Structural problems in Philippine rice cooperatives: A quasi-quantitative analysis of institutional arrangements affecting financial performance

Abstract

Farmer controlled cooperatives contribute significantly to the growth of the rice sector in the Philippines – the country’s most important agricultural sector both in production and in consumption. These cooperatives are promoted and supported by the government as a way of empowering farmers as buyers, value-adders, and sellers in the supply chain. Despite ongoing financial support from various government agencies, many of the country’s rice farmer cooperatives struggle to remain viable. Cooperative failure is often attributed to poor management, inadequate capital, and opportunistic side-selling by members. However, a growing body of literature views these problems as symptoms of much more fundamental flaws in the institutional arrangements that tend to characterise cooperatives in developing countries. This research examines relationships between institutional arrangements and financial performance observed in case studies of four rice farmer cooperatives located in Davao del Norte province. Variables measuring aspects of financial performance and the characteristics of their institutional arrangements were analysed using hierarchical cluster analysis. Better performance was found in cooperatives that applied strategies to mitigate some of the free-rider problems created by conservative laws and norms governing cooperative societies in the Philippines. The findings offer a better understanding of fundamental problems confronting the country’s rice farmer cooperatives and highlight policy and operating practices that may help to improve their performance.