Malaysian Journal
KPDNKK
of
Co-operative
Studies
Formerly known as Malaysian Journal of Co-operative Management (MJCM)
VOLUME 7 2011 ISSN: 1823-5387
Cooperatives as Indicator of Organizational Integrity
Rosmimah Mohd Roslin, Raja Maimon Raja Yusof, Rahimah Abdul Samad & Hasrin Abu Hassan
Determinants of Cooperatives Members’ Participation in Input and Output Marketing by Multipurpose Cooperatives - An Empirical Analysis in Tigray Region, Ethiopia R. Karunakaran, Brehanu Borji & Ahmedin Sherefa
Attributes and Perceived Success Factors of Performing Cooperatives in Malaysia Nurizah Noordin, Sushila Devi Rajaratnam, Mohd. Shahron Anuar Said, Rafedah Juhan & Farahaini Mohd. Hanif
Indicators of Good Governance Practices in Self Employed Women’s Saccos Union in Addis Ababa, Ethiopia - An Exploratory Study M. Karthikeyan
Cabaran Koperasi Pengguna dalam Aktiviti Peruncitan di Semenanjung Malaysia Norazlan Hasbullah, Noranita Mohd Nor, Mohd Faisal Shariff, Ju Samsuddin Safian & Arfizawati Abd Hadi
Tahap Pengambilan Risiko dalam Gerakan Koperasi di Malaysia
Norwatim Abd Latiff
VOLUME 7 2011
MALAYSIAN JOURNAL OF CO-OPERATIVE STUDIES EDITORIAL BOARD
Chief Editor
Norazlan Hasbullah
Editors
Raja Maimon Raja Yusof Dr. Jamilah Din
Nurizah Noordin
Reviewers
Prof. Dato’ Dr. Ismail Rejab
Prof. Dr. Mohd. Ghazali Mohayidin
Prof. Dr. Rosmimah Mohd Roslin
Assoc. Prof. Dr. Rahmah Abd. Rashid
Assoc. Prof. Dr. Noryati Ahmad
Assoc. Prof. Syed Mohd. Ghazali Wafa Syed Adwam Wafa Dato’ Dr. Tam Weng Wah
Dr. Ravichandran Moorthy
Dr. Mohd. Rafi Yaacob
Dr. Zakiah Saleh
Editorial Advisory Board Members
Idris Ismail (Co-operative College of Malaysia)
Prof. Dato’ Dr. Ismail Rejab (Universiti Tun Abdul Razak)
Prof. Dr. Mohd. Ghazali Mohayidin (Open University Malaysia)
Prof. Dr. Rosmimah Mohd Roslin (Universiti Teknologi MARA)
Assoc. Prof. Dr. Rahmah Abd. Rashid (Universiti Teknologi MARA)
Assoc. Prof. Dr. Noryati Ahmad (Universiti Teknologi MARA)
Assoc Prof. Syed Mohd. Ghazali Wafa Syed Adwam Wafa (Universiti Kebangsaan Malaysia) Dato’ Dr. Tam Weng Wah (Jabatan Perdana Menteri)
Dr. Ravichandran Moorthy (Universiti Kebangsaan Malaysia)
Dr. Mohd. Rafi Yaacob (Universiti Malaysia Kelantan)
Managing Editor
Yusnita Othman
Secretariat
Afiza Abdul Karim
Sharepah Nur Azirah Shareh Abd. Rahman
CONTENTS
Malaysian Journal of Co-operative Studies Editorial Board iii
Co-operatives as Indicator of Organizational Integrity 1 Rosmimah Mohd Roslin, Raja Maimon Raja Yusof,
Rahimah Abdul Samad & Hasrin Abu Hassan
Determinants of Co-operatives Members’ Participation in Input 15 and Output Marketing by Multipurpose Co-operatives - An
Empirical Analysis in Tigray Region, Ethiopia
R. Karunakaran, Brehanu Borji & Ahmedin Sherefa
Attributes and Perceived Success Factors of Performing 37 Co-operatives in Malaysia
Nurizah Noordin, Sushila Devi Rajaratnam, Mohd. Shahron Anuar Said, Rafedah Juhan & Farahaini Mohd. Hanif
Indicators of Good Governance Practices in Self Employed Women’s 69 Saccos Union in Addis Ababa, Ethiopia – An Exploratory Study
M. Karthikeyan
Cabaran Koperasi Pengguna dalam Aktiviti Peruncitan 87 di Semenanjung Malaysia
Norazlan Hasbullah, Noranita Mohd Nor, Mohd Faisal Shariff, Ju Samsuddin Safian & Arfizawati Abd Hadi
Tahap Pengambilan Risiko dalam Gerakan Koperasi di Malaysia 103 Norwatim Abd Latiff
ABSTRACT
CO-OPERATIVES AS INDICATOR OF ORGANIZATIONAL INTEGRITY
Rosmimah Mohd Roslin
Universiti Teknologi MARA, Malaysia
Raja Maimon Raja Yusof Rahimah Abdul Samad Hasrin Abu Hassan
Co-operative College of Malaysia
This study addresses the question of how retail co-operatives project their stature as socially responsible co-operatives through their corporate culture and their business ability. Using integrity as the proxy to such projection, the link between integrity and the corporate culture and integrity and business abilities are assessed. The findings of this study confirmed such relationships and further illustrate how integrity is deemed crucial to the image of the co-operatives. Although this study is just an extension of another study on retail co-operatives, it nevertheless established how co-operatives view their positions as socially responsible entities and how important it is for the co-operatives to constantly display their actions as being efforts that will allow their members and the public to perceive them positively.
INTRODUCTION
Co-operatives are social enterprises that are formed and owned by a group of individuals for the purpose of improving their standard of living. The underlying philosophy of co-operatives is essentially service and the well-being of members and as such, co-operatives are non profit-oriented and will always put the welfare of the members as a priority when making key decisions (Tchami, 2007). Most co-operatives are governed by seven co-operative principles that have been universally accepted and adopted by the International Co-operative Alliance. The principles are voluntary and included open membership; democratic member control; member economic participation; autonomy and independence; education, training and information; co-operation among co-operatives; and concern for the
2
community. It is this underlying philosophy that has guided the movement of co-operatives in Malaysia.
Today, the integrity of the co-operative movement in preserving its concept and ideology is being challenged by current trends in the area of information and communications technology (ICT), impact of globalization and liberalization of trade, deregulation and changes in national and global policies. The world has become very competitive for the co-operatives and for those that are operating numerous business ventures as their main source of revenue, the need to uphold the welfare of the members have become more challenging. The business world has never incorporated welfare and autonomic rule as key ingredients to the achievement of high profits. Indeed, business demands and the core responsibility of the co-operatives are at extreme ends and this may prove to be a challenge to those co-operatives upholding thecoreprinciplesoftheirexistence. Co-operativesalsofacechallengesinimproving their stature as well organized co-operatives and the quality of services and products to members. At the same time, they face the challenge of competing with the private sector in a fair and competitive environment.
Challenged by such environmental demands, co-operatives are using their formal entities as means of displaying their integrity. With the co-operative label, these organizations are persuading the public that their existences are solely for the welfare of their members. Although involved in many business undertakings, co-operatives are facing the dilemma of convincing the public that they are genuinely honest, are of high integrity and more importantly are carrying out tasks that have the good welfare of their members at heart. Yet, there are many co-operatives that have been disgraced because of dishonest dealings and mismanagement of funds. This proposed study addresses the extent that co-operatives in Malaysia are using their identities as tools of public relations and to display their image of integrity. Using co-operatives involved in the retail business as respondents, this study evaluates the extent of ‘believability’ that the co-operatives expressed through their roles as co-operatives. From the findings an assessment of organizational identities of co-operatives can be derived and this would assist the co-operatives to understand their roles better.
Corporate Integrity in the Co-operative Environment
Brenkert (2004) asserts that corporations are organizations of humans and those organizations that are not dysfunctional and execute their functions in accordance to what they preach can be regarded as exhibiting some form of integrity. Yet, integrity itself is often subjective and contains many contradictions. This is
Malaysian Journal of Co-operative Studies
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attributed to integrity being associated with the corporate leader or the CEOs and they are increasingly being held accountable for the behaviours of their corporate citizens (Harshbarger & Stringer, 2003). Being a corporate leader is doing what is right on several different levels or in several different ways. Being a corporate leader is about integrity, responsibility, and excellence, and perhaps even honour (Lennick & Kiel, 2005).
Integrity is also associated with the feeling of trust that one has over an organization. The way the organization acts, the way it executes its responsibilities and the way it projects itself are signs of integrity. High levels of corporate integrity will add significant value to the corporation both by avoiding costs and, more importantly, by avoiding damaging losses of brand equity, reputation, and marketplace influence—valuable sources of competitive advantage. In essence, high integrity is good for business (Harshbarger & Stringer, 2003, p.16).
Based on this premise, co-operatives with their underlying philosophy of working for the group and upholding the principle of goodliness for all, would want to be associated with high levels of integrity. It is more pertinent for co-operatives to display a sense of trust and building a sense of community of practices not only among the co-operative members but also with customers and other stakeholders. Kakuchi (1995) observes the Japanese co-operatives and reiterate how co-operatives are essentially obligated to the society in offering goods of high quality and of reasonable prices. Thus, co-operatives are social engines that actually worked for the good of the community and therefore integrity must be observed always.
A sense of integrity linked to trust is expected to be present within the co-operative work environment as co-operative leaders embark on business ventures aimed at attaining substantial returns which are to be shared among the members. The values and principles of co-operatives encourage them to develop a clear ethical stance and to emphasize meeting people’s needs over maximizing profits for shareholders. In so doing, co-operatives work within democratic structures, which provide opportunities for input and involvement for key stakeholders (e.g., member-owners, management, employees, community), and which necessitate emphasis on transparency and accountability (Brown, 2006). Thus, the need to address issues relating to integrity as reflected by the way the co-operatives project themselves through their marketing efforts and their corporate culture will dictate the credibility of the co-operative and its adherence to its core principles of democracy, voluntarism and community values.
