Polytechnic University of the Philippines

COLLEGE OF BUSINESS ADMINISTRATION

DEPARTMENT OF HUMAN RESOURCE
DEVELOPMENT MANAGEMENT
Mabini Campus, Sta. Mesa, Manila

History and Development of Cooperatives

Prepared by:
GROUP 1
Aquino, Fatima T.
Balodong, Joanna Reca C.
Bautista, Mark Paul C.
De Jesus, Gelli I.
Omale, Jomari N.
Paual, Fernando C.
BSBA-HRDM 3-6D

Prepared to:
Prof. Al Fojas Fontamillas
Subject Adviser

December 2016

BEGINNINGS AND PHILOSOPHY OF COOPERATIVES

I. INTRODUCTION
The pre-historic men of various races practiced some forms of cooperation nearly similar to the
present day cooperation. This is supported by deductive and inductive reasoning's anchored on the
universal needs of mankind for food, clothing, and shelter,--- three basic requirements that compel man
to seek and get what he needs for survival -- with the help of others, if he cannot do so alone.
In seeking food, man's forebears wear primarily motivated by instinct to get this where it was
readily available -- in plains and rivers, and trees; in forests and caves, etc. In the forest, it was possible
that these forebears of mankind had accidentally encountered one or a couple of their kind.
A couple of things happened in these encounters: they ignored each other to av oid trouble; they
fought and died together; they fought, with one emerging as victor; or they struck friendship, thus
sowing the very first seed of cooperation along hunting, fishing, gathering of fruits and vegetables and,
later, planting and harvesting staple crops.
The later occurred by the fact that such words as palusong, bayanihan, paluwagan, and others
are still very much in use today in the country.
Even to present day Filipino farmers the word palusong connotes that a farmer does not have to invite
other farmers to help him plow his field; he has only to let this neighbors know that he has palusong and
the word would circulate around that he needs help. On the appointed day other farmers would be at
hand to help him, ditto with transferring one's dwelling to another place --- a Filipino practice to which
the word bayanihan came from.
A more sophisticated form of cooperation, wherein a bigger number of participants are
involved, is seen in the paluwagan. This form of cooperation is economic in nature and is always
restored to by a group of people who cannot afford to buy prohibitively priced items. To hurdle this
problem the group pool their money resources daily, weekly, etc. depending on the amount agreed
upon and each takes turn in getting hold of the collection. This goes on and on up to the time when the
very last member gets his share.

II. BEGINNINGS OF COOPERATIVES

Recorded history on cooperation dates back to the 19th century when European peasants were
severely affected by socio-economic problems emanating from low wages, rising cost of living,
unemployment, and inequitable distribution of income and wealth. These led to discontent, strikes and
disorder.
These conditions in Europe gave rise to a search for practical solutions that led concerned
leaders and intellectuals to work for a new social order.

Influence of Robert Owen and William King. Two important personalities who contributed to the
development of cooperatives were Robert Owen of Wales and William King of Brighton. They advocated
the concept of cooperative societies in Britain. Their concept influenced the major growth of
cooperatives in that country.
1. Beliefs. Owen and King maintained that individual competition does not benefit the people and
that a system of cooperation is needed to achieve results which will benefit many, where a
totality of individuals can work mutually for a goal desired by all.
2. Principles for cooperative organizations. From these two beliefs, Owen and King established
principles which later serve as a guide in organizing cooperative organizations. These principles
were: existence of equality within the organization among its members, social ownership,
mutual aid, just prices, emphasis on service rather than profit and continuous education on
cooperation.
These ideals were inherited by the modern cooperative movement. They were adopted by all
cooperatives that evolved thereafter.
These are the cooperative experiences of Europe in general. The write -up that follows will
provide a closer insight for the experiences of a particular country.

III. COOPERATIVE MOVEMENT

The modern cooperative movement began in England with the establishment of the Rochdale
Weavers Society in 1844.
1. England . There were much discontent and frequent strikes in the town of Rochdale in 1844
due to exploitation by the capitalists of the working class. Many people were unemployed. The period of
1840's had gone down in history as the "hungry forties" because of the hunger suffered by the people.
In an effort to correct these socio-economic situations, 28 Rochdale weavers grouped
themselves together to establish the Rochdale Society in 1844. They agreed to contribute one pound
each. This cooperative society was started by weavers, shoemakers, and hat makers. Its organization
was motivated primarily by the group's desire to obtain necessary goods at lower prices, provide
employment for members in the process, build houses for the members, lease agricultural lands and
establish self-governing society.
Due to limited capital, they grouped themselves together and pooled their resources and
established among themselves a prototype of the first form of today's consumer cooperatives.
The success of the Rochdale Society in improving the social and economic condition of its
members led to the establishment of many similar societies.

