Innovative Practice Hungary: Morakert Cooperative

by Lajos Zoltán Bakucs, Imre Fertó and Gábor G. Szabó, Institute of Economics, Hungarian Academy of Sciences 

Summary

The case study is about Mórakert Purchasing and Service Cooperative, in Mórahalom town, Hungary. Approximately 75 per cent of the population of Mórahalom is involved in agriculture. The most important crops are vegetables, the basis of commodity production. The Mórakert cooperative is active in the vegetable and fruit sectors and it was the first officially acknowledged Producers' Organisation (PO) in Hungary. It works as a successful cooperative in terms of increasing annual turnover and membership. The members of Mórakert coop are organized small-scale farmers. The average land size of the members is 25 hectares, whilst 31% of them rent extra land. 88% of members use family labour, whilst 48% employ paid labour. On average, members joined the cooperative 4 years ago.

Although there are similar cooperatives in Hungary, Mórakert cooperative is the most successful. The analysis shed light on three important factors that may explain the success of the Mórakert cooperative. First, there is the screening process of potential members. Second, there are strict rules to enforce the high quality and appropriate quantity of products to sell via cooperative. Third, the leaders of cooperative were able to establish the trust between management and members. One of the secrets of Mórakert is that they have developed a very efficient private contract enforcement mechanism. The success of Mórakert can also be explained by the fact that they were able to adjust the coop activity to the opportunities provided by the ever changing retail sector.

The Mórakert cooperative is a strong marketing implement for its members and also has a radiation effect on the region it works. It has the capacity to fulfil the basic objectives: to help farmers to sell their horticultural products, to purchase input materials on their behalf at the most favourable prices, and to offer long term security. The increase of both membership and turnover of the cooperative demonstrate that it operates efficiently. This is due to the friendly approach of the local authority, the various sources of capital derived from funds for development, and above all, the human capital and resources within the cooperative. The latter is regarded as the true secret and the key to the success of the cooperative.