cooperatives for rural development in romania

Cooperatives for rural development in Romania- Income generation through organic agriculture -

B.EN.A. CONFERENCEENVIRONMENTAL ENGINEERING AND SUSTAINABLE DEVELOPMENTAlba Iulia, Romania May 23 - 25th 2013 PhD(c) Adina-Roxana Munteanu

[email protected] Bucharest University of Economic

StudiesRomania

20130515_BENA_Agric coop_AR Munteanu.ppt20130515_BENA_Agric coop_AR Munteanu.ppt

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Agenda

Problem Statement

Research Question

Methodology

Discussion

Analysis

Conclusions

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Further research7

20130515_BENA_Agric coop_AR Munteanu.ppt

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► Romania’s agricultural potential ► almost 8,5 mil. ha of arable land and family gardens according to INS (2010)

► Increase interest in organic agriculture in Romania ► In 2012 there are more than 8,500 certified produces, intermediaries and traders (MADR 2013)

► The need for rural development in Romania► approximately 29% of the active population is employed in agriculture (INS,2011).

► Majority of households in rural areas are producing for mere survival

► Experience with organic cooperatives in Nepal

Problem Statement

Cooperatives for organic agriculture?


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Would the creation of cooperatives dedicated to

organic agriculture lead to rural development?

Research Question

► What would be the business model of an agricultural cooperative?

► What are the conditions that lead to establishing cooperatives?


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Applied methodology

Methodology

Literature Review

Surveys

Review of grey sources

► Rural development programs► Agricultural Cooperatives in Eastern

Europe► Business Models

► Survey of organic farmers in Chitwan District, Nepal

► Interviews with Romania farmers

► Governmental agencies► NGOs► Market studies


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In Romania:►The agricultural landscape is dominated by highly fragmented land areas: most of the 3,8 milioane agricultural areas are less than a 1 ha (IES, 2013)►Over 1 million citizens are unpaid family workers, with no wage income or in kind reimbursement for the farming activities (IES,2013)►In 2007: 15 088 ha of agricultural land by 71 agricultural entities, increasing 4.5 times compared to 2005 (INS, 2011)► Small farmers encounter a range of difficulties such as:

►lack of bargaining power►restricted physical access to markets►low productivity due to lack of machinery►restricted access to credit (Lernman,2004)

Why cooperation is needed

Discussion


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Nepal experience:►Several examples of successful cooperative of organic medicinal plants (Munteanu, 2010) ►The increase in income generated through organic farming by being able to provide larger quantities as a cooperative (Nechita, 2011)

Scientific literature:►Empirical evidence suggest that the farm size has a strong impact on the degree of commercialization => More land means higher commercialization (Lernman, 2004)

► Enlarging the farm land through forming cooperatives would bring the same benefits relative to commercialization as leasing of land

Why cooperatives are likely to be more successful than individual farmers

Discussion


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Creating cooperatives – a rural development strategy

Analysis

Cooperativesfor rural development

Farmers: Targeted segment: small farmers interested in organic farming less than 10

ha.

Communication strategy: Considering the

psychological factor of the resistance to the idea of a cooperative due to the abuse during the

communist regime (Plunkett Foundation,1995)

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NGOs: promoting the establishing of cooperatives to

increase revenues and improve livelihoods.

Business model design: adapting to market conditions

Knowledge of organic farming

Managing the cooperative: Katz and Boland (2002) describe the new type of cooperative that emerge, one that radically reviews the

rules of ownership towards a more market oriented and

entrepreneurial type and its managerial implications.

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NGOs because:►Nepal Experience showed that NGOs did a very good job => it is reasonable to think that it can be achieved in Romania too

► In Romania there are 67.000 registered NGOs (IES, 2013) ►NGOs can be closer to the farmer, and have a good attitude and be more involved (volunteers)►NGOs are accountable for their results to their financing organizations and they have clear incentives to be successful ►Arguably, they do a better job than governmental institutions when it comes to development programs However: ►A good exist strategy must be designed (empower members of the community to do further research; create a SPOC; establish connections between farmers and knowledge sources such as institutes; build farmers networks)

NGOs projects to stimulate the creation of cooperatives

Analysis

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Business Model for a Cooperative cultivating organic medicinal plants

Analysis

Key Partners Customer Segments

Value Proposition

Activities

Resources Channels

Customer Relationships

Cost Structure Revenues Model

NGOs Direct communica-

tion

Direct sales

Fixed assets

Raw MAPs products

Processing of MAPs

Essential oilsMarketing

Farmer Association

s

Farmers

Trading platforms

SalesVariety of organic essential

oils

Flexibility of

delivered quantities

Specialised shops

Cosmetics industry

Member fees

Specific knowledge

Machinery

► Multiple variations on the Business Model are possible, as each cooperatives should adapt the model to suit preferences, resources of members

► Application of Business Model Canvas –Osterwalder & Pigneur (2003)

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YES! Organizing cooperatives is viable strategy for rural development, under certain conditions:

Conclusions

► Cooperatives are formed and they act and are managed as companies ► Leadership and vision exist► Organic farming certification is achieved by the farmers as

producers and by the cooperative as trader ► Specific knowledge on organic agriculture is available► Expert knowledge on MAPs must be effectively communicated ► Although not essential, communication with governmental

authorities and subsidies are an additional incentives for adoption of MAPs cultivation