2. Germany . In 1847, economic conditions in Germany were similar to that of England. The
cities were crowded with the unemployed. The farmers were heavily indebted and their land or working
animals were most often forfeited to the usurers or money-lenders.
Frederick Wilhelm Raiffeisen, mayor of a small German district, appealed among the rich of the
community for financial help, but alms giving just did not work.
Raiffeisen pondered how he can help his constituent solve the proble m of usury. After a period
of soul searching, he decided that the only way was for the people to help themselves. So he set up his
first rural credit association in 1864. The Rural Credit Associations are cooperatives that were organized
to provide credit services to the members. The associations seek to initiate and develop the habit of
thrift among members in order to generate capital which can be loaned to members at very low rates of
interest.
Raiffeisen's principles upon which he built his rural credit association were the following: only
people who belonged to the rural credit association could borrow from it, loans would be made only for
provident and productive purposes at low interest, and that a man's character was the most important
security for his loan.
He insisted that the members of the association should have a common bond of interest.
Throughout the world, credit association or unions operate on these principles today.
By 1888, Raiffeisen had organized 423 credit societies. Majorities of these societies were small
village multi-purpose societies that undertake deposit and loan business and acted as agents for the
bulk purchase of agricultural requirements. These goods were sold to the members at a lesser price and
the association carried out the marketing of the members' farm products.

Early credit cooperative in the 1800's were inspired by the teachings of Victor A. Huber. 18081883 --- Hermann Schulze-Delitzch organized credits coops among urban workers.

3. France. While Mayor Raiffeisen was undertaking the formation of credit societies in
Germany, a Frenchman was initiating the formation of an entirely different type of cooperative in
France. The French people, particularly those involved in cottage industries were experiencing
difficulties.
a. Difficulties of cottage industry workers were the middlemen underpriced the produce of cottage
industries, leaving the producers of these products very little or no profit at all; the producers of
these goods worked as isolated individuals or groups and were not in any position to bargain for
better prices. The outlets of these goods were almost non-existent because the volume of goods
to be sold on a wholesale basis was not enough.
b. Marketing cooperative prototype --- Charles Fourier, a Frenchman, formed Productive
Cooperative Society which became the basis of the marketing cooperatives in existence today.
This cooperative offered to assemble the goods of producers in order to demand better prices,

sell these goods in bulk in order to eliminate middleme n, and find or even create markets for
these goods in bulk in order to eliminate middlemen, and find or even create markets for these
goods.
4. Belgium. In a poor parish of Goor, Belgium, a certain parish priest by the name of Jacques
Mellaerts saw that his parishioners, who were mostly farmers, were being cheated by buyers and
sellers. They had no insurance to cover their losses. They had no sources of credit to help them buy
much needed equipment and were defenseless against disaster caused by bad weather.
After experiencing failures in his past attempts to help the people, Father Mellaerts saw that the
only workable course of action would be to organize a cooperative guild or association.
He organized a cooperative guild in the year 1887 starting with seven members. In a few months
the membership had risen to 86. The guild made collective purchases of food stuffs, machinery and farm
implements. At each monthly meeting, members were given instructions in modern agriculture
techniques. At the end of a year a flourishing cooperative had come into existence. As the cooperative
expanded in its operation, a small credit bank was established.
5. Japan . It provides another example of the strength and influence that cooperatives can exert
over the lives of the people.
" Tanomushi" is an early form of cooperation in Japan. Coop movement was spearheaded by
Toyoshiko Kagawa who later became famous for his "KAGAWA DOCTRINE."
Japan has islands covered almost entirely by forest. As such, very little of her land can be used
for agricultural purposes. Because of this limitation, she developed to the greatest extent one of her
main assets --her fishing industry.
a. Cooperative fishing societies --- most of the cooperative in Japan are fishing societies. Majority
of these societies are found in the rural areas. These societies are powerful. They own and
control the markets for fishing; act as wholesalers, selling fish to big consumers and to brokers,
who in turn sell them to retailers in local areas or else ship them to more di stant towns; own
warehouses, most of which are equipped with cold storage facilities; own vessels used to
transport fish from one part to another; undertake fish processing activities; and operate joint
processing factories. Fish cooperatives in Japan are federated.
The fishing societies of Japan extend social welfare schemes to their members. The
social welfare provides hospital services for fishermen and their families and nursery services for
children whose mothers are engaged in fishing or work on the store. They own 150 hospitals
and 120 health centers.
b. Agricultural cooperatives --- aside from fishing societies there are agricultural cooperatives in
Japan. Japanese agricultural cooperatives act as credit and marketing societies.

