CO-OPERATIVES SOCIETIES IN AGRICULTURE

Cooperative is a legal business organisation formed by a group of people for the

purpose of helping them solve their common economic problems. Typically, it
involves a group of people who have an identifiable common tie. The common tie
may be that they are involved in the same business, for example farmers; or are all
working in the same place such as a produce company; or are all indigenes of the
same town, or that they all just share common goals and so forth. Whatever it may
be, the common understanding is that the cooperative exists for the benefit of each
member. When the cooperative is formed to operate and cater for the interest of
members basically in the field of agriculture, it is denoted as an agricultural
cooperative society.

THE ORIGIN OF CO-OPERATIVES

Cooperatives have existed for quite a long time and their use is widespread. The first
agricultural cooperatives were created in Europe in the seventeenth century in
the Military Frontier, where the wives and children of the border guards lived
together in organized agricultural cooperatives next to a funfair and a public bath .
The first civil agricultural cooperatives were created also in Europe in the second half
of the nineteenth century. They spread later to North America and the other
continents. They have become one of the tools of agricultural development in
emerging countries. Farmers also cooperated to form mutual farm insurance
societies.
Also related are rural credit unions. They were created in the same periods, with the
initial purpose of offering farm loans. Some became universal banks such as Credit
Agricole or Rabobank

Their long period of existence provides some evidence for the school of thought
which argues that traditional business organisations do not necessarily meet the
needs of all the people. Members of the cooperative benefit from the society in very
significant ways. For example they gain access to loans more readily than they could
from banks and at lower interest rates. They purchase land through common effort
more cheaply than they would as individuals. They purchase necessities and goods at
producers’ prices and so forth.

Agricultural cooperatives are therefore created in situations where farmers

cannot obtain essential services from financial institutions e.g banks (because
the provision of these services is judged to be unprofitable by the financial
institutions), or when financial institutions provide the services at
disadvantageous terms to the farmers (i.e., the services are available, but the
profit-motivated prices are too high for the farmers).

OBJECTIVES/ AIMS OF AGRICULTURAL COOPERATIVES

The aims/ functions or objectives which agricultural co-operative societies have

been serving in recent years include the following;

1. To buy farm produce in bulk from farmers:

Agricultural cooperatives buy farm produce in bulk from farmers and retail them to
their members. Typically, this ensures that members buy the goods at next to farm
prices. There is virtually no restriction to the type of farm produce that can be
purchased and retailed.

2. To receive savings from members:

Agricultural cooperatives receive regular savings from members, many of whom are
farmers and keep them in individual member’s accounts. When all members are
working in the same agro-based organisation, these savings are deducted from the
workers’ salaries from source making it very convenient for individual workers to at
least save some amount of money each month.

3. To advance loans to members:

Agricultural cooperatives advance loans to members. Such loans are twice or thrice
the total amount that the member has in his or her account with the cooperative.
Cooperative loans have two principal advantages over loans sourced from banks. The
first is that no collateral of whatever kind is demanded unlike what is obtained in the
banks. The second is that much less paper work is required to enjoy cooperative
loan. Every member is entitled to a loan and becomes due for it again as soon as the
former loan has been repaid. Of course to enjoy a loan the member also has to
present guarantors which are also members of the cooperative organisation. It is
good to notice that unpaid loans and bad individual debts are rare in cooperatives
unlike in banks.

4. Investing on behalf of members:

Agricultural cooperatives collectively invest saved funds on behalf of members of the

society in interest yielding portfolios. Accruing interests are later shared among
members of the cooperative according to level of individual savings.
5. Acquiring farmland on behalf of members:

Agricultural cooperatives also acquire huge tracts of lands which they develop into
big farms by selling plots to members. Plots acquired from cooperatives tend to be
cheaper than those purchased individually from other vendors. This is due to the fact
that because of the comparatively large number of plots involved, economics of scale
are realised and the associated costs of development and use of the land

6. Providing social security to members:

Cooperatives in a real sense offer some social security to people. This is particularly
true of agricultural cooperatives. In Nigeria and many other African countries,
citizens have learnt from experience not to trust their governments very much.
Therefore, when real needs for goods, money and other assistance arise they
-approach their cooperatives for some possible helps. Such requests often work out.

