MODULE 1

BIRTH OF COOPERATION, EARLY FORMATION AND GROWTH

Overview:
This module aims at introducing highlights of the history, background and
ideology of the cooperative movement, specifically the origin of the movement on
European level and the history and development on national level in every partner
country. The aim is also targeted at increasing members’ understanding on how
cooperatives are a different kind of business and how to put cooperative principles
and values into action. This module can be used as an introductory part along with
one or more of the following modules.

Lesson Objectives:
At the end of this module 1, the learner should:

• Be aware the history and relevance of cooperatives in the Philippines and around
the world.
• Have increased awareness about how cooperatives are a different kind of business
• Evaluate his/her own perceptions and perspectives toward the cooperative
ideology
Course Materials:

Lesson 1. THE HISTORY OF COOPERATIVE

The Birth of a movement

The Rochdale Society of Equitable Pioneers is regarded as the prototype of the

modern cooperative society and is regarded as the founder of the cooperative movement as
we know it today. In 1844 a group of 28 artisans working in the cotton mills in the industrial
town of Rochdale, near Manchester, United Kingdom, founded the first modern cooperative
enterprise.

The workers faced deplorable working conditions and low wages, could not afford the
high food prices and generally the high cost of living. In an effort to mitigate these conditions,
they decided to pool together their scarce resources in order to start a small grocery store in
Toad Lane that would afford them basic foods at lower prices.

The Pioneers decided that it was time shoppers were treated with honesty, openness
and respect, that they should be able to share in the profits that their custom contributed to
and that they should have a democratic right to have a say in the business. Every customer
of the shop became a member and so had a true stake in the business. It is important to note
the Pioneers started with an agreed set of values that guided their actions and later developed
the appropriate (cooperative) structure that embodied these values.

Evolution of the international cooperative principles

Worker cooperatives began in France about the same time and in the 1860s credit
cooperatives were formed in Germany. Cooperatives were also organized in other countries
and by 1895 this movement had spread so widely that in that year a global apex organization
of the cooperative movement – the International Co-operative Alliance (ICA) was formed

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Cooperatives in the modern marketplace
Cooperatives have unique advantages based on the special relationship they have
with their members as well as with the community they live in. They have the power to
consolidate demand and purchase supplies at cheaper prices than their competitors

The cooperative form of enterprise operates across many sectors of the economy
empowering members and building more sustainable and resilient communities.

Milestones in the History of Cooperatives

(Source: ICA, History of the cooperative movement

1761
The earliest cooperative for which there are full records traced to Fenwick, Scotland
when sixteen weavers and apprentice weavers came together to form the Fenwick Weaver
Society to set purchase prices for yarns, selling prices for cloth and to deal fairly and honestly
in their work. They also set up a fund that they lent back to members to purchase high cost
items, and from which they gave charitable donations to the poor in the village. Some have
seen this as a proto- credit union.

1761
The Weavers set up a library in the village, together with the Free- masons and the
Friendly Society to fund the building of a school- house

1844
The Rochdale Society of Equitable Pioneers is formed

1862
Hermann Schulze-Delitzsch and Friedrich Wilhelm Raiffeisen establish the first credit
cooperatives in Germany

1966
The 50th session of the ILC adopts Recommendation No. 127 concerning the Role of
Cooperatives in the Economic and Social . Development of Developing Countries (later
replaced with Recommendation No. 193 in 2002).

1966
The final discussion of the report Promotion of Cooperatives is held at the 90th Session
of the ILC. The 90th session of the ICL adopts the Recommendation (No. 193)1 concerning
the promotion of cooperatives. The new Recommendation replaces the Cooperatives
(Developing Countries) Recommendation (No. 127), 1966

2012
United Nations International Year of Cooperatives with the slogan “Cooperative
Enterprises Build a Better World”

2014
ILO Coop and the ICA jointly produce a publication on cooperatives and the
sustainable development goals

Filipino Traditional Forms of Cooperation

Man as Social Being

There would have been no need for special beliefs if man were simply an individual
with an individual purpose; but man is also a member of society and as such , he has social

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aspect which requires proper considerations The social dimensions of man is founded on
nature, . Man needs other human being survive, man to cooperate with society in order to live
life comfortably and safely. •Against natural and other dangers, he needs protection only
society.

The Social Obligation, however, is a general not an individual command. The species
of mankind has the obligation to socialize or to form social units, but the individual as individual
is exempted from this general obligation •under normal conditions, however, man needs
society and not as a mere convention. In the Social contract claims that when man enters into
a society, he contracts his freedom because he has to live with other free beings.

FORMS OF COOPERATION
Primitive Communism Era
In period of society, man are co- equal with other they gathering foods, hunting with
others, They need to cooperate with people to survive , people group together societies,
also known as primitive communist societies, were structured so that economic forces and
political forces were one and the same. Societies generally did not have a state, property,
money, nor social classes. Due to their limited means of production (hunting and gathering)
each individual was only able to produce enough to sustain themselves, thus without any
surplus there is nothing to exploit. Form of Cooperation: People grouped together for
survival
Master and Slave Era
Slave societies, the ancient mode of production, were formed as productive
forces advanced, namely due to agriculture and its ensuing abundance which led to the
abandonment of nomadic society. Slave societies were marked by their use of slavery and
minor private property; production for use was the primary form of production. Slave society
is considered by historical materialists to be the first class society formed
of citizens and slaves. Surplus from agriculture was distributed to the citizens, which exploited
the slaves who worked the fields. Form of Cooperation: Trade system, Loan societies, Mutual
Association
Feudal Era
The feudal mode of production emerged from slave society (e.g. in Europe after the
collapse of the Roman Empire), coinciding with the further advance of productive forces.
Feudal society's class relations were marked by an entrenched nobility and serfdom. Simple
commodity production existed in the form of artisans and merchants. This merchant class
would grow in size and eventually form the bourgeoisie. Despite this, production was still
largely for use.
Form of Cooperation: Artisan guilds, craftsman, traders, merchants, religious group.
Capitalist (Industrial Revolution) Era
The capitalist mode of production materialized when the rising bourgeois class grew
large enough to institute a shift in the productive forces. The bourgeoisie's primary form of
production was in the form of commodities, i.e. they produced with the purpose of exchanging
their products. As this commodity production grew, the old feudal systems came into conflict
with the new capitalist ones; feudalism was then eschewed as capitalism emerged.
The bourgeoisie's influence expanded until commodity production became fully generalized.
Industrial revolution there is significant inventions of technological advance in the
1700’s and 1800’s. The invention of sources of energy and machines made possible

