COOPERATIVE DEVELOPMENT STRATEGY

MINISTRY OF INDUSTRY, TRADE AND TOURISM

P.O. BOX 30366,
LILONGWE

23 APRIL, 2019
TABLE OF CONTENTS

TABLE OF CONTENTS i
Foreword ii
Preface iii
Abbreviations and acronyms iv
1. INTRODUCTION 1
1.1 Overview 1
1.2 Background 2
2. SITUATIONAL ANALYSIS OF COOPERATIVES IN MALAWI 3
2.1 History and Current Status of Cooperatives 3
2.2 Challenges to Cooperatives Growth in Malawi 4
2.3 SWOT Analysis for Co-operatives in Malawi 6
3. THE COOPERATIVE DEVELOPMENT STRATEGY 8
3.1 Key Guiding Principles 8
3.2 Vision 10
3.3 Mission 10
3.4 Strategic Objectives 10
3.5 Addressing the Challenges to Cooperatives Growth 11
3.5.1. Policy Priority Area 1: Conducive legal, regulatory and institutional framework
for cooperatives development. 11
3.5.2. Policy Priority Area 2: Improved inter-governmental and sector co-ordination
and networking 12
3.5.3. Policy Priority Area 3: Instilling ownership and promoting good governance in
the sector 12
3.5.4. Policy Priority Area 4: Knowledge strengthening and skills development 13
3.5.5. Policy Priority Area 5: Access to reliable markets 13
3.5.6. Policy Priority Area 6: Access to finance and investment in the sector 14
3.5.7. Policy Priority Area 7: Inclusive economic participation and cross-cutting issues
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4. INSTITUTIONAL ARRANGEMENTS FOR STRATEGY IMPLEMENTATION 16

i
Foreword

ii
 MINISTER FOR INDUSTRY, TRADE AND TOURISM

iii
Preface

SECRETARY FOR INDUSTRY, TRADE AND TOURISM

iv
Abbreviations and acronyms

BDS Business Development Services

CDP Cooperative Development Policy
CIC Cooperative Implementation Committee
GOM Government of Malawi
ILO International Labour Organisation
MGDS Malawi Growth and Development Strategy
MoITT Ministry of Industry, Trade and Tourism
NGOs Non-Governmental Organisations
PIMC Policy Implementation Monitoring Committee
RBM Reserve Bank of Malawi
TWG Technical Working Group

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1. INTRODUCTION

1.1 Overview
Cooperatives play an important role by contributing to sustainable economic growth, stable
and quality employment of the country. As member-owned, member-run and member-
serving businesses, co-operatives empower people to collectively realize their economic
aspirations, while strengthening their social and human capital and developing their
communities. Cooperatives exploit economies of scale and economies of scope, both by
increasing the size of production and therefore reducing unitary costs and by allowing for
several activities to be carried out together by the same organization; for example, they have
comparative advantages in being able to simultaneously address output commercialization
and input purchases.

The cooperative model is based on ethics, values and principles that put the needs and
aspirations of their members above the simple goal of maximizing profit. Through self-help
and empowerment, reinvesting in their communities and concern for the well-being of
people, cooperatives nurture a long-term vision for sustainable economic growth, social
development and environmental responsibility.

The Ministry of Industry, Trade and Tourism (MoITT) is the custodian of the legislative and
policy framework for cooperatives in Malawi and is responsible for driving the vision of socio-
economic transformation through the cooperative model. The Ministry is responsible for
formulating and implementing a legislative framework that meet the ever changing legal and
regulatory environment in order to provide an enabling environment to effectively guide the
development of sustainable cooperatives in Malawi.

This strategy paper hinges upon the revised Cooperative Development Policy which outlines
the broad objectives of the Government of Malawi (GoM) for this important sector of the
economy. The policy objectives are captured in the following core policy statement:

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Policy Statement: “To facilitate and create an enabling inclusive economic environment
where cooperatives grow, attract investments, use clean and modern technology to
increase production, value addition, attract reliable markets, create sustainable
employment, increase member benefits and stimulate growth and development of
Malawi’s economy.”