The agricultural cooperatives are engaged in cottage industries. They produce straw
mats, ropes and bags. As a sideline, Japanese farmers are engaged in raw silk processing. The
cooperatives provide farmer-members with the necessary technical assistance in the production
of silk.
6. Taiwan . Yao Hut another form of cooperation had already existed in Taiwan. The experience
of farmers associations in Taiwan reveals the outstanding and dominant role in the life and progress of
Taiwan's farming population.
In Taiwan, farmer-members obtain credit, buy their farm supplies and market their products
through the farmers association. The farmers' associations manage the irrigation system, process and
export agricultural products and pay for the salaries of extension workers.
By now, the reader may have noticed that different countries evolved different types of
cooperatives according to the different needs and demand of the people.
7. Korea. Shirk San Kei refers to an early form of village level cooperative. It acts to market
collectively farm products and serves also as collective agency. The three-tiered agricultural cooperative
structure previously existing in Korea was modified into a two-tied one on 1981 consisting of one
primary cooperatives and six National Agricultural Cooperation Federation (NACF), the apex cooperative
structure. Cooperatives in Korea are multi-purpose, with NACF being the result of a merger, emanating
from the country's experiences on the complexity and inefficiency of multilayered and disjointed
cooperative organizations. Eighty percent of NACF funds come from government sources and has since
strengthened its performance compared to the time when government support was inadequate.
Aside from agricultural financing, NACF engages in international banking and non-bank activities
such as marketing, purchasing, insurance and research. Innovative techniques enhance effectively of its
operations. Through the interest compensation system, it extends medium term loans and utilizes
deposits for lending. Under this system, it is accorded interest subsidy by the government. Its credit
guarantee fund enables farmers who lack securities to obtain loans. Cooperative education and training
are given much emphasis. Among the non-agricultural cooperatives the funds interlending scheme i s
successfully being implemented, particularly among the credit unions.
8. India. Cooperatives are generally organized into a three-tiered structure for a short and
medium term credit, and a two-tiered structure for long term credit. For short-term credit, the State
Cooperative Bank is the apex bank, the Central Cooperative Bank at the district level, and primary multi purpose cooperatives at the base. The Reserve Bank of India supports the short-term credit structure
with the National Agricultural Credit Development Fund for infusing capital. The National Agricultural
Credit Stabilization Fund converts short to long term loans in case of arrearages. Long-term cooperative
finance structure consists of the state cooperative land development banks at the apex level the primary
land development banks at the village level.
9. Israel. Cooperative is a way of life in the Kibbutz in Israel. The Israelites adopted the principle
of cooperation as a way of life. Whereas cooperation societies in other parts of the world exist to

perform specific services for the members, the Kibbutz embraces the total existence of a Kibbutz
member.
In a Kibbutz everything is owned by the organization. The land is rented on a leasehold basis and
collectively cultivated. The produce is sold collectively. Cash is shared equally among those who cultivate
the land. Production facilities are supplied to the members. The size of a Kibbutz varies greatly.
Membership ranges from 60 to 2,500 persons.
There are three types of agricultural cooperative settlement in Israel, all of which are alike with
respect to basic cooperative organization, but each of which makes its own specific contribution to
cooperative practice.
a. Kibbutz or collective settlement abolishes private property.
b. Moshav or cooperative smallholders' settlement considers private individual family unit as the
base of the cooperative.
c. Moshav Shitufi combines the leading features of the other two types.
Each individual settlement is registered as a cooperative society, and each bears the triple
aspect of a producers' cooperative, a marketing cooperative, and a consumers' cooperative.
Agricultural lands tilled by the agricultural cooperatives are leased by the government. These
are "re-leased" by the cooperative to its members. In most Moshav, credit to farmers are not limited
especially those that boost production. Each of the organizations generally serve as: (a) "cashier" in
behalf of all its members; (b) bank where many member deposit their money; (c) wholesale buyers who
produces in bulk the essential needs of its members; and (d) operator of its own share capital and
reserve funds. It can also take loans from various institutions.
10. United States. Cooperative movement in the United States is largely rural in nature. An
American consumer is so well-off that development of coops was very slow. Edward Filene who believed
in cooperativism was a successful merchant and spent so much money by promoting the spirit of credit
union movement, in 1985.
In 1865 --- The Michigan First State Coop law was passed (March 20).
The Central Bank of Cooperatives is a component of the Cooperative Farm Credit System along
with the Federal Land Bank and Land Bank Associations and Production Credit Association. All the
government initiated and presently owned by borrowers. The three institutions pay for the expenses of
the farm credit system. The Central Bank for cooperatives is loans that exceed individual loan limits of
12 district banks for cooperatives. The district banks lend directly to eligible cooperatives. Along with the
provision for savings and credit, the Central Bank organizations on the area of training and education.

HISTORICAL DEVELOMENT OF COOPERATIVES IN THE PHILIPPINES

Cooperation in the Philippines is as old as its culture. It spans centuries of human existence from
its pristine form of mutual assistance to what we call in the native tongue, the "bayanihan."
Cooperation, however, as a system which seeks to harness the limited resources of people of small
means and opportunities for economic and social ends, as we know it today, was first introduced in the
late 1800's. Dr. Jose Rizal, inspired by the cooperative idea during his travels in Europe, organized in
1898 a Marketing Cooperative among the farmers of Dapitan during his exile.
Subsequent attempts to introduce cooperatives in the country were mainly through
government imitative and effort. Cooperatives were established only after the Philippine governm ent
had enacted enabling laws which called for their organization with government aid; such as financial
support and others.