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 mechanized production. The mechanized process factories were totally different from
production of the feudal era.
The feudal system of industry, in which industrial production was monopolized by
closed guilds, now no longer sufficed for the growing wants of the new markets. The
manufacturing system took its place. The guild-masters were pushed on one side by the
manufacturing middle class; division of labor between the different corporate guilds vanished
in the face of division of labor in each single workshop.
The untold sufferings the people experienced during the industrial revolution led to
the emergence of many social thinkers, social theories, and varied forms of collective actions
to change the prevailing situation, the suffering people searched and actually to proposed
alternatives. Among the proposal were Cooperation (with the big C) and formation
cooperative
Form of Cooperation: Voluntary association (friendly society, cooperative, trade unions)

Assessment:
1. Describe the forms of cooperation during the different stages in societal development.
2. Explain the mode of production of the different eras.
3. Find similarities from the forms of cooperation during the different societal stages

References:

https://www.ilo.org/wcmsp5/groups/public/---americas/---ro-lima/---sro-
port_of_spain/documents/publication/wcms_634184.pdf

Dr. Doeke Faber Netherlands Institute for Co-operative Entrepreneurship (NICE) Aug. 2006

Lesson 2
History and Development of cooperatives as Socio-economic System

Key Theorists
Robert Owen, William King. The Rochdale Pioneers, Charles Fourier, Charles Gide, , Friedrich
Raiffeisen
Robert Owen (1771–1858)
OWEN first cooperative theorist and credited with inspiring the Rochdale Pioneers,
who in 1844 began the cooperative movement at Rochdale, Lancashire. Owen believed in
putting his workers in a good environment with access to education for themselves and their
children. These ideas were put into effect successfully in the cotton mills of New Lanark ,
Scotland .
Robert Owen (1771–1858) Fathered the cooperative movement. A Welshman who
made his fortune in the cotton trade. Owen had the idea of forming & quote; villages of
cooperation & quote; where workers would drag themselves out of poverty by growing their
own food, making their own clothes and ultimately becoming self-governing. He tried to form
such communities in Orbiston in Scotland.

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 It was here that the first co-operative store was opened. His efforts bore fruit in the
international cooperative movement, launched at Rochdale, England, in 1844. Owen died on
November 17, 1858, in his home town of Newtown
Dr. William King (1786–1865)
Although Owen inspired the cooperative movement, others – such as– Dr. William King
took his ideas and made them more workable and practical. King believed in starting small,
and realized that the working classes would need to set up cooperatives for themselves, so
he saw his role as one of instruction.
He founded a monthly periodical called The Cooperator, the first edition of which
appeared on May 1 , 1828 . This gave a mixture of cooperative philosophy and practical advice
about running a shop using cooperative principles.
King advised people not to cut themselves off from society , but rather to form a society
within a society, and to start with a shop because, & quote; We must go to a shop every day
to buy food and necessaries—why then should we not go to our own shop?& quote;
The author of The Co-operative Movement in Great Britain (1891).
Charles Fourier
His cooperative model also mentioned as an important influence. A voluntary
organization of worker and the families. To acquire huge apartment for living quarter, member
are his worker in the farms and industries of their produce goods they needed. Goods
distribution, pharmacy, saving bank, security and insurance.
USA & Canada
In the United States cooperatives are generally organized according to state law. They
are often organized as non-capital stock corporations under state-specific cooperatives laws,
which often restrict the use of the words; to such organizations. However, they may also be
organized as business corporations or unincorporated associations, such as Limited Liability
Companies (LLCs) or partnerships; such forms are useful when the members want to allow
some members a greater share of the control, which may not be allowed under the laws for
cooperatives
Cooperatives do not generally pay dividends, but return savings or profits, sometimes
known as patronage, to their members. Cooperatives can have special income tax benefits in
the United States; however, because they are an unusual form of organization requiring
specialized knowledge, legal and accounting costs are often very high and many choose to
be taxed under less favorable corporate or partnership tax laws.
Switzerland
Migros, is the largest supermarket chain in Switzerland and keeps the cooperative
society as its form of organization. Nowadays, a large part of the Swiss population are
members of the Migros cooperative – around 2 million of Switzerland's total population of 7,2
million[1] [2], thus making Migros a supermarket chain that is owned by its customers
Supermarket Chain.Coop is another Swiss cooperative which operates the second largest
supermarket chain in Switzerland after Migros. In 2001, Coop merged with 11 cooperative
federations which had been its main suppliers for over 100 years.
As of 2005, Coop operates 1437 shops and employs almost 45,000 people. According
to Bio Suisse, the Swiss organic producers' association, Coop accounts for half of all the
organic food sold in Switzerland

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Italy
Rome, Italy, the view from the Villa Medici shows the many domes and churches in
the ancient city of Rome. This gives totals of 7,100 social cooperatives, with 267,000
members, 223,000 paid employees, 31,000 volunteers and 24,000 disadvantaged people
undergoing integration. Combined turnover is around 5 billion euro. The cooperatives break
into three types: 59% type A (social and health services), 33% type B (work integration) and
8% mixed. The average size is 30 workers.
India
A Market Place in India. A vegetable seller checks the accounts at the Crawford
Market in Mumbai (Bombay), the capital of the western Indian state of Maharashtra. Rice is
the principal crop grown in India, and the country ranks second only to China in terms of world
rice production. Much of the crop is used to feed the domestic population, as rice is the dietary
staple for many Indians. Thrift & credit, oilseed Success Stories in Coop Sector
The most cherished expectation of members from their coops is NOT cash alone but
timely and advantageous marketing of their products, timely supply of credit, quality seeds,
farm chemicals, fertilizers and extension service.

Assessment:
1. What are the significant theories that lead to the formations of cooperative ideas?
2. Discuss the cooperative practices of the different countries?

Reference:
Source: Dr. Doeke Faber Netherlands Institute for Co-operative Entrepreneurship (NICE)
Aug. 2006

LESSON 3
History of Cooperative Development of the Philippines

Bayanihan,’ the Filipino word for cooperation, is as old as our Philippine culture. The
Banaue Rice Terraces is the most symbolic evidence of the cooperative movement in the
Philippines. (Abasolo, Ruiz & Bertol, 1996)
Pre-Spanish Period Subsistence Agriculture Spanish Period Philippine economy
transformation Feudal and Commercialized Economy GREMIOS Gremios (local crafts unions
and guilds) were the forerunners of cooperatives during the Spanish period.
1ST STAGE OF COOPERATIVE PHILIPPINES (1895-1941) MOVEMENT
Pre-Formation Period – Spanish Period -- Revolutionary illustrados like Jose Rizal, Emilio
Jacinto and Isabelo delos Reyes recognized cooperatives as instruments for social justice and
economic development. -- “The initial germ of cooperativism during the Spanish colonial
periods failed to take root due to the intense revolutionary struggles of the Filipinos against
the Spaniards.” (Muñoz & Battulayan, 1989)
Formation Period
The American Colonial Period. Raiffeisen-type of rural agricultural cooperatives implanted. In
1906, the Corporation Law (PA No. 1459) passed legal framework for all private organizations.
In 1907, the Sandiko Bill disapproved – first attempt for state assistance to rural cooperatives

