WOLKITE UNIVERSITY

COLLEGE OF AGRICULTURAL AND NATURAL

RESOURSE
DEPARTMENT OF AGRIBUSINESS AND VALUE
CHAIN MANAGEMENT
COURSE TITLE:ORGANIZATIONS AND
MANAGEMENT OF COOPERATIVES [COOP272]
GROUP ASSIGNMENIT
NO. NAME ID
1.DAWIT TILAHUN…………………………………………………1O19/16

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 SUBMITTED TO :Mr.
SUBMISSION DATE: 2/04/2025

1.What is the Differences Between Cooperative, Union, and League?

All three terms involve groups of people working together and here is more datailed
breakdown

A. Definition and Purpose

Cooperative:A cooperative is a member-owned and democratically controlled business or

organization that operates for the mutual benefit of its members. The primary goal is to meet
common economic, social, or cultural needs, such as agricultural cooperatives that help farmers
sell produce collectively or credit unions that provide financial services.

Union: A union (trade union or labor union) is an organized association of workers formed to
protect and advance their rights, working conditions, wages, and benefits through collective
bargaining with employers. Examples include teachers' unions and factory workers' unions.

League: A league is a broader alliance of individuals, groups, organizations, or even nations

formed for mutual support, competition, or advocacy. Unlike cooperatives and unions, leagues
may not always focus on economic benefits but rather on shared interests, such as sports
leagues (e.g., Premier League) or political leagues (e.g., League of Nations).

B. Ownership and Governance

Cooperative: Owned and governed by its members on a "one member, one vote"basis,
regardless of capital contribution. Decisions are made democratically.

Union: Governed by elected representatives (union leaders) who negotiate on behalf of

members. Membership is based on employment in a specific sector.

League: Governance varies—some leagues have centralized leadership (e.g., FIFA), while others
operate as loose alliances with shared rules but independent members.

C. Economic vs. Non-Economic Focus

Cooperative: Primarily economic aims to improve members' financial well-being through

shared resources, bulk purchasing, or collective sales.
Union: Focuses on labor rights and economic benefits(wages, safety, job security) but may also
engage in political advocacy.

League: Often non-economic can be social, recreational, or political (e.g., the Arab League
focuses on geopolitical cooperation).

D. Membership Structure

Cooperative: Open to anyone who shares the cooperative’s goals and is willing to contribute
(e.g., consumers, farmers, workers).

Union: Restricted to workers in a specific industry or company (e.g., only nurses can join a
nurses' union).

League: Membership can be diverse—individuals, clubs, or nations with a shared interest (e.g.,
the UEFA Champions League includes football clubs).

E. Profit Distribution

Cooperative: Profits (surplus) are shared among members based on participation, not
investment (e.g., dividends in a consumer co-op).

Union: Does not distribute profits; instead, it fights for better wages and benefits from
employers.

League: May generate revenue (e.g., ticket sales in sports leagues), but profits are reinvested or
distributed according to league rules.

F. Legal and Regulatory Framework

Cooperative: Registered under cooperative laws, often with tax benefits to encourage collective
economic development.

Union: Recognized under labor laws, with rights to collective bargaining and strikes.

League: Governed by internal charters or international agreements, depending on its scope

(e.g., the United Nations as a global league).

G. Examples in Practice

Cooperative: Ethiopian coffee cooperatives, credit unions, housing co-ops.

Union: Ethiopian Teachers’ Association, factory workers' unions.

League: African Union (political), Ethiopian Premier League (sports).

Conclusion

While cooperatives, unions, and leagues all involve collective action, they differ in purpose,
governance, and membership. Cooperatives focus on economic empowerment through shared
ownership, unions advocate for workers' rights, and leagues bring groups together for broader
social, political, or competitive goals. Understanding these differences helps in choosing the
right model for collaboration, whether for business, labor rights, or large-scale alliances.

2.Why We Develop a Business Plan for Cooperatives

A business plan helps clarify the activities for the cooperative and identifies the logistics,
resources and finances needed for it to be successful. All cooperatives should be able to
prepare forecast financial statements that identify how the cooperative will fund its first year of
operation.

A business plan is a crucial tool for any cooperative, as it provides a clear roadmap for achieving
its goals while ensuring financial sustainability and member satisfaction. Below are the key
reasons why developing a business plan is essential for cooperatives:

A. Clarifies Vision and Objectives

A business plan helps cooperatives define their mission, vision, and long-term objectives. It
ensures that all members and stakeholders are aligned with the cooperative’s purpose,
whether it is providing affordable goods, generating employment, or supporting local
producers.

B. Guides Financial Planning and Resource Management

Cooperatives rely on member contributions and external funding, making financial planning
critical. A business plan outlines:

- Startup and operational costs

- Revenue projections

- Funding sources (loans, grants, member shares)

- Profit distribution strategies

This ensures financial stability and prevents mismanagement of resources.