I. AMERICAN REGIME (1900-1934)

In 1907, a bill providing for the organization of rural credit cooperatives was presented in the
first Philippine Assembly by Rep. Alberto Barreto through the efforts of the late Senator Teodoro
Sandico, who was then the Civil Governor of Bulacan. The bill was ostensibly intended to help the
people in the rural areas overcome the strange-hold of usurers who even then were already
impoverishing the people. Although this bill was approved by the Philippine Assembly, the same was
disapproved by the Philippine Commission which constituted the upper chamber of the Philippine
Legislature. In 1914, however, a similar bill was presented before the Philippine Assembly by
Representative Rafael Corpuz, and this time it was able to go through both houses of the Philippine
Legislature and was enacted into a law on February 5, 1915 as Republic Act No. 2508, otherwise k nown
as the Rural Credit Law. The administration of the Rural Credit Law was entrusted to the Bureau of
Agriculture. Under this law, Rural Credit Cooperative Associations were organized to accumulate funds
by way of cooperation in order to extend credit to their members at reasonable terms for exclusively
agricultural operations. The amount of funds available to farmers was dependent initially on the amount
they saved. In 1916, the First Consumer Cooperative was established at the UP College of Agriculture,
now UP Los Baos. However, in 1919, Republic Act. No. 2818 was passed and provided an appreciation
of PHP 1 million for rice and corn production to members of rural credit associations. At the end of 1926
there were 544 rural credit cooperatives organized in 42 provinces.
While the rural credit associations were designed to help finance the productive efforts of the
farmers, there was at the same time the need to provide incentives to the farmers to produce more
through efficient machinery for the profitable marketing of their produce. The Cooperative Marketing
Law (Act No. 3425) was, therefore, enacted and approved on December 9, 1927, entrusting the Bureau
of Commerce and industry with the responsibility of organizing farmers into marketing cooperatives.
The first cooperative marketing was established in Cagayan Valley among the tobacco farmers.

II. COMMONWEALTH PERIOD (1935-1946)

In 1939, the total number of rural credit cooperatives reached its peak of 570 associations with
aggregate membership of 105,000 individuals and resources of P3,376,400. In addition, records show
there were 160 cooperatives marketing associations with a total membership of approximately 5,000
farmers. The apparent weakness of the rural credit cooperatives diminished the enthusiasm of farmers
to organize themselves into marketing associations.
Difficulties encountered with the rural credit cooperatives continued unabated to undermine
the organization and growth of marketing associations with only 20 percent of the marketing
associations reporting found to be active at the time. The major factors which contributed to the
difficulties of these early attempts to institutionalize cooperatives are given as follows:
a. Lack of education and training, information and practical know-how on the principles, nature
and operation of cooperative organizations which led to incompetent management;
b. Absence of adequate safeguard against unscrupulous officers who took advantage of their
positions to grant loans to themselves and their "compadres" which proved disastrous to the
system;
c. Improper use of credits by the borrowers who utilized borrowe d funds for non-prescribed
purposes;
d. Defective securities;
e. Political interference particularly in the collection of overdue accounts;
f.

Inability of cooperatives to secure adequate capital and establish adequate marketing facilities;
and

g. Ineffectiveness of the government agency or agencies entrusted with the development and
promotion of cooperative organization and inadequate supervision.
The same Bureau of Commerce and Industry undertook to develop another type of cooperative
in the Philippines. It also fostered the development of consumers' cooperatives through its sponsorship
of the formation of the Consumers' Cooperative League of the Philippines which was formally organized
on October 18, 1938. Before this project was launched, however, there did already exist some
consumers cooperative which were operating quite successfully. In this group may be mentioned the
Consumers' Cooperative Association organized on October 20, 1916, among the faculty, students and
employees of the College of Agriculture, University of the Philippines at Los Baos and the Dumaguete
Consumers Cooperative Association in 1936, sponsored by professors of Siliman University.
The fact that the Bureau of Commerce and Industry promoted and organized various types of
cooperatives accentuated the need for a law specifically designed to meet the needs of cooperatives as
they were considered as a very special type of corporate organization. The Corporation Law, under

which all cooperative organizations registered, was insufficient to meet the d ifferent concerns and
needs of cooperatives.
In 1938, the second oldest consumers cooperative was established in Siliman University. In
1939, the total number of rural credit cooperatives reached its peak of 570 with 105,000 members.
There were 160 cooperatives marketing associations with 5,000 members. The apparent weakness of
the rural credit cooperatives diminished the enthusiasm of farmers to organize marketing cooperative.
The difficulties encountered in institutionalizing cooperatives were: lack of education and tra ining,
information and practical know-how on the principles, nature, and operations of cooperatives led to
incompetent management; absence of adequate safeguard against unscrupulous officers (granting loans
to themselves and relatives, and compadres); improper use of loans; defective securities; political
interference especially in the collection of overdue accounts; inability to secure adequate capital and
establish adequate marketing facilities; and ineffectiveness of government agencies entrusted with the
promotion and development of cooperatives.
In 1940, the Cooperative Movement gained impetus when Commonwealth Act. No. 565,
otherwise known as the Cooperative Law, was enacted, largely due to the interest taken by the late
President Manuel L. Quezon. This law provided for the organization of all types of cooperatives,
authorized the creation or designation of a government agency to promote and supervise them,
established a National Cooperative Fund, and allowed 15 or more persons to form a cooperative whi ch
for the first five years of its operation shall be exempt from all taxes and government fees.
The National Trading Corporation (NTC) was created to take charge of the formation,
organization and supervision of cooperatives or mutual aid associations. Through the NTC, the
government was to act as a wholesaler of consumers and capital goods and as a marketing agency to
cooperative societies. Essential commodities were to be supplied to cooperatives at reasonable prices
under a soft-term agreement, aside from extending them free delivery, consignment privilege and 30day credit for orders.
Commodity corporations were created along abaca and other fibers, rice and corn, tobacco and
coconut to serve the farmers with credit, modern agricultural technologies, processing, warehousing,
marketing and exportation. The need, however, for closer supervision of the growing movement and
economic activity of cooperatives compelled the President to organize a separate office to handle the
work of the government for cooperatives.
Hence, in 1941, the National Cooperative Administration (NCA) was established, transferring to
it the cooperative functions of the NTC, including the National Cooperative Fund. Under the NCA much
headway was accomplished along education, and the promotion and organization of cooperatives
continued. The progress of the cooperative movement, however, was cut short with the outbreak of
World War II on December 8, 1941.

