Testimony in Support of USAID’s Cooperative Development Program (CDP)

Paul Hazen, Executive Director
U.S. Overseas Cooperative Development Council
In the FY2020 State-Foreign Operations and Related Programs Appropriations Bill.

The U.S. Overseas Cooperative Development Council (OCDC) is requesting $17 million for the FY2020 Cooperative Development Program (CDP) of the Development Assistance account in the FY2020 State-Foreign Operations and Related Programs Appropriations bill. For more than four decades, USAID has supported the development of cooperatives as part of its foreign aid program, mainly through the Cooperative Development Program (CDP) that is designed to bring U.S. leadership to the mission of capacity building for the development and growth of cooperative businesses and cooperative systems around the world. This request for $17 million represents a $5 million increase from today’s $12 million level of funding that supports CDP’s current competitive grant program managed by USAID/E3/LS. The expectation is that a $5 million increase would enable expanded work in support of developing cooperatives and their members.

Who is OCDC and What is Our Interest in USAID’s CDP Program?
The U.S. Overseas Cooperative Development Council (OCDC) has a membership of eight U.S. cooperative development organizations (CDOs) with expertise in sectors as diverse as agriculture, finance, health, energy and information technology. These OCDC members are successful U.S. cooperatives who are part of a robust U.S. cooperative sector that contributes more than 2 million jobs and over $65 billion in annual revenue to the U.S. economy. It’s estimated that more than 120 million Americans benefit from their membership/participation in one or more of the close to 60,000 cooperatives that exist throughout all sectors of the U.S. economy.

In addition to being leaders in the U.S. domestic cooperative community, OCDC members have a shared interest in being champions, advocates and promoters of effective international cooperative development. Individually and collectively they have an impressive record of achievement and they bring many resources to this international work from the private sector. They apply their expertise and approaches to development in a wide range of countries, settings and sectors. They share their business expertise and send their members around the world as volunteers to build sustainable cooperative businesses, while also building goodwill for the U.S. And, they develop trading relationships between cooperatives in the U.S. and those in developing countries, which increases jobs at home and security around the world.

Examples of impacts achieved by OCDC members include:
Equal Exchange:
Fair Trade-certified coffee cooperatives in Ethiopia, Rwanda, East Timor and Central America link thousands of smallholder farmers directly with global markets and their premium coffee prices.
Genex: Based on a foundation of business consulting provided by Genex through CDP funding, more than $95 million of investments has been leveraged for dairy cattle cooperatives in South Africa.
Global Communities: Through the establishment of the Agency to Support Housing Initiatives, the organization facilitated the building of 1,140 new units of cooperative housing at 33 sites in Poland, with an estimated 4,560 individuals benefiting from the housing. Participating cooperative members contributed over $39 million to finance their housing projects, with 34% of the units financed by mortgage loans issued by local banks.
HealthPartners: 46,000 members of health-care co-ops in Uganda now have reliable access to care, including bed nets to prevent malaria and Zika.
Land O’Lakes: Land O’Lakes’ work with the dairy sector in Rwanda has focused on partnering with cooperatives that have leveraged economies of scale through horizontal or vertical integration — working with each partner to improve operational management, organizational governance and business decision-making.
NCBA CLUSA: In a 2017 Cooperative Leadership Event in Madagascar, co-organized with OCDC’s Enhancing Development through Cooperatives, NCBA CLUSA led a conversation of over 100 stakeholders. This CLE led to an analysis of the cooperative law and created the momentum for a locally-led campaign for reform.
NRECA International: Decades-long relationship with the Philippine rural electric community included assistance in the more recent recovery from Typhoon Yolanda (Haiyan) that has included work to make the Philippines’ power distribution infrastructure more storm resilient. 49 rural electrification projects in the Philippines provide power for 4.3 million co-op members.
World Council of Credit Unions: In Kenya, WOCCU enrolled over 30,000 new youth members (18-35) in the past year. Over 84,000 Agriculture Loans have been issued, totaling to $8.7+ M. 3,000 orphans of HIV/AIDS received support and 466 scholarships were given for orphans and vulnerable children to attend secondary school.