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via legislation. In 1915, the Rural Credit Cooperative Association Act (PA No. 2508) passed
– appropriation of P1 million state assistance for farmers’ credit. In 1916, the first rural credit
cooperative association assisted by the government formed -- By 1926, 541 credit
cooperatives in 42 provinces.
Self- Administration Self-Help Self Responsibility Raiffeisen Cooperative Model Member’s
Promotion Voluntary Participation (Dr. Hans-Detlef Wulker, Member of the Board of Directors
of the German Cooperative and Raiffeisen Confederation (DGRV))
State-Initiated Cooperatives
In 1927, the Cooperative Marketing Law (PA No. 3425) passed – formation of state-initiated
farmers’ marketing cooperatives
In 1940, Commonwealth Act No. 565 created the National Trading Corporation (NTC).
Replaced by the National Cooperative Administration (NCA) in 1941 Assessment: -- The state-
initiated cooperatives introduced by American and Filipino missionaries and teachers in 1927
“eventually failed due to corrupt and incompetent management” (Villasin, 1990).
Privately-Initiated Cooperatives
In 1938, the Vigan Credit Union, Inc. founded – a churchbased credit union –
In 1938, the Consumers Cooperative League of the Philippines organized - the first
cooperative federation – By 1939, there were 570 credit cooperatives, 150 farmers’
cooperatives and 48 consumers’ cooperatives.
By 1941, there were already 30 privately-initiated credit unions. Assessment: -- Privately-
initiated cooperatives of Raiffeisen types served as the stable foundation of the Philippine
cooperative movement (Prof. Jorge V. Sibal, UP, Diliman, Quezon City).

2ND STAGE OF COOPERATIVE MOVEMENT IN THE PHILIPPINES (1941-1986)

Japanese Occupation
Cooperatives increased tremendously - severe food shortages in Manila and other urban
areas. Around 5,000 consumers’ and producers’ cooperatives organized constituting 77%
increase over 570 rural cooperatives in 1939.
The Rehabilitation Period after WWII
Many laws were passed to assist the organization and reorganization of cooperatives during
the rehabilitation period after WWII.
Resurgence Period of State-Initiated Cooperatives
To counter revolutionary activities - the state became very active in organizing farmers'
cooperatives.
In 1952, the Agricultural Credit Cooperative Financing Administration (ACCFA) established --
Farmers' Cooperative Marketing Associations (FACOMAs) and Producers Marketing
Associations (PROCOMAs) provided collateral-free loans funded by the United States Agency
for International Development (US AID).
The Introduction and Encouragement of Non-agricultural Cooperatives
In 1957, the Philippine Non-Agricultural Credit Act (RA No. 2023) implemented. In 1957, the
Roman Catholic Church called for the organization of credit cooperatives in all parishes

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In 1960, the Agricultural Credit Cooperative Institute (ACCI) in the University of the Philippines
Los Baños established. In 1969, the National Electrification Administration (NEA) created -
rural electrification through rural electric cooperatives
In 1969, the Philippine College of Commerce (now Polytechnic University of the Philippines) -
designated training center of nonagricultural cooperatives. In 1989, the Institute of
Cooperatives founded - offered Bachelor in Cooperatives
The Martial Law Period Before Martial Law
No cooperation among cooperatives, government disorganized in supervising and
coordinating cooperatives During Martial Law:
In 1972, the Bureau of Cooperative Development (BCOD) created - to rationalize the
cooperative movement the Cooperative Union of the Philippines (CUP) formed - to centralize
coordination of all education and training programs of all cooperatives
The Martial Law Period Analysis
Cooperatives were politicized. Bureaucracy locked up coop capital. Majority of the
cooperatives were fake. In 1973, PD No. 175 passed to “strengthen the coop movement”
through tie-up with the Marcos Land Reform Program (PD No. 27) compulsory for a tenant
farmer to join a cooperative or Samahang Nayon (SN)
The haphazard formation of SNs resulted in weak Area Marketing Coop (AMCs) and Coop
Rural Banks (CRBs). Intended government funds re-coursed to rural banks. However, rural
banks owned mostly by the elites - not necessarily pro-cooperatives and pro-land reform.
Created a big crack both in coop development and land reform program.
Successful story - the rural electrification program paved the development of electric
cooperatives. The success of the electric cooperatives is due to the fact that its rational for
their organization was not as politicized as the SNs. (Muñoz & Battulayan, 1989)
3RD STAGE OF COOPERATIVE MOVEMENT IN THE PHILIPPINES (1941-1986)
Cooperative Movement as a Political Force
One cause of Marcos regime downfall - the failure of land reform and cooperative programs
in solving the widespread poverty
The 1987 Constitution under the Aquino administration cooperative-friendly and the mistake
of the past in organizing state-initiated cooperatives for political and anti-insurgency purposes
avoided.
In 1990, the Constitution provision was operationalized with the enactment of RA No. 6938,
also known as the Cooperative Code of the Philippines (which was later amended to RA No.
9520 known as the “Philippine Cooperative Code of 2008”), and RA No. 6939 (Cooperative
Development Act Authority Act).
The CDA took over the functions of the BCOD and was tasked to coordinate the efforts of
other government branches, subdivisions, instrumentalities and agencies in providing
technical guidance, financial assistance and other services to cooperatives.
The Local Government Code of 1991 (RA No. 7160) gave the cooperatives, NGOs and POs
the opportunity to actively participate in local governance. The coop movement, together with
the NGOs (Non-Governmental Organizations) and POs (People’s Organizations) emerged as
the country's third sector (civil society), the government and the private enterprises being the
first two. The coop movement is the "largest socio-economic institution” in the country.
In the first party list elections in the country, five coop and coop-based parties won 6 out of 13
Sectoral representative seats for the marginalized and underrepresented sectors of society.