III. JAPANESE RULE (1942-1945)

Another attempt was made during the Japanese Rule to revive the cooperative movement as a
means of helping the masses. Largely through the initiative of the then Minister of Economic Affairs,
Hon. Pedro Sabido, and efforts were exerted to organize consumers' cooperatives to help ameliorate
the economic sufferings of the people especially those living in Manila. Such was expected from the
movement due to the intensive training of the Managers, under the direction of Dr. Pablo N. Mabbun,
but the program was cut short with the arrival of the liberation forces.

IV. LIBERATION PERIOD (1945)

Immediately after the entry of the liberation forces, cooperatives were again organized through
the Emergency Control Administration (ECA), primarily for the distribution of relief goods. Cooperatives
were registered as fast as they came without proper indoctrination of members. No investigations were
conducted before they were registered due to lack of personnel. The more than 1,500 consumers
cooperatives then organized became dormant when the relief goods distribution program ended.

V. PHILIPPINE REPUBLIC
Formation of cooperatives continued at a slow pace due to difficulties encountered in the
procurement of basic commodities following liberation and the withdrawal of all tax exemptions and
other privileges under Republic Act No. 89 somewhat weakened the movement in 1946.
In 1947, the merchandizing functions of the NCA for cooperatives were transferred to the
Philippine Relief and Trade Rehabilitation Administration (PRATRA). At this time, in pursuance of
Republic Act No. 51, the NCA was converted into National Cooperatives and Small Business Corporation
(NCSBC). In 1950, the NCSBS was abolished and in its place, the Cooperative Administration Office (CAO)
under the supervision of the Department of Commerce and Industry was created and charged with the
function of promoting, organizing and supervising cooperative.
The creation of the CAO established government agency implementing three cooperative laws,
namely: (a) the Rural Credit Cooperative Association Act; (b) the Cooperative Marketing Law; and (c) the
Cooperative Law. The devastation wrought by the war upon the economy imposed untold economic
hardships among the population giving rise to social discontent and eventual dissidence. The
Government embarked on various programs to restore the economy to normalcy and this included
special measures for cooperatives. One of these measures was the creation of the Agricultural Credit
and Cooperative Financing Administration (ACCFA) in 1952 by virtue of Republic Act No. 821. The ACCF A
was established to administer an agricultural credit and cooperative financing system which would
function to assist small farmers in securing liberal credit; to promote the effective groupings of farmers

into cooperative associations and enable them to market their agricultural commodities efficiently; and,
to place agriculture on a basis of economic equality with other industries.
One unique, almost radical innovative feature of RA No. 821 was the extension of credit to
farmers without collateral except their productive capacity. This large scale program of rural financing
was to be carried out through various types of loans; each loan designed to serve a specific need of a
farmer or of a cooperative. As a matter of policy, ACCFA extended loans only to members of Farmers'
Cooperative Marketing Associations (FACOMAS).
The ACCFA was heralded as a program that would finally emancipate the farmers from the iron
grip of exploitative usury and establish a producer-controlled marketing system to free the small
farmers from the clutches of the middlemen-traders who controlled the marketing of farm crops and
consequently reaped the greater part of the value of the fruits of the farmers' toil.
By the end of the first five years of the program, 453 FACOMAS were organized and operating.
These had an aggregate paid-up capital of P5,125,007.79 and they represented 259,027 farmers in
10,700 barrios in 50 provinces. During the fiscal year of 1956-1957, the FACOMA system handled a
volume of business of P98 million worth of production inputs and P6 million worth of consumer goods.
If the rise and expansion of the Movement was fast, the swiftness of its decline appeared faster.
Fiscal year 1958-1959 saw a drop of loans extended from P44 million the previous year to P14 million.
The next year further experienced a drop to P3 million, and finally in 1960-61, an all-time low of loans to
farmers registered at P1.8 million. On the part of the FACOMA network, repayment of loans went down
to 28 percent in 1960.
Between 1960 to 1963, attempts at revitalization of both the cooperative movement and the
ACCFA proved futile. The problems met in the revitalization efforts were up in the 1961 report of the
then ACCFA Administrator Vicente Araneta as follows:
"The revitalization program started against the tremendous odds of skepticism and
cynism that had accumulated and hardened in previous years. In many FACOMAS, directors and
managers had established vested privileges in the cooperative so that it was not easy to change
them; moreover, honest members tended to shy away from their cooperatives for fear of being
one way or another implicated in cases of irregularities that had been commitment in previous
operations. Losses in previous ventures also had all but extinguished members' faith in the ability
of their cooperatives to promote their members' social and economic interest."
The low repayment rate of borrowers, a factor found to be one of the program's greatest
impediments, is attributed to the low debt-repayment capacity of farmers due to unfavorable farm
business and poor loan administration. With the failure of the credit function, the marketing operations
also suffered. Delinquent borrowers did not deliver their crops to their FACOMAS, and the volume of
marketing business declined as the clientele was severely limited to non-delinquent borrowers and nonborrowers. Many FACOMAS were found to be loosely organized and financially incapable of assuming