The Cooperative Development Strategy is intended to stimulate, broaden and sustain the
development of an inclusive social and economically successful cooperative sector based on
the premise that a larger, stronger and more influential sector will result in substantial
benefits to members by increasing their individual and national wealth. The cooperative
development strategy is consistent with the Malawi Growth and Development Strategy
(MGDS III), which aims to reduce poverty through sustainable private sector-led economic
growth and ILO Recommendation 193 which provides a framework for governments to
develop the laws, administrative systems and policies that can enable cooperatives to
flourish.

As guided by the Cooperative Development Policy, in preparing this Strategy, the Ministry of

Industry, Trade and Tourism aims to address the following policy thematic areas:

i) Introduce an effective, innovative and progressive legislative framework;

ii) Improve broad based co-ordination and networking of all stakeholders with clear roles
and responsibilities;
iii) Enhance knowledge and skills development encompassing both general and technical
services; and
iv) Enhance inclusive economic participation and cross-cutting issues.

1.2 Background
The Government of Malawi recognizes that the cooperative sector is vital in the promotion of
economic and social welfare of ordinary people and the creation of individual and national

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wealth. The sector is crucial for job creation, economic and financial inclusion and poverty
alleviation. The cooperative sector in Malawi has the potential to increase food security,
exports, industrial growth and savings mobilization.

Cooperatives have grown in number, type and influence over the years. Currently, there are
more than 1,500 cooperatives, covering agriculture, finance, mining and manufacturing.
However, the cooperative sector is facing significant challenges relating to dependence,
competitiveness, sustainability in terms of their social and economic impact in Malawi.
Cooperatives are not as visible as they could be as a proven model of economic and social
development. There are significant gaps in the services and support mechanism to
cooperatives, preventing them from reaching their full potential.

The Cooperative Development Strategy seeks to support the development of a vibrant

cooperative sector and improve its impact in the economic development of Malawi. It aims at
enhancing collaboration and networking among all stakeholders to streamline and align
development support services and increase accessibility to reliable markets. It also seeks to
address the key shortcomings of previous policy, including the lack of measurable targets and
monitoring and evaluation criteria and limited policy integration. This strategy covers a five-
year period.

2. SITUATIONAL ANALYSIS OF COOPERATIVES IN MALAWI

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2.1 History and Current Status of Cooperatives
The cooperative sector in Malawi is over 70 years, with the first known cooperative being
registered in 1947 following the enactment of the 1946 Cooperative Ordinance which was
based on a British legislative framework. Post-independence in 1964, agricultural
cooperatives faced stiff competition from state owned agricultural estates and enterprises,
while financial cooperatives did not suffer the same fate and were able to grow. In the mid

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1990s, Government increased efforts for the promotion of cooperatives resulting in a new
legislative framework for cooperatives, the Cooperative Societies Act and the resultant
regulations in 1998 and 2000 respectively. A Financial Cooperative specific legislation was put
in place in 2011 focused on savings and credit cooperatives under the regulatory ambit of the
Reserve Bank of Malawi (RBM).

The economic activities of cooperatives in Malawi are directly influenced by cooperative

promoters some of which are registered as secondary cooperatives under the Cooperative
Societies Act and are regulated by the MoITT while others are registered under the Trustees
Incorporation Act and other cooperatives are directly promoted by development partners
and Non-Governmental Organisations (NGOs). The unintended consequence of this situation
is that a significant number of cooperatives are not affiliated to any secondary cooperative/
cooperative union as they are promoted by organisations registered under a different Act.
This complexity has led to having a sector that is not unified under a formal structure that
brings all the cooperatives together under one umbrella body.