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 In the final analysis, the Cooperative Development Authority, in its banner article in its
webpage, states “Considering the experiences of similar societies in other countries, however,
the fundamental cause of failure in a cooperative enterprise is the lack of proper understanding
of the principles and true aims of cooperative associations, and the non-adherence to them in
actual operation of cooperative enterprises.”
Assessment:
1. Evaluate the approaches in cooperative organizing, funding, and operations
through the different historical periods and situations.
2. Cite the government role in cooperatives programs and development.
3. Analyze the approaches in cooperative organizing, funding, and operations
through the different historical periods and situations
4. Identify the role of the government in cooperatives promotion and development
References:

Source: Dr. Doeke Faber Netherlands Institute for Co-operative Entrepreneurship (NICE)
Aug. 2006

MODULE 2
Concept, Nature, Principles and Practices of Cooperatives

Overview:
The ICA has made three formal statements of the cooperative principles: in 1937, in
1966, and in September 1995. Each statement was carefully crafted to adopt and explain
principles which had relevance and value for the contemporary world.
In accordance with the International Co-operative Alliance (ICA), and later adopted by
the International Labor Organization (ILO) under the Promotion of Cooperatives
Recommendation, 2001 (193), “a cooperative is an autonomous association of persons united
voluntarily to meet their common economic, social, and cultural needs and aspirations through
a jointly-owned and democratically controlled enterprise”
Lesson Objectives:
At the end of Module 2, the learner will be able to understand and explain:

• What a cooperative is, its principles and values;

• The difference between a cooperative organization and other types of organizations;
• Advantages and Challenges faced by cooperatives
• How cooperatives influence sustainable community and economic development.

Course Materials:
Lesson 1. Definition of Cooperative
Cooperative as "an autonomous association of persons united voluntarily to meet their
common economic, social and cultural needs and aspirations through a jointly-owned and
democratically controlled enterprise." While intentionally crafted as a minimal statement which
could embrace the vast array of cooperative organizations throughout the world, the statement
emphasizes some important characteristics of cooperative enterprise. These include:

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 Autonomy: The cooperative is as independent of government and private
enterprise as possible.

Association of persons: The definition deliberately does not read "an association of
individuals" and embraces any legal definition of "person," which
includes companies as well as individuals.

Voluntary: Members are free to join and leave at will, within the purposes
and resources of the organization.

Meet needs: The central purpose of the cooperative is to meet member needs,
which can be purely economic or social and cultural.

Joint ownership and The members own the cooperative on a mutual basis. Decisions
democratic control: are made democratically by the members and are not controlled
by capital or by government.

Enterprise: The cooperative is an organized entity that typically functions in

the marketplace and engages in exchange of goods and services.

The word cooperative is derived from the word “cooperate” which means to work or
act together or jointly for a common purpose or benefit
Article 3 RA 9520 define cooperative as:
An autonomous and duly registered association of person, with a common bond of
interest, who have voluntarily joined together to achieve their social, economic and cultural
needs and aspirations by making equitable contributions to the capital required, patronizing
their products and services, and accepting in accordance with universally accepted
cooperative principles.
In this definition, the following points highlight the unique characteristics required for
an enterprise to be classified as a cooperative enterprise:
• Autonomous - Independence and organization base of the enterprise;
• Volunteerism - Open membership;
• Common needs – People come together to fulfil a mutual need;
• Ownership - Members are owners (not merely customers or workers) of the
enterprise and should invest wisely in its growth;
• Democratic control - Each member is given a single vote regardless of
Contribution /wealth;
• Enterprise - A cooperative is not only an association of people, but also a business
enterprise.

Nature and Characteristics of Cooperatives

Cooperatives are both associations of people and business enterprises. They
distinguished from other organization by their Philosophy, Nature, and Character.

1. Cooperatives are Service- oriented:

Cooperatives are organized to serve their members by providing goods and
services at reasonable cost. Members contribute the capital of the cooperatives so that
goods and services can be appropriately provided through its business activities and
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 not to maximize the profit or dividends their capitals contributions will earn from the
business.

In servicing the members, don’t act as charitable organizations. Members are

aware that the benefits come from their contributions, patronage refund, and mutual
efforts to help one another. The motto is “Cooperatives are not for profits and not for
charity but for service”.

2. Cooperatives are community- oriented:

Cooperatives work for the welfare of their members by integrating themselves
into the life of the community in particular and the nation in general. Cooperatives
enhance the people’s welfare through increased productivity both members and the
communities where they are located. By the very nature of their concerns, cooperatives
strengthen the economic, social, cultural and ecological base of the community where
they operate.

3. Cooperatives are people-oriented:

Cooperatives are not merely economic instruments concerned with dividends
and related economic and financial returns. They are the mechanism of change for
total human development of man as human being in all the economic, political, cultural,
and spiritual aspects. It make the people with sense of both individual and joint
responsibility, so they may rise individually to a full personal life and collectively to a
full social life.

4. Cooperative are owned, managed and patronized by members:

Cooperatives are member-owned, member-controlled and member-used.
Ownership is a very important factor in the success of any cooperatives. It is very
important that members have full authority to manage and control their cooperatives.
If a cooperatives starts and operates solely from borrowed capital, it violates the
principle of self-help and loses much of its autonomous character.

5. Cooperatives are Business enterprises:

Cooperatives engage in businesses with social responsibility. They play a
meaningful economic role in the community life by serving and performing as efficiently
and responsively as the other financial and business enterprises. Cooperatives have
to generate surplus to be able to continually improve and expand its services. They
have to be viable, creative, enterprising, and efficient to continually grow and serve the
needs of their members. Increasing patronage cannot be maintain without good quality
service, management, and performance. The net surplus generated from the business
operations are allocated to the members at the end of each year.

6. Cooperatives develop best through self-help and mutual help:

Cooperatives is inspired by “If you want something done, do it
yourself” this philosophy is responsible for the success of many cooperatives all over
the world and it is best alternative for the poor in any country to unite and help
themselves out of their depressed condition. This is not to say they should not be
assisted. But assistance from outside, whether technical or financial, must not stifle
but stimulate initiatives, self-help and self-reliance. The principle of subsidiarity also
applies that before asking or soliciting aid from outside, self-determination and self-
capability, should be considered. They should not interfere in the purely internal affairs

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 of the cooperatives, taking care that they preserve their autonomous and independent
and self-help through mutual-help characters.
7. Cooperatives serve best when they answer the real felt needs of the members:
We do expect the members to participate in the activities and to patronize the
business if the services they do needs and felt are serve. It is important therefore that
the proper approaches and techniques are employed to ensure that the needs of the
members are identified and recognized before any cooperatives is organized.
The assistance should begin from the organization stage and sustain through the
developmental stage up to the point when the cooperative begin to operate on a self-
sustaining basis.

8. Cooperatives develop best from bottom to top:

Organizationally, their development should be from the Primary level to the
secondary, tertiary and up to the Apex. Geographically, they should develop from
community to City, Regional, and National, to International. The Primary cooperatives
are the foundation stoned of the whole cooperatives structure. Organizing the Apex
before the base is like building the roof of the house before the foundation. Sooner or
later, in such a case, the roof topples down because the foundation is weak and unable
to support its load.