It’s clear that this work is enhanced by the additional private sector partnership with USAID through the CDP Program. OCDC members have been development partners with the U.S. government for over fifty years and the grant funding they’ve received from USAID enables these organizations to further share their expertise and resources through CDP’s competitive grant program. CDP grants are designed to address specific needs, such as: improved governance; capitalization; gender empowerment; youth engagement; financial management; market performance; and, advocacy. CDP also prioritizes collaboration among partners through working groups, cooperative research, learning, and dissemination of cooperative development resources. With CDP grants now operational in 18 countries, it is worth remembering that more than 70 countries have been beneficiaries of multi-year CDP projects over the life of the CDP program. OCDC members have used the CDP program to implement the largest portfolio of cooperative development programs in the world. CDP program activities currently are funded in 18 countries. Two new organizations were funded in FY2019, bringing the total to ten. The current grant cycle began in 2018 and will end in 2023. Three additional organizations have expressed interest in the program.

Impact of the CDP Program
Compared with other U.S. foreign aid programs, the CDP program has received a modest amount of funding and yet it has achieved tremendous success as a catalyst in laying an effective base for widespread and sustainable international cooperative development. Among the measures of the CDP program’s success over the years are reports of the following impacts:
• 500 cooperatives and credit unions assisted with a combined savings to members of $495 million;
• Provision of health insurance and services to more than 42,000 people in Uganda;
• Leveraging of more than $95 million of investments for cattle cooperatives in South Africa;
• Increased member equity among cacao cooperatives in Ecuador, Peru, and the Dominican Republic by more than $4 million; and,
• Reforms to cooperative law and regulation in Mozambique, Tanzania, Uganda, and Kenya.

This is only a representative sample of an impressive track record for the CDP program. The challenge is to use the CDP program to get additional traction for cooperative development that will produce similar impacts in other parts of the developing world. Among the lessons we’ve learned is that the CDP program is an important resource for demonstrating the positive experience of cooperatives in the developed world that can then be replicated to address the economic and social challenges of developing countries where cooperatives have not had a similar successful history.

It’s well known that the experience of creating cooperatives in developing countries has been mixed, and in some cases, this has created a negative legacy, particularly where cooperatives have operated as instruments of the state. In these instances, membership has often been compulsory and civil servants were assigned to management and even board positions. These organizations have been instruments of official economic policy and channels for government services, and do not function to serve the needs and wants of their owner/members. These government-controlled parastatals are not true cooperatives, and it is inaccurate to ascribe their failures as failures of the cooperative model. The lesson learned from this experience is that it is extremely important to get the enabling legal environment structured correctly so that member-owned and member-controlled cooperatives can grow and flourish. What the CDP program does is provide access to the expertise of successful U.S. cooperatives that bring their experience with a cooperative model that is grounded in a legal environment that enables and encourages democratic governance.

Why Cooperatives Should be an International Development Tool
Cooperatives are community-based private enterprises that promote grassroots democracy by bringing people together to meet their mutual needs through democratically governed businesses. Successful cooperatives build open markets and provide community-based jobs that help to alleviate poverty by bringing minorities, women and the poor into the mainstream economy. The community-based jobs that are created by the cooperatives help members of the cooperative achieve their own economic independence and provide resources to the community to address social goals such as improved access to health care and education.

Cooperatives have been particularly successful in promoting agricultural and rural development in the developed world. These same mechanisms, if properly structured and supported by good government policy that does not excessively intrude into cooperatives’ management and governance systems, have the potential to bring similar development success to people around the world. Where cooperatives have been allowed to operate according to true cooperative principles of member ownership and control, they have overcome obstacles and shown notable accomplishments at an impressive scale. Several examples of successful cooperative development on a larger scale include:
• 100,000 dairy cooperatives in India representing 12 million members;
• Rural electric cooperatives in Bangladesh that serve approximately 28 million people;
• Insurance cooperatives insuring two million people in Colombia; and,
• Credit union movements in Ecuador and Kenya, both with over a million members.