The role of the cooperative promoters manifests itself through the proliferation and
concentration of cooperatives in specific economic activities, with agro-based cooperatives
being predominant. Other types are financial, rural livelihoods, manufacturing, mining and
housing cooperatives.

2.2 Challenges to Cooperatives Growth in Malawi

Due to lack of financial and human resources in the MoITT, there is little, or no support
provided to cooperatives or organizations that are establishing cooperatives. There is very
little oversight and training provided to the cooperatives. The Ministry lack resources to
regulate and monitor the sector which is affecting the development of the cooperatives
sector. The cooperatives Unit is highly under-resourced and the fact that the Ministry is
centralized, it is frustrating organisations that need its support for the promotion and
development of the sector. Their monitoring, supervision and auditing are not visible and

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there is no other organization given the responsibility to provide pre-registration training.
There are no guidelines on cooperatives development as such there is confusion as to who is
responsible for the promotion, training and formation of cooperatives. The MoITT needs to
be capacitated to fulfil its mandate and should appoint and certify other organisations to be
responsible for the pre-registration training but maintain its oversight role.

The cooperative sector is facing numerous challenges and these include institutional and
regulatory weaknesses; lack of coordinated business development services (BDS); lack of
harmonization of training materials, lack of coordination and networking, lack of reliable
markets, lack of access to finance and investments, and lack of recognised national
cooperative structure for advocacy and representation. These challenges have resulted in
high rate of mortality of cooperatives, slow growth, unsustainability and underdevelopment
of cooperatives in the country. These challenges were outlined by primary cooperatives and
various stakeholders grouped as private sector, promoters and the public sector during
stakeholder consultations and various studies on cooperatives.

Recognizing cooperatives as a National Priority Agenda is critical to the development of the

cooperative sector. Cooperatives are vital in the promotion of economic and social welfare of
ordinary people and the creation of individual and national wealth. The cooperative sector is
crucial for job creation, economic and financial inclusion and poverty alleviation. The sector
has the potential to increase food security, exports, industrial growth and savings
mobilization.

The Cooperative Development Policy has been designed to create a more enabling
environment for cooperatives to grow and become a major player in the social and economic
development of the country. To achieve this objective, specific measures have been spelt out
in both the Cooperative Development Policy and Strategy. The Cooperative Development
Strategy provides for a framework which is flexible to enable changes and updates to be
made to reflect the social and economic realities on the ground. The periodic reviews will

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assist in making adjustments, incorporating challenges encountered and new developments
in the sector.

2.3 SWOT Analysis for Co-operatives in Malawi

The situational analysis provides a breakdown of the cooperative sector’s Strengths,
Weaknesses, Opportunities and Threats (SWOT). The SWOT analysis leads to the
understanding of strengths to be worked upon as well as weaknesses to be counteracted in
this cooperative sector.

Strengths
 The availability of the legal framework
for cooperative development
 Cooperatives have stood the test of
time and have done well in some areas
for example SACCOs and coffee
cooperatives
 Growth in number of cooperatives
 Co-operatives becoming more
structured and formalized
 Good donor support for Co-operative
development
 Technical support to cooperatives in
production
 Some cooperatives are audited and hold
annual general meetings annually.
 Some cooperative organizations have
succeeded and become popular local
and international brands like Mzuzu
Coffee.
 There is willingness amongst various
stakeholders in the sector to work
together
Weaknesses
 Limited support, supervision and monitoring
by the MoITT
 No guidelines for establishment of
cooperatives
 No sector standards
 Limited access to reliable markets
 Limited access to finance and investments
 Limited knowledge and skills development
 Limited participation of women and youth in
cooperatives including leadership
 Lack of harmonized training materials and
coordinated cooperatives training
 Lack of continuous training around
governance, member education, production
& cooperative management
 Low literacy levels at member level
 Weak governance leading to recycling of
leaders and founders’ syndrome. Cultural
beliefs also play a big role in governance
problems.
 Lack of entrepreneurship culture in the
sector
 Inadequate Co-operative business
development services
 Lack of record keeping, accounting and
audits