9. Development of cooperatives is enhanced through a multi-sectorial approach:

Having in mind the specific roles of each sector, the government, non-
government and the cooperatives sector, must play a multi-sectoral approach can
ensure that all aspect of development process are considered. This enhances the
smooth and continuous development of the cooperatives. This approach involves the
participation of all sectors from planning stage to the implementation, evaluation and
monitoring of all activities. Such approach enhances true people power, enlightened,
democratic, and participation in all levels, both organization and geographical.
Assessment:
1. Define cooperative according to R.A 9520
2. Explain cooperatives are business enterprise

3. Explain why Cooperatives are not for profits and not for charity but for service.

Reference:
https://prokoop.wordpress.com/the-nature-and-characteristic-of-cooperatives/
RA 9520

Lesson 2: PRINCIPLES OF COOPERATIVES

The Rochdale Principles (ICA, 1966)
1. Membership of a co-operative society should be voluntary and available without artificial
restriction or any social, political, religious or racial discrimination to all persons who can make
use of its services and are willing to accept the responsibilities of membership.
2. Co-operative societies are democratic organizations. Their affairs should be administered
by persons elected or appointed in a manner agreed by the members and accountable to

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them. Members of primary societies should enjoy equal rights of voting (one member, one
vote) and participation in decisions affecting their societies. In other than primary societies the
administration should be conducted on a democratic basis in a suitable form.
3. Share capital should only receive a strictly limited rate of interest, if any.
4. Surplus or savings, if any, arising out of the operation of a society belongs to the members
of that society and should be distributed in such manner as would avoid one member gaining
at the expense of others. This may be done by decision of the members as follows:
(a) by provision for development of the business of the co-operative;
(b) by provision of common services; or
(c) by distribution among the members in proportion to their transactions within the
society.
5. All co-operative societies should make provision for the education of their members,
officers, and employees, and the general public, in the principles and techniques of co-
operation, both economic and democratic.
6. All co-operative organizations, in order to best serve the interests of their members and
their communities, should actively co-operate in every practical way with other co-operatives
at local, national, and international levels.
Cooperative values
Traditionally, the cooperative movement has had deep ties to the world's wide array of
religions and ideologies. It has continuously explored its own belief systems and attempted to
identify those personal ethics and social ideas, if any, that are shared by cooperators and
motivate our future actions. The 1995 Statement articulates the best in our belief system, the
ideals of personal and social conduct to which we aspire. In its background paper on the
Statement of Identify, the ICA explains, "Any discussion of values within cooperatives must
inevitably involve deeply-felt concerns about appropriate ethical behavior. Achieving a
consensus on the essential cooperative values [within a rich array of belief systems among
ICA members] is a complex but rewarding task."
Basic cooperative values are general norms that cooperatives, cooperative leaders
and cooperative staff should share, and which should determine their way of thinking and
acting. They are our statement of what we think is the right thing to do. Based on a book written
by Sven Ake Book for the 1992 ICA conference, Cooperative Values in a Changing World, the
discussion assumes every generation recreates and refines its basic values so that they are
inspirational to contemporary society. It is in our statement of values that we engage the
hearts, conscience and loyalty of cooperative members.
The first sentence of the values statement addresses our convictions about how to
achieve a better society and what form that society should take. The values include:
Self-help: People have the will and the capability to improve their destiny peacefully through
joint action which can be more powerful than individual effort, particularly through collective
action in the market.
Democracy: Members have the right to participate, to be informed, to be heard and to be
involved in making decisions. Members are the source of all authority in the cooperative. "The
basic unit of the cooperative is the member....This basis in human personality is one of the
main features distinguishing a cooperative from firms controlled primarily in the interests of
capital." (ICA Background Paper)

13
Equality: Equal rights and opportunities for people to participate democratically will improve
the use of society's resources and foster mutuality, understanding and solidarity.
Equity: Fair distribution of income and power in society and its economic life should be based
on labor, not ownership of capital. Within the cooperative, rewards for active membership in
the cooperative will be distributed equitably, be it through patronage dividends, allocations to
capital reserves, increases in services or reduction charges.
Solidarity: Cooperatives are based on the assumption that there is strength in mutual self-
help and that the cooperative has a collective responsibility for the well-being of its members.
Further, individual cooperatives strive to create a united cooperative movement by working
with other cooperatives to improve collective well-being.
The value statement also articulates values of personal and ethical behavior that
cooperators actualize in their enterprises. They describe the kind of people we strive to be
and the traits we hope to encourage -- honesty, openness, social responsibility and caring for
others --through cooperation.
From the earliest days of the Rochdale Pioneers, cooperatives have emphasized the
importance of honest dealings in the marketplace: accurate measurements, reliable quality
and fair prices. Members have insisted that their enterprises have honest dealings with them.
This in turn has led to honest dealings with non-members and a unique level of openness
throughout the organization. And many cooperatives have manifested the values of social
responsibility and caring for others, reflecting concern for the health and well-being of
individuals within communities and a commitment to help them help themselves.
THE 1995 COOPERATIVE PRINCIPLES
Principles are guidelines for how to put ideals and values into practice. They rest on a
distinct philosophy and view of society that helps us judge our accomplishments and make
decisions. If successful, principles are incorporated into the organizational culture of the
cooperative; they are the broad vision statement for cooperatives and cooperators individually
and collectively. Shared and actualized principles allow cooperatives to be distinguished from
other forms of organization. As the ICA puts it, "Principles are not a stale list to be reviewed
periodically and ritualistically; they are empowering frameworks through which cooperatives
can grasp the future."
Given that the ICA has adopted a new set of principles and, implicitly all of the world's
cooperatives have agreed to uphold them, there is no more important visioning work for your
cooperative to do than to become familiar with the new principles, discuss them and
understand what impact they may have on your business and your members. They give each
of our businesses an opportunity to re-energize and recommit itself to the general goals of
cooperation and to attract new people to the cooperative movement.
Voluntary and open membership
This principle has changed little from the 1966 version. It implies that individuals must
not be coerced into cooperative membership. Rather, their participation as active and
responsible members should be based on a clear understanding of the values for which
cooperatives stand and support for those values. At the same time, while membership is open,
the principle assumes the member is able to use the services provided and is willing to take
on the responsibilities of membership.
This language recognizes that some cooperatives may restrict membership based on
ability to use the cooperative or on a limit to the number of members the cooperative can
effectively serve. The important idea here, however, is that cooperatives do not discriminate
against potential members based on their inherent characteristics (social, racial, political,
religious, or gender). Particularly important is the addition of gender as a category in the 1995
principles. The ICA Women's Committee worked long and hard to have gender added to the

