Conflict, fraud, and distrust in Ethiopian agricultural cooperatives

Abstract

Agricultural cooperatives are seen as an efficient way for smallholder farmers to create bargaining power in order to achieve poverty reduction and food security. However, the success of these cooperatives depends on their ability to maintain their social capital, which is at the core of collective action. A few studies have addressed issues of member participation, commitment, and trust, yet less is known about rural cooperatives in developing countries as a social organization. It is also unclear whether a relationship exists between cooperative size and the incidence of conflict, fraud, and distrust. Using unique data collected from 511 agricultural cooperatives in 12 districts of Tigray region in northern Ethiopia, this paper examines the effects of cooperative size on conflict, fraud, and distrust. We used instrumental variables (IV) probit estimation techniques, accounting for endogeneity of membership size, to confirm that cooperative size does affect the occurrence of conflict, fraud, and trust. The results also indicate that other influencing factors include: cooperative age, number of employees, payment of dividends based on transaction volume, and heterogeneity of member goals.