7 Reasons Why Cooperatives Are Important To Poverty Reduction
Cooperatives are critical to reducing poverty. All cooperatives, social or economic, are mechanisms that ensure the growth and prosperity of communities. In developing and transitioning countries that lack access to capital, education, and training, cooperative structures allow communities to pool together their resources to solve problems, identify common goals and target the causes and symptoms of poverty.

What Are Cooperatives?

Cooperatives, or co-ops, are organizations of all types that address a wide range of issues — from food producers and consumers in sub-Saharan Africa, to credit and hybrid cooperatives all around the globe.

Anytime people have common concerns, face similar struggles or are looking for solutions bigger than they alone can accomplish, cooperatives offer an answer via strength in numbers. This is why cooperatives are important to poverty reduction.

When Did Cooperatives Begin?

Co-ops date back to the 1840s when the Rochdale Society of Equitable Partners came together after losing their jobs to industrialization. This group decided to band its resources together and open a store that provided goods they all needed, but couldn’t afford on their own.

Out of their individual experiences, we were left with the Rochdale Principles — a set of operations still in use today that helped the pioneering group manage the realities of poverty in an organized and productive manner.

What Are Cooperatives Core Principles?

The success of co-ops depends upon seven core principles of cooperative development:

  • Voluntary and open membership
  • Democratic member control
  • Member economic participation
  • Autonomy and independence
  • Education, training and information
  • Cooperation among cooperative
  • Concern for community

More than 760 million people around the world are a part of the cooperative movement. Here are seven reasons why cooperatives are important to successful poverty reduction.

7 Reasons Cooperatives are Important to Poverty Reduction

  1. Co-ops directly answer community needs, adjusted to local concerns. They are anchors that distribute, recycle and multiply local expertise, resources and capital. Autonomous cooperatives reach the poorest people in the community, offering upward mobility and basic infrastructure ignored by large businesses. Consumer Cooperatives, like Rochdale play a vital role in distributing food and basic resources in poor and rural areas. Profits and benefits also circulate within the same community.
  1. Co-ops help build peaceful societies. In the process of transforming poverty-ridden communities into vibrant economies, cooperatives contribute to skill-development and education. They bolster gender equality and improve the health and living standards of an entire community. Cooperatives have been instrumental in meeting the Millenium Development Goals, as nations are more likely to stay peaceful by escaping the poverty trap.
  1. Co-ops enable farmers to obtain higher returns. Agricultural and fishing cooperatives support its members by providing training, credit and resources. Rural cooperatives, dependant on agriculture, don’t have to look to international companies to grow. In impoverished communities with low inputs, it is unlikely they can produce the quality and quantity desired to make profitable margins. Combining supply purchases, sales and other expenses can help cooperatives operate at lower cost-per-unit than their individual farmer counterparts. This can allow for an entire community to re-market their product at a higher price.
  1. Worker co-ops promote collaborative entrepreneurship and economic growth. Cooperatives reduce individual risk in much-needed business ventures and create a culture of shared productivity, decision-making and creative problem-solving. Only 10 percent of co-ops fail while 60 to 80 percent of businesses fail; in fact, cooperatives can revive communities by allocating funds to rising workers with vested interests. Credit co-ops also supply money to start a new business or repair current ones. Profits from sales can then support larger community projects that help each member and the community as a whole to survive.
  1. Co-ops create competition within local markets. Since services come at a cost to members, pricing adjustments occur to benefit members and impact other organizations in order to compete at the same efficiency. Purchasing cooperatives, in particular, help businesses compete with large, national retailers. Co-ops not only provide positive outcomes for its members, but also excite local markets as a whole.
  1. Multi-purpose and credit co-ops provide small loans to their members. These loans go to self-employment, offering an opportunity for better wages through retail shopkeeping, farming or livestock. This allocation of funds can go towards building needed community infrastructure projects and financing small businesses that help local economies grow.
  1. Industrial and craft co-ops help members produce marketable products. In addition to training, shared facilities allow members to access raw materials and technical machinery otherwise unavailable in rural areas. These cooperatives can provide an additional source of income for families and allow them to grow in their communities, rather than travel to urban centers at a high cost.

Empowerment and Collaboration

Co-ops organize all over the world because they can help in almost every circumstance. Both developing and developed countries depend on cooperatives because they are an empowering model that promotes collaborative social change.

While foreign aid and investments drastically help impoverished communities, external remedies are only half the battle. Co-ops provide a grassroots initiative and social structure to address all symptoms of poverty.

Cooperatives also make aid and assistance all the more powerful. With strong communities and the right foreign assistance, eradication of extreme poverty becomes all the more feasible.

