Co-operatives as a Tool for Poverty Reduction and Promoting Business in Tanzania

Twelve Tanzanian co-operatives were studied by semi-structured interviews to find out if the co-operative business model can reduce poverty and address food security. Four types of co-operatives were identified: traditional co-operatives, reforming co-operatives, new co-operatives and co-operatives with some innovations. Both cases of poorly working unions and more recent success stories were found. The good functioning of cooperatives in Tanzania is characterized by a number of features:

1) The primary cooperative society is strong and works as the engine of cooperative development, business promotion, job creation and poverty reduction. The local people have control of the cooperative.
2) Financial services, i.e. services offered by SACCOs (Savings and Credit Cooperative Societies), AMCOs (Agricultural Marketing Cooperative Societies), cooperative banks and cooperative insurance companies easily accessed by the members of the primary society.
3) Members of cooperative societies are trained to know their rights, know how to run a cooperative efficiently, maintain their autonomy and independence from external pressures.
4) The secondary structures (unions or similar) are light. Members of primary cooperatives may sell through other channels than the union.
5) The secondary structure provides relevant information to the members and carries out business negotiations with foreign and domestic buyers. The secondary structure does not deal with any money or physical commodities directly.
6) Activities carried out by the secondary cooperative are transparent.
7) In cases where the cooperative is clearly market oriented, developing new products and partnerships with foreign investors seems beneficial.
8) The mutual relationship between the cooperative and the foreign investor is also based on mutual relationship between the co-operatives themselves.

Concrete examples of effective, profit-driven business that improve the situation for the poor segment of the population in Tanzania can be found in the close cooperation between SACCOs and AMCOs engaged in coffee marketing. Members receive higher prices, timely payment and sell fair trade coffee overseas. The primary societies cooperate with the local SACCOs and the cooperative bank for financing. The secondary structure is light with only a few employees who facilitate entry or exit deal with knowledge management, disseminate information and manage business negotiations with buyers. Such a model of partnership could be applied to other crops and products in other areas in Tanzania.

Business driven cooperatives create employment opportunities, reduce aid dependence, and contribute to the tax base. In one case (TDCU) about 2,200 members were young. The success factors include market orientation, partnership between local and foreign cooperatives, high demand for products, expanding market, the inclusion of young producers and facilitating their needs, the establishment of collection centres and efficient milk collection. This type of cooperative which plays a role in in the national dairy market is clearly business and market oriented.