This article appears as part of our Localization & Inclusive Development blog series.
Cooperatives and credit unions are key partners in international development. They are locally owned businesses that address market gaps, provide economic and social value to their members, and build more resilient communities. These inclusive businesses can be found in almost every country in which USAID works. Yet, partnerships with cooperatives and credit unions are often overlooked in favor of traditional businesses or nonprofit organizations.
What Are Cooperatives and Credit Unions?
There are more than 3 million cooperative businesses around the world that represent 1 billion members and employ 10 percent of the global workforce. As member-owned businesses, cooperatives operate to advance the shared economic and social needs of their members. People who join cooperatives often share common market challenges, such as the need to increase their bargaining power and improve their access to markets, quality services, low-cost inputs, or education and training. What sets cooperative and credit unions apart from other organizations in development is ownership. Each cooperative member owns a piece of the cooperative through financial investments in the businesses, called member equity. Since members have a stake in their cooperative, they are more committed to its success.
Cooperatives and credit unions also operate according to the Seven Cooperative Principles, which provide guidelines on how to put values such as equality, democracy, and self-help into practice. Because of these principles, cooperatives are drivers of inclusive growth and development in their own communities.
They also are versatile businesses. Cooperatives exist in every critical sector—from agriculture, finance, and energy to health, housing, and information technology. They also operate at any level—community, regional, and national—all to meet the evolving needs of their members. Cooperatives around the world range in size from as few as 10 people to as many as 50 million.
USAID’s Partnerships with Cooperatives and Credit Unions
USAID-supported health cooperatives in Uganda have established Girls Centers to empower girls and young women in their communities through mentoring, leadership training, and skill building. Girls Center participants complete internships with their local health cooperatives, learn about budgeting and financial management, and generate income through gardening, cooking, sewing, and hairdressing. Today, these Girls Centers are self-sufficient through locally mobilized member dues.
In Paraguay, a sugarcane cooperative has established its first gender equity and sexual harassment policies to create greater inclusion and accountability within the organization as part of its USAID-funded activity. Institutionalizing these inclusive policies reinforces the idea that anyone can join and participate in the cooperative and feel included and protected. To further support this effort, the cooperative also formed a gender and inclusion committee where women and youth can learn how to obtain leadership roles and effectively participate in decision-making.
In Mexico, a coffee cooperative made up of members of the Indigenous Maya Tzeltal community co-designed sustainable coffee production and natural resource conservation activities with USAID. These activities present members with opportunities to protect the environment, maintain their cultural ties and practices with the land, increase farmer incomes, and offer attractive jobs for youth who often migrate away from their local communities in search of work. For instance, the cooperative started an ecotourism initiative that provides lodging, amenities, birdwatching, and tours of the El Triunfo Biosphere. Ecotourism is now one of the cooperative’s largest income streams.
In Kenya, students involved in a performing arts club at their university came together to form a worker cooperative to capitalize on their talents. By booking gigs at local venues and events, members put on performances that raise awareness of prevalent issues within their community, like unemployment, crime, and social injustice. To grow their membership and provide opportunities to fellow youth, potential members are mentored to improve their talents and learn about the cooperative business model.
While there are a range of underutilized partners that USAID and other donors can work with, and several ways in which to partner, cooperatives and credit unions are unique in that their members span different ages, genders, races, ethnicities, and socioeconomic backgrounds. USAID can leverage their diversity and unique perspectives to strengthen and improve its development programming.
Join These Innovative Partnerships
To partner with cooperatives and credit unions in development assistance programming, USAID Missions and operating units should first identify local cooperative partners by engaging with host country governments, especially ministries of agriculture, finance, health, energy, and industry that will have a grasp of the cooperative landscape within their respective countries. Local cooperatives also can be identified through listening tours, industry days, trade shows, political economy analyses, landscape analyses, and social network mapping.
There are a variety of ways that USAID can partner with cooperatives. The most direct type of partnership is when a local cooperative or credit union is the prime partner on a USAID award. However, USAID also can partner with traditional implementing partners who provide subawards to, or sign memoranda of understanding (MOUs) with, local cooperatives or credit unions.
If USAID cannot partner directly with a local cooperative or credit union, it is still possible for the partnership to be locally led. For example, USAID’s Cooperative Development Program (CDP) partners with U.S.-based cooperatives and cooperative development organizations (CDOs) who co-design, co-implement, co-monitor, and co-fund activities with local cooperatives and credit unions. The CDP also encourages its implementing partners to have a methodology for engaging local partners as well as exit strategies so that local cooperative partners avoid dependence on USAID assistance and can continue to operate sustainably on their own after the activities end.
It also is possible for local cooperatives and credit unions to be recipients of a transition award, in which a traditional partner:
- Is the prime recipient and provides a large passthrough subaward to the local partner in order to strengthen their capacity and performance;
- Is the prime recipient and provides a subaward to a local cooperative partner in order to gradually transfer key areas of implementation, award management, and accountability; or
- Is the subrecipient and provides the local partner—the prime recipient—with capacity strengthening assistance.
As local private sector actors, cooperatives and credit unions can provide unique value to USAID’s development efforts, such as the ability to effectively scale; extensive networks that can reach underserved populations and individuals; the ability to influence host country policy; entrepreneurship and industry experience; and flexibility and efficiency.
Cooperatives and credit unions interested in partnering with the Agency in a USAID presence country should reach out to that Mission’s Private Sector Engagement Liaison for information, support, and opportunities; follow the Mission’s communications on social media; attend industry days; respond to Requests for Information; review the Agency’s Business Forecast; and register in the WorkWithUSAID.org Partner Directory.