DETERMINANTS OF MEMBERSHIP AND BENEFITS OF PARTICIPATION IN

PYRETHRUM COOPERATIVES IN MUSANZE DISTRICT, RWANDA

BY

CLAUDINE KAYITESI

A56/82032/2015

A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR

THE DEGREE OF MASTER OF SCIENCE IN AGRICULTURAL AND APPLIED

ECONOMICS OF THE UNIVERSITY OF NAIROBI

DEPARTMENT OF AGRICULTURAL AND APPLIED ECONOMICS

FACULTY OF AGRICULTURE

UNIVERSITY OF NAIROBI

OCTOBER 2019
 Declaration

I declare that this thesis is my original work and has not been presented for an award of a degree

in any other academic institution.

Claudine Kayitesi

Reg. No. A56/82032/2015

Signature……………………………………..Date…………………………………

This thesis has been submitted with our approval as University supervisors

Prof. Rose Adhiambo Nyikal

Department of Agricultural Economics, University of Nairobi

Signature…………………………………………Date………………......................

Prof. John Mburu

Department of Agricultural Economics, University of Nairobi

Signature………………………………………….Date……………………………….

i
DEDICATION

With a profound gratitude, this thesis is dedicated to my wonderful family; my husband; Didier

Uhoraningoga, my daughter; Hirwa Nikita Ornella, my Son; Hirwa Lucas Michael and my parents.

ii
Acknowledgement

This thesis is based upon work supported by the United States Agency for International

Development, as part of the Feed the Future Initiative, under the CGIAR Fund, award number

BBSF-G-11-00002, and the predecessor fund the Food Security and Crisis Mitigation II grant,

award number EEM-G-00-04-00013

First, I give my sincere thanks to the Almighty God for this accomplishment. He has guided me

all the way from the beginning to the end.

I would like to express my appreciation and gratitude to my supervisors Prof. Rose Adhiambo Nyikal

and Prof. John Mburu who stood out uniquely for their encouragement, and timely and constructive

inputs to make this happen. My special thanks goes to the Government of Rwanda for granting me a

two-year study leave to pursue my studies. Without this support I could not have made it.

I also wish to acknowledge the passionate motivation and support from Dr. Charles Murekezi and Dr.

Theogene Rutagwenda throughout my studies. Finally this acknowledgment cannot draw to close

without expressing my gratitude to Mr. Fidele HAKIZIMANA, the pyrethrum specialist within the

National Agricultural Export Development Board and the staff of Horizon SOPYRWA who have

assisted me in different ways during data collection. Furthermore, I am grateful to my classmates in

the Collaborative Masters in Agricultural and Applied Economics (CMAAE) of 2015-2017 for their

constructive concerns, motivation and support which made my effort fruitful.

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ABSTRACT

For many years, pyrethrum in Rwanda has been among the top cash crops that earn significant

foreign exchange for the country. Farmers grow subsistence crops for their own food needs and

rely on pyrethrum as the cash crop to supplement their income. Cooperatives have been an

important institution to organize farmers especially in agriculture export, so as to earn significant

foreign exchange. Despite the effort in improving pyrethrum enterprise and strengthening

farmers along the value chain, membership to cooperatives is still low and the sector is also

under stress of shortage in the supply of raw materials. It is therefore interesting to explore the

apathy in the pyrethrum cooperatives. Such institutions should be attractive and guarantee

economic benefits to their members. The study investigated the membership and participation in

pyrethrum cooperatives in Rwanda, and the respective subsequent benefits. It used primary data

collected from a sample of 250 pyrethrum farmers from Musanze District. Descriptive and

endogenous treatment regression/Heckman model were used for analysis. The study observed

differences between members of farmer cooperatives and non-members with respect to

households’ characteristics, production resource endowments and access to institutional services

such as credit and extension. The mean difference indicates that members of pyrethrum

cooperative earned higher gross margin than non-members. The average means for members and

non-members were Rfw 360,208.5 and Rwf 178,292.8 respectively while the mean gross margin

was Rwf 280165.6 (US$1 = 900 RwF). The results showed that the majority of pyrethrum

farmers are relatively old persons. The study also found that there were capital constraints to join

pyrethrum cooperatives and subsequently, farmers with access to credit, off-farm income, higher

land size and higher share of pyrethrum income are more likely to be members. This reflects the

need to encourage youth to join cooperatives and also facilitate them to acquire the required

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capital. This is because membership seems to favour older persons who appreciate the benefits

and also have required capital. In regard to the benefits of participation, the study found that

membership to pyrethrum cooperatives had a positive and significant effect on farm profit. In

fact by participating in a pyrethrum cooperative a farmer could increase his/her farm benefit by

Rwf 548567.8 (US$1 = 900 RwF) per hectare per year. Moreover, the study perceived that

members benefited from a numbers of opportunities including; access credits and extension

services through cooperatives. Furthermore, future plan to expand the production scale and

access to extension services had negative effect on farm profit. The negative relationship

between access to extension services and farm profit implies the need to develop a new and

specific extension package pertaining to pyrethrum production. However this will also need to

assess the effectiveness of the extension approach currently used in pyrethrum sector. Despite a

number of factors that may hinder farmers from joining pyrethrum cooperatives, relevant

institutions should address key concerns that include the need to organize farmers into

cooperative so as to improve smallholder farming profitability. This implies that farmers must

be facilitated to meet membership requirement and different capital required to join cooperative.

Furthermore membership fees should be accepted to be paid through different installments to

help small holders with resource constraints to join cooperatives.

Keywords: Cooperatives; Pyrethrum; Farm profit; Farm benefits; Rwanda

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Table of contents

ABSTRACT................................................................................................................................................. iv
Table of contents .......................................................................................................................................... vi
List of tables............................................................................................................................................... viii
List of Figures ............................................................................................................................................ viii
CHAPTER ONE ........................................................................................................................................... 1
1. INTRODUCTION .................................................................................................................................... 1
1.1 Background ......................................................................................................................................... 1
1.2 Statement of the research problem ...................................................................................................... 5
1.3 Objectives of the study ........................................................................................................................ 6
1.3.1 Overall objective .......................................................................................................................... 6
1.3.2 Specific objectives ....................................................................................................................... 6
1.4 Research hypotheses ........................................................................................................................... 6
1.5 Justification of the study ..................................................................................................................... 7
1.6 Organization of the Thesis .................................................................................................................. 8
CHAPTER TWO .......................................................................................................................................... 9
2. LITERATURE REVIEW ......................................................................................................................... 9
2.1 A historical account of the development of cooperatives in Rwanda ................................................. 9
2.2 Cooperatives in Rwanda’s Agriculture development ....................................................................... 10
2.3 Role of cooperatives in Pyrethrum value chain in Rwanda .............................................................. 12
2.4 Factors that influence participation in farmer organizations ............................................................. 13
2.5 Effect of cooperatives on farmers’ levels of performance ................................................................ 15
2.6 General approaches/methods used in similar studies ........................................................................ 17
CHAPTER THREE .................................................................................................................................... 20
3. METHODOLOGY ................................................................................................................................. 20
3.1 Conceptual Framework of farmer’s decision and benefit of participation in pyrethrum cooperatives
................................................................................................................................................................ 20
3.2 Theoretical framework ...................................................................................................................... 22
3.3 Empirical framework ........................................................................................................................ 23
3.3.1 Endogenous treatment regression/Heckman model specification .............................................. 23
3.3.2 Empirical model ......................................................................................................................... 25
3.4 Data sources and sampling procedure ............................................................................................... 31
3.5 Study area.......................................................................................................................................... 32

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 3.6 Diagnostic tests ................................................................................................................................. 34
3.6.1 Test of Multicollinearity ............................................................................................................ 34
3.6.2 Test for the goodness of fit of the model ................................................................................... 34
CHAPTER FOUR....................................................................................................................................... 35
4. RESULTS AND DISCUSSIONS ........................................................................................................... 35
4.1 Farmer, cooperative and farm characteristics ................................................................................... 35
4.1.1 Level of membership ................................................................................................................. 35
4.1.2 Level of members’ commitment ................................................................................................ 36
4.1.3 Socio-economic and institutional characteristics of farmers...................................................... 37
4.1.4 Marketing characteristics of pyrethrum farmers ........................................................................ 42
4.1.5 Reasons that limit farmers from joining cooperatives ............................................................... 44
4.2 Determinants of participation in cooperatives and its benefits ......................................................... 45
4.2.1 Factors influencing farmers’ decision to participate in pyrethrum cooperatives ....................... 46
4.2.2 Determinants of benefits of participation in pyrethrum cooperatives ........................................ 49
CHAPTER FIVE ........................................................................................................................................ 52
5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ........................................................... 52
5.1 Summary ........................................................................................................................................... 52
5.2 Conclusions and recommendations ................................................................................................... 53
5.3 Areas for further research ................................................................................................................. 55
REFERENCES ........................................................................................................................................... 56
APPENDICES ............................................................................................................................................ 64
Appendix 1: Household interviews questionnaire .................................................................................. 64
Appendix 2: Checklist for key informants interview .............................................................................. 78
Appendix 3: Test for the Goodness of fit of the model........................................................................... 79
Appendix 4: Tests for multicollinearity .................................................................................................. 80
1. Variance Inflation Factor ................................................................................................................ 80
2. Correlation matrix ........................................................................................................................... 81

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List of tables

Table 3. 1: Definitions of variables that are hypothesized to affect membership decision making
....................................................................................................................................................... 29
Table 3. 2: Definitions of variables that are hypothesized to affect the benefits of participation 30
Table 4. 1: Level of cooperative membership per sector .............................................................. 35
Table 4.2: Ratio of participation in pyrethrum cooperatives ........................................................ 36
Table 4.3: Farmers' households' characteristics ............................................................................ 38
Table 4.4: Different constraints that limit farmers' access to credits in pyrethrum production .... 41
Table 4.5: Reasons for not joining cooperatives ........................................................................... 44
Table 4.6: Determinants of membership in pyrethrum cooperatives ............................................ 46
Table 4.7: Determinants of benefits of participation in pyrethrum cooperatives ......................... 50

List of Figures

Figure 3.1: Conceptual framework of farmers’ decision and benefit of participation in pyrethrum
cooperatives .................................................................................................................................. 21
Figure 3.2: Map of Rwanda Showing the location of Musanze District ...................................... 33
Figure 4. 1: Different sources of credit for pyrethrum farmers in Musanze District .................... 40
Figure 4. 2: Distribution of farmers per method used in drying process ...................................... 42

viii
CHAPTER ONE

1. INTRODUCTION

1.1 Background

Farmers’ organizations are acknowledged worldwide as suitable institutional arrangements to

address poverty and improve food security and farm income (Tolno et al., 2015; Verhofstadt &

Maertens, 2014; World Bank, 2008). Cooperative framework is progressively being presented as

a condition for individual development through joint action and mutual responsibility, where one

can achieve more due to the influence of collective action (International Labor Office, 2014).

Members of cooperatives cut across various backgrounds including rural, urban, gender divide,

agricultural and non-agricultural sectors and sometimes professionals. Members of agricultural

cooperatives are mostly rural large and small farmers. From the evidence in developing

countries, where over 3.1 billion people live in rural areas and a quarter of them still live in

extreme poverty, it is obvious that cooperatives are essential means in alleviating poverty given

that membership is open to all community members without any discrimination (Todaro &

Smith, 2012; Wanyama, Develtere, & Pollet, 2008). Todaro and Smith (2012) argue that, in

order to end rural poverty, emphasis should be placed on rural areas in general and agriculture

sector in particular. However, the latter is fraught with risks and uncertainties, particularly in less

developed countries. Hence, there is need for Africa to strengthen institutional arrangements for

economic development through collective action. This includes promotion of cooperatives for

the sustainability, profitability and productivity of the predominant agricultural sector.

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The process of improving productivity, profitability and sustainability of smallholder farming is

highlighted as an essential way out of poverty in developing countries. However, the impact on

poverty reduction depends on rural farmers’ participation as well as ownership of the

development process (Verhofstadt & Maertens, 2014). World Bank (2008) acknowledges

producer organizations as the main component of institutional innovations to ensure the enabling

environment and structural changes for the productive agricultural sector. It also reveals the key

role of farmer organizations in responding to the increasingly competitive world with strong

rules of globalization.

