Determinants of the performance of Irish potato farmer co-operatives in Rwanda: experience from the northern and western provinces

Abstract

Farmer co-operatives are expected to be the backbone of agricultural development by offering an extensive range of services to smallholder farmers. In many countries, governments have established an environment conducive to the development of co-operatives to ensure that they are profitable enterprises capable of improving the social and economic transformation of their members. However, smallholder farmer co-operatives in developing countries have proven to be largely poor. This thesis empirically analysed the determinants of performance of Irish Potato Farmer Co-operatives (IPFCs) in Rwanda. Specifically, the thesis analysed the determinants of members' satisfaction with access to IPFCs' services, examined the influence of co-operative characteristics on financial performance of IPFCs, examined co-operative governance factors that affect financial performance of IPFCs and determined the influence of market orientation dimensions on performance of IPFCs. The study employed mixed-methods sequential explanatory design and was conducted in the Northern and Western provinces, Rwanda. The design allowed the use of mixed-method approach and serves as means for triangulation and validation process. Northern and Western provinces were selected purposively due to their predominance in Irish potato farming. Purposive sampling technique was also applied to select co-operatives included in the study, 32 active IPFCs with audited financial reports were selected. Simple random sampling was used to select 387 members from sampled co-operatives and distributed to each cooperative on the basis of Probability Proportional to Size. This thesis used both primary and secondary data sources. The former employed a structured questionnaire, key informants’ interviews (KIIs) and focus group discussion (FGD), while the latter was obtained from co-operatives’ audited financial reports and administrative documents. Quantitative data were analysed by developing indices, descriptive statistics, Pearson correlation, factor analysis with principal component analysis, regression and ANOVA. Qualitative data obtained from KIIs and FGDs were analysed using content analysis to validate and triangulate quantitative findings. Findings reported a low level of members' satisfaction with IPFCs services and the latter failed to improve their activities, forcing some farmers' exit from Irish potato farming activities. Findings also showed that liquidity, leverage, number of employees, size of the co-operative and value of share capital are significant factors that contributed to financial performance. Moreover, among governance factors, the xvi study reported members' participation (b = 1.456, p < 0.001), accountability (b = 0.520, p < 0.047), transparency (b = 1.046, p < 0.001) and leadership (b = 2.813, p < 0.001) as significant factors contributing to the financial performance of IPFCs. Concerning market orientation dimensions, findings showed a positive significant relationship between customer orientation and financial performance (b = 0.090, p < 0.001), and competitor orientation and financial performance (b = 0.055, p < 0.001), while supplier orientation has shown a negative correlation (b = -0.021, p < 0.05). The study concluded that, due to limited financial capacity among IPFCs, providing the required services to their members is a significant concern. Most IPFCs failed to revive their activities, resulting in the exit from Irish potato farming activities for some of the farmers. If this problem persists, it will have a detrimental impact on the overall production of Irish potatoes in Rwanda. Limited financial capacity along with weak internal governance and reported cases of mismanagement among IPFCs encourage government interference in management and administration of their cooperatives. In response to the research findings, IPFCs should encourage their members to increase their shareholdings to raise capital for their co-operatives and to enhance performance. Rwanda Co-operative Agency (RCA) and other community development partners should organize capacity-building training for IPFCs leaders in self-governance to limit the interference of local authorities in cooperative administration under the guise of reported mismanagement and weak leadership.