risks associated with the neither loaning operations nor crops with the unfavorable externa l
competition.
It was against this background that the ACCFA was reorganized and renamed the Agricultural
Credit Administration (ACA) in 1963 by virtue of RA No. 3844, otherwise known as the Agricultural Land
Reform Code. The promotion and organization of agricultural cooperatives was shifted to the
Agricultural Productivity Commission (APC) in addition to its functions of providing marketing,
management and other technical services to agriculture. The ACA retained the functions of supervision
and credit extension services to agricultural cooperatives.
These legislative changes, however, did not produce encouraging results. The varied problems
of the agricultural cooperative movement were assessed in 1969 as follows:
The string of failure in the past coupled with those odious causes of mismanagement and less
supervision had disenchanted the people from the Movement. Those who were never members but had
nevertheless known of the failures were likewise difficult to attract for membership.
Since FACOMAS in general were promoted and organized as channels for liberal credit to
farmers, the members became loan-oriented. Farmers looked upon their FACOMAS as credit agencies
not as a marketing arm of their produce; their participation became solely dependent on the availability
of loan funds from the ACA, thus gearing the life of cooperatives on financial support.
The lack of competent management weakened the ability of cooperatives to operate as business
oriented enterprises. Dedicated and well-educated leadership existed at a minimum, and the
inadequate compensation offered made employing capable managers for cooperative ventures near
impossible.
Many so-called "active" FACOMAS operated on sub-marginal volumes of business and continued
in incur losses, thus consequently failing to provide essential services to members.
The resources of ACA were insufficient to meet the credit requirements of farmers and
cooperatives. Even for palay and corn cooperatives alone, within which the loaning program of ACA was
confined, ACA resources were found inadequate. In 1967, out of a total number of 217 "active"
FACOMAS, ACA was able to serve only 99 FACOMAS and their members.
Under the administrative set-up, the APC provided services for the promotion and organization
of agricultural cooperatives; ACA regulates and extends financial assistance; and the Securities and
Exchange Commission registered cooperatives. All three agencies exercised some degree of supervision,
giving rise to confusion and a general lack of coordination. Moreover, the situation became
compounded by the number of laws governing agricultural cooperatives; the Rural Credit Cooperative
Law of 1914; the Cooperative Marketing Law of 1927; the General Cooperative Law of 1940; the ACCA
Law of 1952; and the Land Reform Code of 1963.
In the non-agricultural cooperative sector, clamor for general basic cooperative law and the
consolidation and amendment of existing laws in order to strengthen non -agricultural cooperatives

prompted the passage of RA No. 2023 otherwise known as the "Philippine Non-Agricultural Cooperative
Act." This was enacted into law on June 22, 1957.
The law charged the CAO with the administration of this act. It, likewise, delineated the
separation of agricultural cooperatives (farming, fishing, poultry and f orest products) from the nonagricultural cooperatives (credited unions, consumers, industrial, multi -purpose and service).
By provision of law, therefore, two principal types of cooperatives were administered by two
separate government entities. Agricultural cooperatives were the charge of the ACCFA while nonagricultural cooperatives were within the supervision of the CAO.
By 1963, there were approximately 750 non-agricultural cooperatives registered with the CAO,
serving an aggregate number of more than 200,000 Filipinos. These figures did not include some
cooperatives scattered all over the country which were not yet registered with the CAO in accordance
with law.
Of the total number of registered cooperatives, 565 were credit unions, 180 were consumers
cooperatives, 15 were industrial cooperatives while the rest were service cooperatives. Of these, the
credit unions and the consumers cooperatives had the biggest volume of business.
Among credit unions, those of the Victorias Milling Company, Philippine Iron Mines and Subic
Bay Employees had already reached the P1 million mark in total loans granted. Among consumers
cooperatives, the UST, FABRICA, in Negros Occidental, Victorias Milling Company (also in Negros) and
NAMAWU (Camarines Norte) stores had passed the P1 million mark in annual sales. In the field of
industrial cooperatives, the most noteworthy was that formed by the workers and employees of the
National Development Corporation (a government textile factory). With their meager resources and
some outside financial assistance, they purchased the multi -million government factory in what is
considered as an unprecedented transaction in Philippine cooperative history. In April 1963, three
industrial cooperatives composed of workers combined their resources to lease the P5 million TalisaySilay Milling Company in Negros for a period of three years.
The non-agricultural cooperative sector received a big boost in 1960 when in pursuance of the
provision of RA 2023, the Philippine National Cooperative Bank (PNCB) was established to provide credit
to non-agricultural cooperatives and the private sector. After 10 years, however, the PNCB was
liquidated due to insolvency brought about by defective structure and mismanagement.
The years 1960-63 were also marked by two significant achievements by the non-agricultural
cooperatives. In 1960, credit unions bonded together into the Philippine Credit Union League (PHILCUL)
while in 1963, consumers cooperative united to form the Philippine Federation of Consumers
Cooperatives (PFCC), more popularly known as the Philippine Cooperative Wholesale Society. The
organization of the PHILCUL was the first attempt to institutionalize the non -business activities,
especially education and training of credit unions. On the other hand, the federation of consumers
cooperatives marked the beginning of the efforts in setting a National Wholesale Society which would

