would be
politically unacceptable to see a donor project organization
more or less openly replace an apex organization. 

There is no simple and generally valid answer to the question
what to do in such situations. One answer could be to give up
the idea of  support to a particular co-operative movement.
Another answer could be to use the apex organization as an
entry point but make sure that sufficient influence is
exercised to ensure that a relevant support programme is
formulated and implemented in line with a revised strategy for
co-operative development. The context specific circumstances
will have to provide the answer.

3.4  Assistance without creating dependence
*******************************************

Many apex and intermediary co-operative organizations have
been, and still are, unacceptably dependent upon donor funds.
This is almost as bad as dependence upon government funding
and clearly does not contribute to sustained development.
Donor assistance should be given with explicit recognition of
how and when the activities undertaken with donor funds can be
supported by local funding.

Alternatively, it should be convincingly demonstrated that an
activity supported with donor funding has a logical time
limit, or that the activity can be terminated with lasting
benefits. The principles for donor assistance outlined in the
preceding section apply regardless of what strategy for co-
operative development that is the basis for cooperation
between co-operative movements. The principles which are
discussed in the following sections are based on the
assumption that the strategy for co-operative development
outlined in Chapter II is accepted.

3.5  The choice between transformation/adjustment of existing
     co-operative organizations and co-operative development
     outside these structures
**************************************************************
Whereas it is foreseen that donor support also in the future
primarily will be directed to formal co-operative
organizations, a donor can also choose to provide assistance
to co-operative development outside formal structures. As we
have discussed in Chapter II, genuine co-operative development
in Africa today to a considerable extent takes place outside
the formal co-operative organizations.

As matter of principle donor agencies should take a radically
different attitude to co-operative development in the sense
that co-operative development outside existing formal co-
operative structures should be seen as  potentially equally
interesting.

Hence, far more interest should be given to co-operative
development outside formal co-operative structures by co-
operative donor agencies than has been the case in the past.

However, it has to be recognized that support to co-operative
development outside the formal structures calls for a
different strategic approach and different modes of operation.
It will also take partly new skills from the donor agency.

Therefore, the donor agency must be prepared to adjust its
modes of operation and acquire the skills required to fulfil
such a broader supportive role for co-operative development.
Only then are the considerations in the following paragraphs
relevant.

A donor can choose to focus it co-operative development
assistance either on support to adjustment and transformation
of existing formal co-operative organizations or on support to
co-operative development outside formal co-operative
organizations.

Obviously support can also be given to both types of co-
operative development. In all likelihood this might be the
most common situation. The orientation of the assistance has
to be decided on a case by case basis.

In situations where the formal co-operative organizations are
characterized by:

-    severe constraints by continued government control and
     intervention,

-    inadequate capacity to adjust in relation to the need for
     change,

-    this is foreseen to be a lasting situation in the
     foreseeable future, and

-    and where co-operative development flourishes outside the
     formal structures,

the obvious choice may seem to be to focus exclusively on co-
operative development outside existing formal organizations. 

In situations (countries) where there is considerable
potential for successful adjustment within formal co-operative
organizations in line with the strategy outlined above, focus
may exclusively be directed at these organizations. In many
cases there may be situations in between, where modest pilot
efforts seem to be justified within formal organizations at
the same time as important developments outside these
organizations can be supported and vice versa, when activities
in the formal sector do not exclude activities in the informal
sector.

3.6  Considerations of relevance for support to informal co-
     operative activities
********************************************************

Co-operative development in self-help groups outside the
formal co-operative organizations is typically characterized
by diversity and smallness. This development is diverse in the
sense that the activities of such groups may cover a wide
range of economic, social or cultural needs by single-purpose 
or by multi-purpose groups. Self-help groups are also diverse
in form, operational modes and membership.

Self-help groups are also typically small, and more often then
not are they formed and function in a local context without
any relation to other groups. Only exceptionally are such
groups federated into regional or national structures. Such an
exception is the Federation of Women's Savings groups in
Zimbabwe. The potential of self-help groups as a leverage for
development has already been noted. Extensive interest by
governments, donor agencies, NGOs and researchers in self-help
groups is documented in a rich literature which cannot be
summarized here. 

Any co-operative donor agency that would seriously consider to
provide support to self-help groups has to make a very major
effort to get closely familiarized with this literature and
the experiences behind it, provide training to its staff and
probably look for additional staff with first hand experience
from working with self-help groups.

Here we will only point out a few major issues which need to
be considered. 

In far too many instances self-help groups have been used by
governments, donor agencies and NGOs as receiving mechanism
for assistance decided upon and designed by the external
agency. For instance, self-help groups have been seen as
useful institutions for implementation of drinking water
schemes, preventive health care programmes, physical
infrastructure development such as building feeder roads
decided upon, designed and funded by external agencies. 

Despite attempts to "involve" and "consult" local people, such
approaches have generally meant that the basic principles upon
which self-help groups have been formed and operate are
undermined or contravened. 

