Facilitating access to working capital financing by cooperatives to strengthen their competitiveness is one of the major objectives of the Tsehay Farmers’ Cooperative Union-2SCALE Partnership.
As a union, Tsehay sources Niger seed-an oilseed native to Ethiopia and Eritrea- for its edible processing plant from over 142 affiliated cooperatives with a total membership of approximately 120, 450 smallholder farmers. Niger seed supply from these primary cooperatives is limited, leading Tsehay to source for these seeds from other multipurpose farmers’ cooperative unions. Megenaga Multipurpose Farmers’ Cooperative Union is one of the major unions that supplies Niger seeds to Tsehay.
Located in Debre Tabor town in southern Gondar Zone of the Amhara regional state, Ethiopia, Megenaga Multipurpose Farmers’ Cooperative Union has 73 member cooperatives with a total number of 97,660 (10, 320 Female) smallholder farmers (SHFs). As a union, Megenaga’s major role under the partnership is to aggregate Niger seeds from smallholder farmers and supply them to the Tsehay edible oil factory. Farmers sell their produce to cooperatives in cash as is the norm in most of the cooperative businesses in Ethiopia. Apart from direct buying from smallholder farmers, Megenaga Farmers’ Cooperative also deals with supply of inputs such as fertilizer and seeds, grain marketing, and supply of consumer goods. It also purchases grains and various oil crops from affiliated primary cooperatives and other cooperative unions, for resale to processors, traders, urban and rural consumers.
To run successfully, and to enable direct purchase from smallholder farmers, the cooperative requires capital all year round to aggregate in cash from farmers. However, shortage of capital is often a key hindrance to the aggregation and marketing capacity of Megenaga.
The unions coach, Mr. Getalem Amha, explains:
As a primary cooperative, some of our operations are constrained due to unavailability of working capital. Initially, we expected to receive a cash advance from Tsehay Farmers’ Cooperative union, to enable us to aggregate Niger seeds from farmers. This reliance meant that in the absence of such pre-financing, our aggregation capacity was under threat.