Philippines, May 2021 - Agricultural cooperatives, especially small- and medium sized, are often faced by similar challenges that hinder their growth and sustainability: poor market access, lack of capital, inadequate member interest, and lack of management capacity to operate a business, among others. The GROW Coop project, funded by USAID and implemented by Agriterra, is helping address this problem by facilitating the development of large agri coops that serve as Local Resource Organizations (LROs) to capacitate and support smaller agri coops so they can have greater participation in agricultural value chains. This will ultimately increase opportunities for farmer members and boost their incomes and overall well-being.
East West Seed (EWS), a market leader for vegetable seeds in Asia, Africa, and Latin America, is one of five LROs under GROW Coop assisting its seed production partner cooperatives in addressing organizational gaps that will make them more efficient and reliable suppliers.
“As contract growers for EWS, our partner agri coops ensure the sustainability of high-quality tropical vegetable seed supply that are bought and sold by EWS locally and abroad. This business model of EWS provides mutual benefit to the company and farmers through better supply chain and new income opportunities for farmers,” said EWS Cooperative Specialist Alfred Bautista.
However, many of EWS’ seed production agri coops are burdened by limited resources and knowledge on managing a cooperative and in building a sustainable business model. With support from GROW Coop, EWS conducted an online cooperative assessment in January 2021 for two of its partner cooperatives in the provinces of Isabela and Cagayan. The assessment, led by Agriterra’s Business Advisors together with EWS specialists, identified gaps in various areas of the cooperative’s business, including governance and financial management. The results showed that the agri coops were struggling primarily with financial management, and that their financial reports including some of their accounting processes were not at par with industry standards.
The findings led to the conduct of Financial Management Process Re-engineering which was an online process audit on the cooperatives’ revenue cycle, inventory cycle, payment cycle, and practices on budgeting and forecasting. The three-day activity was attended by key staff from the cooperatives including the manager, accountant, bookkeeper, and external auditor which provided a walk-through of their respective financial processes.
“The financial side of managing a business can be challenging especially when the coop’s farmer leaders have no background in finance. This can impact the cooperative’s long-term viability if they are not able to build the financial discipline needed to run their cooperative optimally,” said EWS Finance Manager Julius Sulit.
Julius led the Financial Management Process Re-engineering activity on behalf of EWS and together with Agriterra business advisor. He narrated that in one of the agri coops audited, the organization’s budget was typically determined by year-end which is not a proactive approach in finance. “The cooperative planned a huge operating expense during the year, unfortunately the contracts did not push through. This reduced their income for that year because they did not plan ahead for contingencies,” he added.
Agriterra business advisor and EWS staff analyzed the cooperatives’ financial management process based on its efficiency and effectiveness and the internal controls in place to safeguard the business. They then formulated recommendations on the ideal financial processes that can address the gaps in the cooperatives’ current practices. One of the top recommendations is to help the agri coops rebuild their financial statements by coming up with more realistic numbers. On this front and with support from GROW Coop, EWS is planning to work with an an accounting firm in the Philippines. All recommendations were cascaded by EWS to the cooperatives to determine if they can be implemented and to establish ownership of the proposed changes.
According to Julius: “The reception of the cooperatives is an important feature of the GROW Coop project. Coops are able to recognize gaps in their own processes and understand the mutual benefit of these interventions for their cooperative and for EWS as their business partner.”
EWS and Agriterra are now gearing up for the final stage of the activity, slated between May and June of this year, which will be a process audit of the implementation of recommendations by the cooperatives. In terms of the value that GROW Coop adds to the work of EWS in strengthening its partner agri coops, Julius said:
“We have observed the challenges faced by EWS partner cooperatives from the very beginning when we helped organize them, but our resources are also limited. GROW Coop provided an opportunity and template on how to do things—and that takes out the entire friction of not knowing where to start.”
About GROW Coop Project
GROW Coop Project is funded by USAID and implemented by Agriterra with the goal of expanding rural livelihood opportunities and boosting rural households’ income by facilitating the development of large, successful local cooperatives, federations, and private companies to become local resource organizations (LROs). LROs provide in-depth mentoring and capacity development, for smaller agri coops so that they can participate more in agricultural value chains. GROW Coop is co-implemented by a consortium of partners which are also the LROs: AgriCOOPh Federation, Federation of People’s Sustainable Development Cooperative (FPSDC), Sorosoro Ibaba Develoment Cooperative (SIDC) and other private companies such as East West Seeds (EWS) and Citicore Candlewick Bioenergy, Inc (CCBI).
Agriterra provides high quality, and hands-on advice, training and exchange services, to cooperatives and farmer organisations with maximum impact for socio-economically strong and productive rural areas. Agriterra draws on a century of cooperative knowledge in the Netherlands and the Dutch agri-food sector. In 2018, with 117 employees, Agriterra advises 208 cooperatives in 17 countries in Latin America, Africa and Asia.