Analysis of the Role of Cooperatives in Agricultural Input and Output Marketing in Southern Zone of Tigray, Ethiopia

Abstract

When the issue of economic growth and development of the country is raised, one has to take into account the performance of the growth of smallholder farmers. Reducing the challenges they are facing and utilizing their potentials can help to accelerate the agricultural sector and economic development of the country as a whole. Agricultural cooperatives are ideal means for self-reliance, higher productivity and promotion of agricultural development. Therefore, the major concern of this study is empirically analyzing the role of agricultural multipurpose cooperatives found in the Southern Zone of Tigray Region of Ethiopia. From the five Woredas of the Southern Zone of Tigray Region Alamata and Ofla Woredas were selected at random for the study. Both primary and secondary data were taken for this study. A three-stage random sampling procedure was adopted to select 10 primary agricultural multipurpose cooperatives and a total of 208 sample respondents at the rate of 56 from Alamata and 152 from Ofla Woreda. Primary data pertaining to the year 2006/7was collected from the selected sample respondents by using a through structured interview schedule. Of the total respondents, about 70.209% and 29.80% were participants and non-participants of the cooperatives agricultural input and output marketing respectively. Secondary data of 5 cooperatives was also taken in to consideration to examine the performance of the input and output marketing by the cooperatives in the Alamata and Ofla Woreda. Financial ratios were analyzed taking the two audit year's financial data. The liquidity analysis showed that the cooperatives under investigation were below the satisfactory rate (current ratio of less than 2.00). The financial leverage ratio (debt ratio) showed that the cooperatives under investigation used financial leverage (financed more of their total asset with creditors’ fund).The profitability ratio of the cooperatives showed that the profitability of most cooperatives improved when we compare from the first audit year to the second audit year, except two cooperatives in Ofla Woreda (Tadesech from 25.9% in 2004 to negative 1.6% in 2007 and Higumberda from 40.8% in 2002 to negative 5.2% in 2003. .Descriptive statistics were used to compare the explanatory variables of the participant and non-participant sample respondents in the agricultural input and output marketing. Testing differences between two samples were done using T-test and Chi-square test. The comparison revealed that there is a significant difference between the two groups of sample farmers regarding their age, education livestock ownership in TLU, share holding, non-farm income, expenditure on agricultural input, distance of the cooperative office from the farmer member's house, membership of the household head in other cooperatives and price of improved seed. Probit econometric model was employed to identify the factors influencing the participation of cooperative members in the input and output marketing by cooperatives in the two Woreda. Fifteen explanatory variables were included in the model of which ten variables were found to be significant. Of these, six explanatory variables namely own land, shareholding ,distance, output price, membership 6 in other cooperatives and seed price) were found to be significantly and positively related to the participation of cooperative members in the agricultural input and output marketing by cooperatives. Hence, it is suggested that more attention is to be given to the human resource development of the cooperative auditors through short term and long training programs so that to able to undertake timely audit of the cooperatives both in terms of quality and quantity. This implies, cooperatives can pay the patronage and capital dividend to members and minimize financial embezzlements through strong internal control system. Moreover, professional management is becoming crucial issue for the cooperative societies in order to run viable and profitable business that can meet members benefit. Therefore, due attention is required for the recruitment of professional managers