Cooperatives Face Market Reckoning With New Law Welcoming Outside Capital

Jan 17 , 2026. By NAHOM AYELE ( FORTUNE STAFF WRITER )

Under the draft law, non-member investors may now acquire up to 10pc of a cooperative’s shares, earning dividends but without voting power or eligibility for leadership roles. According to officials of the Ethiopian Cooperative Commission, which oversees over 89,000 primary cooperatives, 435 unions, and five federations, these measures are designed to attract fresh capital while preserving core governance principles.

Cooperatives will soon be permitted to raise capital beyond their membership base and engage in joint ventures with private-sector actors, a longstanding prohibition under the sector's legal regime.

Nine years after it was passed, the revised proclamation was tabled before Parliament last week. The law lifts longstanding bans on selling shares to non-members and forming partnerships with private companies. Once enacted, the legislation is expected to restructure the financial and institutional architecture of cooperatives, enabling them to compete in broader markets and participate in strategic sectors such as agro-processing, energy, finance, tourism, and infrastructure development.

“The amendment seeks to make previously restrictive provisions permissible,” said Zeleke Yebeltal, legal services and inspection director at the Ethiopian Cooperative Commission, citing the need to bring laws in line with the broader transformation agenda.

The revised provision allows cooperatives to raise equity from non-members, albeit with tight guardrails. Investors may buy up to 10pc of a cooperative’s total shares, giving them dividend rights but no voting power or eligibility for leadership. Senior officials of the Commission argued that these safeguards are designed to preserve the cooperative principle of democratic control while opening new avenues for capital injection.

Over 89,000 primary cooperatives, 435 unions, and five federations representing 25 million members hold 55 billion Br in aggregate capital. The sector remains a foundation of rural mobilisation.

Ethiopian Cooperative Commission led by Getenet Tadesse, a former CEO of the state broadcaster EBC who is now a commissioner, says the amendments as critical to confronting the capital and operational limitations that have dogged cooperatives for decades.

“This is an important step toward addressing financial constraints and inefficiencies,” said Zeleke. “It allows cooperatives to access new pools of capital and enhances their economic competitiveness.”

However, the shift has raised concerns.

Leul Kahsay, manager of the Hawltiy Multipurpose Cooperative, fear that allowing non-member shareholding, even capped, could erode the cooperatives' foundational principles.

“This may dilute member control and open the door to external influence,” he warned.

The second major reform removes the legal barrier preventing cooperatives from forming joint ventures with private firms. Now permitted through formal contracts and subject to regulatory oversight, these partnerships are expected to enhance cooperatives’ access to technology, managerial expertise, and foreign exchange.

Sectors designated for such ventures are wide-ranging from agriculture, agro-processing, and manufacturing to mechanisation, transport, construction and energy. Even climate resilience and watershed development are included. According to the Commission, the goal is to unlock scale, diversify services, and integrate cooperatives into the mainstream economy.

Abinet Tarekegn, general manager of the Oromia Agricultural Cooperative Federation, which represents over three million members, applauded the move.

“We’ve struggled with limited capital and competitiveness," he told Fortune. "These reforms will allow us to enhance our capacity and access larger projects.”

Beyond capital and partnerships, the revised law introduces structural overhauls, most notably provisions allowing cooperatives operating in similar sectors to merge. According to Commission officials, this measure targets the chronic fragmentation and duplication across the grassroots, union, and federation levels, which have undermined efficiency and growth.

"Mergers are expected to bolster scale, reduce administrative redundancies, and create financially viable entities capable of operating in more complex markets," Abinet told Fortune. “Previously, many small cooperatives were competing in the same areas with limited capacity. Consolidation will make them more effective and attractive to partners.”

In a move toward greater self-reliance and financial discipline, the revised law also shifts audit responsibilities to the cooperatives themselves. Previously conducted by the government, audits are now commissioned and paid for by the cooperatives, using certified audit firms. Authors of the revised bill expect this to improve audit quality, accountability, and timeliness, given the sector’s growing size and complexity.

The bill, having been submitted to Parliament, was scheduled for discussion last week, but the session was postponed for reasons that were not made public. Once lawmakers take up the draft, it will undergo further scrutiny in standing committee meetings and public hearings before a final vote.

PUBLISHED ON Jan 17,2026 [ VOL 26 , NO 1342]