GUIDING PRINCIPLES OF COOPERATIVE SOCIETIES

Agricultural cooperatives along with other cooperative organizations operate on the following
guiding principles:

1. The membership is open to all those who qualify to be its members. For instance to become a
member of an agricultural cooperative society one must at least have a recognizable interest in
agriculture as a basic qualification for membership. Someone with virtually no interest in agriculture
will not be a useful member of the agricultural cooperative society.

2. No member of a cooperative is allowed to have controlling shares in the cooperative. Where the
number of members is large each member has an equal number of shares.

3. A cooperative is democratically controlled. Executive members are voted in and they are all
members of the cooperative .Each member of the cooperative has just one vote.

4. Each member regularly contributes a specified amount that is decided by him or her into his or
her account held by the cooperative

5. Profits which accrue to the cooperative are to be distributed among members according to their
level of contributions and patronage of the cooperative. According to law, profits of the cooperative
societies are not taxed,

6. A cooperative society must be neutral in respect of politics, religion, ethnicity and other things of
a divisive nature. However, outside the ambit of the cooperative society, individual members are
free to belong to any side of the divide as they deem fit.

7. No unusual risks are allowed to be undertaken by a cooperative society. The reas on for this is the
need to protect the capital contributed to the cooperative by its members. Cooperative societies are
also excluded from involvement in illegal investments.

8. Good quality goods must be sold at all times and at prices that are close as much as possible to
producer’s prices.
9. Just like the case of Public Liability Companies (Pic), there is no limit to the size of membership of
a cooperative society.

10. Cooperative societies have unlimited liability. In addition the business is not a separate legal
entity.

TYPES OF COOPERATIVES

Cooperatives are of various types. Some are single purpose cooperatives while others are
multipurpose cooperatives. Some are activity-based cooperatives while others are commodity-based
cooperatives. Common types under these categories are the following, and all are found in the field
of agriculture.

l. Producers’ cooperative: Examples found in agriculture include oil palm producers cooperative,
cocoa producers cooperative, cotton producers cooperative, and others.

2. Consumers’ cooperative: Examples in agriculture are the buyers’ cooperatives which are also the
counterparts of the sellers’ cooperatives. Members purchase the produce from farmers and process
them.

3. Marketing cooperative: Examples found in agriculture include grain sellers cooperative, maize
sellers cooperative, cowpea sellers cooperative, meat sellers cooperative and others.

4. Credit and thrift cooperative: This involves farmers and non-farmers alike, Members are not
compelled to be involved in agriculture. Anybody who chooses to be involved in farming is not
discouraged.

5. Farmers’ cooperative: The farmers’ cooperative typically involves all farmers regardless of the
type of produce, s17e of farm and farming system used.

6. Agricultural multipurpose cooperative society: This kind of cooperative involves farmers and non-
farmers who however play productive roles in agriculture. For instance sellers of agricultural inputs
such as tools, seeds, herbicides, pesticides and others are also accepted as members.

DISADVANTAGES OR DEMERITS OF COOPERATIVE SOCIETIES

1. Insufficient membership size can restrict the capital available to the cooperative. This also means
a strong hindrance is placed on the usefulness of the cooperative to individual members. The real
benefits of a cooperative to members come with large size of membership. This is due to the fact
that big size usually translates to big capital available for disbursement as loans and for purchases to
members.

2. Since the managers of the cooperative society invariably come from the membership,
administrative quality and management acumen is limited to what is available in the society. If the
generality is poorly educated this ultimately reflects in the management of the society’s affairs.
3. The profits of the cooperative are exempted from taxation. The financial discipline which taxation
forces on a business organization is therefore lost in the case of the cooperative

4. Since cooperatives are not as strongly regimented as limited liability companies cases of fraud and
embezzlement among officials of such societies are not unusual. For example many cooperative
societies hardly publish their accounts for members to see.

MANAGEMENT OF COOPERATIVE SOCIETIES

1. Constitute a management committee: A management committee should be set up.