14
list and to ensure that the organization's expectations for cooperative enterprises are clearly
expressed.
Democratic member control
Building on the principle of open and voluntary membership, the principle of democratic
member control defines the way in which members will make decisions. It assumes that
members will participate in setting policy and giving broad direction to cooperative activities in
a way in which no member has a greater "voice" than any other member.
This principle is closely related to the "one member, one vote" principle of the 1966
version. The new principle, however, gives specific attention to the potentially different voting
structures that may be put in place in secondary cooperatives. When cooperatives are
members of secondary cooperatives, the one member, one vote rule may result in substantial
inequities for the individual members of member cooperatives. For example, if a cooperative
of 1,000 members and a cooperative of 25 members each has one vote in the affairs of their
cooperative distributor, the 25 members of the smaller cooperative clearly have a much
stronger proportional voice than do the 1,000 members. The principle addresses the possible
need for different voting procedures at the distributor level in order for voting to be democratic.
Member economic participation
This principle deals directly with the very difficult problem of capital acquisition by
cooperatives in amounts large enough to compete effectively with vast global industries.
Throughout their history, cooperatives have been built on the premise that capital is a servant
of the enterprise, rather than the master. Cooperative activities are organized to meet member
needs, not to accumulate capital in the hands of investors. In the past, the principle of capital
as servant led to a belief that resources generated by profitable cooperative enterprises should
be retained by the cooperative, rather than being concentrated in the hands of owners of
capital, by strictly limiting returns to invested funds.
It has not always been clear what role, if any, is played by non-member capital
investment, or investment by members beyond the "fair share" required. Although members
own millions of dollars that they might invest in cooperatives, the previous restrictions on
dividends to be paid on capital did not encourage them to invest beyond the required amounts.
Consequently cooperatives have repeatedly been unable to generate equity for capital
intensive projects; and they have been unable to maintain the value of invested capital during
inflationary times. The strict limitation on dividends to capital has been lifted in the 1995
principles, which now imply that cooperatives compensate capital and labor fairly.
In order to retain the democratic nature of the enterprise, members of cooperatives are
expected to contribute capital equitably and to democratically control the capital of the
business. To retain the community centered nature of the enterprise and the belief that
strength comes from pooling resources to engage in mutual self-help, there is an underlying
expectation that a portion of the cooperative's capital should be owned collectively by all
members. Finally, the principle also gives guidance to members on possible uses for surpluses
generated by the enterprise, specifically mentioning cooperative reinvestment and reserves,
patronage rebates, and other activities approved by the members.
Autonomy and independence
In the thirty years since the passage of the 1966 Cooperative Principles, numerous
third world countries have used cooperatives as an intentional part of their social and
economic development strategies. While there are many instances of successful development
through cooperatives, government initiation and support was necessary to begin the
cooperative ventures. Unfortunately, many of the governments, especially in centrally planned
economies, were unable to withdraw from the cooperatives. Instead, cooperatives, closely

15
controlled by government functionaries, became inefficient and poorly managed, a haven for
government bureaucrats. Independence and autonomy was often never realized.
The new principles emphasize that cooperatives must be free of intervention from
governments or other sources, so that members are able to control their own destiny.
Education, training, and information
Education continues to be a priority of the cooperative movement in the new Statement
of Identify. The background paper on the principles emphasizes that cooperative education is
more than advertising product or distributing information. It is critical to the effective and
informed participation of members which lies at the core of the cooperative definition. "It means
engaging the minds of members, elected leaders, managers and employees to comprehend
fully the complexity and richness of cooperative thought and action." The rewritten principle
also highlights the importance of educating the young and opinion leaders about the nature
and benefits of cooperation. If cooperatives are to be part of the solution to many of the world's
problems, people must be not only aware of the concept, they must appreciate it and be willing
to participate in it. Such active involvement will not occur if people do not understand
cooperative enterprise.
Cooperation among cooperatives
This principle is virtually unchanged from the 1966 Principles.
Concern for community
Grounded in the values of social responsibility and caring for others, this new principle
articulates the cooperative interest in making contributions to a better society at large. By
taking ownership of portions of the economy, cooperative members are saying, in effect, "We
can meet our needs and the needs of others better than they are currently being met."
Because the effort is a mutual one, cooperative members understand that to provide for any
member is to provide for all members.
Interestingly, much of the writing and debate that evolved into this principle was
centered on environmental protection as well as sustainable development. Much of the
development of the Statement of Identify was presented to the 1992 ICA Congress by Sven
Books' report Cooperative Values in a Changing World, which emphasized the tie between
cooperatives and the environment, saying, "The next century needs the contributions of
cooperative organizations as a people-based 'international countervailing power' for
economizing the natural resources of the world and hence protecting the fundamental needs
of coming generations." The background paper articulates the responsibility of cooperatives
to participate in the environmental protection of their communities.
The beginning
The ICA has concluded a nearly fifteen-year process of exploring the fundamental
values and principles of the international cooperative movement. In spite of the vast
differences in national circumstances, industry practices, cultures and ideologies, cooperators
were able to identify those characteristics that describe their unique form of human enterprise.
These are the values and principles which give voice to the enduring soul of the cooperative
movement. The ICA sees them as "inherently practical principles, fashioned as much by
generations of experience as by philosophical thought." As we join millions of other
cooperators throughout the world in adopting them, we cannot but reflect on the nature of
democracy, the use and control of capital, and the critical roles of members, directors,
management, staff and the community in our cooperatives.
As part of an international commentary on the new Statement of Identity, M. Pax
summarized the critical importance of this effort: "Our values and principles are our self-
definition, our distinctive contribution to society and the basis for our practical activities. The