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Corporate Culture and Abilities – Linkage to Integrity
The values adhered by the co-operatives are also linked to the corporate culture they advocate. Goals, philosophies and principles are deemed to portray the construct of corporate culture (Melewar & Jenkins, 2002) and these are valid elements present within the co-operative environment. Corporate culture is the personality or the shared values of the organization (Koberg & Chusmir, 1987) and in the context of co-operatives, it is such culture that dictates the behaviour of the members and the co-operatives’ ‘way of life’. In assessing the corporate culture, one is able to assess the extent of adherence of the co-operative to the community. As a co-operative, their culture or the way the members and the leaders behave may reveal their true character. Thus, the construct of corporate culture is postulated to influence the extent of integrity especially within the co-operative scenario.
In line with this assumption, the co-operatives’ ability to carry out their responsibilities diligently and with the highest level of integrity is the core of their existence. The behaviour of the members and the leaders would therefore project the image that the co-operative is indeed credible in their execution of responsibilities. Sternberg (1991) expresses the idea that corporate identity is all about values and these values direct operations and behaviours of the members. As co-operatives are also business entities, the ability in carrying out their businesses effectively and their keen sense of business acumen will indicate their level of social responsibility. It is therefore pertinent that the co-operatives’ ability be given adequate attention in ensuring that the integrity of the co-operative is upheld. Thus, the co-operatives’ ability is deemed as another construct which may well influence the level of integrity projected by co-operatives. Although there is no common designation and consensus as to how business performances should be evaluated especially for co-operatives, in this study, the co-operatives’ business ability is assessed by operationalizing it through the elements of financial stability, business acumen and the strategic orientation adopted by the co-operatives in managing their businesses. This is decided based on the integration of several studies assessing performance and productivity (Jessup et al., 2004; Dragun, Howard & Reynolds, 2004) to provide a basic idea of how business abilities could be measured.
THE STUDY
This study is an extraction of a bigger study conducted between two institutions, Universiti Teknologi MARA and the Co-operative College of Malaysia. The initial study sets out to assess the extent of involvement co-operatives have in the retail
Malaysian Journal of Co-operative Studies
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business. From this study, delineation was made of those co-operatives already involved in the retail business and an evaluation of the extent of their efforts in projecting their image as a co-operative of high integrity was carried out. A total of 100 retail co-operatives were identified and the assessment of their activities associated with their display of integrity and corporate identities were carried out.
The objectives of the study therefore were to:
1. Determine the efforts exerted by the co-operatives in displaying their level of integrity.
2. Evaluate the correlation between the corporate culture of co-operatives with the level of integrity displayed.
3. Assess the relationship between the ability of the co-operatives to carry out their business ventures and the level of integrity projected through their marketing efforts.
The objectives serve as the basis to determine how co-operatives used their virtues as co-operatives to relate to the public their identities as highly responsible entities. The framework for this study is outlined in Figure 1 below.
Corporate culture
• Identity
• Values
• Behaviour
• Commitment
Ability of Co-operatives
• Strategic direction
• Financial stability
• Business acumen
Figure 1: Research Framework
Integrity of Co-operatives
• Trustworthiness
• Accountability
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METHODOLOGY
Using the descriptive method of research, a questionnaire was developed as the main instrument for data collection. Based on the sampling frame of co-operatives registered with the Malaysian Co-operative Commission (Suruhanjaya Koperasi Malaysia) a total of 500 consumer co-operatives were identified. From the 500, co-operatives that were active and still operating were identified. A stratified random sampling was then carried out based on geographical zones of main cities in Malaysia and co-operatives from these zones were randomly selected. This list was then distributed to enumerators for the distribution of questionnaire. Enumerators met with any of the key management team of the co-operatives and they were asked to answer the questionnaire. Generally, the respondents were represented by any one of the board members, the managers or the secretary of the co-operatives. In total 100 co-operatives that were actively involved in the retail business answered the questionnaire.
Quantitative analysis followed after the data were keyed in, cleaned and processed accordingly. Descriptive analyses including correlation were then executed to answer the research objectives. The following discussion explains the findings and answers the research objectives.
FINDINGS AND ANALYSIS
The analysis begins with an assessment of the reliability of the instrument used for the research. As such, reliability test was carried out to ensure that consistency of the research items was maintained at all times. Table 1, provides the Cronbach alpha values of the three main variables in the study. The highest values are noted for the variable of corporate culture with a Cronbach alpha of .8388 while the alpha value for integrity is .6480. Sekaran & Bougie (2010) asserts that alpha values of .6 and above can be considered as acceptable for most social research that is exploratory in nature. However, in this case, the items on abilities need further assessment as the consistency is rather low as depicted by the value of .4176.
Table 1: Reliability Analysis
Variables
No. of Items
Alpha values
Integrity
7
.6480
Corporate culture
6
.8388
Abilities
5
.4176
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The low alpha value for the items on abilities may be attributed to the scarce number of items in assessing this variable. As asserted by Hattie (1985), Cronbach alpha values may increase with an increment of items. The measure of co-operative abilities may also be a complex construct where the co-operatives may view their abilities differently and not necessarily from a business perspective. Despite their involvement in the retail business, the co-operatives’ abilities may be evaluated also from their social responsibility angle. As this was not inserted in measuring the variable, there appear to be some inconsistencies in the views of the respondents. Nevertheless, the items are still maintained for this exploratory study as it is only meant to gauge the co-operatives’ initial assessment of their business acumen.
The descriptive analysis that follows is presented in Table 2 where the basic details of the co-operatives are described to gauge the background of the co-operatives. A majority (46%) of the co-operatives were experienced ones having been established before 1990. Such an indication of experience would imply their ability to manage their co-operatives and to understand the demands of ensuring that the co-operatives live up to its name. The number of members is also indicative of the co-operatives’ strength. In total 35% of the co-operatives have members of 100 to 300 and 32% have more than 500 members. The size of the co-operatives is important to imply their abilities to carry out more demanding activities and therefore their business ventures are also likely to be more structured to gain adequate profits for dividend payments to all its members.
Another indicator of size is the amount of capital that the co-operatives possess. A total of 32% of the co-operatives owned more than RM100 thousand (USD31.3 thousand) of capital and by Malaysian standard, this is relatively large. Although the assets accumulated are not relatively large (54% reporting less than RM50,000 or USD15,600), this is typical of co-operatives that are not necessarily inclined to accumulate assets as this would imply fixed investments that may not directly benefit all the members.
In terms of the income generated by these co-operatives, a majority (69%) are reporting a relatively low income of less than RM100,000 (USD31,250) in the year ending 2008. What can be implied here is the tendency of the co-operatives to be involved in less risky ventures that may not be accumulating large amount of income for them. Those who are involved in retailing are generally relying on their members as their target customers. This is the scenario in Malaysia where no significant large retail co-operatives exist. Those that do report their involvement in the retail business
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are basically targeting their members and these co-operatives are located in specific rural or suburban areas where there is a dearth of modern retail outlets. This is in fact a contribution of the co-operatives who feel that they are socially obligated to provide the retail services to their members.
Table 2: Co-operatives’ Background
Details of Co-operatives
%
Year established
Before 1990
46.0
1990-1995
20.0
1996-2000
8.0
2001-2005
16.0
After 2005
10.0
Number of members
Less than 100
19.0
100-300
35.0
301-500
14.0
More than 500
32.0
Amount of capital (2008)
Less than RM10K
29.0
RM10K-RM50K
20.0
RM51K-RM100K
19.0
More than RM100K
32.0
Amount of assets (2008)
Less than RM50K
54.0
RM50K-RM100K
12.0
RM101K-RM500K
16.0
More than RM500K
18.0
Net income (2008)
Less than RM100K
69.0
RM100K-RM500K
15.0
RM501K-RM1Million
10.0
More than RM1 million
6.0
The analysis continues with a descriptive analysis on the efforts relating to the projection of integrity of the co-operatives. This includes items pertaining to the level of trustworthiness and accountability of the co-operatives based on their perceptive assessment. As indicated in Table 3, trustworthiness as displayed through the experiences of the board of directors, the knowledge of the staff/members who work in the retail outlets and the confidence that the customers as well as the members have toward the co-operatives are depicted by a mean of 4.76. On a scale of 1 (extremely
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unimportant) to 6 (extremely important), a mean of 4.76 implies a relatively strong feelings which the co-operatives perceived as their projection of integrity. Accountability is another measure of integrity and this is evaluated through statements relating to the financial aspects of the co-operatives, the supporting element they provide and that are given to them as well as the acceptance of the members/public toward the co-operatives in general. With a mean of 4.66, this is again a reflection of the importance the co-operatives regard the projection of their integrity.
Table 3: Integrity Measure
Scale: 1: Extremely unimportant – 6: Extremely important
Based on the framework developed, the analysis continues with the assessment of correlations between the variable of integrity and corporate culture as well as integrity and the ability of the co-operatives. As indicated in Table 4, there is a correlation between the culture of the co-operatives and their display of integrity as indicated by the correlation value of .495 for ability and .426 for integrity and corporate personality. Although the correlation values are rather weak, they do indicate the presence of relationship between integrity of the co-operative and how they project themselves through their personality or corporate culture. Their abilities also are indicative of how their integrity is being projected.
Table 4: Correlations
TRUSTWORTHINESS
ACCOUNTABILITY
N Valid Missing
Mean
Std. Deviation
100 0 4.7600 .57726
100 0 4.6667 .72474
INTEGRITY
CULTURE
ABILITY
INTEGRITY
Pearson Correlation
1
.426(**)
.495(**)
Sig. (2-tailed)
.
.000
.000
N
100
100
100
CULTURE
Pearson Correlation
.426(**)
1
.430(**)
Sig. (2-tailed)
.000
.
.000
N
100
100
100
ABILITY
Pearson Correlation
.495(**)
.430(**)
1
Sig. (2-tailed)
.000
.000
.
N
100
100
100
** Correlation is significant at the 0.01 level (2-tailed).
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The findings concur with the assumption that co-operatives view their integrity as an indicator of who they are and this is reflected through their corporate culture or their corporate personality. As co-operatives, their responsibility to their members and to the public in general needs to be visible through the way they behave and through their ability to carry out their functions well. In this study, co-operatives that are involved in the retail business are the focus of the research and their abilities to carry out their business operations effectively are also seen as a key element in ensuring that they are carrying their functions effectively as responsible co-operatives.
Further inferential analysis is carried out through regression analysis to determine to what extent the independent variables, corporate culture and abilities influence the integrity of the co-operatives. Table 5 provides the model summary of the regression analysis and the ANOVA output.
