Co-operatives in Rwanda

I have had the opportunity to hear the stories of people from a number of co-operative enterprises in Rwanda, host this year to the annual conference of the International Co-operative Alliance (ICA).

The country is rebuilding impressively over recent years, after the horrors of the war and genocide of 1994.

Every town has a Genocide Memorial, including one in the capital city Kigali, which I visited with an ICA delegation, to lay a wreath in remembrance.

The cooperative sector before 1994 had been weak, seen as a conduit for donors, but in the last decade, they have started to play a much wider role in the economy. In 2007, legislation was passed for co-operatives, and each sector of farming was organised into primary co-ops, federations and unions, offering a chance to bring cooperation into the entire value chain.

Today, the number of cooperative members is 3,816,591, representing over half of all the Rwanda adult population (55.3% of Rwanda). The number of co-operative enterprise has increased from 919 in 2005 to 8,995 in 2018.

This rebuilding of the co-operative sector has helped the country to reduce levels of poverty and inequality, Monique Nsantabaganwa, Deputy Governor, Rwanda Central Bank told ICA delegates on Thursday. “Taken together, the co-operative sector is now Rwanda’s biggest wealth creator” said the Business and Industry Minister, Soraya Hakuziyaremye.

Following an excellent three day conference, exploring the role of co-operatives in advancing the United Nations Sustainable Development Goals (which you can read more about via the reports of Co-op News) I had the chance to meet two transport co-operatives operating out of the capital city, Kigali.

One, Coctramavk, was formed in 2009 by 88 lorry drivers, each investing ten thousand Rwandan francs (around ten US dollars). One of the founders was Peter Kambanda and he showed me one of the seven trucks today that is jointly owned by the co-op, alongside the trucks (typically imported from Europe after they had been driven for around 300,000 kilometres) owned by the members themselves.

Peter Kambanda, co-founder of the Drivers’ Co-op

They compete for contracts to drive goods between Rwanda and around seven other countries in the region. Today they have ninety eight members, with good profits, shared as a dividend for each in 2018 of six hundred thousand Rwandan francs (around six hundred dollars). The co-op also offers medical insurance too for members and their families.

Medical insurance is also on the to do list for the second co-op I visited. Remera Transport Co-operative was formed by seventy cab drivers in November 2011, each contributing capital of one hundred thousand Rwandan francs. When a competition was run for the provision of public transport in the city, Remera won the contract for twenty one routes.

In 2014, therefore, the co-op borrowed money to finance the purchase of the first seven coasters (29 seater minibuses), with a further eleven in 2015. Today, it has paid off the loans and increased its capacity with 70 seater buses too. In concert with the regulator and other co-ops serving different routes, it has introduced tap and go payment technology, to make public transport cashless. The buses also operate free WiFi.

Remera Transport Co-operative

The co-op has won awards from the Rwanda Utilities Regulatory Authority for its services and has increased its members from 70 to 240.

Eric, member, Remera Transport Co-operative

In a blustering wind, with rains falling outside, Eric, a member of the co-op, described to me the key challenges as ones of access to capital, traffic jams and a lack of public awareness of the importance of co-operatives. “We overcome each of these challenges by working hard and being optimistic.”

The achievements he lists of the venture as: creating employment, reducing poverty and contributing to the national government through taxes.

Eric, for one, was proud of their contribution to taxation. He liked the idea of the Fair Tax Mark, pioneered by co-ops and social enterprise in the UK.

His words chimed for me with an event I saw being organised which was Taxpayers Appreciation Day and the song with which Peter and his fellow lorry drivers had welcomed us with – 🎵Who will build Rwanda? We will build Rwanda and we will do it by ourselves.

Self help? You can’t fake it, and you certainly can’t beat it.

Towards a co-operative SORP – why we need accounting for purpose & not just accounting for profit

How do you tell your story?

I presented a motion today on the need for a new way of telling the story of co-operatives in our financial accounts. This is a proposal developed by a team of us around the world and I’m happy to say was approved unanimously.

It is not my usual blog post, but here below is the presentation I made at the 94-nation strong General Assembly of the International Cooperative Alliance, taking place in Rwanda.

Robert Owen-Wahl, Pixabay

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It is hard to compare apples and oranges. That’s what I was told at school.

In French, you say it differently: don’t mix up cabbages and carrots. In Italian: don’t compare cabbages and potatoes

In Denmark, Susanne from Kooperationen who is seconding this motion tells me, it is apples and pears. In my home town of London, that means stairs.

In Russia, the saying is more subtle – that we should not confuse what is warm and what is soft

You may have a phrase in your own first language.

Well, co-operatives are apples, but financial accounting is designed for oranges… or potatoes.

Let me explain.

There has been a race towards global accounting standards in recent years, but with a single minded focus on shareholder firms and the needs of their investors. 

The International Accounting Standards Committee (IASC) was established in 1973 to oversee the project of harmonising financial reporting globally. The project was, from the outset, concerned with companies whose shares are traded publically through stock exchanges, i.e. listed companies.

