Aquaculture farmer organizations and cluster management: concepts and experiences

2.7.6 Increased voice 
FOs, especially larger ones, can provide a platform for producers to advance their 
interests and influence local, national and international policies that affect them.
2.8
COSTS OF FARMERS’ ORGANIZATIONS
As mentioned above, FOs and collective action are not a universal solution to the 
problems of small-scale producers. Aside from their many potential benefits, FOs can 
also face very real costs and challenges of collective action that need to be overcome 
if they are to be successful. The existence of these costs and challenges may go some 
way to explaining why FOs have had such a mixed record of success in the agriculture 
sector. The main costs and challenges facing FOs are those related to lack of trust 
between members, high internal transaction costs and the problem of free riding.
2.8.1 Trust 
Poor management and the subsequent breakdown of trust among FO members, 
leaders and managers is one of the main reasons FOs are unsuccessful. When an FO 
is made up of producers with different asset levels, interests and objectives, it can be 
difficult to manage, especially when the FO becomes larger. A lot of time and effort 
is needed to consult with members and communicate between the different levels of 
the FO to develop consensus on important issues. It is easy to forget the importance 
of maintaining the trust and commitment of members or to feel it is too costly to 
continue to put such effort into maintaining “social capital”; however, it is crucial to 
the sustainability of the FO. 
2.8.2 Transaction costs
While decreasing transaction costs between FO members and service providers and/or 
buyers, collective action also incurs certain internal transaction costs such as negotiation 
costs, monitoring and enforcement costs, and information costs. If these costs are too 
high, collective action may be unsuccessful. Negotiation costs can include those related 
to deciding upon which rules/institutions to base the collective action. Monitoring 
and enforcement costs relate to ensuring members adhere to the rules decided upon 
to protect against “free riding” (see below). Information costs include those related 
to information exchange for joint decision-making, which in itself can be a constraint, 
especially when business decisions need to be made quickly. High transaction costs can 
also lead to delays in providing services to members, such as purchase and distribution 
of inputs or collection and transportation of produce to the buyer. This could result in 
members deciding to obtain such services from traders or other intermediaries who are 
more efficient than the FO owing to lower operating costs.