Role of Social Capital in Agricultural Producers’ Cooperatives for Commercialization: In the Case of Ethiopia

Abstract

Social capital is a broad term that encompasses the ‘norms and networks facilitating collective actions for mutual benefits. It is also the important immaterial stocks affect agricultural producers’ cooperatives and consequent rural development. Agriculture is the most important sector of the Ethiopian economy. Moreover, the government of Ethiopia is actively promoting the involvement of agricultural cooperatives for achieving commercialization, The, major constraints in commercialization of smallholder agriculture is lack of coordination that limit their ability to bargain for higher prices and deny them the chance to exploit economies of scale from bulking together their individual small volumes. Therefore, this paper examines social capital building, utilization and its role in agricultural producer’s cooperatives commercialization.

Social capital, which is a productive resource built from social interactions between actors. As the result, Most of Agricultural cooperatives in Ethiopia have been traditionally associated with social capital which encompasses the ‘norms and networks facilitating collective actions for mutual benefits. Besides, 91% of rural Ethiopian households have social ties and networks. Those types of social capital developed through traditional associations in a way of reputation and reciprocity mechanisms play a crucial role for continuity of cooperative behavior and facilitating the establishment of formal/ modern type of cooperatives. Therefore, this review, paper indicates that when collective action group (a cooperative) is established bottom-up based on trust and relationship, that initial social capital also affects the performance of the cooperatives.

Social capital built within the framework of development of rural agricultural producer’s cooperative is utilized by members and enable participants to act together more effectively to pursue shared objective and cooperative management has play major role in improving cooperative’s performance at organizational, financial and operational aspects through create job opportunities, enhances horizontal and vertical linkage. In addition, It helps cooperative members to get a product guarantees like certification as well as cooperative members livelihoods through improving their ability of collectivity to make decisions by overcoming market failures, reducing transaction costs, addressing problems of information asymmetry and adopting new technologies. Therefore, greater understanding of how social capital is built and utilized in agricultural producers’ cooperatives is help for better design and implements in commercialization interventions.

Keywords: Commercialization, Social Capital, Agricultural Producers' Cooperatives

JEL Classification: [3529211]