16
test of our values and principles is not only in their intrinsic morality, the logic and social justice
which they embody, but in our ability to translate them concretely and realistically from social
theory into social fact and to make them effective in our daily lives. It is only a courageous
social movement which would dare to probe so deeply and so openly into the foundations on
which it rests."
The 1995 Statement of Identity represents a remarkable worldwide consensus on
basic values. Monumental as that achievement is, it is only the beginning. The profound
challenge is to articulate, activate and actualize the values in our own communities. The path
is clear. Now is the time to set forth.
The International Cooperative Alliance Statement of Cooperative Identity
(Adopted September 1995)
DEFINITION:
A cooperative is an autonomous association of persons united voluntarily to meet their
common economic, social, and cultural needs and aspirations through a jointly-owned and
democratically controlled enterprise.
VALUES:
Cooperatives are based on the values of self-help, self-responsibility, democracy,
equality, equity, and solidarity. In the tradition of their founders, cooperative members believe
in the ethical values of honesty, openness, social responsibility, and caring for others.
International cooperative values and principles
Cooperative enterprises are governed by universally accepted guidelines or principles
that are among the features that distinguish them from other types of enterprises, such as
partnerships and limited liability companies
Cooperative enterprises are governed by universally accepted guidelines or principles
that are among the features that distinguish them from other types of enterprises, such as
partnerships and limited liability companies
1st Principle: Voluntary and Open Membership
Cooperatives are voluntary organizations, open to all persons able to use their services
and willing to accept the responsibilities of membership, without gender, social, racial, political,
religious or other forms of discrimination.
2nd Principle: Democratic Member Control
Cooperatives are democratic organizations controlled by their members, who actively
participate in setting their policies and making decisions. Men and women serving as elected
representatives are accountable to the member-ship. All members have an equal say at
cooperative general meetings and in elections for the committee that appoints the manager
and oversees the running of the cooperative. Members also have the ability to let their name
stand to serve as an elected official of the cooperative, unlike a customer of a traditional
business enterprise
Voting rights go with membership, not with the amount of money invested (as would happen
in a shareholder-owned company). The rule is ‘one member one vote’. To become a member,
one must usually buy at least one share, but extra shares do not give a person more votes.
3rd Principle: Member Economic Participation
Members are both users and owners who contribute equitably to, and democratically
control the capital of their cooperative. Each member is required to purchase a share, which

17
provides access to goods and services. Unlike a conventional company where profits are
distributed in proportion to the number of shares a person owns, cooperatives
Distribute surpluses to members to in proportion to their transactions with the
cooperative thus, members who have done more business with the cooperative will receive a
correspondingly larger share of the profits.
Surpluses are also reinvested back into the cooperative to expand and grow
operations, a decision made my members at the annual general meeting. Members usually
receive limited compensation, if any, on capital subscribed as a condition of membership
4th Principle: Autonomy and Independence
Cooperatives are autonomous, self-help organizations controlled by their members. If
they enter into agreements with other organizations, including governments, or raise capital
from external sources, they do so on terms that ensure democratic control by their members
and maintain their cooperative autonomy
5th Principle: Education, Training and Information
Cooperatives provide education and training for their members, elected representatives,
managers, and employees so they can contribute effectively to the development of their
cooperatives. They inform the general public – particularly young people and opinion leaders
– about the nature and benefits of cooperation
6th Principle: Cooperation among Cooperatives
Cooperatives serve their members most effectively and strengthen the cooperative
movement by working together through local, national, regional, and international structures.
7th Principle: Concern for Community
Cooperatives work for the sustainable development of their communities through
policies approved by their members. Cooperatives are founded on strong human values; they
do not just selfishly pursue their own interests at all costs. Even where not all the members of
the local community are members of the cooperative, the cooperative should consider the
needs of the non-members when they can. The cooperative can play a constructive role in the
social and economic life of its local community.
Assessment:
1. In your opinion, which one of the cooperative ICA principles is the most important?
Least important? Why?
2. Differentiate the ICA 1966 and 1995 cooperative principles
Reference:
https://www.grocer.coop/articles/cooperative-principles-updated

Lesson 3: Cooperatives Identity

How a cooperative differs from other forms of business
It is recommended that a review of the local business and taxation laws and regulations
be done when comparing cooperatives with other forms of business structures

18
1. Sole proprietorship
With this type of business organization, a person is the sole owner and fully
responsible for all debts and obligations related to that person’s business. All profits are
the owners’ to keep.
Advantages
• Easy and inexpensive to register;
• Regulatory burden is generally light;
• Owner has direct control of decision making;
• Minimal working capital required for start-up;
• Subject to local tax laws, there may be tax advantages if the business is not doing
well (for example, deducting losses from the owner’s personal income, and a lower tax
bracket when profits are low);
• All profits go to the owner directly.
Disadvantages
• Unlimited liability (if the owner has business debts, claims can be made against their
personal assets to pay them off);
• Income is taxable at the owner’s personal rate and, if the business is profitable, this
could put the owner in a higher tax bracket;
• Lack of continuity for the business if the owner is unavailable;
• Can be difficult to raise capital as an individual owner.
2. Partnership
A partnership is a non-incorporated business that is created between two or more
people. In a partnership, the financial resources of the business partners are combined and
put into the business. The partners would then share in the profits of the business according
to any legal agreement that has been drawn up.
Advantages
• Fairly easy and inexpensive to form a partnership;
• Start-up costs are shared equally between partners;
• Equal share in the management, profits and assets;
• Tax advantage — if income from the partnership is low or loses money (the partners
include their shares of the partnership in their individual tax returns).
Disadvantages
• There is no legal difference between the owner and their business;
• Unlimited liability (if the owner has business debts, personal assets can be used to
pay off the debt);
• Can be difficult to find a suitable partner(s);
• Possible development of conflict between partners;
• Each partner is held financially responsible for business decisions made by the other
partner(s); for example, contracts that are broken.

19
3. Corporation
Another type of business structure is a corporation. Incorporation can be done at the
national or territorial level. When a business is incorporated, it is considered to be a legal entity
that is separate from its shareholders. As a shareholder of a corporation, the owner will not be
personally liable for the debts, obligations or acts of the corporation. It is always wise to seek
legal advice before incorporating.
Advantages
• Limited liability;
• Ownership is transferable;
• Continuous existence;
• Separate legal entity;
• Easier to raise capital than it might be with other business structures;
• Possible tax advantage as taxes may be lower for an incorporated business.
Disadvantages
• A corporation is closely regulated;
• More expensive to set up a corporation than other business forms;
• Extensive corporate records required, including documentation filed annually with the
government;
• Possible conflict between shareholders and directors; • Proof of residency or
citizenship of directors may be required.
4. Cooperative enterprise
A cooperative is owned and controlled by an association of members. It can be set
up as a for-profit or as a not-for-profit organization. This is the least common form of business,
but can be appropriate in situations where a group of individuals or businesses decide to pool
their resources and provide access to common needs, such as the delivery of products or
services, the sale of products or services, employment and more.
Advantages
• Owned and controlled by its members;
• Democratic control (one member, one vote);
• Limited liability;
• Profit distribution.

20
Comparison of Business Ownership Models

COOPERATIVE PRIVATELY INCORPORATED COMPANY

Its main purpose is to provide service and savings

It main purpose is to make profit for investor.
to member

It is essentially a union of person It is essentially a union of capital.

Control is not equal; it is based on the number of

Its control is democratic, each member has one voting shares held. As the volume of shares
share and therefore one vote regardless of their purchased is generally unlimited, individual
patronage level investors can acquire substantial or complete
control.

Ownership is in the hands of its members in the Ownership is in the hands of investors who may be
community who use the service located in another community province or country.