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Opportunities
 Enthusiasm and drive in the
development of cooperatives by many
organizations
 Development partners are willing to
fund the development of co-operatives
 Decentralization of governmental
operations under local government
authorities
 Scope for cooperatives to venture into
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 Lack of professional management running
most of the cooperatives and where they
exist, the cost is funded by development
partners.
 Most of the cooperatives have no staff to
manage day to day operations leading to
mistrust where members suspect each other
when they manage the organizations on their
own.
 Lack of sustainability resulting in reliance on
donor funding (Dependency Syndrome).
 Absence of sector wide Management
Information System (MIS) for data collection
 Little inter-governmental coordination in the
cooperative development
 Lack of information sharing, coordination and
networking amongst stakeholders
 Weak umbrella body
 Limited research on cooperatives
 Lack of a cooperative college to provide
cooperative training services
 Lack of understanding of the essence of
cooperatives leading to low members
investment
Threats
 Environmental degradation leading to
climate change
 High interest rates leading to limited access
to credit
 Exchange rate risk
 Reluctance by banks to offer credit to co-ops
 Unstable political environment
 Changes in the legal framework for the co-
operatives
 new areas such as:  Prevalence of HIV / AIDS
 Housing  Conflicts amongst stakeholders in the sector
 Manufacturing
 Transport and logistics
 Electronics
 Finance and insurance
 Event tourism
 Renewable Energy

3. THE COOPERATIVE DEVELOPMENT STRATEGY

The Cooperative Development Strategy Framework is developed after assessing the existing
cooperatives’ situation and trends of the cooperative sector in Malawi. The framework is
aligned to the Cooperative Development Policy and is necessary to turn around the state of
cooperatives. A vision statement, mission, guiding principles and strategies have been
developed to effectively implement various key interventions that would propel the sector to
prosperity.

3.1 Key Guiding Principles

The implementation of the strategy is guided and reinforced by the following key principles:
a) Bottom up approach: Cooperatives must be self-driven and ownership must be clear
from the beginning that the members are owners and masters of their own destiny.
While government and other stakeholders can facilitate the mobilisation of people to
start cooperatives, the members must take full control of the running and
management of the cooperative in fulfilment of the Cooperative Principle Number 4
of Autonomy and Independence which states that “Cooperatives are autonomous,
self-help organizations controlled by their members.” Therefore cooperatives at any
level of the structure must be developed using the bottom up approach.

b) Cooperatives as business enterprises: Cooperatives are business enterprises as such

should not be developed as a social development agenda. Members and stakeholders
must understand the essence of cooperatives and they should be developed as a

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 business development agenda. For sustainability, cooperatives must be run and
managed as professional businesses, with clear accountability structures.

c) Determined timeframe for cooperative assistance: Support provided to cooperatives

from promoters must have a pre-determined timeframe where all measures are taken
to ensure the cooperatives are sustainable over time to be self-reliant to avoid
cooperatives collapsing after the assistance has been withdrawn at the end of the
project; as such cooperatives must not be used as exist strategies for projects without
ensuring their sustainability.

d) Harmonisation of support to cooperatives: Collaboration and networking between

government Ministries Departments and Agencies and amongst stakeholders and
government is crucial for harmonising cooperative development support. Therefore,
broad-based coordination amongst stakeholders is a key guiding principle of this
strategy. This principle recognises that the responsibility of promoting the
development of cooperatives is a shared responsibility and cannot be achieved by the
MoITT alone, but must involve all stakeholders from both the public and private
sector.

3.2 Vision
Inclusive socio-economically transformed Malawi through self-sustained cooperatives in a
variety of economic sectors that generate income and create employment in an ecologically
sustainable manner.