Producer organizations can take on different legal forms such as cooperatives, associations and

societies (World Bank, 2008). A number of studies have stressed on the potential role of

cooperatives in improving its members and community’s wellbeing in different ways. Evidence

from Tanzania shows how cooperatives in export crops have enhanced farmers’ entry to

Warehouse Receipt System as a means of mitigating against price fluctuation and access to

finance (Antonaci et al, 2014). Evidence from Rwanda in the last decade also shows that tea

planters’ cooperatives had an impressive employment of 4,476 temporary workers on a yearly

basis (Wanyama et al., 2008).

The government of Rwanda has experienced a significant contribution of cooperative enterprises

to the economic growth, though challenges remain daunting (Musahara, 2012). The coffee sector

in Rwanda has been a good example in demonstrating how effective cooperatives can be in the

process of development. The effort in coffee sector has resulted in a great impact because ever

since the formation of cooperatives, the country embarked on production and exportation of

specialty coffee whose revenue rose from $0 in 2001 to over $ 27,000,000 in 2011 (Bizimana et

2
al., 2012; Bourdreaux, 2011). Therefore, there are strong theoretical and practical bases to

encourage smallholder farmers to actively participate in cooperatives.

In alignment with Vision 2020, the government of Rwanda has made the agricultural sector the

main stake in its aim to accelerate economic growth and increase export revenue. Furthermore, a

heavy emphasis is being placed on coffee, tea and pyrethrum, recognized as traditional export

crops. Beside this, horticulture as an emerging sector with high diversification potential, is also

among priorities to boost export revenues (GOR, 2013). Cooperative platforms are

acknowledged to have played a key role in organizing farmers to earn the country’s foreign

exchange through increased productivity and quality in accordance with the export market

(Mukarugwiza, 2010).

In Rwanda, pyrethrum is produced by 25,000 farmers, both small and large, and mainly in

Musanze District where the climate is more conducive. Pyrethrum is grown across 3,200

hectares in Western and Northern provinces of Rwanda. All produce is marketed through

cooperatives, and there is only one processor; SOPYRWA. The processed commodity is mainly

for export although a little proportion that is used locally in the manufacture of pesticides

(Bizimana et al., 2012; Goverment of Rwanda, 2012). Typically, farmers in the sector grow

subsistence crops for their own needs and rely on pyrethrum as the cash crop to supplement their

income. Thus pyrethrum industry potentially has an important contribution to the livelihood and

wellbeing of farmers.

In the 1990s, Pyrethrum industry was owned and operated by a government agency. The sector

later collapsed due to the effect of 1994 Genocide. Hence, following the country’s development

agenda; vision 2020 that brings attention to private sector-led development, pyrethrum industry

was privatized in 2001. The state acts only as a catalyst; ensuring that infrastructure, human

3
resources and legal frameworks are availed towards stimulation of production in accordance with

the directives of export markets. After privatization, farmers were informally organized in 22

cooperatives, poorly managed with non-active members (Stoelinga & Gathani, 2013). The poor

management of pyrethrum cooperatives led to poor management of commodity chain and

subsequently the total exports fell from 30 tonnes in 2006 to 4.6 tonnes in 2008. Since 2009, the

government in collaboration with development partners and the processor embarked on

mobilizing the organization of self-sustained, formal and well managed producer cooperatives

(Huggins, 2013). The sector was restructured and seven new self-sustained cooperatives with

strong management were established (Kagera, 2015).

Farmers are encouraged to form and join cooperatives to collectively address risks and related

challenges that hinder production and improvement of income levels. In the same context, the

processor does not accept pyrethrum from individual farmers and hence, non-members also have

to sell their produce through cooperatives. Besides the role of cooperatives in increasing

knowledge and skills as well as improving access to credit, the profit margins gained by

cooperatives after sales are retained as shares for cooperative members only. Cooperative effort

had a great contribution in the increase in production on the global market, from 6 percent to 15

percent between 2009 and 2015 respectively (Kagera, 2015). However the domestic as well as

international markets have not yet been fully realized and the factory is still functioning below

capacity, due to the insufficient supply of raw materials (GoR, 2013). Moreover, the government

is striving to increase the productivity as well as the area under pyrethrum production that are

anticipated to lead the increase in pyrethrum export revenue from 6, 200,000 USD in 2013 to 28,

000,000 USD by 2018 ( Stoelinga & Gathani, 2013; National Agricultural Export Development

Board, 2015).

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1.2 Statement of the research problem

Cooperatives have been a successful model in poverty reduction through different ways. Various

researchers have demonstrated the effectiveness of cooperative platforms in economically and

socially empowering its members as well as the whole society. However, membership impact is

to some extent challenged by the incidence of poor performance of cooperatives (Khumalo,

2014).

Facilitating pyrethrum farmers to join cooperatives reflects the provisions of the Rwanda’s

cooperative policy and law No 50/2007 of 18/09/2007, which provide incentive for inclusive

participation. The current situation in cooperative perspective shows how active the Government

of Rwanda has been in strengthening cooperative development, however it does not guarantee a

maximum and direct membership. According to Kagera (2015), membership to pyrethrum

cooperatives has increased from 2,769 in 2012 to 5,265 in 2015. Given the number of farmers in

the sector, membership is still at 20 percent, and thus, it is not clear why farmer apathy in the

cooperative movement exists. This is complicated by the fact that non-members of cooperatives

do not have a different channel to sell their produce. Moreover, the supply of dried flowers to the

factory is not yet up to the required capacity. The factory processing capacity is estimated at

3000 Metric tons per year while the factory produces at less than 50 percent of its capability

(National Agriculture Export Development Board, 2017). Therefore, the question remains

whether cooperatives make a difference in terms of benefits among members.

To make a difference in livelihoods, cooperatives need to be both inclusive and effective

(Verhofstadt & Maertens, 2014). In this case the inclusivity reflects high participation level

while the effectiveness reveals cooperative’s impact on income levels and wellbeing,

unambiguously from increased productivity. The pyrethrum industry is characterized by the low

5
supply of dried flowers (GoR, 2013) and there is little documentation to indicate whether this is

linked to the low trend of cooperative membership. The most obvious reason for individual

farmers to join cooperatives is to improve their level of performance so as to become

economically better off (Hansen et al, 2006). Therefore, there is need to understand the dynamics

in pyrethrum farm profit with respect to the nurturing institutions; the pyrethrum cooperatives.

1.3 Objectives of the study

1.3.1 Overall objective

The purpose of this study is to explore the membership and participation in pyrethrum

cooperatives in Rwanda, and the respective subsequent benefits.

1.3.2 Specific objectives

1. To characterize farmer participation in pyrethrum cooperatives.

2. To analyze factors influencing farmer participation in pyrethrum cooperatives.

3. To assess the financial benefit of participating in pyrethrum cooperatives.

1.4 Research hypotheses

1. There are no characteristic differences among pyrethrum farmers in Musanze District.

2. Socio-economic and institutional factors have no effect on farmers’ decision to

participate in pyrethrum cooperatives.

3. Membership to pyrethrum cooperatives, socio-economic and institutional factors have no

effect on farm profit.

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1.5 Justification of the study

Under Rwanda’s Vision 2020, agriculture is acknowledged as an important pillar, to accelerate

the country’s economic growth. The Strategic Plan for the Transformation of Agriculture

prioritizes the development and promotion of producer organizations as one of the strategies to

accelerate the agricultural sector growth. Mukarugwiza (2010) highlighted the importance of

cooperatives in organizing producers to earn the country’s foreign exchange. Pyrethrum is

amongst the top agricultural export products that earn country’s foreign exchange (Bizimana et

al., 2012) and drive the livelihood of about 25,000 farmers. Hence, the promotion and support of

pyrethrum cooperatives should be at the center of the sector concerns if the country’s foreign

exchange and farmers’ income levels are to be improved.

The study displays the key underlying factors that explain pyrethrum cooperative membership

and its impact on members’ performance. This provides insight on policy inputs that are needed

to fuel the institutional and socio-economic environment within which pyrethrum cooperatives

operate in, so as to increase membership and the level of farmers’ performance. Additionally the

underlining factors that explain membership and farm profit should be brought to the fore and

analyzed for policy consideration. The results of the study also give insights on how farmers

exploit pyrethrum cooperatives, the challenges they face and possible desirable interventions to

promote successful cooperatives that guarantee the greatest level of membership and benefits.

This study therefore adds to the existing literature that explain different potential benefits

associated with farmer groups and their impact on farm benefits. This suggests that the results of

this study are applicable in other fields of agriculture in which farmers face similar conditions,

especially in Rwanda. Furthermore the results of the study are in line with provisions of the

country’s development agenda; vision 2020, SDG1 and SDG2. Rwanda Vision 2020 prioritizes

7
the transformation of Agriculture from subsistence to a knowledge based and value creating

sector which contribute to the national economy and ensure food security in a sustainable way.

1.6 Organization of the Thesis

Chapter one of the thesis presents the background of cooperatives, particularly in poverty

reduction and raising income levels among poor rural farmers in developing countries. The

research problem, objectives and research hypotheses and questions are also covered in this

chapter. Chapter two is a review of different elements of literature. It covers issues of

agricultural cooperatives in Rwanda, pyrethrum subsector and studies that addressed related

topics. Chapter three presents the methodology, which covers the conceptual, theoretical, and

empirical frameworks. It also reviews the underlining theory on which the study is based and the

analytical approach that was used in the study. It further describes techniques that were used in

sampling and data collection. Chapter four covers the results of the study then chapter five

presents the summary, conclusion and recommendations.

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CHAPTER TWO

2. LITERATURE REVIEW

2.1 A historical account of the development of cooperatives in Rwanda

Cooperatives in Rwanda have their origins in the efforts of the colonial government that sought

to create institutions for implementing policies, but on the other hand, the spirit of cooperation as

part of traditional social capital has been in Rwanda since time immemorial (Musahara, 2012).

Until the colonial period to the independence in 1962, cooperatives were used as political tools

for implementing policies that attempted to keep the population in disadvantaged positions. This

resulted in little growth of these institutions during the colonial period whereby only 8

cooperatives were formed by 1962 (Mukarugwiza, 2010; Sentama, 2009). After independence,

the new government used the cooperative movement as an instrument for economic

development, which resulted in increased cooperative entities. In 1996, the number of

cooperatives was estimated at 4,557 and by 2005, about 10,038 associations were identified, and

notably 68 percent of them were operating in agriculture (Musahara, 2012).

Following ILO’s (2003) advice to governments to support cooperatives growth, the Government

of Rwanda promoted and supported cooperative growth through the promulgation of cooperative

policy in 2006 followed by the endorsement of law governing cooperatives’ structure and

functioning. Furthermore the country’s midterm strategy titled Economic development and

poverty reduction strategy (EDPRS), embraces cooperative as precondition for the achievement

of national development goals. Hence, cooperative platforms are acknowledged as the

appropriate and pertinent way for the development of the majority of the population, of whom 80

percent are employed in the agricultural sector (GoR, 2013). Furthermore, for the fulfillment of

9
cooperative policy, the government established an agency named Rwanda Cooperative Agency,

which is mandated to provide consistent regulatory services to cooperatives (Mukarugwiza,

2010). The prevailing evidences show how active the government of Rwanda has been in

creating enabling environment for the improvement of cooperatives. The participation of the

people in the movement, however, still stands challenged.

2.2 Cooperatives in Rwanda’s Agriculture development

Agricultural cooperative is defined as a group of farmers united voluntarily with the main

purpose of pooling their resources together in certain area of activity to facilitate optimal

production through efficient use of these resources (Msimango & Oladele, 2013). Agriculture is

argued to be the main foundation for economic growth through improving the productivity,

profitability, and sustainability of smallholder farmers (Verhofstadt & Maertens, 2014). For

such achievement, institutional innovations are critical for structural changes towards the

transformation of the agriculture sector from subsistence into a diversified and market oriented

sector. The government of Rwanda targets high value productive and market oriented agriculture

as a bridge towards achieving vision 2020 goals. To that effect, the strategic plan for the

Transformation of agriculture (PSTA), put farmers’ cooperatives at the center of its concern in

its aim to shift the agricultural sector from subsistence to a commercialized one.

The current situation portrays the key role that cooperatives played in the success of the Crop

Intensification Program (CIP) introduced by the Government of Rwanda in 2007. The Program

aimed at increasing agricultural productivity to ensure food security and self-sufficiency.

