Membership and financial performance of farmers' organisations in peninsular Malaysia
Malaysian Farmers' Organisations (FOs) strive to achieve both social and economic objectives. However, the achievement of economic objectives are often emphasised in appraising their performance. Thus, many FOs tend to be categorised as poor-performing. To identify factors influencing farmers' behaviour towards FOs, and factors affecting FO financial performance, solvency and self-financing potential, this study utilised data from a survey conducted on 418 farmers, statistical reports of the Farmers' Organisation Authority, and the 1985 and 1986 Auditor's Reports on 149 FOs in Peninsular Malaysia. Two logit models indicated that members' familiarity with FO officials is the most significant variable influencing positively farmers' decisions to join and subsequently to support FOs. One way to attract many non-members who indicated their willingness to join FOs is by easing the procedure for membership. Although total FO assets had increased markedly since 1973, members' paid-up share capital only financed about 11 per cent at the end of 1986. Accumulated profits and statutory reserves had contributed significantly to the growth of FO equity capital. However, the poor collectability of accounts receivable had an adverse effect on FO liquidity positions. A log-linear regression model indicated that stock turnover, assets per share, business diversification, per member administrative expense and the ratio of cash to current liabilities significantly affected FO financial performance. A semilog regression model indicated that FOs solvency positions were positively affected by sales per member, and negatively by the ratio of operating expense to operating income, percentage of bad debts, stock turnover and the ratio of current assets to paid-up shares. The total incomes of most FOs in 1986 were lower than their estimated break-even volume of business, mainly due to low gross margin rates resulting from high rates of operating expense and/or low mark-up. Thus, about 12 per cent of FOs have the potential to become self-financing.