3.3 Mission
This Strategy seeks to stimulate, broaden and sustain the development of a successful
cooperative sector based on the premise that a larger, stronger and more influential
cooperative sector will result in the following substantial benefits:
a) Increased number of sustainable cooperatives in various sectors of the economy that
provide incremental member benefits, sustainable jobs, individual and national wealth;

9
b) More integrated approaches to financing/investment, knowledge strengthening, skills
development and improved governance that will make the cooperative sector self-reliant
and resilient enough to meet challenges and pursue new innovative opportunities; and
c) Cooperatives that will have a greater positive social and economic impact in the country
as a whole.

3.4 Strategic Objectives

The strategic objectives are as follows:
i. To create a conducive legal, regulatory and institutional framework for cooperatives
development;
ii. To increase broad-based co-ordination and networking amongst cooperative
stakeholders;
iii. To instil ownership and promoting good governance in the sector;
iv. To enhance knowledge and development of skills in the sector;
v. To promote value chain linkages, value addition, innovation and technology to
increase access to reliable markets;
vi. To increase access to finance and investment in the sector;
vii. To promote inclusive economic participation and cross-cutting issues in the sector.

3.5 Addressing the Challenges to Cooperatives Growth

Key Policy Priority Areas have been stated in the CDP. The strategies below are developed to
address the challenges in the cooperative sector through the priority areas.

3.5.1. Policy Priority Area 1: Conducive legal, regulatory and institutional framework for
cooperatives development.

Objective: Introduce an effective, innovative and progressive legislative framework

Strategy:
 Amend the Cooperative Societies Act of 1998 and Regulations of 2000 to enhance a
conducive legislative environment to promote and support the development and
growth of cooperatives;

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  Develop, implement and enforce performance standards and guidelines in the
establishment of cooperatives;

 Effective supervision and enforcement through well capacitated Ministries,

Departments and Agencies;

 Reinforce the distinctive legal character of the cooperative, including the different
cooperative tiers;

 Non-compliance reduction through constant and consistent member and cooperative

education; and

 Popularize the Cooperative Development Policy, Regulations and other relevant

policies.

3.5.2. Policy Priority Area 2: Improved inter-governmental and sector co-ordination and
networking

Objective: Institute broad-based coordination and networking amongst cooperative

stakeholders

Strategy:
 Promote and strengthen MDAs and cooperative sector collaboration and networking;

 Create National and Regional Cooperative Forums to facilitate interaction and

dialogue amongst stakeholders;

 Establish a database (e-cooperative) for effective monitoring, reporting, and provision

of up to date and sound statistical data;

 Compel all stakeholders promoting and developing cooperatives to ensure that

cooperatives are affiliated to appropriate cooperative tiers for realignment; and
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  Mobilize development partners and private sector to align their development agenda
and priorities with the Cooperative Development Policy.

3.5.3. Policy Priority Area 3: Instilling ownership and promoting good governance in the
sector

Objective: Promote ownership and governance in cooperatives

Strategy:
 Develop standard training materials and promote continuous members education,
training and coaching;

 Implement regular supervision and monitoring to ensure adherence to performance

standards, financial reporting and that cooperatives are audited and hold annual
general meetings annually; and

 Develop guidelines on promotion of cooperatives by stakeholders to avoid developing

them as exit strategy for projects.

3.5.4. Policy Priority Area 4: Knowledge strengthening and skills development

Objective: Enhance knowledge and development of skills in the sector

Strategy:
 Conduct regular training/coaching needs analysis to provide regular and continuous
training to enhance knowledge and skills development;

 Conduct feasibility study for the establishing a cooperative college while developing
cooperative development curricula for schools, colleges and universities and
identifying foster colleges/universities;

 Promote extensions services in production and training in competitive value addition;

and
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  Collaborate networking within and outside the cooperative sector including
international markets.

