Producer Cooperatives´ Acquisition of Financing: The Case of Coffee Cooperatives in Jaén And San Ignacio (Peru)

Nadine Köcher

Student thesis: Master thesis

Abstract

Producer cooperatives play an important role in socio-economic development as they provide farmers the opportunity to access markets and to receive higher prices for their products. In the context of developing countries, their role is even more pivotal as most rural areas offer few other livelihood prospects aside from agriculture and livestock farming The acquisition of financing has been denoted as the major threat for cooperatives´ sustainability, both in developing as well as in developed countries. Even though there is extensive literature examining this issue in developed countries, the topic has barely been studied in a developing country context. Hence, this thesis aims to contribute to narrow the research gap by studying cooperatives in a developing country, namely Peru, and investigating: How does the institutional context influence the acquisition of financing of coffee cooperatives in Jaén and San Ignacio, Peru? The influence of selected institutions was thus examined on the internal, local and foreign financing in form of a case study in Northern Peru. The research was conducted by following a critical realist approach and the generation of data through seven semi-structured interviews, informal conversations and observations. The findings revealed the existence of an institutional void in form of a lack of national regulation, which leads to a limitation of potential capital sources and incurs a strong reliance of coops on informal institutions. The latter have been discovered to facilitate the acquisition of capital from all three sources by allowing cooperatives to fulfill the regulations of lenders which have shown to be strict to compensate for the lack of national regulation. Networks and trust were discovered to be particularly important by acting as a compliance security for local and foreign financing and as a moral obligation mechanism for internal financing. Due to the distrust discovered in the region and the initial weak links in a network, younger coops were revealed to have strong difficulties to acquire financing from all sources. The knowledge of managers was exposed to define potential sources of capital, with only slight differences between formally and informally gained knowledge. A lack of knowledge by members was discovered to lead to the formation of incorrect assumptions and low levels of internal capital. Both knowledge and the use of technology were further revealed to have a trust-enhancing function. This illustrates one of the strong interlinkages between nstitutions the analysis discovered.

EducationsMSc in Business, Language and Culture, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2014
Number of pages209