C. Enhances Credibility for Funding and Partnerships

Investors, banks, and government agencies require a well-structured business plan before
providing loans or grants. A strong plan demonstrates the cooperative’s viability, increasing its
chances of securing financial support.

D. Improves Decision-Making and Risk Management

A business plan includes market analysis, competitor assessment, and risk evaluation. This helps
cooperatives:

- Identify potential challenges (e.g., market competition, supply chain issues)

- Develop contingency strategies

- Make informed operational decisions

E. Ensures Legal and Regulatory Compliance

Cooperatives must adhere to specific laws and regulations. A business plan outlines necessary
legal structures, tax obligations, and compliance requirements, reducing the risk of legal issues.

F. Strengthens Member Engagement and Transparency

A clear business plan fosters trust among members by detailing:

- Roles and responsibilities

- Profit-sharing mechanisms

- Growth strategies

This transparency encourages active participation and long-term commitment .

G. Facilitates Growth and Expansion

As cooperatives grow, they may need to diversify services or enter new markets. A business
plan provides a framework for scaling operations sustainably.

Conclusion
A well-developed business plan is vital for a cooperative’s success. It ensures financial health,
operational efficiency, and member satisfaction while attracting investors and mitigating risks. By
investing time in creating a strong business plan, cooperatives can achieve long-term sustainability and
fulfill their social and economic missions.

3.Why the Government Uses Cooperative Development to Minimize Poverty

Governments around the world promote cooperative development as a key strategy to reduce
poverty because cooperatives empower marginalized groups, create sustainable livelihoods,
and foster inclusive economic growth. Below are the main reasons why cooperatives are
effective in poverty alleviation:

A. Economic Empowerment of Low-Income Groups

Cooperatives provide members—especially small-scale farmers, artisans, and low-income

workers—with access to collective resources, fair wages, and profit-sharing. By pooling
resources, members can achieve economies of scale, reduce costs, and increase their
bargaining power in markets.

B. Job Creation and Income Generation

Cooperatives generate employment opportunities by supporting small businesses, agricultural

ventures, and community-based enterprises. Unlike traditional corporations, profits are
distributed among members rather than external shareholders, ensuring that wealth stays
within local communities.

C. Financial Inclusion and Access to Credit

Many poor individuals lack access to formal banking services. Cooperatives, such as credit
unions and savings cooperatives, provide affordable loans, microfinance, and financial literacy
programs, helping members start or expand businesses.

D. Social Protection and Community Resilience

Cooperatives often offer social benefits such as healthcare schemes, education funds, and
disaster relief support. By strengthening community networks, they help vulnerable
populations withstand economic shocks.

E. Sustainable Development and Local Ownership

Since cooperatives are member-owned and democratically controlled, they prioritize long-term
community development over short-term profits. This model ensures that economic benefits
remain within the local economy rather than being extracted by outside investors.

F. Government Support and Policy Integration

Governments provide cooperatives with tax incentives, grants, and training programs because
they align with national poverty reduction goals. Cooperatives also reduce the burden on social
welfare systems by enabling self-reliance.
Conclusion

Cooperatives are a proven tool for poverty reduction because they combine economic
sustainability with social equity. By promoting cooperative development, governments
empower disadvantaged groups, stimulate local economies, and create a more inclusive society
where wealth is shared more equitably.

4.Barriers to Cooperative Development in Ethiopia

The finding identified challenges of cooperatives such as low participation and lack of
awareness, low involvement of the stakeholders, lack of professionalism, weak linkage,
inadequate support, lack of good governance, lack of adequate infrastructure, lack of diversity
products and globalization.

Despite the potential of cooperatives to drive economic growth and reduce poverty, Ethiopia
faces several challenges that hinder their effective development. These barriers stem from
structural, financial, cultural, and policy-related issues.

A. Weak Institutional and Legal Frameworks

- Inconsistent Policies: Frequent changes in cooperative laws and regulations create

uncertainty.

- Bureaucratic Delays:Excessive government interference and lengthy registration processes

discourage cooperative formation.

- Poor Enforcement: Existing cooperative laws are often poorly implemented, leading to
governance issues.

B. Limited Access to Finance

- Lack of Credit Facilities: Many cooperatives struggle to secure loans due to high interest rates
and collateral requirements.

- Weak Financial Management: Poor accounting practices and lack of transparency make
cooperatives unattractive to investors.

- Dependence on Donor Funding: Some cooperatives rely heavily on external aid, which is
unsustainable in the long term.

C. Poor Infrastructure and Market Access

- Transportation Challenges: Rural cooperatives face difficulties in transporting goods due to
poor road networks.

- Limited Market Information:Many cooperatives lack access to market data, leading to low
bargaining power and exploitation by middlemen.