However, inadequate land size was an extremely limiting factor to meet its objectives and hence

the only option was to increase the productivity of the land. To this effect, Land Use

10
Consolidation approach was used to address the land fragmentation issue and to make the

available land more productive (Cantore, 2011). The effort built on cooperation spirit among

farmers. It organizes farmers in a specific area to consolidate their small plots of land and grow a

specific crop with respect to the agro-ecological and climatic conditions of the area without

altering the plot ownership. The Program was successful as improvement in productivity was

noticed, whereby maize yield increased from 0.65 to 2.5 metric ton per hectare between year

2000 and year 2010; wheat yield increased by 2.5 times during the same period. Beside this,

cooperation among farmers has reduced transaction costs through bulking up production to

access markets (GoR, 2013). Cooperatives engaged in cash crop production, such as tea,

pyrethrum and coffee, play a major role in organizing small holder farmers to increase their

levels of income and earn the country foreign exchange (Mukarugwiza, 2010). In the Rwandan

coffee sector, cooperative effort resulted in improved management and use of coffee washing

station which prompted dramatic growth since 2002, with receipts growing at an average of 30

percent per year (GoR, 2013).

Besides success stories related to cooperatives in Rwanda agricultural sector, various challenges

with respect to performance remain discouraging. Among others, the low human capital of

farmers has exacerbated the poor performance of agricultural cooperatives (GoR, 2013). This

reflects the need to support and promote farmers’ cooperation in agricultural sector so long as the

sector development growth is expected to drive the achievement of the country’s Vision 2020.

Cooperatives in the pyrethrum sector have not yet attained their optimal membership, and the

supply of their major commodity still below expectation.

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2.3 Role of cooperatives in Pyrethrum value chain in Rwanda

Pyrethrum crop is grown for its flowers which are dried and processed into natural insecticides

or botanical pesticides, to control a wide range of insects and parasites. Pyrethrum farming in

Rwanda is limited to the Northern and Western Provinces due to the prevailing suitable climatic

conditions. Four districts namely; Musanze, Nyabihu, Rubavu and Burera are known to be the

producers of pyrethrum in Rwanda (Huggins, 2013) .

Pyrethrum value chain in Rwanda has three main players, namely; farmers, cooperatives and the

processor named SOPYRWA. The chain starts with farmers that grow pyrethrum for the

production of dried flowers. Furthermore, farmers are not only responsible for growing

pyrethrum but also for performing drying operation which makes the value chain very delicate,

since it requires alertness to maintain the product quality in terms of moisture content. Flowers

are picked by hand, and approximately 27-45 kilogram of flesh flowers per person per day can

be picked and thus the labor intensive characteristic of pyrethrum farming. Because the processor

does not accept produce from individuals, all production is collected or purchased by

cooperatives, from both members and non-members (Huggins, 2013; Stoelinga & Gathani,

2013), but the benefit margins gained after selling the produce to the processor flow back to

members only. It is therefore interesting to investigate why some pyrethrum farmers have not

joined cooperatives.

Cooperatives are responsible for weighing, storing, and paying farmers after checking on quality.

They also assist their members in applying good agricultural practices, and act as mediators

between farmers and the processor. After sufficient quantity of dried flowers is collected, it is

delivered to the processor, who pays cooperatives after checking on quality at a specific

12
laboratory for that effect (Huggins, 2013). Should the quality, specifically moisture content, not

meet the required standards, the cooperative is likely to incur financial losses as it is paid less

than what it has already paid farmers. This may negatively affect membership and later affect

cooperative performance. Therefore the drying process depicts the uncertainty and risk bearing

function of farmers and cooperatives along the value chain and may lead to low supply of dried

flowers if not well handled. Due to the perishability and labor intensive characteristic of

pyrethrum, it requires large expenditure to fund production and processing at farm level, yet

pyrethrum farmers are small scale and often depend substantially on the crop for its cash to meet

their family expenses.

Since the establishment of cooperatives in 2009, the sector recorded progress, However,

Pyrethrum commodity chain still faces challenges and thus low supply of dried flowers. The

main challenges include: (1) limited land availability, (2) competition between pyrethrum and

Irish potatoes and (3) limited availability of planting materials (GoR, 2013). The link between

these and farmer apathy in pyrethrum cooperatives as well as farmers’ performance is worth an

inquiry.

2.4 Factors that influence participation in farmer organizations

Technological, organizational and institutional innovations are key factors for the development

of the agriculture sector in many developing countries (Botlhoko & Oladele, 2013). Producer

organizations offer the institutional framework to boost smallholder farming sector through

which the majority of the population derive their livelihood. The prevailing evidence provides a

basis to promote active and successful farmer organizations. However for their sustainability and

13
effectiveness as well, emphasis should be put on an enabling environment as an incentive system

for those organizations to flourish. To that effect, technical, institutional and socio-economic

factors need to be identified and tackled. A number of studies have revealed different variables

that influence membership to different types of producer organizations. According to Awotide et

al. (2015), gender, education, farm size, output and expenditure per hectare significantly affect

farmer’s decision to participate in agricultural cooperative organizations in Nigeria. Similarly

Kimutai (2016) analyzed determinants of small scale horticulture farmers’ decision to join

farmer based organizations in Kenya and found that education level, gender and farm size were

significant. Zheng et al (2012) revealed that farmers who plan to expand their production scale in

future are more likely to become members of agricultural cooperatives since the latter can ensure

reduced risks for their investments. This concurs with Leathers (2006) who asserted that reduced

production and marketing risks is one among other economic reasons that explain why farmers

decide to join cooperatives.

Nugussie (2010) argues that besides personal interests of rural population, there are other factors

that motivate them to join agricultural cooperatives. Among others, the author highlighted access

to credit and trainings as the important predictors of farmers’ decision to join Agricultural

cooperatives. Furthermore, Ouma & Abdulai (2009) found that household’s resource

endowment such as access to off-farm income , education and number of adult members in the

household significantly affect the probability of joining a farmer welfare group. The author also

reported social capital such as trust, to be the main predictor of membership to a welfare group.

Similar studies also found that age, access to social networks and information are important

factors that determine membership to farmer group (Asante et al., 2011; Fischer & Qaim, 2011;

Gyau et al., 2016). Therefore one can say that participation in agricultural cooperatives is driven

14
by farmers’ human, physical and social capital. The actual situation in pyrethrum cooperatives in

Rwanda deserves an investigation especially due to farmer apathy regardless of what the

institution promises. The prevailing conditions show the role of different factors in attracting

farmers to join producers’ organizations. However, participation must generate positive benefits

for its members (Ngaruko & Lwezaula, 2013). Therefore successful farmer based organizations

should be attractive and effective as well. This implies the level of participation and performance

of members, which deserve analysis on own sake.

2.5 Effect of cooperatives on farmers’ levels of performance

There is substantial evidence in literature that farmers’ organizations are institutional tools to

improve smallholder agricultural performance through improved market participation, improved

levels of income, and in effect, rural poverty reduction (Fischer & Qaim, 2012; Verhofstadt &

Maertens, 2014; Tolno et al., 2015). Similarly Abebaw & Haile. G, (2012) found that agricultural

cooperative has a positive impact on new agricultural innovation and technology adoption. The

prevailing evidence provides a basis for concluding that farmer based organizations are central

for improved livelihood through a wide range of opportunities and services offered to its

members.

Wollni & Zeller (2006) conducted a study to identify farmer benefits from participating in

specialty coffee and cooperative market channels in Costa Rica. The results revealed that

participation in cooperatives significantly affect the probability that farmers choose to grow

specialty coffee. This implies that membership to farmer cooperative, provides members with the

capacity to evaluate and adopt high quality and competitive product for remunerative market.

Different empirical studies have stressed different potential benefits associated with agricultural

15
cooperatives. For example Tolno et al. (2015) argue that farmers’ organizations play a key role

in enhancing their levels of income. Verhofstadt & Maertens (2014) have demonstrated the

importance of agricultural cooperatives in improving farm income and reducing rural poverty in

Rwanda. However, their findings highlighted a phenomenon that the effect of membership is too

low for land-poor farm households. Similarly Tanguy et al (2008) found that farmers’

cooperatives have a positive impact on the commercialization of cereals in Ethiopia, however the

impact was more pronounced for large farmers than for smallholder ones. Conversely Ngaruko

& Lwezaula (2013) argue that sustainable farmer groups should satisfy their members’ felt-

needs and generate net positive benefits regardless of whether they are small or big farmers.

Pyrethrum farmers are smallholders with limited access to production resources such as land and

high yielding planting materials and consequently, it is evident that cooperative members are

more likely to be smallholder farmers. Therefore there is a need to understand the effectiveness

of these entities given the resource constraint characteristics of pyrethrum farmers.

Zheng et al .(2012) argue that farmers view cooperatives as important organizations which

enable them to improve their economic welfare; however they are to some extent disappointed

by the performance of these cooperatives. Therefore, there is a need to understand whether under

the current production, marketing and institutional environment, cooperative entities are effective

and at which extent farmers can benefit from membership. Yet, there is limited literature on

diverse impacts of agricultural cooperatives in Rwanda. Moreover the current study anticipates

the endogeneity bias that may arise from the unobservable factors that affect both selection

function (membership to pyrethrum cooperative) and the outcome level (farm profit) and thus the

endogenous binary treatment variable.

16
2.6 General approaches/methods used in similar studies

A number of econometric methods have been used to estimate the probability of participation

and effect of an intervention or program while controlling for bias in observational settings. For

example, Tanguy et al. (2008) used the propensity score matching to assess the impact of

cooperatives on commercialization of cereals in Ethiopia. The method analyzes the effect of an

intervention on the behavior and welfare by estimating the counterfactual and uses it to identify

the intervention’s effect. However, this model emphasizes more on the mechanism of

randomization to balance data between treated and untreated groups rather than modeling

structures of selection bias that may arise from the unobservable attributes which may also lead

to the endogeneity.

Akpalu & Normanyo (2013) analyzed the effect of illegal fishing on catch potentials among

small scale fishers in Ghana. The study applied the endogenous switching regression model to

estimate the counterfactual catch potentials of violators and non-violators in the first step and

used it to identify the effect on catch levels for violators and non-violators in the second step.

The model consists of the selection equation and two continuous regression equations that

describe the behavior of a farmer as he/she faces two regimes of violating or not-violating

fishing regulations. This approach accounts mainly for selection bias that may arise from both

observable and unobservable behavioral factors. However, the model assumes a triumvirate

distribution of error terms and does not provide the effect of parameters of a linear regression

model augmented with an endogenous binary treatment variable. Asfaw et al. (2010) explain the

triumvirate distribution of error terms as mainly the three sources of variation in the endogenous

switching regression model where the first is the variation in regime one, second; the variation in

regime two and thirdly; cross variation between the two regimes.

17
The two stage least square method is also used in the same context. The use of this approach is

based on the suspected bias from the fact that the dependent variable’s error terms are correlated

with the independent variable. This is known as endogeneity bias (Wooldridge, 2012) which may

arise from the self-selection bias, omitted variables or some measurement errors. The model

corrects for this bias by the use of instrumental variable which is not easy to find given the

assumptions that an instrumental variable has to be correlated with the endogenous variable but

uncorrelated the with outcome. Mburu et al (2002) used the two stage least squares approach

to analyze relative importance and the determinants of transaction costs incurred by individual

community members of wildlife conservation program in Kenya. The authors assumed that

other participants’ behavioral characteristics that were not measured could affect both the

magnitude of participation costs and the benefits from participation. Hence, participation benefit

as an explanatory variable that affects the magnitude of transaction costs was considered as an

endogenous variable.

Other authors have estimated the effect of a program or intervention on members’ performance

using Heckman model also called the endogenous treatment regression. Briggs (2004) used the

Heckman model to estimate the effect of commercial coaching programs on the SAT

performance of high school students. The SAT is a kind of examination that high school

graduates should pass to be admitted in competitive four-year colleges in the United States of

America. Similarly the model was discussed in Brown and Mergoupis (2010). The model

assumes that participants may self-select themselves based on some unobservable phenomena

which in turn are correlated with the outcome response function and thus the treatment variable

18
is endogenous. This is known as endogenous binary treatment which occurs in the case of

selection on unobservable aspects (Cerulli, 2014). In such a context, the endogenous treatment

regression model (Heckman model) is the appropriate econometric approach that can be used to

derive the asymptotically unbiased program or intervention effect. This model is used to estimate

the Average Treatment Effect and other parameters of a linear regression model augmented with

an endogenous binary treatment variable (Cerulli, 2014). Therefore, the present study applied the

endogenous treatment regression, also called Heckman model to analyze membership decision

making and the benefits of participation (impact of cooperative on farm profit). This is because

due to some non- measured behavioral characteristics of farmers, cooperative members might be

self- selected into cooperatives and since the level of farmers’ performance (farm profit) is a

function of membership, it is evident that those behavioral characteristics are more likely to be

correlated with the level of performance and thus the cooperative membership variable is

endogenous.

