Rural institutions definitions

The words “institutions” and “organizations” are usually used interchangeably or inclusively and often lead to misunderstandings and misguided interventions.

The most widely used definition of institutions and organizations is the one propounded by North, who pithily described institutions as “rules of the game” and organizations as “the players”.

Institutions are of both a formal nature (constitutions, rules, regulations, laws, rights, etc.) and an informal nature (sanctions, customs, mores, traditions, etc.). They are characterized as follows:

• They are societally determined and govern social, political, cultural and economic exchanges and interactions.
• They define the range of choices, regulate risk and uncertainty and determine transaction and production costs and hence the feasibility and profitability of engaging in economic activity.
• They evolve incrementally, linking the past with the present and future.
• They provide the incentive structure of an economy and set the tone of societal development.

Organizations, on the other hand, refer to a group or association, formal or informal, in which there are defined and accepted roles, positions and responsibilities structured in some relationship to each other in order to achieve a specific objective/s.

Organizations exist to secure and advance the interests of their members within the existing institutional framework, while constantly seeking to influence that framework so as to achieve greater advantages and benefits. Organizations exist in all sectors of society – the private sector (family, commercial entities and corporations), civil sector (associations, membership-based groups, NGOs) and public sector (government and its various organs, government-owned enterprises). They also exist at all levels, extending from the micro (family, community, CBO) to the meso (local, regional, provincial), to the macro (national) and international (e.g. UN, WTO, multilaterals) level. They perform a variety of roles and functions in order to fulfill the needs and meet the interests of their members and clients.

Source: IFAD

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