Exploring double side-selling in cooperatives, case study of four coffee cooperatives in Rwanda

Apart from the difficulty to attract new members, leakage of sales outside the cooperative is a major challenge for the coffee cooperatives in Rwanda. Local (independent) traders still constitute a major market for coffee producers. Yet, cooperatives also accept the produce from non-members and pay them the same price. Our objective in this paper is to analyse the importance of this phenomenon of double side-selling. We collected data from a sample of 170 coffee farmers. We use a probit model to analyse characteristics linked to cooperative membership and to study double side-selling. We describe the trade relationships between farmers and the cooperative on the one hand, and between farmers and traders on the other by the attributes of transaction costs involved in the trade of coffee. Membership characteristics include easy access to labour, land tenure, risk aversion, and mutual trust between farmers and cooperatives' management. Preference to sell to traders can be explained by the trust farmers seem to have in them after the repeated transactions in credit and basic consumption items and by long-term relationships in the community. (C) 2013 Elsevier Ltd. All rights reserved.