Challenges Of Agricultural Cooperatives And Their Impact On Profitability Of Potato Growers In Eastern Ethiopia

Background of the research: Agricultural cooperatives are established for the sake of improving the livelihood of smallholder farm households through improving their profitability. However, due to several challenges facing the cooperatives, their establishment may not guarantee such an achievement. Hence, it is essential to empirically verify their impact on profitability of the smallholder farm households. Purpose of the article: The purpose of this study is to measure the impact of agricultural cooperatives on profitability of small holder potato farmers in Eastern Ethiopia. Methods: The study was conducted making use of survey data on members and non-members of agricultural cooperatives in Eastern Hararghe based on multi-stage sampling method. Simple inferential and econometric methods of data analyses were carried out. The simple inferential analysis involves mean comparison tests whereas the econometric analysis is related to PSM method along with simulation-based sensitivity analysis. Findings and value added: The inferential analysis indicates that there is no significant difference in per unit profit between members and non-members. This result also holds true with disintegration of components of the profitability into per unit price, per unit cost of production and per unit cost of marketing. The PSM result also shows that, except the slightly significance for per unit cost of production in favour of non-members, there is no significant difference in terms of per unit profit, per unit price, and per unit cost of marketing. The result implies that membership to cooperatives does not guarantee positive impact on profitability of its members. Recommendation: Therefore, it is recommended that strict follow-up is crucial on the cooperatives’ performance; agricultural cooperatives better be functional in all aspects attached to profitability of farmers; active participation of member farmers is inevitable; frequent and regular trainings are also necessitated in order to build the managerial capacity of the leaders; and there should be clear framework of coordination in production and marketing activities. The other mentioned challenges should also be considered.