19
CHAPTER THREE

3. METHODOLOGY

3.1 Conceptual Framework of farmer’s decision and benefit of participation in pyrethrum

cooperatives

This study is conceptualized as a two-step approach to draw the causal inference between a

response schedule and a selection function. This means that a farmer’s performance (generated

farm profit) is a function of cooperative membership. A farmer makes a decision on whether or

not to participate in a pyrethrum cooperative. Thereafter, membership to cooperatives, farm

characteristics, institutional and socio-economic factors define the performance of such farmers

(farm benefit). It is expected that membership should benefit farmers in terms of derived benefit

from pyrethrum production. Members benefit from a number of opportunities from which they

decide on adopting new production technologies, hiring more labor or land, given their perceived

level of benefits. Hence the membership choice which appears to include a number of

subsequent decisions is more likely to affect farmers’ level of farm profitability. The implication

here is that different performance levels are possible depending on whether a farmer is a member

of cooperative society or not.

This conceptual framework summarizes the study. It presents the contextual variables which

determine farmers’ choice on membership or otherwise, effect of cooperative on farm profit, and

ultimately increased export revenue from pyrethrum. The social-economic logic behind this is

that some factors such age, education, access to off farm activities and to institutional services

such as extension and credit, can explain the membership decision making. This is because for

example; the risker taking characteristics of youth can influence them to take a decision to join

cooperative. Educated farmers are also able to analyze and understand different opportunities

that pertain to improve pyrethrum production and improve the livelihood of the household.

20
Access to institutional services such as extension and credit are also the determinants of

membership. The Cooperative is the strategic channel to fetch the appropriate knowledge and

information to improve on production. It can serve as the source of credit as it can also serve as a

network to link farmers to different funding sources. Membership to pyrethrum cooperative is

also expected to have an influence on farm profit. Therefore, socio-economic and institutional

factors explain why households behave differently and can help them to make decisions to

become more productive and improve their livelihood. The interventions are imperative to

ensure the enabling environment for better functioning of cooperatives which in turn impact on

the performance of their members.

Relevant Poverty reduced, Increased

institutions export Revenue

Farm-profit
Production cost,
Price

Membership Decision

Socio-economic and Farm characteristics

Institutional factors

Figure 3.1: Conceptual framework of farmers’ decision and benefit of participation in

pyrethrum cooperatives
Source: author

21
3.2 Theoretical framework

The study followed the Random utility model (RUM), which assumes that a choice is a discrete

event. A household head chooses to participate in cooperative so as to maximize a welfare-

enhancing factor or utility, subject to his/her specific behavioral characteristics. According to the

theory in question, this study assumes that heads of households choose to participate in

pyrethrum cooperatives because it maximizes their utility, otherwise they might choose not to

participate if membership costs outweigh benefits. Therefore, the study used RUM to represent

the membership decision making process based on the utility maximization. Farmers make

decisions on whether or not to participate in pyrethrum cooperatives and on how to improve their

production process either through hiring more labor and / or land, or improving processing

procedures. Their decision is purposively to maximize the return from pyrethrum production.

According to Greene (2002), a rational farmer will choose to participate in a cooperative if the

utility (Uij) derived from participating is greater than that derived from not participating (Uik).

Uij (βjXi + εj) > Uik (βkXi + εk) Ɐ j ≠ k (1)

Pij = Pr [Uij - Uik > 0] Ɐ j ≠ k (2)
= Pr [(βij + εij) – (βik + εik)] > 0 (3)
= Pr [X (βij - βik) + εij - εik > 0ǀX] (4)
X is a vector of socio-economic and institutional characteristics of the individual/farm, and ɛ is

the stochastic component of the utility function representing the unobserved attributes affecting

individual i's choice (k, j), while β is the parameter to be estimated. The major focus of this study

is to provide an estimate of the probability that a farmer will choose to participate in a

cooperative and this will have an effect on the farm profit. Gross margin per hectare of land per

year was used as a proxy for farm profit in pyrethrum farming.

22
3.3 Empirical framework

3.3.1 Endogenous treatment regression/Heckman model specification

The endogenous treatment regression model (Heckman model) is a two-step approach that is

widely used to estimate the treatment effect while catering for endogeneity bias arising from

selection on non-observable factors (Cerulli, 2014; Greene, 2007). The model is estimated in two

steps; (1) the selection function (a dummy variable indicating the treatment condition) and (2) a

continuous regression equation which is observed for both subsamples (treated and control). In

the second step, the treatment variable is directly entered into the continuous regression equation.

Furthermore the first step involves the estimation of treatment probability then includes it in the

second step outcome regression. Therefore the treatment equation is specified in two equations

as follows:

Equation (5) represents the probit model used in the first step of Heckman model. Under this

model, the equation is specified as a selection function which identifies factors that influence

farmers’ membership decision making. In the relationship, is a vector of parameters to be

estimated, Zᵢ is a vector of explanatory variables expected to influence membership decision

making, Pᵢ is a dummy variable that takes on the value of 1 if a farmer is a member to pyrethrum

cooperatives and 0 if not a member. Furthermore, vi is a random error term assumed to be

normally distributed and to account for unobservable factors that determine the decision to join

pyrethrum cooperatives.

23
Equation (6) represents the second step which is the outcome function, where Yi is the pyrethrum

farm’s gross margin per hectare per year, Xi is a vector of the explanatory variables that are

expected to impact on farm gross margin, Pᵢ is a dummy variable representing cooperative

membership, β and δ are the parameters to be estimated, and ɛi is a random error term.

Following Greene (2007), the expected value of Y conditional on whether a farmer is a

cooperative member or not is given by:

(7)

And

(8)

The difference in expected farmers’ level of benefit between participants and non-participants is

given by:

(9)

Following Brown and Mergoupis (2010), Equations 7 and 8 represent separate models for

outcome for treated and non-treated participants respectively. This is so since the term in bracket,

is always positive, and the term ρ which measures the correlation can take on values

between -1 and 1. Therefore given the negative or positive sign that ρ can take, the least squares

method could underestimate or overestimate the treatment effect. According to Green (2007), by

estimating the two separate equations for participants and non-participants it would be the same

as estimating two regressions by OLS, which would lead to inconsistent estimates due to the

24
selection bias. Therefore, the treatment effect is given by Equation (9) with the causal parameter

of interest δ.

3.3.2 Empirical model

Objective 2

By fitting into explanatory variables, the model is estimated as follows;

The first step which is deciding whether to participate in cooperative or not is:

Pi = α0 + α1AGE + α2FAMLSIZE + α3PLAN+ α4 EXTENSION + α5CREDIT + α6DIST +

α7EDUC + α8 OFF_FARMINCOM + α9 LANDSIZE + α10 PROPINCOME + α11 TRUST + α12
CONDITIONALITY + α13 PROFITMOT + Vi (12)

The hypothesis that socio-economic and institutional factors have no effect on farmers’ decision

to participate in pyrethrum cooperatives (H₀: ᵢ= 0) is rejected if αᵢ≠0

Objective 3

The Second step which involves the impact outcome response (pyrethrum farm’s gross margin

per hectare per year);

Yi = β0 + β1X1 +……………..+ βnXn + δPi + ρσ (Pi, αZi)+ εi (13)

Yi = β0 + β1AGE + β2FAMLSIZE + β3 PLAN+ β 4 EXTENSION + β5CREDIT + β6DIST + β

7EDUC + β 8 OFF_FARMINCOM + β 9 LANDSIZE + β 10 PROFITMOT + δPi + εi (14)

The hypothesis that membership to pyrethrum cooperative, socio-economic and institutional

factors have no effect on farm profit (H₀: βᵢ = 0, δ= 0) is rejected if βᵢ ≠ 0, δ ≠ 0.

Different studies have demonstrated that membership to cooperatives or farmer groups and the

resulting impact may be explained by different factors related to farmer and farm characteristics

as described in Section [Link]

25
 [Link] Justification of variables hypothesized to affect membership decision making

Following the conceptual framework and based on some literatures on farmers’ organizations,

relevant explanatory variables that are expected to affect the likelihood of participation in

cooperative were identified and included in this study. Key factors were identified and

considered, based on findings from similar studies. Education, family size, off-farm income,

age, proportional income from pyrethrum, plan to expand the production scale in the future,

access to credit and extension services, land size, profit motivation and distance from household

to the collection center were used in this analysis. Social capital feature such as trust is also

anticipated to be a key driver of membership.

Education is hypothesized to have a positive effect on membership since it equips farmers with

knowledge and skills to easily understand and respond to new ideas and information aiming at

increasing household’s livelihood (Gyau et al., 2016). Land size is also hypothesized to have a

positive effect on membership likelihood because big farmers need more support in terms of

improved technologies and information on their use, so as to increase their farm revenue given

the related expenses (Asante et al., 2011). However farmers with large parcels are likely to

produce more of whatever commodity and hence may not require cooperatives or other farmer

organizations in purchases and in sales, yet a statutory requirement that pyrethrum processors

buy from cooperatives only will make large farmers join cooperatives, and education is expected

to enhance this. Age is expected to have a negative effect on adoption or in responding to new

ideas (Olukunle, 2016). This implies that active and dynamic working population such as youth

who are interested in searching for new production information rather than relying on their

experience, are more likely to participate in cooperatives. The size of the family plays an

26
important role in the supply of family labor (Fischer & Qaim, 2011). Thus given the labor

intensive characteristic of pyrethrum farming and the prevailing wage rate, the household heads

are more likely to attend the available social network since they have a significant number of

family labor to take in hand a number of production and processing activities.

Access to off-fam income is an alternative source of income for farmers to meet their needs

(Ouma & Abdulai, 2009). Therefore access to off-farm income is expected to have a negative

effect on the likelihood to join pyrethrum cooperatives. Furthermore, access to institutional

services such as credit and extension are expected to have a positive effect on the likelihood to

participate in cooperatives (Mugabekazi, 2014; Nkurunziza, 2014; Tolno et al., 2015).

According to Zheng et al. (2012) the plan to expand the production in future is hypothesized to

have a positive effect on the probability of participation in cooperatives. This is mainly because

farmers who plan to expand their production scale in the future are more likely to join

cooperatives since the later insure reduced risks and thus provide farmers the opportunity to

expand their operating scales. Moreover, Woolcock & Narayan (2000) reported trust as

important facet of social capital which indicate the level of trust of an institutional arrangement

and thus an important key predictor of the membership probability. Other variables hypothesized

to have a positive effect on the decision to participate in pyrethrum cooperatives are;

proportional income from pyrethrum, profit motivation and the perception of farmers on the

conditionality to participate in pyrethrum cooperatives. Given the smallholder characteristics of

pyrethrum farmers, the higher income from pyrethrum farming should drive the likelihood to be

highly involved in farming activities and other social network that promote pyrethrum

production. Furthermore profit motivation is another important predictor of the likelihood to join

pyrethrum cooperatives. This is mainly related to the historical background of pyrethrum

27
farming in Rwanda that started under the compulsory method where farmers were given land and

it was mandatory to grow pyrethrum on 40 percent of the land. Therefore, given different

changes in agricultural production and farmers’ behavior due to some programs such as Crop

Intensification Program which improved the use of improved inputs and pushed farmers to

consolidate their lands, farmers are motivated by different reasons which can affect their

decision making process.

[Link] Justification of variables hypothesized to affect the benefits of participation

Suitable factors considered as the strong and important predictors of level of performance

(pyrethrum farm’s gross margin per hectare per year) were also included in the model to identify

membership impact outcome. In this view, there is substantial evidence that farmers’

organizations significantly and positively affect the respective level of income, selling price,

reduce rural poverty and increase market participation (Barrett, 2007; Wollni & Zeller, 2006;

Fischer & Qaim, 2012; Vendeplas, Minten, & Swinnen, 2013; Verhofstadt & Maertens, 2014).