3.5.5. Policy Priority Area 5: Access to reliable markets

Objective: Promote value chain linkages, value addition, innovation and technology to
increase access to reliable markets

Strategy:
 Promote business linkages between large enterprises and cooperatives and facilitate
buyer seller meetings;

 Promote the establishment of market information system (MIS) and access which will
also be responsible for advocating for fair prices and price negotiations for
cooperatives;

 Ensure provision of export promotion support services for cooperatives;

 Develop capacity of cooperatives to meet product quality standards and consistent

supply;

 Increase market share in government and private sector procurement from

cooperatives;

 Promote the buy Malawi Strategy;

 Provide technical and business development services for value chain development
and management;

 Promote adoption of value addition technologies; and

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  Apply modern clean technologies and techniques in production and processing.

3.5.6. Policy Priority Area 6: Access to finance and investment in the sector

Objective: Increase access to finance and investment in the sector

Strategy:
 Advocate for cooperatives to become a National Priority Agenda;

 Provide enabling environment for cooperatives to grow and become sustainable in

order to attract both internal and external investments;

 Facilitate closer funding linkages between financial cooperatives and the rest of the
sector; and

 Encourage banks and other financial institutions to develop tailor-made products for
cooperatives;

3.5.7. Policy Priority Area 7: Inclusive economic participation and cross-cutting issues

Objective: Promote inclusive economic participation and cross-cutting issues

Strategy:
 Develop strategies around broad-based inclusion and elevating the business agenda;

 Promote the involvement of youth for advancing the use of modern and green
technologies in cooperatives;

 Promote the development of financial products for women, youth and other
disadvantaged groups in all financial cooperatives,

 Promote the establishment of cooperatives in schools and colleges/universities;

 Promote internship programs for college/university graduates in cooperatives;

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  Create awareness on gender, youth and HIV/AIDS related matters amongst
cooperative members;

 Promote the conservation of environment and natural resources among cooperatives;

 Promote environmental friendly cleaner production technologies and practices; and

 Promote waste management cooperatives as a viable business enterprise.

4. INSTITUTIONAL ARRANGEMENTS FOR STRATEGY IMPLEMENTATION

The MoITT, through the Department of Cooperatives and SMEs is the custodian and lead
Government Department for the Cooperative Development Strategy. Consistent with the
Policy, it is expected that line Ministries will incorporate cooperative development in their
sector strategies. The strategy will fall under the ambit of the Policy Implementation
Monitoring Committee (PIMC) chaired by the Principal Secretary in the MoITT. This
committee will be supported by the Cooperative Implementation Committee (CIC) which will
be chaired by the Registrar of Cooperative in the MoITT and the CIC will be supported by
individual Technical Working Groups (TWGs) focused on each Policy Priority Area. This
strategy framework runs for a period of five years (5) and in line with the Cooperative
Development Policy Review.

Strategy:
 Establish a permanent high-level Policy Implementation Monitoring Committee
chaired the Principal Secretary of the MoITT. The other members will be the Registrar
of Cooperatives and directors from relevant line ministries;

 Harmonize and align cooperative development efforts across government, with

specific changes envisaged in line ministries;

 Advocate for cooperatives to be a National Priority Agenda;

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  Mobilize development partners and private sector to align their development agenda
and priorities with the Cooperative Development Policy;
 Monitor the implementation of the CDP, receive and deliberate on implementation
reports, review progress being made and decide on policy issues;

 Establish a Cooperative Implementation Committee (CIC) which will meet quarterly

and chaired by the Registrar of Cooperative Societies in the MoITT. The committee will
have representation from deputy directors from relevant line ministries two
representatives from other stakeholders (private and development partners) and two
from the national apex body representing the cooperative sector. This committee will
be responsible for formulating action plans, ensuring implementation of the action
plans and coordinate resources for the implementation.

 Establish Technical Working Groups (TWGs) focused on each policy priority area.
These working groups will be reviewing progress being made in a particular priority
area and make proposals to adjust or improve the implementation strategy for better
results. These TWGs will submit quarterly reports to the CIC.

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