Village Cooperatives In Thailand: Breaking The Cycle Of Poverty Among Rice Farmers

Thai farmers produce approximately 19-20 million tons of rice annually. Two-thirds is consumed by farmers themselves, used as seed, or sold for domestic consumption. The remaining one-third is sold abroad, gaining for Thailand a world-wide reputat ion. While the country is not the world's leading rice producer, it has been the number one exporter for the past 20 years.

It might seem strange, therefore, to learn that a significant number of Thai rice farmers lack an adequate supply of rice to eat and that their children, grandchildren, nieces and nephews suffer from malnutrition. Many families are burdened by massive debts and are forced to send their children of working age to seek employment away from their homes. Their income is needed to cover family expenses during the year and to repay loans that their parents have had to take from both formal and informal sourc es. This cycle of poverty and debt arose when rice became a cash export crop similar to tapioca, corn, jute and other crops.

The unpredictability of the weather, droughts and floods, epidemics and pest infestations are all risks which farmers must face. Sixty percent of Thai farmers sell their rice on the spot immediately after threshing; twenty percent sell to middlemen, an d twenty percent sell their rice at the local central market. Farmers have to sell their rice quickly in order to repay the loans that they owe to the very same merchants, middlemen and millers who are buying their rice. Clearly, this arrangement gives th e farmers no bargaining power, and the luxury to hoard rice and wait until market prices rise belongs solely to the merchants, middlemen and millers. There are still many steps before the rice reaches the consumers: first brokers, then wholesalers and fin ally retailers. Farmers who are forced to sell at low prices must later buy rice for their own consumption at prices twice as high. A considerable number of farmers have to borrow rice from merchants or wealthy farmers at an interest rate of 50% per growi ng season.

Even so, most farmers will likely continue to be farmers. Rice farming is an occupation which has been passed down to them by their ancestors for centuries and at which they are highly skilled. Though attempts have been made to improve production throu gh the use of modern technology in the form of fertilizers, new rice strains and pesticides, incomes have failed to keep pace with the increased expenses which these new methods incur.

An examination of the entire process, from production to delivery, to both domestic and foreign consumers reveals that the cost increases which double the price of rice after it leaves the hands of the farmers, enrich only the merchants, middlemen, mil lers, buyers, exporters, retailers and wholesalers. The steps in the process have become fixed and offer obvious benefits to all but the farmers. Changes at one end of the process will have an impact on the entire system.

Some farmers in the Northeast, therefore, have begun to seek an alternative which will give them greater security and allow them to continue farming.

There are several basic village self-help models that have become popular in rural communities to alleviate common problems. Rice Banks, Buffalo Banks, Saving Groups and Cooperative Stores are all based on the principle of sharing and cooperation for m utual benefit. Each is designed to reduce exploitative practices, meet specific basic needs and promote collective decision-making.

Community rice banks are a means of addressing the problem of seasonal shortages of rice for consumption for some households, through simple sharing among those who have more than needed and those who have less. They also serve as a way to protect the poor from exploitation in the form of exorbitant interest rates on rice loans - as high as 150-200% in some places - charged by the merchants and middlemen.

A communal rice storage barn is constructed by the villagers who contribute labour, using locally available materials supplemented usually by outside contributions such as roofing, nails, etc. Deposits of rice paddy in the bank are collected through se veral means; individual donations based on the villagers' own capacities; a traditional "merit-making" ceremony; or a sharing of labour in a collective rice field in order to contribute the harvest to the bank. Most Thai's are Buddhist, and daily make mer it by providing food and other necessities for the monks in their local temple. A special merit-making ceremony each harvest is adapted so that host villagers, neighbours and guests can donate rice paddy to the local Buddhist temple instead of the usual c ontributions to the monks. The temple can inturn, contribute the paddy to the community rice bank.

A rice committee is then formed to manage the rice bank by drawing up loan regulations, setting the rate of interest and loan schedules. Once a year, the committee members meet to review loan applications and allocate loans, normally on the basis of wh o has the most need. They are also responsible for collecting repayments after the harvest.

A rice bank is also a form of pooling together resources on reserve for collective use. If there are deposits left over after loan distribution, the community may decide to sell the paddy for cash and use it for other needs such as fertilizer on credit to members. Members however, always pay back the loans with rice paddy.