It is expected that membership to pyrethrum cooperative will affect the level of farmers’

performance in terms of realized profit from pyrethrum production. Based on findings from the

above cited authors, the following exogenous factors were identified as the main possible

determinant of farmers’ level of performance (gross margin). These are; Education, Family size,

off-farm income, access to extension and credit services, land size, age and distance from the

household to the collection center. Moreover, given the historical background of pyrethrum

farming inherited from the colonial period, the study included profit motivation as an important

predictor of the level of farmers’ performance because it was noticed that farmers have different

behavior behind pyrethrum farming. It is also expected that farmers who plan to expand their

28
 future production scale are more likely to invest in long term assets which in turn can increase

the production costs and thus negatively affect the gross margins. This explains the inclusion of

PLAN, a dummy variable which indicates if a farmer has a plan to expand the pyrethrum

production or not. The respective variables hypothesized to affect membership decision making

and benefits of membership are defined in Tables 3.1 and 3.2, respectively.

Table 3. 1: Definitions of variables that are hypothesized to affect membership decision making

Variables Definition of variables Expected signs

AGE Age of the household head -

EDUC years of formal education of household head +

FAMLSIZE Number of members of a household +

PROFITMOT Profit motivation (1= for expected profits, 0= otherwise) +

PLAN Plan to expand production in future (1=yes, 0=no) +

LANDSIZE Household’s total arable land ( hectares) +

DIST Distance from household to cooperative ( Km) -

TRUST Trust the management of cooperative (1=yes, 0=no) +

CONDITIONALITY Conditionality of participation (1=high , 0=low)

-

OFF_FARMINCOM Access to off farm income (1=yes, 0=no) -

CREDIT Access to credit (1=yes, 0=no) +

EXTENSON Access to extension services ( 1=yes, 0=no) +

PROPINCOME Proportional income from pyrethrum (percentage) +

Source: author

29
 The variables in Table 3.1 are used to test the hypothesis that socio-economic and institutional

factors have no effect on farmers’ decision to participate in pyrethrum cooperatives. The

predicted signs or directions of influence of each variable are shown on the right-hand column of

the table.

Table 3. 2: Definitions of variables that are hypothesized to affect the benefits of participation

Variables Definition of variables Expected signs

AGE Age of the household head -

EDUC years of formal education of household head +

FAMLSIZE Number of members of a household +

PROFITMOT Profit motivation (1= for expected profits, 0= otherwise) +

PLAN Plan to expand production in future (1=yes, 0=no) -

LANDSIZE Household’s total arable land ( hectares) +

DIST Distance from household to cooperative ( Km) -

OFF_FARMINCOM Access to off farm income (1=yes, 0=no) +

CREDIT Access to credit (1=yes, 0=no) +

EXTENSON Access to extension services ( 1=yes, 0=no) +

COOPMSHIP Cooperative membership (1=member, 0=non-member) +

Source: author
The variables in Table 3.2 are used to test the hypothesis that membership to pyrethrum

cooperative, socio-economic and institutional factors have no effect on farm profit. The predicted

signs or directions of influence of each variable are shown on the right-hand column of the table.

30
3.4 Data sources and sampling procedure

This study used primary data for analysis. Semi-structured questionnaires were designed, pre-

tested and administered to pyrethrum farmers in Musanze District of Rwanda. The questionnaire

was developed to adequately collect data on farmer and farm characteristics by conducting face

to face interviews. The sampling frame comprised of pyrethrum small holder farmers from

Musanze District while the sample unit was the head of household (participant and no-participant

in pyrethrum cooperatives). Random, purposive and multistage sampling methods were applied.

Musanze district is made up of 15 sectors, out of which 7 were purposively selected because

pyrethrum production takes place in those sectors. Amongst 7 sectors purposively selected, 4

were selected based on identifiable highly active cooperatives in those sectors. Sampling was

done in three stages; firstly, the cells where pyrethrum production is more concentrated were

identified. Secondly, members and non-members were identified, and finally, farmers to be

interviewed were randomly selected. Interviews with key informants were conducted to get

insight on opportunities, issues and efforts in place for the improvement. Key informant groups

consisted of various actors in the value chain, extension staff and cooperative management.

According to Kothari (2004), the sample size when estimating a proportion and in the case of

infinite population is given by:

n is the sample size, Z is standard variation at a given confidence level (e.g. 95%) worked out

from the table showing the area under normal curve, e is the desired level of precision, p is the

31
proportion of the population in the issue of focus; in this case p is the proportion of those farmers

in cooperatives, and q is 1-p, i.e. the proportion of farmers not in cooperatives.

Kothari (2004) argues that, one method to estimate the value of p must be based on a personal

judgment, results of a pilot study or on past data. The level of cooperative membership in

pyrethrum sector of Rwanda is estimated approximately at 20 percent. Therefore, the variability

in the proportion that will be participating in cooperative is assumed to be 0.2. Hence the value

of p is assumed to be 0.2 and q; 0.8. The desired confidence level is 95 percent and ± 5 percent

the desired level of precision. The resulting sample is specified below:

Hence a sample size of 246 was arrived at. However the study used a sample of 250 to reduce
errors that may arise when some questionnaires are not filled appropriately and also the author
had resources to reach 250 farmers.

3.5 Study area

This study was conducted in Musanze District located in the Northern Province of Rwanda. The

district is known to be a mountainous area with moderate slopes and volcanic ash soils. It also

presents the friendly climate with an average altitude of 1860 meters above sea level and an

average temperature of 20ºC. Rains are generally abundant, ranging from 1,000 to 2,000

millimeters (GoR, 2012) and hence it presents suitable condition for growing pyrethrum which is

ideally grown on an altitude of 1900 - 2000 meters, on volcanic soil, and requires sufficient rain

and sunshine. The district experienced a significant expansion of area under pyrethrum

production in the recent past; to date it accounts for 50 percent of land under pyrethrum

production in Rwanda. The district has a total population of about 368,267 of whom 91 percent

32
are employed in the agriculture sector, with the poverty level of 20.1 percent (National Institute

of Statistics of Rwanda, 2014). Musanze district is purposively selected because it is the main

producer of pyrethrum, which is anticipated to have a great contribution in reducing rural

poverty in this District. Figure 3.2 shows a map of Rwanda indicating the geographical position

of Musanze District.

Figure 3.2: Map of Rwanda Showing the location of Musanze District

Source: National Institute of Statistics of Rwanda

33
3.6 Diagnostic tests

3.6.1 Test of Multicollinearity

To test for the suitability of explanatory variables included in the model; multicollinearity test

was carried out. The correlation matrix was also used. Using the Pearson’s correlation coefficient

of ±0.5 and above which reflects the existence of multicollinearity, the variable EXPERIENCE

was omitted from the model because it was correlated with AGE. (See Apendix4)

3.6.2 Test for the goodness of fit of the model

The log likelihood for the fitted model and Wald Test were considered when testing the

goodness of fit of the model. (See Apendix3)

34
CHAPTER FOUR

4. RESULTS AND DISCUSSIONS

4.1 Farmer, cooperative and farm characteristics

4.1.1 Level of membership

The sample contained 140 members and 110 non-members from four sectors namely; Gataraga,

Shingiro, Kinigi and Nyange. Kinigi and Nyange present the highest number of respondents

compared to other remaining sectors. The explanation here is that cooperatives in those sectors

have the high level of membership compared to other sectors. Table 4.1 presents the level of

membership in the sample.

Table 4. 1: Level of cooperative membership per sector

Sectors Non-members (n= 110) Members (n=140) Pooled (n=250)

Frequency Percent Frequency percent Frequency Percent
Gataraga 25 22.7 27 19.3 52 20.80
Shingiro 29 26.4 28 20 57 22.80
Kinigi 34 30.9 51 36.4 85 34.00
Nyange 22 20 34 24.3 56 22.40
Source: Survey data (2017)

Pyrethrum cooperatives serve not only as pyrethrum markets at the proximity of farmers but also

offer employment to their members and the whole society as well. To perform all marketing

related activities, pyrethrum cooperatives use permanent and casual workers. In this regards, 85

permanent workers were employed by cooperatives. They also use to employ casual workers

where 19,728 of them were employed by 2016. This is evidence that pyrethrum cooperatives

35
play a key role in empowering farmers economically, both members and non-member through

job creation initiatives in rural areas.

4.1.2 Level of members’ commitment

Table 4.2 presents the extent to which members are involved in cooperatives’ activities as

shown by the ratio of participation. This ratio was measured in terms of the number of activities

attended over the total number of organized activities by the cooperative.

Table 4.2: Ratio of participation in pyrethrum cooperatives

Cooperatives Number of Mean ratio of Standard Minimum Maximum

Members participation deviation

KOABI 27 0.685 0.203 0.333 1

ABAKUNDUMURIMO 28 0.696 0.279 0.167 1
ABAKUNDIBIRETI 51 0.611 0.303 0 1
JYAMBERE 34 0.583 0.326 0 1
Pooled 140 0.635 0.288 0 1
Source: Survey data (2017)

The findings show that the ratio of participation in the cooperatives’ activities is about 0. 63,

implying that at least members attend 63 activities out of 100 organized activities per year. This

reflects the commitment and motivation of members towards the achievement of shared goals as

well as their own economic goals.

Gyau et al. (2016) discussed that among members of any farmer group, the level of commitment

and intensity of participation vary across individuals, given that their motivation and perceived

benefits are different. Moreover, the success of such groups does not depend on only

36
membership, but also on members’ commitment as argued by Fischer and Qaim (2011). The

current study analyzed the ratio of participation within pyrethrum cooperatives. According to

Vorlaufer et al. (2012), the commitment of members influences the collective action outcome

and hence the performance of the group. The results show that, members of cooperatives are

active in general since the mean ratio of participation is above 0.5. At least 3 out of 6 organized

activities were attended. Fischer and Qaim, (2011) argue that low rate of participation in joint

activities may be a drawback for the success and viability of farmer groups. Therefore the

sustainability and success of pyrethrum cooperatives will depend on potential members that are

committed to contribute to the acheivement of cooperatives’ goals.

4.1.3 Socio-economic and institutional characteristics of farmers

The descriptive statistics for the sample farmers are presented in Table 4.3. The average age of

sample farmers was 47 years. This backed the argument of Bojang and Ndeso-Atanga (2013)

who assert a very low participation of African youth in primary agriculture production and

natural resource conservation and preservation. Furthermore the mean age of formal education is

between 4 to 5 years which implies that the majority of sample farmers had at least completed

part of primary school. The implication here is that, the majority of farmers are able to read and

understand different opportunities that can improve their pyrethrum production. Additionally the

majority of respondents were mainly farmers with only 36 percent who had off farm income and

members were found to earn more off-farm income than non-members. This reflects the national

figures where the off-farm employment in rural areas is about 13 percent of the working

population (National Institute of Statistics of Rwanda, 2014).

37
Table 4.3: Farmers' households' characteristics

Variables Mean Test of significance

Continuous variables Non- Members Combined t-statistic p-values
members (n=140) (n=250)
(n=110)
AGE 43.24 50.52 47.32 -4.006 0.0001***
EDUC 4.57 4.89 4.75 -0.675 0.5003
FSIZE (hectares) 0.31 0.40 0.36 -2.8023 0.006***
LANDSIZE (hectares) 0.64 0.85 0.76 -3.3632 0.001***
FAMILSIZE 4.68 4.57 4.62 0.4326 0.665
GROSS_MARGIN(Rwf) 178292.8 360208.5 280165.6 -3.4602 0.0006***
PROPINCOME (%) 22 33 28 -4.3869 0.000***
DIST (Km) 1.64 1.71 1.68 -0.7024 0.7024
Discrete variables Percent χ2-statistics p-values
OFF_FARMINCOME 25 45 36 10.165 0.001***
PROFITMOT 76 91 84 9.635 0.002***
CREDIT 9 29 20 15.471 0.000***
EXTENSION 66 94 82 32.537 0.000***
TRUST 70 86 79 9.1056 0.003**
CONDITIONALITY 38 6 20 40.5866 0.000***
PLAN 50 66 59 6.279 0.012**
Source: Survey data (2017)

As indicated from the table 4.3, about 84 percent of respondents reported that the main

motivation behind the production of pyrethrum was the expected profit from flower sales;

members appeared to be more profit motivated than non-member (p<0.01). It is generally

noteworthy that pyrethrum production is mainly driven by financial returns from pyrethrum

flower sales. This agrees with Msimango and Oladele (2013) who argue that the majority of

farmers participate in cooperatives to improve on profit. It was also observed that for the future,

38
59 percent of respondents plan to expand their production, however members were more

concerned about the future than non-members (p<0.05).