The initiative is taken away from the group. Furthermore, the
group no longer makes its own decisions, it implements
decisions taken by others. The group and its leadership is no
longer accountable to the members of the group as resources
are external rather that provided by the members. In most
cases the external intervention creates dependence which
indeed is fundamentally at variance with the concept of
self-help.

Although the top-down nature of such interventions may not be
as obvious and the authoritarian tone may not be as loud and
clear as that of governments in their relationship with co-
operative organizations in the past, the basic notion is the
same - self-help organizations are seen as instruments to be
used for development. 

Co-operative development in support of self-help organizations
does not see these organizations as a mechanism to be used.
The key word is support. Support should be provided to
self-help groups on their initiative, upon their request, for
purposes they decide and in forms and scale which do not
undermine their independence. To find this balance is no easy
task and demands consciousness of the problems involved, great
care and experience.

Among other, this means that support to co-operative
development through self-help groups to a considerable extent
has to be re-active rather than pro-active. It is a matter of
making ones presence known, to enter into dialogues with
self-help groups on their terms and to cautiously respond to
requests as they may be forthcoming with a constant eye on the
conceivable implications with respect to the principles
briefly mentioned above.

An operational difficulty in supporting self-help groups by a
co-operative donor agency is generally the difficulty to
identify a co-operating partner. Few have federated into
organizations with some coverage. Obviously the donor agency
cannot and should not attempt to build up its own local
organization (in a country) for implementation of support
programmes in direct interaction with scores of self-help
groups. A more appropriate strategy is to find local
organizations which perform this function. Such local
organizations are likely to be local NGOs, and at times
international NGOs. These NGOs should be scrutinized in
relation to the principles elaborated above before a
relationship with them is considered.

Local presence and intensive monitoring on the part of the
co-operative donor agency is probably the best way to ensure a
selection of relevant partners. This may presuppose that the
donor establishes country or regional offices.

3.7  Only support to organizations with a potential
***************************************************

Care should be taken to ensure that support is only provided
to co-operative organizations with potential for successful
adjustment and adequate capacity to make necessary changes.
For instance, business consultants should be used to assess
this capacity before support programmes to organizations with
major business operations, such as the intermediary
organizations in Anglophone Africa, are entered into.

It is critically important that support programmes do not
maintain doomed co-operative organizations through artificial
means. In the interest of co-operative development a seemingly
tough stand often needs to be taken.

Furthermore, a donor agency should actively work for having
defunct co-operative organizations closed down and
de-registered as part of any support programme.

3.8  Grant support to non-business activities
**********************************************

As a general principle, donor grant support should not be
given to activities which have a direct impact on the profit
and loss statement of co-operative organization. In other
words, support should not be given to the business activities
of such organizations.

Such support could easily disguise the inability of a co-
operative to make necessary adjustments and give the false
impression of economic viability. However, nothing of what is
envisaged in the support programmes for primary society
development would be of this nature.

In support programmes for adjustment at intermediary level,
grant funds can be used for implementing the process of
problem review and analyses, including business consultant
studies which may be part of such a review as well as training
that may be part of a reform process.

3.9  Support programme ideas
****************************

We will in this section briefly delineate what we consider to
be relevant in terms of type of support for the co-operatives
in the situation they now are facing. It goes without saying
that the type of support to be provided will depend on the
local situation. However, in conformity with what we
previously have argued about the possibilities to generalize
about the present co-operative situation in Africa, we believe
that, in a similar manner, it is possible to make some
generalized observations about the type of assistance to be
provided. Furthermore, it is again emphasized that any
development programme must be the result of the deliberations
between two parties, in this case the African co-operative and
the donor organization.

In the following sections a tentative list of support
programme ideas in line with the proposed strategy are briefly
summarized.

3.9.1     Re-orientation and awareness raising:

Previous sections of this report have pointed out the scope
and the orientation of the changes many co-operatives in
Africa will have to undergo in the immediate and the medium
term future. These changes will put tremendous strain on the
co-operatives and their ability to change. By own experience
the cooperators in Europe have intimate knowledge of the
process of change, and their experience in this respect would
be of value to their counterparts in Africa. 

It is not only a matter of initiating and undertaking the
various economic and technical measures of reform leading to
greater business efficiency. But there are also the more
subtle and mental aspects of change, which inter-alia include
the mental capacity as well as resistance to change, the need
for visions and the necessity for strategic philosophy and
thinking.

The cooperators in Africa will need assistance to undertake
the economic and technical changes, but they would also be
helped by a dialogue with a counterpart with own experience of
the elusive intricacies of the process of change.

Awareness Campaigns. Closely connected to, and actually
preceding the transformation process, is the stage of
awareness. Without awareness of the changes in the environment
and how they will affect the co-operatives, there are no
prospects for change. Change may come, but only forced by the
market forces, and this could be too late. This awareness must
not be confined to the co-operative leaders, it has to
permeate the entire co-operative structure. Many co-operative
leaders fully recognize this, and have also embarked upon
campaigns to raise the awareness among the co-operative
organizations. Co-operative donors should be prepared to
assist in raising awareness, it would not only be helpful to
the African cooperators, it would also contribute to a greater
understanding of the complexity of current situation on the
part of the participating donor. 