Table 5: Model Summary(c) and ANOVA
a Predictors: (Constant), ABILITY
b Predictors: (Constant), ABILITY, CULTURE c Dependent Variable: INTEGRIT
ANOVA(c)
Model
R
R Square
Adjusted R Square
Std. Error of the Estimate
Durbin-Watson
1 2
.495(a) .549(b)
.245 .301
.237 .287
.48590 .46993
2.104
Model
Sum of Squares
df
Mean Square
F
Sig.
1 Regression Residual
Total
2 Regression
Residual Total
7.516 23.138 30.654
9.233 21.421 30.654
1 98 99 2 97 99
7.516 .236
4.617 .221
31.834 20.906
.000(a) .000(b)
a Predictors: (Constant), ABILITY
b Predictors: (Constant), ABILITY, CULTURE c Dependent Variable: INTEGRIT
The predictors of the model are ability and corporate culture or personality and as seen in Table 4, ability of the co-operatives account for 23.7% of the variation on integrity of the co-operatives. When both predictors are entered into the model, this variation increased to 28.7%. The Durbin-Watson value of 2.104 implies that the assumption of independent errors is tenable as the value is close to 2.0 (Field,
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2009). The ANOVA analysis also reveals that the model enhance the prediction of the outcome variable, meaning that integrity as the outcome of the postulated model can be predicted by looking at the two predictors.
DISCUSSION
The study sets out to address the efforts exerted by the co-operatives in their initiatives to project their integrity. As indicated by the descriptive analysis, the co-operatives view aspects of integrity as important in their stature as co-operatives. This then is linked or correlated to dimensions of corporate culture and although the correlation is not distinctively strong (.426), there is still positive relationship. This is also true of the correlation between integrity and the abilities of the co-operatives in carrying out their retail ventures and again even though a correlation of .495 is noted, the positive correlation is enough to indicate that relationship exists among the variables.
The inferential analysis also provides enough evidence to accept the postulation that the corporate identity of the co-operatives which is proxy through the dimensions of integrity is linked to their corporate culture and the display of their abilities. To the co-operatives, integrity is important as this is a reflection of who and what they are. As co-operative they have a social obligation to uphold their outlook as a responsible entity not only to their members but to the public as well. The public especially will generally link the co-operatives with how they carry out their functions and with retail co-operatives they are often in the public eye. As such, their actions are akin to their marketing efforts, be it in a positive or negative manner. What this implies is that as co-operatives their roles and responsibilities are in the public eye and will be scrutinized by the public and their members. As members, the higher the level of identification they have with their co-operatives, the more likely that they relate to the co-operatives (Stoel, 2002). Thus, how a co-operative carries itself is pertinent to the effectiveness of the co-operatives.
This study is only an exploratory one as it seeks to address how the co-operatives view their obligations and how these are translated into the activities that they carry out. With an identity that is reflective of their personality, the co-operatives are indeed using this as a tool to project their level of trustworthiness and accountability. Although much needs to be done, this study has established that co-operatives do carry out distinct efforts to project who and what they are. Indeed co-operatives exist to serve their members and to ensure that the welfare of the members are a priority and if what they do is reflective of who and what they are doing, then would already indicate that they are in the right path to attaining co-operative effectiveness.
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Future studies should address more dimensions that would provide a more rigorous assessment of the corporate culture of co-operatives, the projection of integrity and the means that co-operatives used to evaluate their abilities. What has been done in this study is just a small extension of another study on retail co-operatives and as such, a lot of pertinent elements may have been omitted. It is hoped that this study will open more avenues for other studies on co-operatives especially those that are linked to the marketing efforts of the co-operatives.
REFERENCES
Brenkert, G.G. (2004). The need for corporate integrity in Corporate integrity and accountability, George G. Brenkert (editor), Thousand Oaks, Sage Publications.
Brown, L. (2006). Innovations in co-operative marketing and communications, Centre for the Study of Co-operatives, University of Saskatchewan, 1-16.
Dragun, D, Howard, E. & Reynolds, J. (2004). Assessing the productivity of the UK retail sector, Oxford Institute of Retail Management, Templeton College, University of Oxford.
Field, A. (2009). Discovering statistics using SPSS (Introducing statistical methods series), 3rd. Edition, London, Sage.
Harshbarger, S. & Stringer, R. (2003). Creating a climate of corporate integrity, The Corporate Board, May-June, 10-16.
Hattie J. (1985): Methodology review: assessing unidimensionality of tests and items. Applied Psychology Measure, 9: 139-164.
Jessup, E., Casavant, K., Monson, J. & Duft, K. (2004). Business decisions in a co-operative environment, Journal of Business and Economic Research, 2(6): 71-75.
Kakuchi, S. (1995). Japan: consumer coops make it big, www.uwcc.wise.edu/icic/today/ consumer/big.html, [accessed 30 May, 2009].
Koberg, C.S. & Chusmir, L.H. (1987). Organizational culture relationships with creativity and other job-related variables, Journal of Business Research, 15: 397-409.
Lennick, D. & Kiel, F. (2005). Moral intelligence: Enhancing business performance and leadership success. Upper Saddle River, NJ: Pearson Education Wharton School Publishing.
Melewar, T.C. & Jenkins, S. (2002). Defining the corporate identity construct, Corporate Reputation Review, 5(1): 76-90.
Sekaran, U. & Bougie, R. (2010). Research methods for business: A skill building approach, 5th edition, New York, John Wiley & Sons.
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Sternberg, R. (1991). Making up a face to fit, Asian Business (Hong Kong), 27(4): April, 55-56.
Stoel, L. (2002). Retail co-operatives: group size, group identification, communication frequency and relationship effectiveness, International Journal of Retail and Distribution Management, 30(1): 51-60.
Tchami, G. (2007). Handbook on co-operatives for use of workers’ organizations, Geneva, International Labour Office.
AUTHORS’ BACKGROUND
Prof. Dr. Rosmimah Mohd Roslin is currently a Professor of Marketing at the Faculty of Business Management, Universiti Teknologi MARA, Malaysia and has 23 years experience as a lecturer. Besides teaching, she has undertaken a number of research studies and written journal articles. She also provides advisory services and reviewing journal articles for the International Marketing Review, United Kingdom, International Journal of Interdisciplinary Social Sciences, International Journal of Internet and Enterprise Management, Zagreb University and Jurnal Pengurusan, Universiti Kebangsaan Malaysia. Rosmimah is the Chief Editor for the Journal of International Business and Entrepreneurship (JIBE), Editorial Advisory Board of the Asian Academy of Management Journal and Academic Advisor for the Institute of Marketing Malaysia. In addition she also a member for the Academy of Marketing, United Kingdom, a member for the Asian Academy of Management and a member for the Qualitative Research Association of Malaysia (QRAM).
Raja Maimon Raja Yusof is the Deputy Chief Director (Academic) at the Co-operative College of Malaysia (CCM). She holds a Masters in Business Administration from Universiti Kebangsaan Malaysia (1997), Bachelor in Economics with Honours from Universiti Malaya, Malaysia (1987) and Diploma in Co-operative Training Methodology from Pune, India (1979). She joined CCM in 1979 and is an experienced lecturer in business management. She also provides advisory service to co-operatives, undertaken a number of research studies and written articles relates to co-operative management.
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Rahimah Abd. Samad is currently the senior lecturer of the Co-operative Entrepreneurship and Retailing Centre at the Co-operative College of Malaysia (CCM). She has more than 26 years experience as a lecturer with CCM and besides teaching, has undertaken a number of research studies and written related article in the field of co-operative management. She obtained her Masters in Business Administration (2009) and Bachelor in Business Administration (Human Resource Management) (1998) from Universiti Teknologi MARA, Malaysia.
Hasrin Abu Hassan joined the Co-operative College of Malaysia in 2004 as a lecturer. Besides training, he has been involved in research studies and written related articles. He obtained his Master in Business Administration (Advanced Operation Management) from Universiti Teknikal Malaysia (UTeM), Bachelor in Business Administration (Operation Management) from Universiti Teknologi MARA, Malaysia and Diploma in Technology Management from Universiti Teknologi Malaysia (UTM).
Malaysian Journal of Co-operative Studies
DETERMINANTS OF CO-OPERATIVES MEMBERS’ PARTICIPATION IN INPUT AND OUTPUT MARKETING BY MULTIPURPOSE CO-OPERATIVES - AN EMPIRICAL ANALYSIS IN TIGRAY REGION, ETHIOPIA
R. Karunakaran, Brehanu Borji & Ahmedin Sherefa
ABSTRACT
Hawassa University, Ethiopia
The main aim of this study is to empirically analyze the major factors influencing members’ participation in input and output marketing of agricultural multipurpose co-operatives in the Southern Zone of Tigray Region of Ethiopia. A multi-stage random sampling procedure was adopted as to selection of Woredas, co-operative societies, and member respondents. As such, in the first stage, Tigray Region was purposively selected. In the second stage, from the five Woredas (Districts) of the Southern Zone of Tigray Region, Alamata and Ofla Woredas were selected at random for the study. In the third stage, out of 27 primary multipurpose co-operatives in the selected Woredas, 10 societies were selected based on the volume of business. In the final stage, a total of 208 sample respondents at the rate of 56 from Alamata and 152 from Ofla Woreda by adopting probability proportionate to size sampling. Primary data pertaining to the year 2007/08 was collected from the selected sample respondents by using a structured interview schedule. Of the total respondents, about 70.2% and 29.8% were participants and non-participants of the co-operatives agricultural input and output marketing respectively. Probit econometric model was employed to identify the determinants of participation of co-operative members in the input and output marketing by co-operatives in the two Woreda. Fifteen explanatory variables were included in the model of which ten variables were found to be significant. Of these, six explanatory variables namely own land, shareholding, distance, output price, membership in other co-operatives and seed price were found to be significantly and positively related to the participation of co-operative members in the agricultural input and output marketing by co-operatives.
INTRODUCTION
Currently, there are around 28,000 primary level co-operatives (60 percent are agricultural co-operatives) 180 secondary co-operatives (unions), two co-operative federations and a Co-operative Bank with 16 branches operating throughout Ethiopia
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serving more than 5 million members with a total capital of over 1.2 billion Ethiopian Birr in different sectors of the economy like Agriculture, Banking, Credit and Savings, Marketing, Processing, Construction, Service, Housing, Irrigation, Agriculture. etc (Federal Co-operative Agency 2010). It is noteworthy that more than 85 percent of the total agricultural inputs requirements of the rural community are distributed through co-operatives. As to market share, co-operatives are responsible for over 25 percent of coffee exports, the major foreign exchange earner of the country. Coffee unions are exporting high-quality, organic and Fair Trade coffee to the United States, Europe and Japan, fetching premium prices on behalf of smallholder coffee farmers. Through co-operative unions, primary co-operatives have unfettered access to inputs at competitive prices with substantial price reductions) and have attained a strong bargaining position in marketing their outputs.
