Internal capitalisation trajectories 2015

This project includes all trajectories related to activities to improve internal capitalisation within Agriterra's clients. Literature as well as cooperative experts state that lack of internal capitalization is one of the key reasons why cooperatives in Africa are having hard times to survive, grow, compete and realize new business ambitions. Lack of member equity to leverage investments or use it for working capital purposes is a major problem for many cooperatives in the countries where Agriterra is active. It is an topic that continuously comes back as a problem at almost every new client Agriterra start a relationship with. Therefore Agriterra is in the process of structuring the advice services on this specific topic. Inside capital formation by members within a cooperative becomes increasingly important to attract 'outsider' finance from banks and other moneylenders. Without capitalization - inside mobilization of finance of members - it is hard for any cooperative to become bankable and get a loan. By overlooking the capitalization of the cooperatives, many remain weak, creditworthiness stays low and investment capacity is hardly available. Agricultural cooperatives have different ways to build internal capital. The self-financing principle is of high importance. When members have trust in their cooperative, they are willing to leave or invest their capital in the cooperative. It is a significant indicator of commitment towards the cooperative, and thus a healthy member base. Around 40% of the financing of the cooperative should be own equity in order to have a healthy balance sheet and gain trust from banks to provide loans for capital investments and working capital for output marketing. Different modalities are applied at different cooperatives around the world to maintain or increase the own equity position, such as: • Shares • Member account - allowing equity on the names of the members • Member loan • Membership fee • Retained earnings • Proportional capital return based on transaction level of a member with the cooperative Within most of Agriterra's c;ients, the process of internal capitalization hardly happens. Since capitalization and building own equity is key for coops and unions to become independent and realize sustainable growth, it is important to gain further understanding of what the options can be for unions and cooperatives to build own equity. Issuing shares is one option, but it often happens ad hoc and non-structured. This project seeks to advise several clients of Agriterra, on what internal capitalization modalities would suit them and how they can implement those. It will be a standardized trajectory starting with a workshop. After the workshop there will be more tailored advise to each of the participating clients.