It’s very difficult for this kind of large successful cooperative systems to develop spontaneously and, for this reason, it is important the cooperative development be incorporated as an objective of international development agencies like USAID. We know from our own economic development experience here in the United States that any successful business needs assistance from a network of resources and supporting partners to succeed. Cooperatives are no different. To achieve size and scale in agricultural markets, U.S. agricultural cooperatives have depended on networks that have included key players such as: cooperative extension agencies; NGO’s with development expertise; government grant and loan programs that provide access to capital; as well as farmer associations that have worked together to create cooperatives.

These same resources are essential for successful cooperative development to happen in developing nations. The daunting challenges facing farmers in the developing world demand similar support, as well as technical assistance to allow them to build their own self-help cooperative enterprises. The CDP program has provided the U.S. cooperative community with an important resource that has enabled them to help lay the groundwork for similar networks that will serve the needs of cooperatives in the developing world. It’s important that the CDP program continues to serve that important role in USAID’s portfolio of development tools.

When people have jobs, can feed their children, find adequate health care and experience an overall better life, communities, countries and the world become more stable. Through old-fashioned self-help, cooperatives have proven to nurture economic development and wealth generation for their members. Cooperatives also expose people to democracy and, for the vast majority of members of new cooperatives, this is their first experience participating in a democratic system. Cooperatives serve their members’ needs, but they also put democratic and accountable governance into action. In countries that have experienced ethnic tension, conflict or dysfunction, democratic governance that is learned as part of the cooperative business enterprise can empower citizens and contribute to rebuilding the political, economic and social fabric of the nation.

Reason for Increased Funding Request for CDP Program – A Focus on Linking Farmers to Markets
No group has been more neglected than farmers in low- and middle-income countries. In many places these poor smallholder farmers represent the majority of the population. This is especially true in rural settings in Africa and other parts of the developing world.

Cooperatives can and should play a central role in linking the developing world’s small- and medium-scale farmers to markets, all of which will promote poverty reduction, increased food security and expanded agricultural growth. In particular, cooperatives allow small- and medium-sized farmers to become more productive, to actively participate in growing markets with greater market power and to provide inclusive economic growth that overcomes instances of market failure and exploitation. As a result, U.S. and international development agencies should increase their emphasis on creating cooperatives to achieve widespread and equitable economic growth that will pull millions of rural people out of poverty. It is the expectation that the requested $17 million in funding that’s being requested for the FY2020 appropriations bill would enable the CDP program to provide an even larger number of competitive grants for farmer to farmer exchanges of information and best practices.

The CDP Program Received High Marks in Recent USAID Evaluation
In 2017, USAID engaged Management Systems International to conduct an evaluation of the CDP. The evaluation team concluded that the CDP achieved notable successes in meeting its mission of creating self-reliant cooperative enterprises that are meeting members’ needs and making a positive contribution to quality of life in members’ communities and their nations. According to the evaluation, CDP also has successfully advanced larger USAID objectives and strategic priority areas, including: economic growth and trade; global health; democracy; human rights; governance; and public-private partnerships. The evaluation concluded that much of this value is due to the partnerships that stakeholders build with cooperatives supported under the CDP program, as well as external organizations seeking to enhance cooperative development.

REQUESTED FUNDING: The U.S. Overseas Cooperative Development Council (OCDC) is requesting $17,000,000 for the Cooperative Development Program (CDP) in the FY2020 State-Foreign Operations and Related Programs Appropriations bill.

“Provided that not less than $17,000,000 shall be made available for USAID cooperative development programs within the Bureau for Economic Growth, Education and Environment.”

“The Committee has repeatedly recognized the important role that U.S. cooperatives and credit unions play in overseas programs as a means to lift low-income people out of poverty through their own efforts by mobilizing equity and savings for community-based economic growth. The Committee directs the Agency for International Development to increase the budgetary level of the program for the next five-year agreement to include funding for research on the impact of cooperatives on members and their communities. Due to increased demand for the program and the programmatic impact the Committee intends to budget for not less than $17,000,000 per year for the next five years.”