However:► The communication strategy of the NGOs regarding the creation of

cooperatives is crucial ► Exist strategies are essential – capacities must be built to

achieve continuity► Funding strategy of such projects is still under development


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► In depth market studies to fill the market information deficit regarding traded volumes of organic products key actors to improve market transparency

► Identification and design of financing options and mechanism► Organic certification for farmers & cooperatives;► Assets for cooperatives; ► NGO projects

► Policy design: a subsidies scheme for organic certification of farms

► Assessment of governmental policies for rural development;► Investigating the effectiveness of governmental and NGO

initiatives on medicinal plants cultivation is an important process as it leads to learning that can improve future projects.

Further research areas


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► Couture, M.-F., Faber, D., Levin, M., and Nippierd, A.-B. (2002). Transition to Cooperative Entrepreneurship: Case Studies from Armenia, China, Ethiopia, Ghana, Poland, Russia, Uganda, and Vietnam, Geneva: International Labour Office

► INS 2010 – The 2010 General Agricultural Census -http://www.insse.ro/cms/files/RGA2010 /Rezultate%20definitive% 20RGA%202010/rezultate%20definitive%20RGA%202010.htm accessed January 20th 2013

► INS 2011 - Statistical Yearbook 2011 http://www.insse.ro/cms/rw/pages/anuarstatistic2011.ro.do accessed January 20th 2013

► IES 2013 - http://www.ies.org.ro - accessed January 20th 2013 ► Haverkort, B, van’t Hoft, K. and Hiemsta, W (2003) -“Ancient Roots, New Shoots – Endogenous development in

practice” –published by ETC/Compas in association with Zed Books Ltd► Katz, J. P. and Boland, M. A. (2002) One for All and All for One? A New Generation of Co-operatives

Emerges; Long Range Planning 35; 73-89► Lucas, R. E. (1988) “On the mechanics of economic development” - Journal of Monetary Economics, Volume 22,

Issue 1, July 1988, Pages 3-42► Lernman, Z. (2004).Policies and institutions for commercialization of subsistence farms in transition

countries, Journal of Asian Economics 15; 461-479► Munteanu, A.R. (2010) - The potential of medicinal plant cultivation as an endogenous development strategy

-A study based in Chitwan District, Nepal- available at http://www.scribd.com/doc/41611458/The-Potential-of-Medicinal-Plant-Cultivation-as-an-Endogenous-Development-Strategy-AR-Munteanu-ERM-Thesis [accessed January 20th 2013]

► Nechita, A. “The Effects of Organic Farming On Environment, Health and Livelihood in Nepal” Study based in Chitwan District – A thesis for Master Program at VU University (2011)

► Osterwalder, A.; Pigneur, Y. (2003) ‘An ontology for e-business models’, chapter in Wendy Currie (ed) "Value Creation from E-Business Models, Butterworth-Heinemann

► Plunkett Foundation (1995). Review of 1994 activities. Oxford: Plunkett Foundation quoted in Lerman (2004) – “Policies and institutions for commercialization of subsistence farms in transition countries” Journal of Asian Economics 15 (2004) 461-4

Selected References


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PhD(c) Adina-Roxana [email protected]

The Bucharest University of Economic StudiesRomania

Thank you!


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Back-up


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► Established in 1997 ► Main purpose: aiding in the development of the Chepang ethnic group

► In 2010: 375 members from several Village Development Committees

► The annual fees served as access to the cooperative’s assets and offered the possibility to sell goods to the cooperative as a legal entity

► The profit earned by this type of activity was reinvested in machinery and means of transportation.

Praja Cooperative – Chitwan, Nepal

Documented Cooperatives Examples

Source: Adapted from (Munteanu, 2010 p.29)20130515_BENA_Agric coop_AR Munteanu.ppt

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► Established in 2000 ► In 2010 had around 150 farmers ► The only condition to be part of the cooperative: participated with a minimum of approximately 0.7 ha of land (Munteanu, 2010 p.30)

► The cooperative had the support of a company, namely One World Alc. for the process of certification for organic agriculture since 2007.

► The cooperative sold several types of vegetables and a few medicinal plants species they cultivated to local people, in the markets of larger towns and to One World Alc.

► Key points: leadership and sharing of technical knowledge.

Fulbari Cooperative- Chitwan, Nepal


Source: Adapted from (Munteanu, 2010 p.30)20130515_BENA_Agric coop_AR Munteanu.ppt

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► Established in 2004► Since 2004 there is a store of the cooperative for selling of the products

► The cooperative is the association of ten individual farmers that together offer various products such as meat, eggs, cereal, honey and dairy products.

► Topa farm is part of the World Wide Opportunities on Organic Farms which is a worldwide network of organizations that link volunteers with organic farmers. ► The farmer offers food, accommodation and opportunities to learn about organic lifestyles in exchange for the volunteer’s help on the farms’ chores.

► Key point: farmers come together to facilitate the sale of their products

Biocoop Cooperative – Sibiu, România



cooperatives for rural development in romania

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