A report of Tigray Co-operative Promotion and Input Marketing Division (2008) indicates that there are 1309 different types of primary and 21 secondary co-operative societies in the region, of which 582 (44.5%) are agricultural multipurpose co-operatives which deal with the input and output marketing of their members. The remaining 727 (55.5%) co-operatives comprise of saving and credit, construction, irrigation and other type of co-operative societies. The co-operative societies in the region have a total membership of 361,242 which includes 275,696 (76.3%) male and 85, 546 (23.7%) female members with a total capital of Birr 71,462,247 (Gebru Desta, 2007).
The marketing of agricultural products begin at the farm when the farmer plans his production to meet specific demands and markets prospects. Marketing enables the agricultural producer to step out of a subsistence straight jacket and grow produce for sale. Correspondingly, it permits a large proportion of a country’s population to live in cities and buy their food nearby. Agricultural marketing provides an incentive to farmers to grow produce for export. In this way, it gives farmers more income and earns foreign exchange to pay for imports. Agricultural marketing is complicated by the diverse nature of the products to be handled, and their perishability. A further complication is the scattered nature of agricultural production and, in most tropical countries (like Ethiopia), the very large number of separate production units. For these reasons, agricultural marketing calls for considerable initiative, decision making and skill (Kraenzle, 1989).
Co-operative Marketing is an extension of the principles of co-operatives in the field of marketing. It is a process of marketing through a co-operative association formed voluntarily by its members to perform one or more marketing functions in respect of their produce.
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Agricultural inputs can be categorized into two types, consumable and capital inputs. The former includes manures and fertilizers, seeds, insecticides/pesticides, diesel oil and electricity, etc, on the other hand, capital inputs include tractors and trailers, harvesters and threshers, pump sets, and other implements. Most of the agricultural input markets are seen at the level of grain market towns and large villages or co-operative institutions. There are some general aspects of the rural market like underdeveloped markets, illiterate buyers, lack of communication facilities, many languages, and vast spread of the market, storage, transport problems, seasonality and demand which are applicable to agricultural input markets as well. However, agricultural input markets differ from other product markets in many ways due to the nature of their products, the nature and location of users and the overall environment in which products are being bought and used (Oxford Policy Management, 2003).
Under the current institutional arrangement, the Ministry of Agriculture and Rural Development (MoARD) is responsible to design, implement and monitor agricultural marketing policies through the different divisions organized under the department of agricultural marketing and inputs of the Ministry. Other organizations like co-operatives, unions, traders associations, exporters’ associations etc also play an important role in improving the marketing skill, bargaining power and also in the process of policy formulation (Dawit, 2005).
Statement of the Problem
The weak performance of the agricultural markets (both input and output markets) in Ethiopia has been portrayed in various studies as a major impediment to growth in the agricultural sector and the overall economy (Dawit, 2005). With an inefficient marketing system, the surplus resulting from increased production benefits neither the farmers nor the country (Hind, 1994). This is particularly important as the country is following a policy of agriculture led-industrialization and economic development where the agricultural sector is expected to produce surplus that can move to the other sectors of the economy.
The agricultural markets in Ethiopia are highly influenced by the production system itself. Most of the agricultural production is undertaken by small scale producers scattered all over the country, engaged in different agricultural enterprises without specialization, and with limited marketable surplus. It was estimated that only 28 percent of total farm output in 1996 was marketed. Therefore, the scattered produce in small quantity needs to be collected and assembled, graded, and transported from one market level to another. Thus, the marketing system is characterized with a long chain with many intermediaries. An intervention is required to shorten the marketing
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channel in order to reduce the marketing costs incurred at each level of marketing channel so that the benefits will go to the farmers (Gebremeskel, 1998).
The cause of success and failures of co-operatives corresponds in a building up and breaking down of co-operative identities through the process by which members and employees grow to hold the identity as their own vision. Although co-operatives are considered as an appropriate tool of rural development they are facing critical problems, which retain them from their positive role. Some of the constraints of co-operatives are: low institutional capacity, inadequate qualified personnel, low entrepreneurship skill, lack of financial resources, lack of market information, poor members’ participation in the different activities such as financing the co-operative, patronizing the business activities of the co-operatives, control and supports it. Moreover, the prices of agricultural inputs are increasing from year to year and farmers are complaining on it. These multifaceted problems make very difficult the over all activities of the co-operatives in general and the agricultural input and output marketing in particular. Among the problems discussed above, members’ participation assumes greater significance since members’ participation is being considered as a prime factor which influences greatly on the input and output marketing system of marketing co-operatives. Thus the present study is an attempt to bring forth the factors influencing members’ participation in input and output marketing by co-operatives in Southern Zone of Tigray.
LITERATURE REVIEW
Participation of members in the agricultural input and output marketing by co-operatives: For the effective functioning of the co-operative movement, members’ participation is the pole of the co-operative. These are members who are aware of the importance of the co-operative societies socially and economically. These members will make themselves aware of the problems and have the willingness to contribute to the progress of the co-operatives. Such membership ensures member participation in the business and managerial affairs of the co-operatives. Vigilant members prevent financial irregularities and the emergence of vested interest in co-operatives. Thus the health of co-operatives improves. As against the participant members, ignorant, sleepy, inactive, non-participative and indifferent members become a problem in themselves. They are prone to exploitation by the convert (change) elements in the society. So the members in the society must be highly participative in all aspects of the co-operative affairs.
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Democracy is the basic value of co-operatives. In a democratic organization like co-operatives, the general body is supreme organ of the organization and the management committee is elected by them to look after the day to day affairs. In this study, the concept of participation lays the involvement of member patrons in patronizing the agricultural input and output marketing made by co-operatives. A few studies pertaining to members’ perception, attitude and participation in co-operatives have been reviewed hereunder.
Mitchell A. Seligson (1987) in his report analyzed the Attitude and Perception of Co-operative Members and Nonmembers on the advantages and disadvantages of co-operatives. The study concluded that members of co-operatives have better positive attitude and perception towards the management and administration of co-operatives because of their active participation in both management and business affairs. Further non members too have some knowledge about co-operatives.
Tretcher (1996) used a logit regression analysis to analyze the factors associated with diversification on agricultural co-operatives in Wisconsin. It was found that the impact of diversification upon measures of co-operative performance (profitability, patronage refund and equity redemption) was relatively minor i.e. diversification on agricultural co-operatives was not statistically associated with profitability, increases in patronage dividends or increases in equity devolvement. The result also showed that diversification on agricultural co-operatives was an important factor in determining membership size i.e. diversified co-operatives enjoyed larger membership.
Haileselassie (2003) found that most of the co-operative members appreciated the involvement of co-operatives in input marketing. As a result members in the Saeisietsaeda Emba Woreda in Tigray Region have built a sense of ownership and confidence. The study further indicated that above all members were satisfied for the reason that it removed the need for members moving along distances to collect fertilizer, and reduced time and finance spent on the way.
Kebede (2006) used the logit model to analyze the farmers’ perception and determinants of land management practices in Ofla Woreda, southern Tigray, Ethiopia. The findings of the study showed that Age, Sex, Distance to Woreda market, perceived water logging problem, perceived gully and degradation status, Investment in soil and water conservation practices, slope category were found to determine the farmers perception of land management practice.
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Daniel (2006) used the tobit model to assess the performance of primary agricultural co-operatives and determinants of members’ decision to use as marketing agent in Adaa Liben and Lume Districts. The findings of the study showed that among these significant variables, co-operative price for teff, position in the co-operative, farm size, yield of teff, patronage refund and distance of the district market from the farmer’s house were found to be significantly and positively related to the farmers’ marketing of teff through the co-operatives.
Gebru Desta (2007) in his study Competitive Advantage of Agricultural Co-operatives’ Services in Rural Areas of Tigray observed that agricultural co-operatives are legitimate institutions which belong to farmers. Their main activities are to render variety of services and access the market for input supply particularly to the rural community. The result of the survey further states that the trend of agricultural inputs supply in the study area is highly decreased in quantity of fertilizer, improved seeds and increased unit price almost from year to year.
Amini and Ramezani (2008) investigated the factors involved in the success of poultry growers’ co-operatives in the selected provinces of Iran. The results indicate that the co-operatives studied have generally failed to achieve the objectives mandated in their constitutions which include their members’ satisfaction. The results from path analysis showed that the following factors, in descending order of importance, had the greatest effects on co-operative success: managers’ technical skills, number of training programmes attended, quality of training programmes offered, members’ participation in co-operatives’ administrative affairs and managers’ interpersonal human skills.
The studies reviewed so far have not analyzed the role of co-operatives in input and output marketing in the study area in particular and Ethiopia in general and hence the present study.
Research Questions
The research work is an attempt to find answers to the following questions.
1. Do members actively participate in the input and output marketing of multipurpose co-operatives?
2. Are there significant differences between the socio economic characteristics of participant and non participant members?
3. What are the factors determining members’ participation in the input and output marketing by multipurpose co-operatives?
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Objectives of the Study
In compliance with the research questions, the study has the following specific objectives:
1. To analyze the socio-economic characteristics of the co-operatives members.
2. To assess the nature and extent of participation of co-operative members in agricultural input and output marketing activities.
3. To identify the major factors influencing participation of co-operative members in agricultural input and output marketing activities.
Hypothesis of the Study
In line with the objectives, the following hypotheses have been framed by the researchers.
1. The participation of members of multipurpose co-operatives in input and output marketing is influenced by the shares held by the member household heads.
2. The participation of members of multipurpose co-operatives in input and output marketing is influenced by the distance to the co-operative office from the house of member household heads.
3. Educated members are evincing active participation in the input and output marketing of the co-operatives.
4. Fertilizer prices have positive influence on members’ participation in the input and output marketing by co-operatives.
METHODOLOGY
The study is based on empirical analysis. Hence field survey method was adopted.