The overall mean total land among the sample farmers was 0.76 hectares and results indicated a

significant difference in land size across the two categories. This mirrors the GoR (2013) which

highlights the limited availability of land as the main challenge that limits pyrethrum production.

Besides this, the country’s statistics indicate that the average size of land for rural farmers is

low, about 0.6 hectares and often divided into three to four plots (GoR, 2013). The pooled mean

gross margin per hectare per year is Rwf 280165.6 ($1 = Rwf 900) and members had higher

gross margin than non-members.

Observing from the table 4.3, about 20 and 82 percent of sample farmers respectively had access

to credit and extension services, and the proportion of those who had access to credits and

extension services during the last 12 months were higher among members of cooperatives.

Pyrethrum cooperatives offer credits and extension services to their members. A significant

proportion of members; 59 percent sourced their credit through pyrethrum cooperatives, while 44

percent received extension services through pyrethrum cooperatives. Farmers reported to have

different sources of credits.

Figure 4.1 describes different sources of credits indicated by sample farmers. It gives summary

on different channels where farmers source credits to invest in pyrethrum production.

39
Figure 4. 1: Different sources of credit for pyrethrum farmers in Musanze District

Source: Survey data (2017)

Access to credit is still low; only 20 percent of households had access to credit and this presents

a key challenge to access to farm inputs and other equipment required in production and

processing. Cooperatives represent the main source of funds for pyrethrum production

investment for their members. Pyrethrum cooperatives and financial institutions contributed to

59 and 22 percent of credits given to members respectively, while financial institutions

(SACCOs and banks) which were the main source of credits to non-members has contributed to

50 percent of credit offered to this group. Apart from being the main and affordable source of

funds to invest in pyrethrum production, pyrethrum cooperatives serve as a guarantor to facilitate

their members’ access to loans via banks or SACCOs. Furthermore the buyer offer credits to

cooperative members only. This portrays the importance of cooperative to link farmers with

different networks where they can source credits. In the same view, farmers have described

different limitations to access credits (Table 4.4).

40
Table 4.4: Different constraints that limit farmers' access to credits in pyrethrum
production

reason for non- access to credit Frequency Percent

Lack of required collateral 67 34
High cost to obtain credit 61 31
Short period of repayment 18 9
Adequate collateral but denied amount 6 3
Lack of information 25 12
Source: Survey data (2017)

Given the low level of access to credit in pyrethrum sector, the study has identified different

challenges that limit farmers’ access to credit if they are to improve their access to both input and

output markets and also to adopt new technologies involving some costs. Observing from the

table 4.4, lack of required collateral, high cost, and lack of information are the main challenges

that limit farmers’ access to credit, at 34, 31 and 12 percent respectively. The study concurs with

Kiplimo et al. ( 2015) who argue that, the problem of access to credit is exacerbated by the

inability of lenders to provide loans to farmers due to lack of farm records and lack of required

guarantee. Furthermore lack of knowledge on different procedures to obtain credits also

represents a major challenge. Access to credit could enable farmers obtain capital for not only

primary production but also marketing which involves further processing to dry flowers to the

required level of moisture. The marketing step represents an important stage in production

process because it helps to achieve the average moisture content for the produce to be accepted

by the buyer. Marketing characteristics of pyrethrum farmers is explained in section 4.1.4.

41
4.1.4 Marketing characteristics of pyrethrum farmers

[Link] Use of dryers

The industry requires some specialized tasks to accomplish the marketing process. Some farmers

spread their flowers on mats for drying at home, while some take to the society dryers. Figure 4.2

depicts the ability of farmers to access drying facilities.

Figure 4. 2: Distribution of farmers per method used in drying process

Source: Survey data (2017)

The drying process requires care to achieve the maximum acceptable moisture content. This

imposes the use of drying facilities that can help farmers to avoid losses which may arise from

the process. However, the sector presents post-harvest losses under stress of shortage in drying

facilities (NAEB, 2017). The results show that the use of dryer is still low; only 2 percent of all

respondents use dryers, while 98 percent use mats. About 72 percent of respondents reported that

most post-harvest losses were due to the lack of access to dryers. The study area had only six

42
dryers of which each could accommodate 2 metric tons of fresh flowers at one go. Thus in the

rainy season when the climate is not conducive for drying, farmers are more likely to incur losses

since they handle a number of competing enterprises and thus it rains over pyrethrum flowers in

their absence.

[Link] Pyrethrum marketing channels

Pyrethrum market in Rwanda is dominated by monopoly power. The industry presents one main

buyer at national level; SOPYRWA, while the produce is mainly sold through pyrethrum

cooperatives, following the buyer’s instructions (Huggins , 2013). However, the value chain

presents few brokers who consolidate produce from different farmers at the lowest price and at

non-uniform price. About 9 percent of respondents reported having sold their produce through

brokers. Brokers, as opposed to pyrethrum cooperatives, buy either fresh or dried flowers and

pay farmers immediately. Thus some farmers; members and non-members of cooperatives prefer

to sell to brokers and obtain quick cash because payment after delivery to the cooperative is not

instant; it occurs within one week after the delivery. Brokers deliver to pyrethrum cooperatives,

and thus it is not clear why brokers are still allowed to sell to cooperatives and in most of the

cases, they are non –members. The price paid to farmers per kilogram of dried flowers was 1080

Rwf, however the minimum price could get to 800 Rwf when sold to brokers. Furthermore, non-

members of cooperatives indicated different reasons that hinder them from joining the statutory

farmer organizations.

43
4.1.5 Reasons that limit farmers from joining cooperatives

Table 4.5 presents the main challenges that hinder farmers from joining cooperatives, as reported

by the respondents. It gives more insights on which strategy to adopt in order to help farmers

meet the conditionality to become members of cooperatives.

Table 4.5: Reasons for not joining cooperatives

Reasons for not joining cooperatives Number Percent

Not aware of membership advantages 33 30
High membership fees 63 57.27
Previous experience 10 9.09
Low trust for the management 4 3.64
Total 110 100
Source: Survey data (2017)

About 57 percent of non-members interviewed indicated high membership fees as being their

main reason of the status. Also about 30 percent of them were not aware of any benefits from

membership, while 10 percent were not interested in joining cooperative and they did not see any

benefit or loss from joining or not joining cooperatives. This is because those farmers have

experienced the case of cooperative mismanagement before the restructuring of the value chain.

The other remaining 4 percent said that the main reason they did not join cooperatives was the

lack of trust in regards to cooperative management. In pyrethrum cooperatives, membership fee

is paid in one installment. This means that for a farmer to be a member, he or she has to pay

membership fees in one installment. This is a major limitation for poor farmers to fulfill the

membership requirements. Another important share of non-members; 30 percent, was still

working in the shadow of ignorance because they were not aware of different potential benefits

they could obtain by joining pyrethrum cooperatives. Therefore, awareness initiatives should be

expanded to reach more pyrethrum farmers. The membership fee was estimated at 15,000 Rwf

44
($1=900 Rwf) which is an important amount for a small farmer to pay in one installment.

Flowers can be picked 10 to 12 times a year and to be able to pay the above mentioned

membership fees, it requires a farmer to reach more than 14 kg of dried flowers equivalent to 56

kg of fresh flowers that worth 15,000 Rwf. Considering other family expenses, it could be very

difficult for a small farmer to pay this fee in one harvest. However through several installments,

it is possible for small holders to meet financial requirements to join pyrethrum cooperatives.

4.2 Determinants of participation in cooperatives and its benefits

The results from the regression confirm that membership to pyrethrum cooperatives has a

statistically significant and positive effect on farm profit (p<0.1). The likelihood ratio test of

independent equations rejected the hypothesis of zero correlation between errors in the selection

and outcome equations at 1 percent. This justified the use of the Heckman model. The negative

sign of rho (ρ) indicates the direction of the bias, and hence without the use of this model, OLS

would have underestimated the effect of cooperative membership. The log likelihood for the

fitted model was -3671.6146. The Wald test resulted in a chi-square of 78.95 and the p value of

0.000. Hence the null hypothesis that all parameters in the regression equal to zero was rejected.

The variance Inflation factor (VIF) test for all variables in the regression was 1.26 and none of

these variables had a VIF that is above 2. Gujarati (2003) argues that as a rule of thumb, if the

VIF of any variable in the regression exceeds 10, which might happen if the R-squared from the

regression of Xj on the remaining explanatory variables exceeds 0.90, that variable is said to be

highly collinear. Also using the correlation matrix to test for multicollinearity, the variable AGE

was highly correlated with EXPERIENCE with the correlation coefficient of 0.68 and thus, the

latter variable was omitted from the model.

45
4.2.1 Factors influencing farmers’ decision to participate in pyrethrum cooperatives

Table 4.6 presents the parameter estimates from the first stage of the model. Parameters

estimates from this stage explain the direction of the probability to join cooperatives with respect

to the explanatory variables used in the model.

Table 4.6: Determinants of membership in pyrethrum cooperatives

Explanatory variables Cooperative membership (n=250)

coefficients Robust [Link]
AGE 0.018824** 0.0084727
FAMILSIZE -0.0538035 0.0525111
PLAN 0.2824245 0.192955
PROFITMOT 0.6005274** 0.279535
EXTENSION 1.097045*** 0.2643612
CREDIT 0.8620955*** 0.2633775
DIST 0.0530954 0.0775766
EDUC 0.0420424 0.0298181
OFF_FARMINCOM 0.7084776*** 0.2032472
LANDSIZE 0.3443292* 0.1875562
PROPINCOME 0.0291588*** 0.0053273
CONDITIONALITY -0.6395905** 0.2942146
TRUST 0.6954495 0.4323863
CONSTANT -4.394765*** 0.765895
Source: analyzed from Survey data (2017)
***, **, * indicate 1%, 5% and 10 % significance levels

Conversely with the study hypothesis, the age of the head of the household had a positive and

significant effect on the decision to participate in pyrethrum cooperatives. From the earlier

observations, the majority of pyrethrum farmers are old. Therefore given the age and position in

the household, older members of households are more likely to take decisions that can affect the

46
family’s livelihood. This contrasts Awotide et al (2015) who found that age of the farmer

exhibits a negative influence on participation in cooperative organization in rural Nigeria. This is

because young farmers are perceived to be better risk takers than older farmers, and hence they

are more likely to embrace change. The study agrees with Gyau et al. (2016) who found a

positive relationship between age and participation in farmer groups in Kenya.

The results also reveal that the more a farmer is profit motivated, the higher the likelihood to

become a cooperative member. The plausible explanation here is that given the compulsory

nature of pyrethrum production from the colonial period, farmers are driven by divergent aims,

among others; the compulsory nature as they were given land, inheritance of land and profits or

income from flower sales. It is expected that farmers who are purposely producing pyrethrum

with the aim to increase their farm income or their family livelihood, will behave differently

from those growing pyrethrum to follow their traditional ties or because it is compulsory. Hence

the desire to satisfy the economic goals behind pyrethrum farming is positively associated with

cooperative membership. Hansen et al. (2002) argue that farmers tend to join cooperatives in

order to satisfy their desire to become financially better off. Thus, they expect their membership

to benefit them in terms of higher income derived from a specific commodity production.

Therefore, given variant motivation of farmers behind pyrethrum production, it is evident that

profit oriented farmers are more likely to join pyrethrum cooperatives.

Contrary to the hypothesis, access to off-farm income had a positive and significant effect on

membership. Pyrethrum cooperatives are more acknowledged as marketing agencies at the

proximity of farmers and hence present a number of employment opportunities to perform all

necessary marketing activities throughout. This opportunity is primarily offered to members and

47
hence a number of members possess either casual or permanent jobs with their cooperatives,

which in turn can influence other farmers’ membership decision making. This finding is contrary

to Ouma and Abdulai (2009) who found that the likelihood of membership to a welfare group is

lower for households with access to off-farm income. This is because the off-farm activities

provide farmers with alternative sources of income to satisfy their needs and hence, they are not

motivated to join cooperatives.

Access to institutional services had a positive and significant effect on membership decision

making. As hypothesized, the results showed that access to credit increases the likelihood of

participating in pyrethrum cooperatives (p<0.01). This variable measures whether farmers are

able to afford financial services for the facilitation of production and processing. This implies

that cooperatives serve as sources of credits or networks to link farmers to financial services,

which in turn can attract other farmers to join cooperatives. Hong and Hanson (2016) argue that

for every dollar invested in agriculture in Rwanda, it produces more than three dollars to GDP.

Hence investment in agriculture is crucial in the country’s economic development pathway.