3.9.2     The dialogue with governments:

Governments need to adopt a policy framework and enact a
co-operative legislation, which will enable the co-operatives
to function as independent business organizations in a
competitive environment. Simultaneously, Governments will, as
part of the liberalization of the economy, also revise
policies and legislations affecting commercial trade in
general. Of particular interest for the agricultural co-
operatives is the revision of the regulations governing
marketing and pricing of agricultural produce and inputs (the
Agricultural Marketing Act and similar type of legislation).

One of the highest priorities of the co-operatives in the
present situation, is to maintain, and in some cases to
intensify, the dialogue with the Government in the above
mentioned areas, as well as others of interest to the co-
operatives, for the purpose of promoting the interest of the
cooperators. Considering the importance of the co-operative
dialogue with the Government, the European co-operatives
should be prepared to provide financial support as well as
technical advice in this field.

It should in this context once again be mentioned that we
realize that co-operatives cannot expect to achieve
independence from the State overnight. It will for several
reasons be a gradual process, but this process should to the
extent possible be as short as possible and there should be no
doubts about the direction.

3.9.3     Primary society support programme:

Adjustment and transformation of co-operative organizations is
a task for the organizations themselves and has to be
undertaken from within. However, such a process can be
assisted from outside. 

In particular, it seems justified to promote and stimulate
such a process at primary society level through external
intervention. Primary societies in many co-operative
organizations have not enjoyed much freedom and have been used
to act on instructions from above. Initiatives are then not
necessarily forthcoming unless the conditions introduced by
this strategy are clarified to them and a self-help approach
is promoted.

This is hardly the place to elaborate the details of  a
primary society support programme. Furthermore, such a
programme will have to be context specific. Some general
observations on what it may entail can be made, however. The
strategic framework for such a support programme is given
above. To put it simply, a participatory extension programme
is foreseen. In a problem solving dialogue with primary
societies, a cadre of co-operative extensionists could help
societies to review their situation and develop a "plan" for
how to become competitive (concentrating activities, reducing
costs, simplifying the management task, reducing capital
requirements, etc). The extensionists should also assist the
societies with market information (names of traders, prices,
transport facilities for hire, etc) without taking over the
marketing tasks.

Many apex organizations with donor support have introduced
support programmes of this nature. These efforts need to be
substantially increased compared to more conventional primary
society development programmes. The focus of the programme
proposed here should be how to make the business operation of
a primary society viable and competitive. It is a problems
solving and operational programme aiming at very specific and
concrete issues.

3.9.4     Guarantee funds:

One serious constraint of many co-operative organizations,
particularly at the intermediary level, is the shortage of
working capital suppressing the volume of business and
bringing the organization into a vicious circle.

Under certain conditions a co-operative donor may consider to
provide a guarantee fund with a financial institution in order
to soften the capital constraint.

However, it is imperative that the provision of such a fund is
seen as only one element of an adjustment plan and that the
elements of this plan which ought to precede the provision of
capital are implemented prior to giving access to credit. The
operation of such a scheme has to be surrounded with stringent
rules and be based on nothing but business considerations.

If considered, a guarantee fund should established on a pilot
basis and permitted to grow only if positive experiences
suggest so.

3.9.5     Management and training:

Closely connected with the transformation process above and
also
in several aspects duplicating it, is the support to be
provided to the management function of the co-operatives.

Management is one of the crucial features, if not the feature,
if a co-operative is to successfully transform itself into a
competitive business organization in the short term
perspective. And in order to underline its paramount
importance, it has been given its own heading here.

In principle support under this heading can be divided into
management advice and training. Advice can be provided in a
number of ways, from management extension services for primary
societies, as mentioned elsewhere in this report, to
managerial counsel to intermediary and apex organizations on
fulltime or consultancy basis. Whatever form this assistance
will take, its guiding principle must be to increase the
entrepreneurial capabilities of the co-operative managers and
the boards.

Training cannot replace entrepreneurial talent, but it can
enhance and fortify it where it exists. Many existing co-
operative training programmes in Africa have not been designed
with the entrepreneurial abilities required in an open market
in mind, and they will consequently have to be redesigned or
replaced. Support from the European co-operatives would be
highly relevant within these areas, and one of the first tasks
for future development programmes would be to assist in the
design and development of a training package for managers and
committees at various levels, aiming at increasing their
entrepreneurial abilities.

Also closely connected with the above type of support is
assistance to develop and implement suitable management
systems. The needs for this type of support will vary
considerably; there are on one hand highly developed and
capable co-operative organizations with well functioning
systems in accounting, savings and credit, marketing etc, and
on the other hand, small and weak primary societies with a
faulty bookkeeping. The former may need assistance to
computerize, while the latter will need a well functioning
bookkeeping system. Regardless of the needs, the European co-
operative organizations could make available their experience
and expertise through development assistance programmes.