Sampling Procedure
A multi-stage random sampling procedure was adopted for the selection of region, study area and the sample farmers from the co-operatives in the two Woredas. In the first stage, Tigray region was selected purposively on the justification that the region is beset with large number of agricultural co-operatives which are dealing with input and output marketing. As a second stage, out of five Woredas (Districts) in South Tigray Zone, two Woredas (Alamata and Ofla) were randomly selected for the purpose of the study.
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In the third stage, considering the total number of 27 multipurpose primary co-operatives (11 in Alamata Woreda and 16 in Ofla Woreda) as well as financial and time limitations, 10 primary multipurpose co-operatives were randomly selected from the two study woredas (four from Alamata Woreda and six from Ofla Woreda).
In the final stage, given the available resource and time at the disposal, a total of 208 farmer members (56 farmers from Alamata Woreda and 152 farmers from Ofla Woreda) were selected randomly using probability proportional to sample size (PPS).
Tools for Data Collection
Primary data was collected on age of respondents, marital status, sex of the household head, educational level, family size, family income, size of land holding, livestock ownership, duration of membership, awareness about co-operatives, contact with the co-operative leaders, participation in co-operative management, dividend payment, availability of credit, exposure to mass media, price of agricultural inputs, opinion on price of agricultural outputs, timely delivery of inputs, regular marketing service of co-operatives, distance of the house of the household head from primary multipurpose co-operative society, expenditure and other relevant variables from the sample respondents who are members of the primary multipurpose co-operatives selected for the study.
A structured interview schedule was developed to collect the needed primary data which comprised of both open ended and closed ended questions. The structured interview schedule was prepared for the purpose of conducting face-to-face interview with the respondents to elicit as much information as possible in pursuit of fulfilling the objectives of the study. The interview questions were developed by the researchers at their own by taking into account the nature of the business dealings (input and output marketing) held by the members with their co-operative society. The interview schedule was first prepared in English and translated into Tigrigna for practical field work. The interview schedule was pre-tested with 10 co-operative members before its actual administration.
Data Analysis
Descriptive statistics are important to have clear picture of the characteristics of sample units. By applying descriptive statistics one can compare and contrast different categories of sample units (farm households) with respect to the desired characteristics. In this study, descriptive statistics such as mean, standard deviation,
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percentages and frequency of occurrence were used along the econometric model, to analyze the collected primary data.
Probit Model Specification
To identify the factors influencing the participation of co-operative members in the agricultural input and output marketing business, binary Probit model was employed for this study. Therefore, the determinants of participation in the agricultural input and output marketing activity were estimated using binary Probit regression model. According to Maddala (2002) Probit model is specified as:
I * = α +δ Xi+ε i
Where
I = 1 if I i* >1, the members participate in the agricultural input and output marketing by co-operatives.
I = 0 if I* i ≤ 0, otherwise
are exogenous variables where i = 1, 2 ..., 15. = Age of household head
= Educational level of the household head = Family size of the household head
= Land owned by the household head
= Number of oxen owned by the household head
= Livestock holding of the household head
= Share holding of the household head
= Non farm income of the household head
= Expenditure in agricultural inputs by the household head
= Distance to the co-operative office from the home of the household
= Perception of household head on price of agricultural output
= Perception of the household head on change of standard of living due to
X i X1 X2 X3 X4 X5 X6 X7 X8 X9 X10 X11 X12
X13
X14
joining to co-operatives
= Membership of the household head in other co-operatives = Perception of the household head on Fertilizer price
= Perception of the household head on improved seed price
X15
δ is vector of parameters to be estimated;
α is the intercept term;
ε1i are the disturbance term
The Variance Inflation Factor (VIF) was used to test for the existence of multi-collinearity between continuous explanatory variables. VIF shows how the variance of an
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estimator “R” is inflated by the presence of multi-collinearity (Gujarati, 2004). If R2 is the adjusted square of the multiple correlation coefficients that results when the explanatory variable (Xi) is regressed against all the other explanatory variables, VIF is computed as VIF(X) = (1-R) 1-2
i
As the adjusted R2 approaches 1, the VIF approaches infinity. That is as the extent of collinearity increases, the variance of the estimator increases, and in the limit it can become infinity. If there is no collinearity between independent variables, the values of VIF will approach 1. As a Rule of Thumb, values of VIF greater than 10 are often taken as a signal for the existence of multi- collinearity problem in the model (Gujarati, 2004).
Contingency coefficients were also calculated to see the degree of association between the dummy variables. They were calculated for each pair of dummy variables using contingency coefficient procedure available in Statistical Packages for Social Sciences. Contingency coefficient is a chi-square based measure of association. A value of 0.75 or more indicates a stronger relationship.
RESULTS AND DISCUSSION
Socio-economic Characteristics of the Respondents
The average age of the sample farmers was about 43.2 years. The corresponding figure for the participant and non-participant farmers was about 42.4 and 45.0 years respectively. An independent sample t-test was conducted to compare the difference in mean age between participant and non participant sample respondents are statistically significant at 10% probability level of significance (t = 1.84) (Table 1). This indicates that more aged members do not participate in the input and output marketing activities of the co-operatives as compared with the less aged farmer members.
The average educational level of the sample households was 3.2 years of schooling. While the respective participant and non participant sample farmers average schooling is 3.5 and 2.7 years. According to the independent sample t-test, the difference mean t-test was compared between the participant and non-participant co-operative members with respect to educational level of the household head is found to be statistically significant at 10% probability level (t = -1.8) and the hypothesis has been accepted. This implies relatively educated member farmer members participate in the input
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and output marketing activities of the co-operatives. This can be due to the fact that educated farmer members have more exposure to timely information and understand about the co-operative marketing activities as compared to less educated members.
The mean family size of the sample household in the study was found to be 6.0. The respective average family size for participant and non participant household is 6.0 and 5.9 respectively Nonetheless, the analysis shows that, the mean difference between participants and non-participants of the agricultural input and output marketing by co-operatives with respect to family size is found to be statistically non significant (t = -0.834).
The average land ownership of the sample respondents were 0.67 hectare. Moreover, the corresponding figures for the participant and non-participant sample respondents’ amounts 0.7 and 0.5 hectare respectively. According to the independent sample t- test conducted in this study, the difference in mean land ownership between the participant and non participant household heads is found to be significant at 10% probability level (t = -2.48). Therefore, from this we can conclude that the majority of the sample farmers own more than half a hectare of land which is above the Woreda average (i.e. 0.5 hectare).
The average livestock holding for the sample households as a whole is 5.62 Tropical Livestock Unit (TLU) (Table 1). The average livestock holding of participants is relatively higher (6.0) than that of non-participants (4.6). An independent sample t- test was conducted to compare the mean difference in TLU owned between participants and non-participants of the agricultural input and output marketing by co-operatives. The result shows that there is statistical significant difference between the participant and non-participant households at 5% probability level (t = -2.38).
More importantly the average shareholding of the whole sample farmers, participant and nonparticipant farmer members amounts 2.2, 2.3 and 1.9 respectively. An independent sample t test was analyzed to compare the mean difference between the participant and non-participant households in the agricultural input and output marketing by co-operatives and the result shows statistically significance at 1% probability level (t = -2.99). This indicates, majority of the sample respondents 146 (70.2%) were participating in financing their co-operative societies through investing in the form of additional share capital.
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Table 1:Mean, STD, T-values Continues variables for Non-Participant and Participant Groups (N = 208)
Explanatory Variables
Non- Participant ( N = 62)
Participant ( N = 146)
Total
( N = 208)
Sig.
t values
Mean STD
Mean STD
Mean STD
Mean STD
Mean STD
Mean STD
Age of HH
45.02
9.00
42.47
9.13
43.23
9.15
0.066*
1.84
Level of Education of the HH
2.73
2.79
3.53
2.85
3.29
2.85
0.063*
-1.87
Family size of HH
5.987
1.987
6.02
1.931
6.003
1.959
0.405
-0.834
Land owned by the HH
0.57
0.37
0.72
0.44
0.67
0.43
0.014**
-2.48
Number of oxen owned by the HH
1.23
1.047
1.72
1.34
1.57
1.27
0.010**
-2.58
TLU
4.59
3.47
6.06
4.31
5.622
4.12
0.018**
-2.38
Nonfarm income of the HH
3147
4776
2087
2106
2403.3
3172.7
0.098*
1.68
Expenditure on input
247
229
323
284
300.45
270.6
0.066*
-1.85
Number of share holding by the HH
1.89
0.93
2.36
1.1
2.22
1.07
0.003***
-2.99
Distance from the Co-operative office
3.52
3.10
4.43
3.71
4.16
3.56
0.090*
0.06
* Significant at 10% level of significance ** Significant at 5% level of significance *** Significant at 1% level of significance
Factors Determining the Participation of Members in the Agricultural Input and Output Marketing by Co-operatives
The estimates of parameters of the variables expected to influence the participation of farmer members in the agricultural input and output marketing by co-operatives are displayed on Table 2. Fifteen explanatory variables of which five are dummy variables and the remaining 10 are continuous explanatory variables were taken for the analysis. The result of the probit model analysis showed that 10 variables were found to be significant. The impact of these explanatory variables on the dependent variable is discussed below. Before running the model, it is useful to look into the problem of multicollinearity among the continuous variables and verify the degree of association among the hypothesized qualitative explanatory variables. To this effect, the 10 continuous explanatory variables were checked for multicollinearity using Variance Inflation Factors (VIF) while Contingency Coefficients were used to detect
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the degree of association among five qualitative (discrete) explanatory variables. According to the results, no significant problems of multicollinearity and very high degree of association were observed. Therefore, all the 15 hypothesized continuous and discrete explanatory variables were included in the model.
To start with, endogeneity was suspected in the case of perception of output price, perception of change in standard of living due to joining to the co-operatives, perception of fertilizer price and perception of improved seed price with the dependent variable participation of the household head in the agricultural input and output marketing by co-operatives as there is an increase in participation by the members in the input and output marketing due to those independent explanatory variables. On the other hand, households’ decision of participation depends on the price of output, price of fertilizer, improved seeds and change on the standard of living of the household head due to the participation in the input and output marketing by co-operatives.
Age of household head (AGEHH): Analysis of binary probit model as given in Table 2 reveals that the demographic explanatory variable namely age, has negative and significance effect at 10% probability level on the participation of members in the agricultural input and output marketing by co-operatives in the two study woredas between all categories of members (participant and non-participant). This result is in contrary to the finding of Subburaj and Karunakaran on the peoples’ perception on the social benefits of cooperation (Frank, 2003). This is an important finding that young co-operative members are more active participants in the agricultural input and output marketing by co-operatives. The probable reason for this could be young members might have more awareness about the benefit of co-operatives as compared to aged members.