provide steady wholesale source of consumers requirements and act as a link between producers and
consumers cooperatives.
The PHILCUL (now renamed Philippine Federation of Credit Cooperation, Inc.) continues to serve
the purpose for which it was organized. The Philippine Cooperative Wholesale Society, however, after
some years of promising operations, closed shop after its operations suffered a setback due to
limitations set on privileges of cooperatives along tax exemptions, among others, by virtue of the new
law on cooperatives, PD 175
On June 2, 1969, RA 6038, otherwise known as the National Electrification Act was enacted in to
law. The law designated the National Electrification Administration (NEA) for the promotion,
organization, supervision and development of Electric Cooperative on an area coverage basis.
In 1970, a legislative measure (House Bill No. 886 and Senate Bill 434) on cooperatives
development was filed. The measure provided for a unified state policy on cooperatives, an organic law,
a cooperative insurance system, a cooperative banking system, a cooperative college and a cooperative
wholesale society.
In mid-1972, the proposed cooperative legislative measure was approved with amendments by
the House of Representatives as HB 3501. The bill, however, was not further acted upon as a result of
the abolition of the Philippine Congress by virtue of the proclamation of Martial Law.
The proclamation of Martial Law on September 21, 1972, paved the way of major social and
economic reforms which incorporated the cooperative program in the Integrated Reorganization Plan of
the government under PD No. 1.

VI. NEW SOCIETY

Presidential Decree No. 1 created among others the Department of Local Government and
Community Development (DLGCD); converting the Presidential Arm on Community Development (PACD)
into the Bureau of Community Development; creating the Bureau of Cooperatives De velopment
(BACOD), abolishing the Cooperative Administration Office (CAO) and the Cooperative Division of the
Agricultural Productivity Commission and transferring their functions, personnel, assets and funds to the
BACOD. It also created the Bureau of Local Government. All of these three bureaus were created as staff
bureaus of the DLGCD.
The novel development approach ushered in the need for strategic interplay between the three
bureaus: community development as catalyzer for attitudinal change through informal group action;
cooperative development as builder of economic institutions to serve the people's needs (e.g. credit,
production, marketing, consumption and services), thus raising productivity and incomes and generating
employment in both the rural and urban areas; and culminating into local government development to
improve the quality of the political base of the country.

The President declared on September 26, 1972 the entire Philippines as Land Reform Area as
the imperatives or urgent social reforms became paramount for a rapid transformation of the country's
agrarian structure. The economic condition of the country reflected the lives of the masses, a great
majority of whom were dependent upon the cultivation of land as their major livelihood, but were the
object of exploitation by usurious money lenders and traders and in many cases by the landlords.
On October 21, 1972, the President decreed (PD 27) the emancipation of the tenant-farmers
form the bondage of the soil transferred to them the ownership of the land they are tilling on three
conditions: (a) that they pay for the lands in 15 yearly installments; (b) that they be members of
cooperatives; and (c) that their cooperatives should guarantee their land payment amortizations.
In support of the Agrarian Reform Program, the President issued on April 14, 1973 PD 175
providing for the strengthening of the cooperative movement. The premier provisions of this decree
declares it to be "the policy of the state to foster the creation and growth of cooperatives as a means of
increasing income and purchasing power of the low-income sector of the population in order to attain a
more equitable distribution of income and wealth."
Under a new climate or reforms, the development of cooperatives was envisioned to : (a)
prepare the farmers to become producers; (b) enforce timely payment of land amortizations; (c) enforce
savings among farmers; (d) encourage farmers to perform activities collectively; and (e) develop
marketing outlets for farm products. The cooperatives were meant essentially to prepare tenantproducers for their new roles as owners of the land they till and provide the farmer-members with
economic as well as social securities which were not hither to given by the landlords.
The early failures gave the government the chance to reexamine the principles of cooperative
organization and redirect cooperative development strategies within the country. On April 14, 1973, PD
175 was formulated known as "Strengthening the Cooperative Movement." It replaced al l past
cooperative laws and the full authority to promulgate rules and regulations to govern the promotion,
organization, registration, and supervision of all types of cooperatives was given to the Bureau of
Cooperatives Development (BACOD) under the Department of Local Government and Community
Development (DLGCD). The objectives of the program are: (a) develop cooperatives into viable and self reliant institutions; (b) organize and develop a grassroots level cooperative; and (c) federations of
different types of cooperatives into business and non-business organizations and ultimately establish an
Integrated Philippine Cooperative System. To achieve these objectives, the program provided an orderly
structure of activities.
a. Stage I --- organization and development of barrio associations or Samahang Nayons (SNs) with
the basic orientation on: (i) educational development; (ii) capital formation within the means of
the members; and (iii) institute discipline to develop values among members.
b. Stage II --- organization and development of Kilusang Bayans (KBs) or full -fledge cooperatives
and the development of the SNs -- Area Marketing Cooperative -- Cooperative Rural Bank (SNAMC-CRB) triangular linkage. It also intensified the organization of consumers cooperative and
other service cooperatives.

