Category: Differentiating Services between Members and Non-Members

Alito Joint Christian Farmers’ Group (AJOCFG): oil seed marketing

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By , October 24, 2012 9:20 am

Context
The Alito Joint Christian Farmers’ Group (AJOCFG) in Uganda, was founded in 1998, consisting of 5 members. Their joint interest was to market high quality oil seed production (predominantly sunflower seeds). In 2004 the organization registered as Community Based Organization to expand its function to input provision for production, and extension. By then the core group had expanded to 58 members. In 2005 the group started growing, because there was demand from other regions to benefit from the services. In all the AJOCFG grew to a constituency of 62 cluster sub groups, totaling a number of 1860 members by 2010. These sub-groups are organized as a second tier of producers. Collection of seeds takes place at the sub-groups level. Marketing is done at the level of AJOCFG. In order to manage the growth of the producer group, the AJOCFG installed a governance system for fair and transparent treatment of both incumbent, as well as new-coming members in terms of contribution, access to services, and pricing of their produce..

Mechanisms
The governance system to manage growth comprises of a set of complementary mechanisms:

Differentiating services between members and non-members.
For new member groups AJOFCG applies an admission fees to select for the most motivated of farmers. On top of that an annual membership fee is put in place for all members for rendered marketing services. Every member sub group thus contributes more or less the same in proportion to used services . Non-members may sell their seed to AJOFCG, but will not profit form the added value which is created in sales after bulking.

Anticipating side selling
AJOFCG applies two mechanisms to aid in anticipating side selling. First and foremost they encourage delivery commitment by farmers through providing credit to the farmer subgroups, or support farmer groups to banking institutions for credit indirectly. This credit can be used to finance farming activities during the planting, and growing season. The farmers can repay their loan at harvest time, when they come to sell their produce. Repayment is strictly enforced. In case of side-selling, producer groups as a whole are reprimanded, with the ultimate sanction of barring them from membership at AJOCFG.

Secondly, AJOFCG always makes sure that the price for seeds offered to member-farmers is always set higher than the market price. This provides and fosters loyalty towards selling produce through the AJOCFG channel.

Quality assurance
To guarantee quality of supply each individual farmer has record of his or her supply provided at the subgroup (second tier) level. When the bulked produce is collected by AJOCG the average quality of the bulk is used to determine price levels. The farmer groups are thus remunerated for their average quality, providing an incentive to the group to maintain and control the quality levels of the produce they supply.

Outcome
Fair terms, and clear rules ensure that supply is tightly arranged and free riding is prevented. This results in stable and predictable quality and volumes of oil seed, which provides AJOCFG with a credible proposition to their buyers’ market.

Reference

(Español) Cómo vamos a pagar mejor al socio cuando necesitamos a la producción de los no-socios?

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By , October 11, 2012 12:41 pm

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Aspirasi Bina Usaha mango cooperative

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By , July 8, 2012 9:58 am

The Context
Aspirasi Bina Usaha is a large farmer grouping with 46 members and diverse interests. Aspirasi received mangos not only from members (60 per cent) but also from outside farmers via collectors (40 per cent) and sold to both supermarkets (30 per cent) and traditional markets (70 per cent). To supply the supermarkets the organization works together with Bimandiri, a specialized supermarket supplier. Not all members have the same vision about the partnership and some only partially or opportunistically commit their deliveries resulting in breach of contract.

The Mechanism
Farmers or members of cooperatives who find that other members are free riding on their investments in supplying the higher-end supermarket retail channel, can separate themselves from the members and form a new group.

The Outcome
The institutional innovations undertaken were dynamic and entailed self-correction as well as resulting in improvements.

Evaluation
Some difficulties did occur in the group dynamic, such as mixed incentives and conflicts of interest. Farmer group members who were genuinely interested in the market channel innovation overcame the free‐ ride problem by separating themselves and creating a new farmer group named KUBM, to exclusively supply Bimandiri. KUBM and Aspirasi remained connected because of the benefit of that they could only jointly capture of government subsidies, and extension.

Reference