Land owned by the HH (LANDOWN): As it was expected, landholding has positively influenced the agricultural input and output marketing activity of co-operatives which is significant at five percent probability level. Each additional hectare of land increases the probability of purchasing agricultural input from the co-operative and selling of its agricultural outputs to their co-operative. Therefore, land ownership is an important variable in the input and output marketing participation of the household head. The result of this study was similar with to the findings of Daniel, 2006, as the farm size increases, the co-operative members patronize their co-operative society by purchasing and selling agricultural input and output respectively.
Share holding of HH (SHARHOL): The variable share holding had influenced the participation of farmer members in the agricultural input and output marketing by
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co-operatives positively and significant at five percent probability level as it was expected and hence the hypothesis is accepted. This implies that as the number of share holding of farmer members increases the level of participation in the co-operative affairs such as input and output marketing increases. The larger the share holding the greater will be the sense of ownership by the co-operative members which leads for more participation.
Non-farm income of the HH (NONFARNI): As expected the economic variable non-farm income has influenced the participation of agricultural input and output marketing by co-operatives negatively and significant at one percent probability level. Field survey result shows that, farmers earning high non-farm income are non participants in the agricultural input and output marketing by co-operatives because they don’t involve in the farming activity since they don’t have the land.
Distance of the co-operative office from the HH house (DCOFFH): This variable has influenced the participation in the agricultural input and output marketing by co-operatives positively and found to be significant at one percent probability level and hence the hypothesis has been accepted. It was expected that farmers, who are relatively nearer to the co-operative office, have the chance to participate more in the marketing activities of the co-operative. However, the model result shows that farmers who live far-away from the co-operative office have also increased their probability to participate in the agricultural input and output marketing co-operatives. This implies farmer members at relatively distant location have less alternative marketing agents as compared to those who live near the co-operative which are influenced by other private marketing agents. This result is in contrary with finding of Daniel, 2006.
Perception of the HH on the price agricultural output (OUTPP): This variable had influenced the agricultural input and output marketing of the co-operatives positively and significant at one percent probability level. These shows as the co-operative offers better price to its members agricultural produce the participation of members in selling their farm output to the co-operative increase. The result was in conformity with the finding of Daniel, 2006.
Perception of the HH on the change in standard of living due to joining a co-operative (CHSTDUCO): The variable change in standard of living due to joining a co-operative (becomes a co-operative membership) has negative and significant at five percent probability level. Therefore, the variable change in standard of living has negative contribution to the input and output marketing by co-operatives.
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Membership in other co-operatives (MOTHCOOP): Membership in other co-operatives i.e. other than the multipurpose co-operatives has positive and significance influence at 10 percent probability level in the agricultural input and output marketing by co-operatives. This implies that co-operative members who have a membership in other co-operatives have better understanding in participating in the co-operative affairs including in patronizing the co-operative business (such as input and output marketing business).
Perception of the HH on fertilizer price (FERPRICE): The variable fertilizer price influenced the participation of co-operative members in the agricultural input and output marketing by co-operatives negatively and significant at 10 percent probability level and hence the hypothesis has been rejected. This implies as the price of fertilizer increases the participation of the household head in purchasing fertilizer from the co-operative decreases.
Perception of the HH on improved seeds price (SEEDPRIC): The price of improved seed has influenced the dependent variable participation of co-operative members in the input and output marketing by co-operatives positively and significantly at 10 percent probability level which is contrary with what was expected. This implies farmer members in the two woredas participate more actively in the purchase of improved seeds as compared to other types of inputs regardless the price.
In general, the participation of farmer members in the agricultural input and output marketing by co-operatives was significantly influenced by age, own land, shareholding, non-farm income, distance of the co-operative office from the household house, output price, change in standard of living due to joining co-operative, membership in other co-operatives, price of inorganic fertilizer and price of improved seed. However, out of the 10 significant explanatory variables six of them (own land, shareholding, distance, output price, membership in other co-operatives and seed price) were influenced the participation of co-operative members in the agricultural input and output marketing by co-operatives positively and significantly at 10% probability level.
In Table 2 the last column, marginal effects of the explanatory variables on the probability of member’s participation in the agricultural input and output marketing by co-operatives are also presented. As we can see from the table, a unit change in the variables household age, non-farm income, change in standard of living and price of inorganic fertilizer decreased the probability of participation of farmer members in
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Table 2: Probit Regression Estimates of Determinants of Participation in Agricultural Input and Output Marketing by Co-operatives (N = 208)
Variables
Coefficient
Marginal Effect
Age of HH in years
-0.0403* (0.0150)
-0.0121* (0.0045)
Educational level of the HH in years of schooling
0.0398 (0.0437)
0.0120 (0.0131)
Family size of the HH in number
-0.0369 (0.685)
-0.0111 (0.0206)
Land owned by the HH in hectares
0.8618** (0.3385)
0.2603** (0.1013)
Number of oxen owned by HH in number
0.0401 (0.1558)
-0.0121 (0.0471)
Livestock holding of the HH in tropical livestock unit
0.0349 (0.0496)
0.0105 (0.0149)
Share holding of the HH in number of shares
0.3052** (0.1235)
0.0922** (0.0367)
Non farm income of the HH in birr
-0.0001*** (0.0000)
-0.00003*** (0.0000)
Expenditure in agricultural inputs by the HH in birr
-0.0005 (0.0004)
-0.0002 (0.00013)
Distance to the co-operative office from the home of the HH kms
0.0632** (0.0323)
0.0191** (0.0098)
Perception of the HH on price of agricultural output dummy
0.6539*** (0.2454)
0.1883*** (0.0660)
Perception of the HH on change of standard of living due to joining to co-operatives dummy
-0.5405** (0.2349)
-0.1702** (0.0758)
Membership of the HH in other co-operatives dummy
0.4155* (0.2211)
0.1251* (0.0660)
Perception of HH on fertilizer price dummy
-0.5658* (0.2912)
-0.1809* (0.0962)
Perception of HH on improved seed price dummy
0.6310** (0.2759)
0.1906** (0.0813)
Constant
0.9031 (0.6451)
Pseudo-R2
0.2524
LRX 2 (15)
63.98
Prob >X2
0.000
***, **, and * indicates statistically significant at 1 percent, 5 percent and 1 percent probability level respectively. Figures in parentheses are standard errors
Malaysian Journal of Co-operative Studies
31
the agricultural input and output marketing by co-operatives by 0.0121, 0.000035, 0.1702 and 0.1809 respectively. More importantly, one hectare of extra land owned by the household head increased the probability of participation of the household head in the agricultural input output marketing by co-operatives by 0.2603 units. Similarly, a unit change in the share holding of the household head increased the probability of participation in the agricultural input and output marketing by co-operatives by 0.0922. As clearly shown in Table 2, a one km change in the distance of the co-operative office from the house of the household head also shows an increased probability of participation in the input and output marketing by the co-operatives, which is in contrary with the findings of Daniel (2006).The plausible reasons for this is no matter with the distance farmer members prefer to do business with their co-operative society. One birr change in the price of agricultural produces marketed to the co-operative society by its members results an increase of the probability of participation in the agricultural input and output marketing by co-operatives by 0.1883 units. Similarly one birr change (lower) in the improved seed price increased the probability of participation of the co-operative members in the agricultural input and output marketing by co-operatives by 0.1906 unit and a unit change in the membership in other co-operatives increased the probability of the household head in the participation of in the input and output marketing by co-operatives by 0.1251 units.
As it has clearly shown in Table 2, the overall fit of the model has also quite well with LR chi square value of 63.98 and Prob > chi square = 0.00. The model explains 25.2% of the variations in the participation of agricultural input and output marketing by co-operatives.
CONCLUSION
From the foregoing analysis, it may be concluded that there are significant differences between the participant and non participant members in respect of age, land, tropical livestock unit, shareholding, non-farm income, expenditure in agricultural input, distance of the co-operative office from the household house, membership in other co-operatives and price of improved seed. The probit model results revealed that out of 15 explanatory variables included in probit model, six continuous and four discrete explanatory variables were found to be significant at less than or equal to 10% probability level. More specifically, these variables include age, own land, shareholding, non-farm income, distance of the co-operative office from the household house, perception of the household head on output price, perception of the household head on change in standard of living due to joining co-operative, membership in other
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co-operatives, perception of the household head on price of inorganic fertilizer and price of improved seed were found to be significantly related to the participation of farmer members in the agricultural input and output marketing by co-operatives. Further, among these significant variables own land, shareholding, distance, output price, membership in other co-operatives and seed price were found to be significantly and positively related to the participation of co-operative members in the agricultural input and output marketing by co-operatives.
Policy Implications
From the outcome of the analysis of the research work, a few suggestions have been put forth to enhance the participation of members in input and output marketing:
1. Most of the participant members feel that active participation and interest of the members is a sine-qua-non of any co-operative society. It is normal that some members will not show much interest in the affairs of their co-operatives apart from contributing their share capital, but there is a general consensus that unless members are active, co-operatives cannot prosper. There is, therefore, a clamor for throwing out the inactive members.
2. People generally feel that co-operative as a movement will succeed only if there is better knowledge and understanding of co-operatives. To that end, co-operative education needs to be improved. The education component of the activities of the Regional Co-operative Promotion Agency needs to be strengthened.
3. The need for autonomy in the management of co-operatives is emphasized. The elected board of management is expected to maintain political neutrality. Participatory management decision making in co-operatives is advocated. Members of co-operatives insist on enforcing management accountability by board of management including the executive heads. With a view to establish effective and efficient board of management in co-operatives, selective voting right to members is suggested.
4. There is a growing realization that many co-operative societies fail to live up to their expectations in fulfilling their core objectives. Provision of services that are needed by majority of members of co-operatives is emphasized during the field survey. There is a demand for avoidance of delay and delivery of prompt services. Adoption of simple and flexible procedures in availing the services of co-operatives is suggested.
Malaysian Journal of Co-operative Studies
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REFERENCES
Amini, A.M. & Ramezani, M. (2008). Investigating the success factors of Poultry Growers’ Co-operatives in Iran’s Western Provinces, World Applied Sciences Journal, 5(1): 81-87.