- Inadequate Storage Facilities:Post-harvest losses are high due to a lack of proper storage and
processing infrastructure.

D. Lack of Member Participation and Awareness

- Low Education Levels:Many members lack business and cooperative management skills,
leading to poor decision-making.

- Distrust and Free-Rider Mentality: Some members do not actively contribute, expecting
benefits without participation.

- Cultural Resistance:In some communities, traditional savings systems (like iqub and idir) are
preferred over formal cooperatives.

E. Political Interference and Corruption

- Government Control:Some cooperatives are used as political tools, undermining their

autonomy.

- Mismanagement of Funds: Embezzlement and lack of accountability weaken member trust in

cooperative leadership.

F. Competition from Private Businesses

- Dominance of Private Traders:Large agribusinesses and private investors often outcompete

cooperatives in pricing and market access.

- Global Market Pressures: Cheap imports sometimes undercut locally produced cooperative
goods.

Conclusion

For cooperatives in Ethiopia to thrive, reforms are needed in governance, financial access,
infrastructure, and member education. Reducing bureaucratic hurdles, improving financial
literacy, and investing in cooperative-friendly policies can help overcome these barriers and
unlock the full potential of cooperatives in poverty reduction and economic development.
5. What are the Special Features of Traditional Cooperatives in Relation to
Modern Cooperative?
Cooperatives have evolved over time, adapting to economic, social, and technological changes.

Traditional cooperatives, which emerged in the 19th century, differ significantly from modern
cooperatives in terms of structure, governance, and operational methods. Below are the key
distinguishing features of traditional cooperatives in relation to modern cooperatives.

A. Organizational Structure and Membership

Traditional Cooperatives:

- Localized Membership: Traditional cooperatives were typically formed within small

communities, with membership limited to people from the same geographical area or
profession (e.g., farmers, artisans).

- Closed Membership: Membership was often restricted to individuals with similar economic
needs, and entry was based on personal relationships rather than open enrollment.

- Informal Structure: Many traditional cooperatives operated without formal legal recognition,
relying on trust and mutual understanding among members.

Modern Cooperatives:

- Diverse and Global Membership: Modern cooperatives often have a broader membership
base, including international participants, due to digital connectivity and globalization.

- Open Membership: Membership is generally open to anyone willing to accept the

responsibilities of being a member, regardless of geographical or professional background.

- Formal Legal Framework: Modern cooperatives are usually registered under cooperative laws,
ensuring legal recognition and protection for members.

B. Governance and Decision-Making

Traditional Cooperatives:

- Consensus-Based Decision-Making: Decisions were often made through informal discussions

and consensus rather than structured voting systems.

- Limited Leadership Hierarchy: Leadership roles were usually voluntary or rotated among
members, with minimal bureaucratic structures.
- Strong Social Bonds: Decision-making was influenced by social relationships and community
values rather than strict business principles.

Modern Cooperatives:

- Democratic Voting Systems: Modern cooperatives follow the principle of "one member, one
vote," ensuring democratic governance.

- Professional Management: Many modern cooperatives employ professional managers and

executives to enhance efficiency and competitiveness.

- Transparent Governance: Policies and decisions are documented, and members have access
to financial and operational reports.

C. Economic and Operational Approach

Traditional Cooperatives:

- Subsistence-Oriented: The primary goal was to meet the basic needs of members rather than
maximize profits.

- Barter and Non-Monetary Exchanges: Some traditional cooperatives relied on barter systems
instead of cash transactions.

- Limited Capital and Resources: Funding came mainly from member contributions, with little
access to external financing.

Modern Cooperatives:

- Market-Oriented: Modern cooperatives focus on competitiveness, profitability, and

sustainability in the global market.

- Financial and Technological Integration: They use digital banking, e-commerce, and modern
supply chain management.

- Access to External Funding: Modern cooperatives can secure loans, grants, and investments
from financial institutions and governments.

D.Social and Cultural Influence

Traditional Cooperatives:

- Community-Centric: They emphasized collective welfare, mutual aid, and cultural

preservation.
- Limited Outreach: Activities were confined to local communities with little interaction beyond
their immediate environment.

Modern Cooperatives:

- Global and Social Impact: Modern cooperatives engage in corporate social responsibility (CSR),
environmental sustainability, and advocacy for cooperative movements worldwide.

- Networking and Alliances: They form partnerships with other cooperatives, NGOs, and
governments to expand their influence.

Conclusion

While traditional cooperatives were rooted in close-knit communities and informal structures,
modern cooperatives have adapted to globalization, technology, and formalized governance.
Both models share the core cooperative principles of voluntary membership, democratic
control, and member benefits, but modern cooperatives operate on a larger, more
professionalized scale. Understanding these differences helps in appreciating how cooperatives
have evolved to remain relevant in today’s economy while staying true to their foundational
values.