Factors influencing the performance of rice farmer cooperatives in Davao del Norte, Philippines : A thesis submitted in partial fulfilment of the requirement for the Degree of Master of Applied Science at Lincoln University

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. Unfortunately, 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 the members’ unreliable patronisation to the cooperative. 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 the property rights and governance practices adopted by rice farmers cooperatives in the Davao del Norte province, and assesses their impact on cooperative performance. Four cooperatives were studied using a multiple case study approach. The study interviewed directors, managers, and members using semi-structured interview schedules designed to gather both qualitative and quantitative information. Pattern matching was used to test theory-based propositions about causal relationships between a cooperative’s performance and its institutional arrangements. This qualitative analysis was triangulated against the results of a quantitative hierarchical cluster analysis of the property rights, governance and performance attributes of the cooperatives studied. The research found a strong relationship between good performance and the absence of institutional problems. In particular, the absence of a free-riding problem allows cooperatives to efficiently allocate resources and to establish and maintain their reputation. When institutional problems are present, cooperatives introduce policies to mitigate their effects. Strategies that promote proportionality of investments to patronage allows cooperatives to reliably generate internal capital. The Cooperative Code of the Philippines outlines specific governance practices that Philippine cooperatives must adhere to. Practices that embrace accountability and transparency are well-entrenched in the code. However, the research reveals that cooperatives have instituted practices that complement the existing law and alleviate the specific institutional problem they face. This research offers policymakers, government support agencies, and cooperative leaders a better understanding of the problems confronting rice farmer cooperatives in the Philippines and highlights changes that could be made to address performance problems created by weak institutional arrangements.