Daniel Belay. (2006). Performance of Primary Agricultural Co-operatives and Determinants of Members’ Decision to use as Marketing Agent in Adaa Liben and Lume Districts, Unpublished M.Sc. Thesis in Agricultural Economics, Alemaya University, Ethiopia.
Dawit Alemu. (2005). The Status and Challenges of Agricultural Marketing in Ethiopia, Melkassa Agricultural Research Center, EARO Paper presented at a panel discussion organized by the Ethiopian Association of Agricultural Professionals (EAAP), Addis Ababa, Ethiopia.
Federal Co-operative Agency (FCA). 2010. Annual Report for the year 2009/2010. Unpublished Document, Addis Ababa, Ethiopia.
Frank Ratna Kumar, Savarimuthu, A. & Ravichandran, K. (2003). A New World through Co-operatives, Rainbow Publications, India.
Gebremeskel Dessalegn, T.S. Jayne, & J.D. Shaffer. (1998). Market Structure, Conduct and Performance: Constraints on Performance of Ethiopian Grain Markets, Working Paper 8: Grain Market Research Project, Ministry of Economic Development and Cooperation, Addis Ababa, Ethiopia.
Gebru Desta. (2007). ‘Competitive Advantage of Agricultural Co-operatives’ Services in Rural Areas of Tigray, Ethiopia. Unpublished M.Sc.Thesis, Department of Food Business and Development, National University of Ireland, Cork.
Gujarati. (2004). Basic Econometrics, Fourth Edition, Tata McGraw Hill Companies Inc. New York.
Haileselaqssie Girmay. (2003). The Benefits of Co-operative Membership: A Co-operative Study in Saesie Tsaeda Emba District, Tigray Region, Ethiopia. Unpublished M.Sc. Thesis, Department of Food Business and Development, National University of Ireland, Cork.
Hind, A.M. (1994). Co-operatives: Underperformers by Nature-Explanatory Analysis of Co- operatives and Non-co-operative Companies in the Agribusiness Sector, Journal of Agricultural Economics. 45(2): 213-219.
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Kebede Manjur. (2006). Farmers’ Perception and Determinants of Land Management Practices in Ofla Woreda, Southern Tigray, Ethiopia, Unpublished M.Sc. Thesis in Agricultural Extension, Alemaya University, Ethiopia.
Kimberly A. Zeuli & Robert Cropp. (2004). Co-operatives: Principles and Practices in the 21st Century. Co-operative Extension Publishing, University of Wisconsin, Madison, USA.
Kraenzle, C.A. (1989). Farmer Co-operative: Members and Use. Agricultural Co-operative Society Research Report 77. USDA, Washington, D.C., U.S.A.
Maddala. (2002). Introduction to Econometrics, Third Edition, J. Wiley and Sons Ltd, England
Mitchell A. Seligson. (1987). Coffee Producers in Ecuador: A Comparison of Co-operative Members and Nonmembers, United States Agency for International Development, Quito, Ecuador.
Oxford Policy Management. (2003). Towards a Strategy for Support to Make Agricultural Markets Work Better for the Poor: The Grain Marketing System in Ethiopia, UK.
Tretcher, D.D. (1999). Impact of Diversification on Agricultural Co-operatives in Wisconsin, Agribusiness, USA.
AUTHORS’ BACKGROUND
Dr. R. Karunakaran (1966) is currently Assistant Professor in the Department of Co-operatives, Hawassa University Ethiopia. He has 18 years of experience in teaching, research, training, extension and industry in the fields of Cooperation and Co-operative Management. He has carried out number of research studies and written related articles. He has published more than 26 research and conceptual based papers in reputed Indian and International journals. He has published research papers in the edited books viz., Small Scale Industries-Problems, New World through
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35
Co-operatives and Information Technology – Its Application in Small Scale Industries. He is co-author of two books entitled, “Gender Issues in Co-operatives” and “Training and Development” and sole author of a book entitled, “Socio-Economic Impacts of Co-operative Movement in Rural Areas”. His current areas of research are Impact Assessment of Co-operatives, Functional Areas of Co-operative Management, and Co-operative Marketing.
Dr. Brehanu Borji (1959) is currently Assistant Professor in the Department of Management and Accounting, Hawassa University Ethiopia. He has 12 years of experience in teaching, research, training, extension and industry in the fields of Management and Marketing Management. He has carried out number of research studies and written related articles. He has published more than 2 research and conceptual based papers in reputed Indian and International journals. He has published research papers in the edited books viz., the Impact of liberalization on Ethiopian Cotton Textile Industry. He is a sole author of a book entitled, “Mathematics for Management. His current area of research is Impact of Liberalization on Ethiopian Leather Industry.
Mr. Ahmedin Sherefa (1972) is currently Lecturer and Head, Department of Co-operatives, Hawassa University. He has 4 years of experience in the fields of teaching, research, extension and training. Prior to his teaching assignment, he served as administrator/head in several government organizations for about 15 years. He did his M.Sc. in Co-operative Marketing in Mekkele University, Ethiopia. He had undergone short term training on Development management and Thematic PRA in reputed Indian Institutions. He has completed so far two micro research projects funded by the Research and Development Directorate of Hawassa University. His current area of research is Co-operative Marketing.
Volume 7 2011
ATTRIBUTES AND PERCEIVED SUCCESS FACTORS OF PERFORMING CO-OPERATIVES IN MALAYSIA
ABSTRACT
Nurizah Noordin Sushila Devi Rajaratnam Mohd. Shahron Anuar Said Rafedah Juhan Farahaini Mohd. Hanif
Co-operative College of Malaysia
This paper analyses the attributes of selected performing co-operatives and explored the perception on the factors that have influenced the success of these co-operatives. For identification of the success factor, the survey method is adopted and a total of 567 questionnaires were collected from individual respondents (Board Members) representing 89 selected performing co-operatives. Responses were then analysed using the exploratory factor analysis. A total of three (3) factors were extracted using the principal component method with a varimax rotation. The three factor rotated explained a total of 54.38 percent of the variance and all the factors had acceptable reliability. The three factors identified were managerial competency, effective leadership and support. Group mean scores were then calculated for the three factors to determine their importance in determining the success of the performing co-operatives. Subsequently, effective leadership was perceived as the most important factor with the highest group mean score, followed by the factor, managerial competency. The factor, support was perceived to be the third most important factor.
Key words: co-operatives, management, success factor
INTRODUCTION
Co-operative was introduced in Malaysia in the early 1990s by the colonial government in response to credit and indebtedness problems of peasants, farmers and the civil servants (Frederics, 1973). Since the registration of the first thrift and loan co-operative in July 1922, the co-operatives sector, placed under the authority of the Malaysian Co-operative Societies Commission (MCSC) has become an important part of the economy and made major impact on the lives of millions of Malaysians. From only 11 co-operatives in 1922, as of 31 December 2009, the movement has
38
registered 7,215 societies with a membership of 6.78 million people and total assets worth RM64.9 million (Table 1). These co-operatives have evolved from credit, agricultural and consumer function into a wide range of business activities covering banking, credit and finance, agriculture, housing, industrial, consumer, construction, transport and services.
Although the achievement in terms of numbers, membership size and asset accumulation portrayed that co-operatives have gained huge support and recognition, the co-operative movement currently contributes only slightly more than 1.4 percent to the Gross Domestic Product (GDP) of Malaysia. As such, while providing the best services to their members, co-operatives need to also strengthen their role within the context of national development. In view of this aspiration, the 2011-2020 National Co-operative Policy (NCP) have underlined strategies that will increase the participation of co-operatives in viable and high end economic activities to boost the contribution of co-operatives to achieve the targeted 5 per cent contribution to GDP by 2015 and 10 per cent by 2020.
In order for co-operatives to succeed economically and provide benefits to its members effectively, they would have to be influenced by certain critical factors. Whether driven by the management competency, leadership style or the activities undertaken, it would thus be enriching to discover the attributes of successful co-operatives and identify the important factors which are perceived to have contributed to their success. Identification of these factor could be used to establish a baseline of practices and guidelines for co-operatives to develop and to enhance their performance. It would also assist co-operative to focus their efforts on building the necessary capacity and competency in order to be successful. Correspondingly, identification of the success factors could provide guidance to the related agencies to which appropriate factors and actions they need to focus to stimulate co-operatives to be more successful.
REVIEW OF LITERATURE
In the context of co-operative, a combination of traditional financial measure and non-financial or subjective indicators would appear to be the best measure to reflect the performance of co-operative as a socio-economic entity (Parsley, 1992; Hind, 1997). While the combined measures of performance are deemed to be more appropriate, there are however, arguments that accounting based measures of financial performance are a sufficient predictor of performance (Brief and Lawson, 1992; Peasnell, 1996). For instance Kakani et al. (2001) have utilized accounting based measures for evaluating the performance of firms in India, using the return on
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39
Table 1: Number of Co-operative Societies in Malaysia (According to Sectors, as at 31 December 2009)
Function
No. of Coop.
Members (individuals)
Capital
Assets
Turnover
Profit/Loss
Banking
2
838,932
2,289,504,293
51,251,535,708
4,338,062,555
1,577,844,058
Credit/ Finance
575
1,963,054
4,170,086,940
7,180,092,477
1,367,606,347
348,108,617
Agriculture
1,362
289,484
244,317,272
1,256,095,986
613,878,566
123,113,737
Housing
107
89,182
133,356,559
406,619,034
36,442,571
164,698,774
Industrial
117
17,634
5,238,548
56,620,186
33,127,694
3,339,385
Consumer: (Adult)
1,681
670,908
279,481,976
1,127,480,418
791,900,262
56,451,623
Consumer: (School)
2,115
2,106,130
17,264,427
177,673,323
195,120,375
25,508,868
Construction
117
62,171
14,365,358
56,784,381
64,188,685
2,593,031
Transport
346
148,196
58,654,263
250,163,546
512,207,073
19,914,402
Services
793
598,084
1,753,250,727
3,236,209,436
966,475,435
341,347,245
Total
7,215
6,783,775
8,965,520,363
64,999,274,495
8,919,009,563
2,662,919,740
(Source: Malaysia Co-operative Societies Commission)
asset (ROA), the net profit margin (NPM), the return on capital employed (ROCE), cash flow measure (CFM) and compounded annual asset growth rate (CAGR).