The objectives of the rice bank can be extended to include rice trading. In order to help villagers who are forced to sell immediately after harvest when the price is at the lowest, the rice bank can purchase paddy at a price closer to the normal and s tore it until it can make some profit. Conducting business according to collective principles, they then speculate on the open market. However, this usually means the bank has to have access to outside credit sources to engage in such trading.

Village collective rice mills provide an added opportunity for rice farmers to control prices, and realize profits from their efforts. Members, who are also the mill owners, determine their own policies and receive milling services at prices lower than those charged by most private rice mills. With initial support from private development organizations, these cooperative mills have spread quickly since 1987, and in 1991, the government's village jobs creation program included rice mills as an alternati ve under its policies.

In addition to the profits earned from the rice banks and collective rice mills, both of which required participants to pool their resources, farmers had an opportunity to gain valuable lessons concerning management and administration. In addition, som e groups are able to sell rice to members at bargain prices, and directly to merchants in town. Clearly, this arrangement presents an attractive alternative.

Another experience pertaining to rice processing and trade is that of the network of villages called the Committee to Support Cooperation Among Northeastern Rice Farmers. Comprising of farmers in Khao Wong district of Kalasin province, Phonsai district of Roe Et and from Sa Kaew in Nong Hong district of Buriram province, the Committee set up a medium-sized rice mill and began purchasing paddy from farmers. After milling, their rice is then sold to non-rice growing farmers and to slum residents in Bangk ok who are in direct contact with the mill. This arrangement benefits both villagers who grow the rice and those who later consume it.

A 1991 examination of the trading arrangements between the Sa Kaew cooperative rice mill in Buriram and non-rice growing farmers in Nong Sai, shows that the rice mill could still make a profit with this arrangement that allowed the villagers of Nong Sa i to save 183 baht (approx. $9) /100 kilograms of rice. Given that the 207 families of Nong Sai consume a total of 144.9 tons of rice annually, they save as much as 1,281 baht ($64) per family per year. If these families were to act as a group and pool th ese savings, they could carry out a number of projects which would be of benefit to the entire village.

Saving groups are another form of community mobilization of funds developed in order to solve the common problems of lack of reserves to meet emergency needs such as illness in the family, or seasonal needs such as schooling, or food costs during planting seasons. Normally, villagers borrow from money lenders within or outside the community at a very high interest rate of 5-10% per month to me et such needs.

With a savings group, villagers deposit savings monthly on a designated day; usually the rates are quite low, a minimum of 10 baht per month. Loans are also given out monthly for short loan periods, mostly 3 months, at a maximum interest rate of 3% per month. Once a year, dividends are paid out to members.

Individual loans made by the savings groups are usually small, limited by the size of total savings. They are mainly for emergency food purchases and family illnesses, but are also used for small productive activities such as chicken or pig raising, or buying silk thread for weaving. Some groups decide to use the entire savings for some collective activity, such as communal rice-farming, or setting up a cooperative store.

Savings groups are a type of "pre-cooperative" organization that provide the basis for the establishment of credit unions. With the cooperation of the Credit Union League of Thailand, many savings groups have adopted standard regulations and accounting practices and have become fully pledged credit unions, long-term financial institutions that can service individual and group credit and savings needs.

The industrial-commercial system of Thailand's rice trade is very firmly established, and although government policy is unable to have a major impact on changing the system to better benefit the village rice farmers, there are opportunities for support . Farmers groups have proposed that the government provide support by directly offering them low-interest loans which they could use to purchase rice from farmers. However, the government provides such assistance only to legally-registered farmers groups, of which there are very few, principally because villagers lack the resources to organize and manage such organizations.

Since the isolated successes villagers have experienced selling rice directly to consumers have escaped the attention of the government, they are now working to make the authorities aware of the impact of policies that affect them. Based on their own success, they have become convinced that the financial support the government presently supplies to merchants should instead be given directly to the farmers so that they may set up their own rice mills and granaries. They also feel that the government sh ould provide funds for improving the management skills of villagers.

The importance of these efforts is that they provide a means of achieving self-reliance, to develop villagers' own management skills, to boost production and thereby assure their families a more stable income. They also work to establish a firm and fai r system of safeguards for the rights of farmers, the largest percentage of the Thailand's population.

From the "How to Live in the Real World" education kit, created by the Nova Scotia Environment & Development Coalition.

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