– Joseph Ventura
Photo: Flickr


The United Nations has proposed the Sustainable Development Goals to bring people out of poverty and address the issues that keep them there. These tasks were set down after the Millennium Development Goals, which were supposed to be accomplished by this year but were not entirely fulfilled. The United Nations sat down and looked at the programs that they had implemented to eliminate poverty to see what worked and what did not. The conclusion was that cooperatives saw the most success in raising people out of poverty.

That is the direction the United Nations has decided to go in when figuring out how to make the new Sustainable Development Goals a success.

Cooperatives are community driven; the focus is on the people. They combine the resources of several people/groups in the community, forming bonds and creating businesses that one person could not do alone. It allows people who had never had a say in running things to speak. More importantly, cooperatives allow those who are most affected—the poor—a say in the outcomes. Local people are tied together, and thus, want to work for the betterment of their community.

Research that the United Nations conducted also concluded that cooperatives increased employment (especially in the areas that they were located), improved gender equality, used more clean energy, bettered food security and provided social protection. Generally speaking, cooperatives create 100 million jobs worldwide, which is more than any multinational enterprise. Another economic gain is income protection, as the people earn what they make and no big cooperation takes a cut.

In order to monitor the future success of the cooperatives, the United Nations created the Division for Social Policy and Development. The department is to aid in the formation of cooperatives across poverty-stricken areas.

In conclusion, the cooperatives not only bring economic success to poor areas, but also develop many other aspects of the community—something the United Nations wants to see happen. They want to give people the skills and resources to better themselves not just economically but socially and politically. Cooperatives can do this.

– Katherine Hewitt

Sources: UN 1, UN 2, UWCC
Photo: UN

One of the most intriguing business ideas is that of a co-op.  It can be like a corporation, only it’s governing body is chosen democratically by it’s members, not shareholders.  From a business standpoint, the co-op isn’t profit motivated but exists to serve it’s members.  When a surplus is realized by the co-op, the excess is divided among members by individual use of the organization and not by how much was initially invested.  Members can be essentially anyone, from sole proprietors to nonprofit organizations.

Among the many benefits of co-op membership, knowledge may be the most important.  Nowhere is this more evident than in the developing world, specifically in the nations of Senegal, Zambia, and Mozambique. In their efforts to alleviate poverty, increase income and food production, and provide a higher standard of living for their people, farmers there have partnered with the National Cooperative Business Association (NCBA) in the United States.

Initially founded in 1916, the NCBA has existed as the soundboard for all co-ops in the U.S., touting the benefits and successes of this business framework.  Known today as NCBA CLUSA International, their focus also includes advocacy, cross-sector support and education, and co-op community advancement in a total of 15 different nations.

NCBA CLUSA International maintains a strong presence in Senegal and Zambia through the USAID’s “Farmer-to-Farmer” initiative.  The co-op organization calls on it’s extensive volunteer base, culling professionals from the agricultural, development, technological, and even financial fields.  However, most volunteers for the program are American farmers and agribusiness people who are directly involved with teaching and sharing techniques with farmers in Zambia and Senegal.  Everything from business development, soil fertility, and crop processing is all covered.  NCBA CLUSA International provides transportation, logistical support, and translators for its volunteers.

Recently, USAID acknowledged the NCBA’s efforts in Niger.  Backed by USAID funding, the group’s volunteers have been working with farmers and people in the nation for several years teaching them the best way to grow highly nutritious moringa.  Areas of southwest Niger have transformed from drought-stricken to fields of lush vegetation suited for the climate.

In Mozambique, the NCBA has been granted a contract worth $14 million by Norwegian Ministry of Foreign Affairs.  In a press release dated in December 2012, the NCBA reports their mission is to:

“…boost agriculture production by 20% and increase household resilience by 30%, helping these small farmers progress from the subsistence level, to income generation… This program will train 54,000 farmers and 50 emerging commercial farmers in proven Conservation Agriculture (CA) techniques and nutrition, benefitting more than 140,000 individuals. The practice of Conservation Agriculture is a method of farming that, when adhered to, achieves high and sustained production levels, while concurrently conserving the environment.”

An empowering facet of the program is that half of those 54,000 farmers are women.  This move no doubt increases community capacity and women’s efficacy as they are literally equal partners.

The NCBA is living proof that the co-op model can be successful in myriad ways and is especially helpful in the developing world.  By connecting impoverished farmers and communities with learned volunteers, they’re fostering inclusive, sustainable and economically robust communities.

David Smith

Sources: NCBA, USAID Frontlines
Photo: TechnoServe