Kyriakopoulos, Meulenberg and Nilsson (2004) in their study of the impact of co-operative structure, firm culture and market orientation on performance also adopted the multidimensional construct of profit margin, market share, relative market growth while Mishra, Tegegne and Sandretto (2004) uses the modified net income per dollar of assets and operator‘s labor and management income as a performance measure. Ward and McKillop (2005) on their study of the linkage between the UK Credit Unions characteristics, location and their success on the other hand uses two financial indicators; the payout ratio (dividend and rebate percentage) and efficiency ratio (cost to income percentage) as a measure of success.
Correspondingly, highlighting the attributes and perceived important factors influencing the performing co-operatives would provide a better understanding of the link to their success. Although there are a variety of possible factors that influenced success, previous research categorized the factors as either organizational (internal) or economic (external) in nature (Hansen and Wernerfelt 1989). They cited that these two effects are independent, with organizational factors explaining twice as
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much variance in profit rates, suggesting that organizational factors influence firm performance to a greater extent than economic factors.
Powell (1966) suggest that research on identification of success factors should focus on the firm specific qualities such as culture, relationships, leadership and capabilities. Likewise, Lynch and Giorgis (1997) posit that the characteristics of small business managers, such as age, education background, experience and management skills are important to the success of these organizations. In Ward and McKillop (2005), size, location and affiliation to the league are found out to be contributory factors to the success of a credit union.
As member based organisations, members’ involvement in their co-operatives is of paramount importance to the survival and success of co-operatives. In fact Amini and Ramezani, 2008; Lluch, Gomis and Jimenez, 2006 have dentified active member participation in the administration of co-operatives as a key factor influencing the successful performance of co-operatives. For co-operatives to succeed, it is also imperative that they are managed effectively by visionary and competent leaders who are capable of planning strategically for the continued survival of the co-operative. Prior studies (Carr, Kariyawasam and Casil, 2008; Carlberg, Ward and Holcomb, 2006; Henehan and Pelsue, Jr., 1986; Pathak and Kumar, 2008) has found that having strategic or long term plans was positively associated with successful co-operatives. Bruynis, Goldsmith, Hahn and Taylor (2001), identified the following variables; securing sufficient equity before start up, maintaining adequate business volume, keeping and distributing accurate financial records, previous co-operative experience and continued management training for both the board and manager as important to the success of agricultural marketing co-operatives in America. The importance of training is also highlighted by Pathak and Kumar (2008) which identified that lack of training in financial management and lack of understanding of co-operative concepts were among the main reasons for the failure of many co-operatives in Fiji.
A study by Amini and Ramezani, 2008 investigating the success factors of poultry growers’ co-operatives in Iran found that the following factors, in a descending order of importance, had the greatest effects on co-operative success: managers’ technical skills, number of training programmes received by managers and members, quality of the training programmes offered, members’ participation in the co-operative’s administrative affairs and managers’ interpersonal human skills. Henehan and Pelsue (1986) similarly found that two factors, management experience and adoption of
Malaysian Journal of Co-operative Studies
41
multi-year plans had the most significant influence on co-operative success, measured by sales growth. Meanwhile result of the study by Carlberg et al. (2006) which sought to determine success factors for New Generation Co-operatives (NGC) suggest that “planning and development” factor (strong local leader, steering committee and feasibility study) and financing and costs (low operating costs and member capital base) factor are considered to be critically important by NGC managers.
Thus, the framework adopted for this exploratory study, structured based on the literature reviews and related researches are as in Figure 1 below. The conceptual framework defines the measures of performance employed and the attributes of the performing co-operatives that the study proposed to identify.
Figure 1: The Conceptual Framework
METHODOLOGY
The performance or success of co-operatives is assessed by using the three performance measures; the market measures (ROE), the accounting measures (NPM) and financial measures (ROA). This decision is also aligned with Rahman, 2001 which cited that a combined measure using revenue, profit and other variables would be appropriate to assess performance. All three (3) ratios are calculated for each 3,487 active co-operatives with complete 2008 audited financial data obtained from the MCSC. Each ratio was then given a score of 1 to 5 according to the 20% percentile. The performance of each co-operatives were then calculated and ranked based on the sum of these scores being the highest score 15 and the lowest score 3.
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Overall performance score of between 11 – 15 was taken as the range to reflect good performance. The cut off point of 11 was also used to ensure that a sufficient number of co-operatives of different sizes (large, medium, small and micro) could be identified for the purpose of conducting in depth analysis. 270 co-operatives (excluding co-operative with annual turnover below RM100,000) from different cluster undertaking various functions or activities were finally identified as the performing or successful co-operatives. For the purpose of conducting in depth analysis, 100 co-operatives were selected according to their ranking and as close as possible to the proportion of the number of performing co-operatives. (Sampling size as prescribed by Bartlett Kotrilk, Higgins, 2001) However, after screening for completeness and validity of data, the research finally managed to obtained usable data for 89 co-operatives.
As past research highlighted that the attributes of performing co-operatives would provide a better understanding of their link to success, the research thus intends to study the following characteristics; financial, membership, management practices and the profile of the people who have brought the co-operatives to success.
For the purposes of analysis on the attributes of the selected performing co-operative and the perceived success factor, survey using structured questionnaires were conducted with the Board Members and the management personnel/manager of the co-operatives. Three to six Board Members and managers who have served the co-operatives for more than one (1) year are selected as respondents. Evidentiary documents mainly from annual reports furnished by the co-operatives and MCSS were also used for the study.
Primary data for this study is collected in two stages:
i. At the preliminary stage, a set of questionnaire is used to explore responses from respondents related to the movement (board members, management staff and members of co-operatives as well as government officers supervising co-operatives) regarding factors that they perceived will influence the success of co-operatives. The preliminary set of questionnaire listed a number of perceived success factors mainly focusing on the internal environment, namely the management and the organizational characteristics. External factors, such as macroeconomic environment and market factors are not taken into account. A total of 203 responses were received and usable for analysis. Based on the feedback obtained from this preliminary study, the questionnaire for the final phase were drawn up.
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43
ii. At the final phase, two (2) sets of questionnaires were used to collect information from the co-operative, the Board Members and the managers of the selected performing co-operatives. Set 1 is structured to gather the background information of the respondents (Board Members) and their experience. Another section is designed to assess the perception of the respondents as to the important factors they perceived to influence the success or performance of their respective co-operative. This section requires the respondents to indicate their level of agreement for the 21 statements, using a 5 point Likert rating scale of 1 to 5, with 1 being for ‘not important’ and 5 for ‘very important’
Meanwhile set 2 is intended to obtain the background of the co-operatives, the participation of members in co-operative activities and assistance obtained from various agencies. This set is to be answered by the Secretary or Manager of the co-operatives.
A team of researchers were employed to personally meet the respondents at their respective co-operatives. The questionnaire for the study was then distributed, briefed, checked for completion and collected on the same day.
SCOPE OF STUDY
This paper is an exploratory study that is confined to only performing co-operatives throughout Malaysia of different sizes and activities. The performing co-operatives is selected from the 2009 database provided by the MCSC. School co-operatives and two banking co-operatives that is Bank Kerjasama Rakyat and Bank Persatuan were excluded from the study, Dormant and inactive (co-operatives which has not held their Annual General Meeting for two consecutive years) as identified by the MCCS and co-operatives which incurred net loss for the financial year were also removed from the basic databases.
FINDINGS AND DISCUSSION
Attributes of the Performing Co-operatives
On the whole a total of 30 large co-operatives (11.1%), 66 medium sized co-operatives (24.4%), 116 small sized (43.0%) and 58 micro sized co-operatives (21.5%) were rated as performing co-operatives (Table 1).
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Table 2: Performing Co-operatives, According to Overall Performance Score (OPS) and Size
Size of Co-operatives
No. of co-operatives with Overall Performance Score 11-15
Total
% of Total
Score
15
14
13
12
11
Large
2
3
5
11
9
30
11.1
Medium
2
6
10
24
24
66
24.4
Small
3
6
32
43
32
116
43.0
Micro
3
8
16
12
19
58
21.5
Total
10
23
62
89
86
270
100
A majority of these 270 performing co-operatives are those registered under the consumer function (34.4%), credit function (20.4%) and service function (13.7). However in comparison to the total number of co-operatives under the respective function, co-operatives registered under transportation (10.1%) and credit (9.6%) has the most number being selected as performing co-operatives. On the other hand, although the number of consumer and agriculture co-operatives are large, only a small percentage were selected as performing co-operatives (Table 2).
Table 3: Performing Co-operatives, According to Function
Function
Performing Co-operatives
Sector
Number
Percentage (%)
Percentage to Sector
Number of Co-op.
Credit
55
20.4
9.6
575
Agriculture
33
12.2
2.4
1,362
Housing
6
2.2
5.6
107
Industrial
4
1.5
3.4
117
Consumer
93
34.4
5.5
1,681
Construction
7
2.6
6.0
117
Transportation
35
13.0
10.1
346
Services
37
13.7
4.7
793
Total
270
100
5098
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45
A more detailed analysis on the attributes of a selected sample of 89 performing co-operative, of which 17 (19.1%) are large, 26 (29.2%)are medium size, 29 (32.6%) small and 17 (19.1%) micro sized co-operatives are as follows:
(a) Size and Function
A majority of the selected performing co-operatives carried out agriculture function (20), followed by credit (19) consumer function (19) and services (16). Nine (9) of the selected co-operatives are involved in transportation. Two (2) out of the 89 co-operatives surveyed undertook the construction function while another four (4) co-operatives is in the housing function.
Table 4: Selected Performing Co-operative by Size and Function
Function
No. of Coop
Sizes of Co-operatives
Large
Medium
Small
Micro
Credit
19
7
4
7
1
Agriculture
20
5
8
5
2
Housing
4
2
1
0
1
Consumer
19
1
5
8
5
Construction
2
0
1
1
0
Transportation
9
1
4
2
2
Services
16
1
3
6
6
Total
89
17
26
29
17
(19%)
(29%)
(33%)
(19%)
Most of the large size co-operatives selected for the analysis is involved in credit function while a majority of the medium size co-operative are involved in agriculture function. The smaller size co-operative selected are primarily involved in consumer and credit function, whilst most of the selected micro size co-operative is involved in the services and consumer function.
(b) Age (Longevity)
As reflected in Table 5, a total of 10 co-operatives (11.2%) were registered some 31-40 years ago while another 13 (15.7%) has been in operations for 41-50 years. Overall, 56.1% of the co-operatives surveyed has been in operations for more than 20 years.
Volume 7 2011
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