Establishment of working capital at Bitacha Multipurpose Primary Cooperative
20-08-2024Written by Dita Beshada, Junior Cooperative Advisor Ethiopia
Bitacha Multipurpose Primary Cooperative is located at Kofele woreda, in the southern part of Ethiopia. The cooperative is a member of Raya Kejewa union. Established in 2013 as Bitacha Multipurpose Primary Cooperative, it initially had 70 members and 3500 share capital.In 2024, Bitacha PC has grown to 710 members, of which 202 are female and 120 youth. Currently, the cooperative has a general manager and an extension officer who have both been hired through a co-financing by the Agriterra Acting Now project, and one security guard. Members of the PC primarily produce malt barley rotated with potatoes. Additionally, they grow vegetables such as cabbage, carrots, and beetroots.
The basic functions of this cooperative include the provision of agricultural input supply, collecting the members’ produce and providing the necessary materials for its members for an affordable price. However, three years ago, the cooperative did not have enough financial capacity to effectively provide the right services and to collect produce from its members.
Lack of internal capitalisation has been one of the key reasons why Bitacha Multipurpose Primary Cooperative does not provide agricultural inputs, neither collects the members’ produce nor provides necessary materials for its members at an affordable price. The cooperative has a hard time surviving, growing, competing, and realising new business ambitions. The lack of member equity to leverage investments or use them for working capital purposes is a major challenge for Bitacha Multipurpose Primary Cooperative. Internal capital formation by members in a cooperative is increasingly important to attract external finance from banks and other moneylenders. Without the capitalisation by members, it is challenging for any cooperative to generate working capital for output marketing and effectively provide the right services for its members, and obtaining loans.
A path to financial stability
Agricultural cooperatives have different ways to build internal capital. The self-financing principle is of high importance. When members trust their cooperative, they are willing to invest capital in the cooperative. It is a significant indicator of commitment towards the cooperative, and thus emphasises a healthy member base.
Since February 2024, the Agriterra Acting now project has been collaborating with Bitacha Multipurpose Primary Cooperative. Internal capitalisation was one of the actions planned for 2024. The primary objective of an internal capitalisation training was to increase the working capital of the cooperative. In April, the Agriterra Acting Now project officers conducted an internal capitalisation training at Kofele district for Bitacha Multipurpose Primary Cooperative. In total 45 participants were trained, including staff of government, board members, the controlling committee and the lead farmers of the cooperative.
Before the internal capitalisation training was given all Bitacha Multipurpose Primary Cooperative members had only one share per person, including board members. But afterwards, many board members and cooperative lead farmers purchased more shares. One share value equals 40 birrs. Totally, within two months, 500,000 ETB (8196 EUR) was mobilised through purchased shares. Before the internal capitalisation training was given, the Bitacha Multipurpose Primary Cooperative had only 47,000 ETB (770.4 EUR) in its bank account. After the internal capitalisation training, all cooperative members became aware of the mobilisation capital. This increased the membership commitment and sense of ownership. Thus, the success story was created.
Board members of Bitacha Multipurpose Primary Cooperative
Mr. Kaso Sado, chairperson of Bitacha Multipurpose Primary Cooperative said: “Thank you Agriterra Acting Now project! The training helped us to observe our internal potential to increase our working capital”
Mr. Abdulkerim Sirko, cashier of the Bitacha Multipurpose Primary Cooperative added: “Thank you for the training! We all have learned a lot. I have learned that we can raise money internally without going to the bank or other financial institutions. The Agriterra Acting Now project gave us training and helped us obtain valuable insights on the attitude of share value. As a result, we are now addressing the challenges of a lacking working capital that we previously faced.”
Addressing the challenges of a lack of working capital, the cooperative started to provide agricultural inputs like agrochemicals at an affordable price to its members.
Agrochemicals distribute for cooperative’s members at an affordable price
The results
Agriterra Acting Now’s comprehensive support to the Bitacha Multipurpose Primary Cooperative has yielded remarkable results:
- Increased trust between board members and members of the cooperative
- Strenghtened members’ commitment for their cooperative
- New members joining the cooperative
- Enhanced sense of ownership among members
- Additional shares sold to members due to this internal capitalisation increased the cooperative’s funds from 47,000 ETB (934.4 EUR) to 500,000 ETB (8,196.7 EUR).