c. Stage III --- establishment of consumers cooperatives in key urban centers and develop them
into a steady and regular domestic outlet of agricultural products.
d. Stage IV --- integration of cooperatives into a system to establish the necessary linkages and
coordination of the different components of the cooperative movement.
To operationalize this new cooperative law, LOI No. 23 was passed on July 9, 1973 providing the
guidelines for organizing the various cooperative structures and the capitalization of sources of financial
assistance to cooperatives. It specifically provided for the collection of the Barrio Savings Fund (BSF)
equivalent to five percent of the production loan of borrowing members and P5.00 per month for non borrower and a Barrio Guaranteed Fund (BGF) in the amount of one cavan per hectare per harvest
season to guarantee payment of loan amortization of members and capitalize full-fledged cooperatives.
LOI 23 also provided for the establishment of the Cooperative Development Loan Fund (CDLF) to provide
loan assistance to cooperatives from budgetary source. In the same year, the Cooperative Insurance
System of the Philippines (CISP) was established to provide protection for or benefits to SN members. A
year later, a Management and Training Assistance Program (MTAP) was established to take the
responsibility of training an understudy or understudies to assume management thereafter. MTAP is
administered by an Advisory Board composed of five members. A Cooperative Education and Training
Fund (CETF) was also set up administered by the Advisory Board of MTAP. This fund will eventually be
transferred to a National Union of Cooperatives.
In 1977, the Cooperative Foundation of the Philippines, Inc. was founded to promote the
development, stability, growth, and integration of cooperative enterprises in the Philippines.
Two years later, BANKOOP was organized and registered on December 14, 1979 as the
Cooperative Rural Bankers Association of the Philippines. In the same year, the Cooperative Union of the
Philippines was organized in a National Conference Workshop sponsored by the Consultative
Coordinating Committee, MLGCD/BACOD on December 17-19, 1979. The National Market Vendors
Cooperative was organized to promote the organization of market vendors cooperative throughout the
country.
The turning point in the cooperative development was affected in 1980, with the transfer of the
cooperative development function from the Ministry of Local Government and Community
Development (MLGCD) to the Ministry of Agriculture (MA), strengthening further SNs by granting its full
and complete powers to engage in economic and business activities, and giving them all the powers and
prerogative of a full-pledged cooperative.
As result of a series of policy meetings initiated by MA, several changes were instituted: (a)
reduction of minimum membership requirement and paid-up capital of pre-cooperatives; and (b)
suspending BSF implementation on compulsory deduction by banks. On January 8, 1986, tax -exemption
privileges withdrawn were restored.

VII. THE AQUINO ADMINISTRATION (1986-1990)

The Aquino administration made use of the existing laws such as PD 175 and LOI 23, PD 269, PD
775, and Executive Order 898. They remained in effect until March 1990.
Republic Act No. 6657 was the first law passed by Congress relating to cooperatives. It touched
on the right of farmers, farm workers, the landless, and other agrarian reform beneficiaries to form
cooperatives in order to achieve the goals and objectives of the comprehensive agrarian reform
program.
Executive Order No. 116 restructured the government machinery in the implementation of the
cooperative development program. The BACOD was renamed the Bureau of Agricultural Cooperative
Development.
On March 10, 1990, President Corazon C. Aquino signed into law Republic Act 6939 creating the
Cooperative Development Authority to promote the viability and growth of cooperatives as instrument
of equity, social justice, and economic development. As a matter of policy, the cooperative sector as
primary responsible for the institutional development of cooperatives. The law rationalizes the
consolidation of functions of the various government agencies involved in the promotion, organization,
registration and the supervision of cooperatives. The Cooperative Development Authority (CDA) is the
only agency authorized to register cooperatives.
CDA took over the functions, personnel and assets of BACOD. It is administered by a Board of
Administrators composed of six members and a chairman. The members of the Board are appointed by
the President of the Philippines. An executive director is appointed by the Board to act as chief
operating officer. CDA has established extension offices in the 13 regions of the country.
RA 6938 (Cooperative Code of the Philippines) was also signed into law at the same time with RA
6939. The most important provision of this act is;
"The State recognizes the principle of subsidiary under which the cooperative sector will initiate
and regulate within its own ranks the promotion and organization, training and research, audit and
support services relating to cooperatives with government assistance where necessary."