In 2001 the IASC was replaced by the International Accounting Standards Board (IASB). The IASB adopted the International Accounting Standards which had been issued by the IASC and developed them into International Financial Reporting Standards.

The IASB also started a project to develop a conceptual framework to underpin and give coherence to the work on issuing accounting standards. This conceptual framework explicitly states that the primary purpose of financial reporting is to give information to current and potential financial investors. The IASB sees the main users of financial reports as:

present and potential investors, lenders and other creditors, who use that information to make decisions about buying, selling or holding equity or debt instruments and providing or settling loans or other forms of credit.

The co-op sector, notably the European Association of Co-operative Banks and the UK Co-operative Performance Committee, has responded by looking to influence this agenda.

The resolution, which calls for appropriate accounting guidelines for cooperatives, recognises the work of two outstanding people and teams working on this.

First the Audit and Risk Committee of the International Cooperative Alliance and the work of Isabelle Ferrand.

Second, the Centre of Excellence in Accounting and Reporting for Co-operatives, at the University of St Mary’s in Canada, led by Professor Daphne Rixon.

One of the main problems co-operatives face when accounting under the for-profit format in the International Financial Reporting Standards is the classification of members’ equity.

Two challenges co-operatives face in the International Financial Reporting Standards, now or in future are around accounting for member capital and co-op dividend.

The first risks making co-ops appear far more fragile than they are, as member equity may be treated as a liability.

The second treats member dividends as an expense, i.e. a reduction in sales rather than a distribution of profit. 

In many countries, co-ops are losing what tax advantages they might have, because their accounts don’t distinguish their cooperative difference.

While this is a technical and complex field, the resolution is a permission slip to explore the case for appropriate guidelines and a new framework for co-operatives (a Statement of Recommended Practice, or SORP) at the international level.

Others are doing the same. In July, a five year project was launched by the Ford Foundation and Open Society Foundation for a global Statement of Recommended Practice for non-profits. But that is more. about philanthropy and typically not right for us.

We need to be thinking five to ten years ahead.

It will take time and consultation to explore this further and any work will need to take into account the needs of co-operatives and mutuals across countries and in all their diversity.

It is helpful that an international working group of researcher and academics has been formed on cooperative accounting, following an international roundtable in London last year, hosted by St Mary’s so we can call on expert input.

Can I stress that most financial accounting, such as the valuation of assets, is perfectly appropriate. It is not wrong.

We need to focus on the specific areas of accounting where it is wrong for the member-owned model, where the co-operative model needs a different interpretation. It could be that we have common cause with a wider swathe of ‘for purpose’ business and social enterprise.

We need a financial vocabulary that allows us to express our performance as co-operatives. Otherwise it is like being asked to write poetry in a language that you do not speak.

We can’t progress if we are judged by shareholder value.

We can’t build a cooperative economy, if we don’t have a system of economics and accounting.

What we can do is what we have always been best at, which is to organise; and with ambition and organisation, we can over time win the battle of ideas.

Justice and gentrification in Washington DC

Anita Bonds has spent her entire adult life as a grassroots organizer, activist and campaigner for social justice and it is down to the work of her and colleagues, and a particular form of housing co-operative, that the capital of the USA is becoming less divided and divisive than it has been over time.

In Washington for the first time myself, as a guest of the US co-op sector, I had the chance to hear of her work as a champion for housing co-ops.

As a student at the University of California at Berkeley, she became involved in the Free Speech Movement and returned home to support the struggle for underserved communities in Washington DC, a city long divided by economic and race injustice.

Since 2012, Anita Bonds has served as an At-Large Council Member on the Council of the District of Columbia and she chairs the Committee on Housing and Neighbourhood Revitalization.

“I have always had a concern about poverty in the District of Colombia. I remember being shocked hearing elderly people talking about how they couldn’t afford their prescriptions and they had to choose between food and medicine.”

The District of Colombia has a unique and important longstanding law, the Tenant Opportunity to Purchase Act, which gives tenants the right to purchase their residential building before any other buyer. As many are condominiums of apartments, tenants form ‘limited equity’ housing cooperatives.

Today, she explains in a talk at the Co-op Impact Conference in Washington, organised by the National Co-operative Business Association, that the district has around 4,400 units of co-operative housing in 99 properties. What they have been successful at is keeping low and moderate income residents in their communities, because rents are affordable, even where neighbourhoods are rapidly gentrifying.

Last year, she championed new legislation to promote housing co-ops, with recommendations to increase the number of limited equity co-op units by 40% by 2025.

“We should pay attention to the least of us. This is an expensive community and with different incomes and walks of life, as we like to call it. One part of the city has four percent of affordable units, but cross the river and it is ninety three per cent. Housing co-ops are a way of addressing this because they allow for a mix of people right across the city and they are a powerful way of keeping communities inclusive.”

The next challenge she sees are the rocketing rents faced by small businesses as neighbourhoods gentrify. Her tool for addressing that? As she sees it, this would be small business co-ops, to keep rents in the control of local people.