Abstract
Agricultural cooperatives are producer-owned and controlled organizations to improve farmers’ livelihoods by correcting market failure. They support collective activities where individual incentives are insufficient to produce public goods. The government of Nepal has been investing economic resources in this sector, prioritizing cooperatives as part of a strategy for poverty reduction. This study examines poor farmers’ access to agricultural cooperatives and the impact of membership on farm and total household income, based on a household survey of 572 households and key informant interviews of 37 cooperative managers. The ethnicity of the family and the neighborhood, smallholder land size, distance to an agricultural cooperative, distance to the nearest local market, and distance to a motorable road are key determinants that influence cooperative membership. The analysis of the effects of cooperative membership is based on propensity score matching, controlling for a large array of household and community characteristics. The estimates imply that cooperative membership may significantly affect family net crop income, but the overall effects on total family income are modest. Agricultural cooperatives appear to be focused on financial services such as savings and credit activities but are less concerned with agricultural production, and cooperatives engage in almost no marketing activities.
Highlights
Civil Society and Cooperatives in NepalAn agricultural cooperative is a means of collective action; a group of people takes action to enhance their livelihood options through increasing their access to a market at a lower cost [1,2,3]
Apart from the household survey, this study interviewed either the chairperson or the manager of 37 agricultural cooperatives for a key informant interview (KII) in order to understand their perception about the role and structure of services of the cooperatives
The results indicate that total annual family income was Nepalese Rupees (NPR) 44,025 higher for cooperative members than matched non-members, slightly higher than the difference in net crop income, but this difference in income is not statistically significant
Summary
An agricultural cooperative is a means of collective action; a group of people takes action to enhance their livelihood options through increasing their access to a market at a lower cost [1,2,3]. The role of agricultural cooperatives in minimizing transaction costs is crucial [3]. Collective action in cooperatives may increase members’ bargaining power in input and output markets to obtain lower costs and higher prices, timely delivery of inputs, etc. Cooperatives are an institutional device for smallholders to correct market failure [5,6]. Cooperatives are common in developing countries, in agriculture [7,8]. Policymakers and development scholars argue that cooperatives allow agricultural smallholders to improve their living standards [5,9]
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