However smallholders tend to have little or no access to formal credit, which limits their capacity

to invest in agriculture and hence limits agricultural yields and income. Therefore, given the

nature of smallholder farming; poor farmers with resource constraints who mostly struggle to

meet the requirements of participation in cooperatives, access to credit may help to strengthen

financial capacity of such households and hence an incentive to join cooperatives. Similarly,

Mugabekazi (2014) and Nkurunziza (2014), independently, found that access to credit

positively influenced farmers’ decisions to join coffee producers’ cooperatives in Rwanda.

48
Access to extension services was positively associated with participation in pyrethrum

cooperatives. This may be explained by the fact that extension personnel from the Government,

and other partners, often mobilize farmers to adopt new production technologies and persuade

them to join cooperatives since some new inputs such as seedlings and information on their use

are shared trough pyrethrum cooperatives. It is therefore evident that farmers who often have

access to extension services, are more likely to join pyrethrum cooperatives. This concurs with

Nugussie (2010) who argues that access to some training and visits exposures, plays a key role in

enhancing the awareness of the rural people on the importance of cooperative societies.

The proportional income from pyrethrum was found to be an important driver of membership to

pyrethrum cooperatives. This indicates the economic contribution of pyrethrum industry to the

household total income. The findings imply that the more the household income heavily depends

on pyrethrum, the higher the likelihood to join cooperatives.

4.2.2 Determinants of benefits of participation in pyrethrum cooperatives

Table 4.7 presents parameter estimates from the second stages of the Heckman model; factors

that influence benefits of participating in pyrethrum cooperatives/impact of membership on farm

benefit (gross margin).

49
Table 4.7: Determinants of benefits of participation in pyrethrum cooperatives
Explanatory variables Gross Margin(n=250)
coefficients Robust [Link]
AGE -1612.52 2457.985
FAMILSIZE 537.5144 17437.37
PLAN -126477.8** 58965.44
PROFITMOT 162869.7** 57961.33
EXTENSION -160146.7* 83022.79
CREDIT 2491.13 78365.28
DIST 16359.74 20702.5
EDUC 9186.447 7947.678
OFF_FARMINCOM -53223.44 59860.31
LANDSIZE -83800.7 80111.78
COOPMSHIP 548567.8*** 90586.62
CONSTANT 126492.4 171768.4
/athrho -0.8934463*** 0.1739432
/lnsigma 12.97217*** 0.0816568
Rho -0.7130917 0.0854931
sigma 430269.8 35134.46
lambda -306821.8 51502.08
Wald test of independent equations (rho = 0): χ2 (1) = 50.22 Prob > χ2 = 0.000
***, **, * indicate 1%, 5% and 10 % significance levels
Source: analyzed from Survey data (2017)

As hypothesized, the study found that cooperative membership had a positive effect on farm

profit. The results show that the average treatment effect was 548567.8 Rwf ($1 = 900 RwF)

which indicate that a cooperative member could increase her/his farm profit by 548567.8 Rwf

per hectare year. This implies that pyrethrum cooperatives had a strong positive impact on farm

profit. This concurs with some empirical evidence that farmers’ cooperatives have a positive

impact on farm income, adoption of technology and profitability ( Magreta et al., 2010; Abebaw

et al., 2012; Tolno et al., 2015; Vendeplas et al., 2013).

50
The future plan to expand the production scales had exhibited a negative and significant effect on

farmers’ level of profit from pyrethrum production (p< 0.05). This is because farmers who plan

to expand their production scales in the future tend to invest in long term assets and this could

increase the cost of production and thus reducing the gross margin. The results also indicated a

positive and statistically significant effect of profit motivation on farm benefit (p < 0.05). It is

hypothesized that farmers who are motivated by the profit from pyrethrum flower sales, contrary

to those motivated by the compulsory nature of pyrethrum or by the traditional ties, will probably

embrace possible innovations and invest more resources in pyrethrum production. Therefore, in

the long run, their investment is more likely to increase benefits from pyrethrum production

Another important predictor of pyrethrum farm profit is the accessibility to extension services.

Contrary to the hypothesis, the results indicated that having access to extension services does not

necessarily increase farm profit. The results may attribute this to the fact that the information

received by farmers is general and does not specifically address the pyrethrum production or

processing constraints with specific details. In addition to this, the study found that only 5

percent of respondent who received extension services has been in contact with extension agents

either from the Government or Development partners, while the remaining benefited from farmer

to farmer communication message and its effectiveness is not known. This contradicts findings

by Birkhaeuser, Evenson, & Feder (1991) and Owens, Hoddinott, & Kinsey (2003) who found

that agricultural extension increases farm production and the value of crop production. However

the awareness of the extension message is not only the important determinant of farm production

achieved, but also the detailed knowledge and skills on the correct methods of application

subject to the complexity of methods (Birkhaeuser et al., 1991).

51
CHAPTER FIVE

5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Summary

Pyrethrum farming proved to have potentials on farm profit among members of cooperatives in

Musanze District. However, participation in pyrethrum cooperatives is still low which in turn can

impact on farmers’ level of farm benefit. The current study employed the endogenous treatment

regression alternatively called Heckman model to estimate the probability that a farmer will

choose to participate in pyrethrum cooperatives and the benefits of participation in terms of farm

profit. Descriptive statistics were also used to characterize pyrethrum farmers.

Findings showed that pyrethrum farming is predominantly smallholder and employs more of

relatively older persons than those in the youth bracket. The results also revealed statistically

significant differences between members of cooperatives and non-members with respect to

household characteristics, production resource endowments and access to institutional services.

Results indicated that members managed to earn higher farm profit than non-members.

Regarding factors that determine participation in pyrethrum cooperative; Age, profit motivation,

access to off-farm income, proportional income from pyrethrum, access to institutional services

such as extension and credit, positively influenced the probability of membership into pyrethrum

cooperatives. In regards to benefits of participation, the results showed that membership to

pyrethrum cooperative had a positive and significant effect on farm profit. In fact by

participating in a cooperative a farmer can increase his/her farm benefit by Rwf 548567.8 per

hectare of land per year. It was also found that the profit motivation characteristic of farmers is

positively associated with realized profit from pyrethrum production, while the future plan to

52
expand the production scale and access to extension services negatively affected farm profit. It

is also important to highlight that cooperative members benefited from a number of opportunities

such as sourcing credits and extension services from cooperatives. Besides this, cooperatives

served as guarantor to facilitate farmers’ access to finance. In this view, the study found that 59

percent of credits offered to members were sourced from cooperatives.

5.2 Conclusions and recommendations

The results of this study support the statement in farmer organization literature that producer

cooperatives are institutional tools to improve smallholder production performance and thus

improving farm income and profitability. However, despite a number of potential benefits

associated with membership in farmer cooperatives, very few farmers joined producer

cooperatives. The study emphasized the importance of cooperatives in improving farm income

through the improved farm profit. Hence initiatives focusing on awareness of different potential

benefits of membership to farmer cooperatives could be advanced to attract more farmers to join

cooperatives. It is therefore important that the Government takes a lead and partner with the

processor (SOPYRWA) to support and promote pyrethrum cooperatives.

Results also revealed that aged farmers are more likely to join cooperatives. Therefore, in

addition to promoting and supporting pyrethrum cooperatives, special attention should be put on

getting youth participation and involvement in pyrethrum cooperatives, since the long term

sustainability of these cooperatives will build on such potential members. This should go hand in

hand with facilitating them to acquire required capital, since the study indicated capital constraint

such as credits and land as key predictors of membership. Other farmers should also be

facilitated to acquire needed capital to meet membership requirements.

53
Furthermore, results indicated that profit motivation is an important positive predictor of

membership to pyrethrum cooperatives. Observing from the descriptive statistics, the high

proportion of farmers were motivated by economic benefits; however there was no significant

incentive to reward best farmers. Farmers are paid based on weight and the quality does not

matter. To recognize the effort of farmers, there should be incentive to reward the best quality

such as higher pyrethrin content.

Challenges such as inadequate dryers still impose limits on production levels. From early

findings, the study showed that farmers often incur losses under stress of shortage in drying

facilities. Results indicated that only few farmers had access to dryers and the lack of access to

dryers was reported as the main source of loss during post-harvest handling. Therefore, effort

should be centered on improving farmers’ access to dryers. This will help in improving

profitability by reducing or removing possible sources of losses during pyrethrum production at

farm level. This implies that the support in terms of basic infrastructure such as dryers should be

higher on the policy agenda.

It was also found that access to extension services positively affected the membership decision

making. This implies that training and advisory services are required for the processor to produce

the good quality with respect to the requirements of export markets. The Government could

partner with the processor to train more extension agents and facilitate them to train farmers

appropriately. The study however showed that having access to extension services does not

necessarily increase farm profit. This indicates that farmers may receive general information

which may not necessary help to improve on pyrethrum production because it is not specific to

pyrethrum production. It can therefore be recommended that special pyrethrum production

extension packages should be developed and disseminated to farmers. However, there is a need

54
to make sure that information pertaining pyrethrum is clear, focused and reliable so that farmers

are not confused. This requires the close collaboration with farmers to familiarize them with all

aspects of the technology and ensure the correct application of the technology.

5.3 Areas for further research

The results from this study highlight the role of agricultural cooperatives in the pathway of rural

development and poverty reduction in Rwanda. Increasing agricultural productivity is

fundamental for this to be achieved and will enable farmers to improve on farm income.

However, it will involve some costs at farm level. The present study showed the role of

pyrethrum cooperatives in enabling farmers to increase farm profit and thus improving

pyrethrum income. However, the scope of the study was limited since the sample was taken

from only one pyrethrum growing district. Future study should extend this work by expanding

the scope of the analysis to cover a wide range including all pyrethrum producing districts. This

would help to generalize the result on the wider pyrethrum sector in Rwanda. It will also provide

more insights on all-inclusive policy interventions. Also the apparent negative impact of

extension services to farm profit is confusing considering that extension is among key

agricultural services that cooperatives offer. However, the general information given to farmers

with no specific details on pyrethrum production and processing seems to be confusing them.

The study therefore recommend further research on the impact of membership on farm profit but

with special attention to the heterogeneity of members and also the effectiveness of a farmer to

farmer extension approach that is mainly used in this industry.

55
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63
APPENDICES
Appendix 1: Household interviews questionnaire

UNIVERSITY OF NAIROBI

DEPARTMENT OF AGRICULTURAL ECONOMICS

QUESTIONNAIRE FOR PYRETHRUM FARMER HOUSEHOLD

This questionnaire is destined to collect data on pyrethrum farmers in Musanze District for the

academic purpose. The researcher is pursuing a master’s degree in Agricultural and Applied

Economics at the University of Nairobi. The acquired information will be handled with

confidentiality and no name will appear on the report. Your assistance will be highly

appreciated.

DETERMINANTS OF MEMBERSHIP AND BENEFIT OF PPARTICIPATION IN

PYRETHRUM COOPERATIVES: A CASE STUDY OF MUSANZE DISTRICT,

RWANDA

64
 INTERVIEW SCHEDULE FOR FARMERS

SECTION A: Households characteristics (for both members and nonmembers)

A1. Location

Household No: Date(day/month/year): District:

Sector : Cell: Village:

Name of the interviewer:

A2. Identification

1 Name of respondent:
2 Gender ( 1= male, 0=female)
3 Relationship to the head of household:
4 Name of the household head :
5 Respondent phone contact :
6 Marital status of respondent : codes
7 Membership to pyrethrum cooperative : ( 1= yes, 0=no)
8 Name of cooperative :

6: Marital status
1=Unmarried, 2=Married, 3= Widow/widower, 4=Separated/divorce, 5=others (specify)

A3. Background of the household

marital status

membership

Occupation
schooling

Primary
years of

Group
Sex

age

list of household members /names

1
2
3
4
5
6
7
8

65
 Occupation:
Marital status Cultivation (crop farming) ................................... 1
Sex Agri. labour ......................................................... 2
Female…..0 Married ……………….1
Unmarried……………..2 Non-agri. labour .................................................. 3
Male…….1 Petty business ...................................................... 4
Widow/widower...……..3
Separated/divorced…….4 Business (other than petty business) .................... 5
Others (specify)………..5 Private job ........................................................... 6
Government job ................................................... 7
Other (specify) ..................................... …………8
Group Membership
No Group………….0
Saving & credit group/ibimina ……..1
Farmers’ group …….2
Other community group………3

SECTION B: PRODUCTION CHARACTERISTICS

B1.a).Land ownership (land title)

Number leased in leased out Total operational

category of land of plots Owned(ha) land(ha) land(ha) land
Less than 1 hectare
1-2 ha
Above 2ha

b) What is the estimated size of your land under pyrethrum production? ........................

C) Type of cropping: 1. pure cropping 0. Intercropping

B2. a) Do you own livestock? 1. Yes 0. No

66
 b) If yes, indicate the number of animals kept
Livestock owned Number owned and Value (Rwf) Owner
present at home
1 Cattle
2 Sheep
3 Goats
4 Chickens
5 Pigs
6 Rabbit
7 Bee hive
8 Other( specify)

Owner codes 1: head of household, 2= spouse, 3=soon, 4=daughter, 5=other joint (specify
codes), 6= others (specify)

[Link] are other important crops that you grow?

Name of crop Size of land( ha) Pure cropping=1, Number of years in
intercropping=0 the cropping
1
2
3
4
6
7

B4. Income from pyrethrum last year

Quantity of flesh Quantity of dried price per kg of total revenue/

flowers flowers(kg) Loss(kg) dried flowers last year
1

B5. Do you hire labors?

1. Yes
0. No

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B6. Pyrethrum farming practices and associated costs
1. Materials

Number Materials Quantity Unit cost Total costs

1 Hoes
2 Bags
3 Mats
4 Total costs

2. Farming practices

0=family labor
1=hired labor,

cost(Rwf/kg)
quantity (kg)
type of labor

Unit cost of

total cost of
labor (Rwf)

labor(Rwf)

total cost
number of
labor

Unit
1 Ploughing
2 Planting
3 Fertilization
a)
b)
c)
4 Weeding
5 Pruning
6 Harvesting
7 Drying
8 others specify
3. Other production costs

B7. Transaction cost incurred during production and processing

Quantity per year Unit cost Total cost per
year ( Rwf)
1 Transport to and from the
collection center
2 Extension
services/information /calls
4 Others(specify)
9 Total cost

68
 B8. Goss margin per hectare (to be calculated)……………….

B9. What is your motivation to grow pyrethrum?

1. For making money (profit)

2. Tradition
3. Compulsory
4. Others specify

B10. How many years you have been growing pyrethrum? ……………………..
B11. Which kind of planting materials do you use?
codes
1= seedlings, 0= wild from the field
1

B12 a) In the last 12 months did you get any financial support/ credit in your production?
1. Yes 0. No
b) If yes what is the source of your credit
Source of credit Form of credit Amount Interest rate (%)
, 1= Government, 2=bank, 1=money, 2=inputs, (Rwf)
3=cooperative/farmer group , 4=own others specify
savings, 5=relatives/friends, 6=Buyer,
7=input dealers, 8= NGos, 9=
others(specify)
1

c) If no why didn’t you obtain any credit?

codes
1= I don’t have the required guarantee, 2=high cost to obtain the loan/credit, 3= short period of
repayment , 4=Guarantee adequate but denied amount 5=I don’t need any financial support,
6=others(specify)
1

69
 B13. Have you received information or extension service or training about other crop
production (excluding pyrethrum) in the last 12 months?
1. Yes 0. No

B14. a) Have you received information or extension service or training about pyrethrum
production and marketing in the last 12 months?
1. Yes 0. No

b) If yes, what kind of information or area of training or extension service did you receive
about pyrethrum production and through which approach?

Source of services Types of services

1= reading materials/newspaper, book, 1= good agricultural farming methods,
2= Government, 3=cooperative, 4= 2=drying methods, 3=pests and disease
neighbors, 5=buyer, 6=input dealers, management, 4=fertilizer application,
7=NGos 5= record keeping, 6=others specify

[Link] do you handle pyrethrum after harvesting (drying process)?

codes
1 1= use dryer, 0= use mats

B16. a) Do you transport fresh flowers to dryer, immediately after harvesting?

1. Yes 0. No

b) If no, why?
codes
1= not a cooperative member, 2= don’t have enough time , 3= dryer is very far, 4= I don’t need
a dryer to perform the drying process 5= others specify
1

70
 B17. Nature of losses that often happen at farm Level

1 Nature of losses Main source of losses

pre-harvest Losses
1
2
3
4
5
Post-harvest losses
1
2
3
4
5

B18. a)Changes in quality and quantity of produce in the last five years
codes
1 1= no change 2= improved , 3= worsened

b) If improved what are the reasons for that change

codes
1=use of integrated pests and diseases management, 2= increased acreage, 3= use of improved
seeds and fertilizers, 4=all , 5, others specify
1

[Link] for worsened

Reasons for no change Rank according to the priority
1 No access to fertilizer
2 Limited capacity to adopt resilience strategy
3 No access to drying facility
4 Low benefit
5 Lack of information on good production methods
6 Others specify…………….

71
 B20. a) Do you plan to expand your production scale in the next 5 years?
1. Yes 0. No

b) If yes why do you want to make that change?

1. increase family revenue

2. imitating your neighbors
3. expected benefits
4. Increase savings
5. Others (specify)………….

B21. How do you store dried flowers?

codes
1= in bags, 2= heaped in the corner ,3= others specify
1

72
 SECTION C: MARKET ACCESS
C1. How do you transport pyrethrum from farm to collection center?

codes
1= head , 2= truck , 3= car, 4= others specify
1

C2. What is the distance from your home to the

Distance in walking Distance in Km
hours
1 Nearest input dealers
2 Cooperative( collection center)

C3. Road condition from home to the collection center

1= all seasons tarmac, 2= all seasons murram roads, 3=seasonal murram roads. 4. Others
specify
1

73
 SECTION D: HOUSEHOLDS’ INCOME AND EXPENSES
D1. a) Is pyrethrum your main source of income?

1. Yes 0. No
b) Other sources of income

Source of income Rank according Monthly income Annual Income

to the priority (Rwf) (Rwf)

1 Remittances
2 Rental income from Land
3 Rental income from
Buildings
4 Off farm income
5 Income from other crops
a)
b)
c)
d)
6 Income from business
7 Livestock
8 Other(specify)

[Link] of farmers’ expense

Expenses Amount in RFW

Food
Clothing
School fees
Medical
Entertainment
Donations
Purchase of assets
Savings
Others(specify)

D3. Proportional income from pyrethrum ………………………………………..

74
 SECTION E: farmers’ assessment in regards to cooperative structure, conduct and
performance

C1. Do you trust the cooperative members and the management system?
codes
1= yes 0= no
1

[Link] do you see the conditionality for joining cooperative ?

codes
1= high 0= low
1

C3. Do you think pyrethrum cooperatives guarantee better livelihood ?

codes
1= yes 0= no
1

C4. Do think pyrethrum cooperatives guarantee easy access to production inputs?

codes
1= yes 0=no
1

75
 SECTION D: members of Cooperatives
D1. For which purpose did you join cooperative

1. It was compulsory
2. Followed others
3. Expected benefits
4. Others (specify)……………..

D2. Does membership to pyrethrum cooperative benefit you when compared with before joining
cooperative?
codes
1= yes 0= no
1

D3. If yes, which benefits? Rank according to the priority (at least 5)
Types of benefit Ranking
1 Improved household livelihood
2 Compliance to quality
3 Access to credit
4 Access to inputs
5 Risks coping strategy
6 Trainings
7 Reduced transport costs
8 Others (specify)

D4. Does the cooperative has a transparent structure for conflict resolution

1. Yes 0. No

D5. Level of satisfaction with membership

Level of satisfaction Tick the right answer
1 Highly satisfied
2 Satisfied
3 Indifferent
4 Not satisfied

76
 SECTION E: Non-members
E1. a) Do you know that there is a policy that the processor buy only through cooperatives?

1. Yes 0. No
b) Reasons for not joining cooperative

Reasons Tick the right answer

1 Not aware of membership advantages
2 Cooperative is far away
3 High membership fees
4 Previous experience of cooperative mismanagement
3 Others specify

c) How did you know about a)?

codes
1= public extensionists, 2=buyer, 3= neighbor member of cooperative ,4= family member
5= others specify
1

[Link] you perceive any loss from not joining cooperative

codes
1= yes 0=no
1

E3. Do you plan to join cooperative

1. Yes 0. No

77
Appendix 2: Checklist for key informants interview

Key informants’ discussion questionnaire

1. Are there challenges that restrict farmers from reaching the potential productivity?

2. If yes, what are these challenges?

3. What are possible solutions to address those challenges /cope with risks that may arise

due to those challenges?

4. Does cooperative affect the pyrethrum commodity chain or is the pyrethrum itself that

affect the commodity value chain?

5. Did cooperatives fully achieved their objectives

6. If no, Which challenges that may restrict cooperative from reaching its objectives ?
7. Is there a policy on the quality of pyrethrum? ( in cooperative and in general)

8. If yes, Do farmers met its provisions?

9. Is there contract farming between cooperatives and the buyer?

10. If yes, do cooperatives consistently meet its specifications?

11. How do cooperatives make certain that farmers meet the buyer’s requirements

12. What do you think should be done to meet the buyer’s requirements?

13. Beside pyrethrum what are other activities that the cooperative is involved in?
14. Separate pyrethrum activities from non-pyrethrum activities.

15. What do you think are general recommendations for improving pyrethrum farming

78
Appendix 3: Test for the Goodness of fit of the model

Results for the goodness of fit of the model

Endogenous treatment regression model

Number of observation = 250
Wald Chi Square = 78.95
Prob > Chi Square = 0.000
Log Pseudo likelihood = -3671.6164
Wald test of indep. equations (rho = 0): Chi Square = 20.42, prob > Chi Square = 0.000

*Prob >Chi square = 0.000 shows joint significance of variables in the model

*Pro>Chi square = 0.000 in the Wald test of independent equations, shows the correlation of

error terms in the selection and outcome equations and hence, justifies the use of the model.

79
Appendix 4: Tests for multicollinearity

1. Variance Inflation Factor

Variable VIF 1/VIF

COOPMSHIP 1.59 0.627291
GROSS_MARGIN 1.58 0.631054
PROPINCOME 1.57 0.635889
CONDITIONALITY 1.30 0.771955
EXTENSION 1.26 0.793073
EDUC 1.23 0.810877
PROFITMOT 1.22 0.821658
LANDSIZE 1.19 0.839571
DIST 1.16 0.863500
OFF_FARMINCOM 1.15 0.868295
CREDIT 1.14 0.874821
PLAN 1.08 0.921673
FAMILSIZE 1.08 0.922841
TRUST 1.03 0.967936
Mean VIF 1.26

80
 2. Correlation matrix

AGE EXPERI~E FAMLSIZE EDUC OFF_FA~M LANDSIZE PROFIT~T CREDIT EXTENS~N PLAN DIST PROPIN~E TRUST

AGE 1.0000
EXPERIENCE 0.6827 1.0000
FAMLSIZE -0.1709 -0.1878 1.0000
EDUC -0.4195 -0.2994 0.2326 1.0000
OFF_FARMIN~M -0.2066 -0.1981 0.1302 0.2522 1.0000
LANDSIZE -0.0280 0.0769 0.1218 0.1818 0.1523 1.0000
PROFITMOT -0.0689 -0.2321 0.0551 0.0455 0.0503 -0.0085 1.0000
CREDIT 0.0201 0.0657 -0.0097 0.0526 -0.0116 0.1774 0.0262 1.0000
EXTENSION 0.1652 0.1461 0.0060 -0.0678 0.0299 0.2195 -0.0006 0.1338 1.0000
PLAN 0.0588 0.0625 0.0273 0.0886 0.0928 -0.0195 0.0433 -0.0603 0.0943 1.0000
DIST 0.1518 0.0985 0.0007 -0.1136 0.0113 0.1153 -0.2419 -0.0926 0.0099 0.0285 1.0000
PROPINCOME 0.2468 0.0627 -0.0599 -0.0936 -0.0017 -0.0326 0.1933 0.0491 0.0327 0.0664 0.0614 1.0000
TRUST 0.0486 0.1164 -0.0223 0.0014 0.0812 -0.0264 0.0153 0.0118 0.0518 0.0978 -0.0275 0.0147 1.0000
CONDITIONA~Y -0.0314 0.0066 -0.0439 -0.0717 -0.1496 -0.1256 -0.1433 -0.1539 -0.2863 -0.0488 -0.0911 -0.0469 -0.0878

CONDIT~Y

CONDITIONA~Y 1.0000

81