Surplus (“profits”) refunded to members in Surplus allocated in proportion to voting shares

proportion to patronage owned.

Shares are held in name of members only are not

Shares may be freely traded and fluctuate in value
traded for speculations.

A cooperative is different from other business in some very important areas:

• PURPOSE - service and savings to members.
• CONTROL - one member, one vote.
• OWNERSHIP - members who use the services.
• SURPLUS - is proportionally distributed to members according to patronage
Assessment
1. What are the advantages of cooperatives?
2. Differentiate the cooperative to privately controlled company in terms of purpose,
control, ownership and surplus.
3. Describe the ideal cooperative and what kind of cooperative would you like to
establish and why?
References:
https://www.ilo.org/wcmsp5/groups/public/---americas/---ro-lima/---sro-
port_of_spain/documents/publication/wcms_634184.pdf
https://www.google.com/search?q=CURRICULUM+AND+STUDY+MATERIAL+MOD
ULES+1-3&oq=CURRICULUM+AND+STUDY+MATERIAL+MODULES+1-
3&aqs=chrome..69i57.12628j0j7&so
https://www.grocer.coop/articles/cooperative-principles-updated
https://prokoop.wordpress.com/the-nature-and-characteristic-of-cooperatives/RA 9520

21
 MODULE 3
The Cooperative Code and the Cooperative Development Authority

Overview:
In this module, you will learn how the cooperative should be structured and governed
to effectively implement your business plan. You will further define the organizational chart
that you have made in the management plan section of your business plan. You will also draft
the rules and regulations necessary to ensure good management of the affairs of the
cooperative and its members.
Lesson Objectives:
At the end of Module 3, the learner will be able to understand and explain:
• describe the types and categories of cooperatives;
• identify the Powers, Duties and Responsibilities of the Members, Officers, and Staff of
Cooperatives
Course Materials:
Lesson 1. The types and categories of cooperatives
1. Credit Cooperative is one that promotes and undertakes savings and lending services
among its members. It generates a common pool of funds in order to provide financial
assistance and other related financial services to its members for productive and
provident purposes;

2. Consumer Cooperative is one the primary purpose of which is to procure and distribute
commodities to members and non- members;
3. Producers Cooperative is one that undertakes joint production whether agricultural or
industrial. It is formed and operated by its members to undertake the production and
processing of raw materials or goods produced by its members into finished or
processed products for sale by the cooperative to its members and non-members. Any
end product or its derivative arising from the raw materials produced by its members,
sold in the name of and for the account of the cooperative, shall be deemed a product
of the cooperative and its members;

4. Marketing Cooperative is one which engages in the supply of production inputs to

members and markets their products;

5. Service Cooperative is one which engages in medical and dental care, hospitalization,
transportation, insurance, housing, labor, electric light and power, communication,
professional and other services;

6. Multi-Purpose Cooperative combines two (2) or more of the business activities of these
different types of cooperatives;

7. Advocacy Cooperative is a primary cooperative which promotes and advocates

cooperativism among its members and the public through socially-oriented projects,
education and training, research and communication, and other similar activities to
reach out to its intended beneficiaries;

22
8. Agrarian Reform Cooperative is one organized by marginal farmers majority of which
are agrarian reform beneficiaries for the purpose of developing an appropriate system
of land tenure, land development, land consolidation or land management in areas
covered by agrarian reform;

9. Cooperative Bank is one organized for the primary purpose of providing a wide range
of financial services to cooperatives and their members;

10. Dairy Cooperative is one whose members are engaged in the production of fresh milk
which may be processed and/or marketed as dairy products;

11. Education Cooperative is one organized for the primary purpose of owning and
operating licensed educational institutions, notwithstanding the provisions of Republic
Act No. 9155, otherwise known as the Governance of Basic Education Act of 2001;

12. Electric Cooperative is one organized for the primary purpose of undertaking power
generation, utilizing renewable sources, including hybrid systems, acquisition and
operation of sub transmission or distribution to its household members;

13. Financial Service Cooperative is one organized for the primary purpose of engaging in
savings and credit services and other financial services;

14. Fishermen Cooperative is one organized by marginalized fishermen in localities whose

products are marketed either as fresh or processed products;

15. Health Services Cooperative is one organized for the primary purpose of providing
medical, dental, and other health services;

16. Housing Cooperative is one organized to assist or provide access to housing for the
benefit of its regular members who actively participate in the savings program for
housing. It is co-owned and controlled by its members;

17. Insurance Cooperative is one engaged in the business of insuring life and property of
cooperatives and their members;

18. Transport Cooperative is one which includes land and sea transportation, limited to
small vessels, as defined or classified under the Philippine maritime laws, organized
under the provisions of RA 9520;

19. Water Service Cooperative is one organized to own, operate and manage waters
systems for the provision and distribution of potable water for its members and their
households;

20. Workers Cooperative is one organized by workers, including the self-employed, who
are at the same time the members and owners of the enterprise. Its principal purpose
is to provide employment and business opportunities to its members and manage it in
accordance with cooperative principles; and

21. Other types of Cooperatives as may be determined by the Authority

http://invest.cfo.gov.ph/pdf/part2/registration-of-cooperatives.pdf

23
Categories
In terms of membership
1. Primary - the members of which are natural persons
2. Secondary - the members of which are primary cooperatives
3. Tertiary - the members of which are secondary coops upward to one or more apex
organizations
4. Laboratory – the members of which are minors and must be affiliated with a
registered cooperative
In terms of area of operation
1. Barangay
2. Municipal
3. District
4. Provincial
5. Regional

How to organize a primary cooperative

Organizing a cooperative can be complex and simple. It requires an understanding of the
members. It demands patience from the organizer who must the cooperative’s long-term goal
and objectives and its visions as a real part of the member’ lives.
But it can be too easy because the cooperative Development Authority has devised very clear-
cut steps for the cooperative organizer and members.
General Steps in forming a Cooperative
1. Get organized. You must have at least 15 members to do that at once
determine the common problems you would want to solved and the basic needs
you would want provided for though a cooperative. You may want to include
increasing your production, marketing your produce, credit assistance, power
generation, banking or insurance and other similar needs.

Determining your problems and needs will also help you classify the kind of
cooperative you will be organizing. Even before a cooperative is set up, a
dedicated core group of people who will do all the organizational and property
works is a must. From this core group, working committees may be formed to
set things moving. These committees may include membership, finance,
executive, secretariat to name a few.

2. Prepare a general statement called an economic survey. This statement will

help you measure your cooperative’s chances of success

3. Draft the cooperative’s by-law. The by-laws contain the rules and regulations
governing the operation of the cooperative
4. Draft the article of cooperation. Here you indicate the name of the cooperative,
its member, term of existence and other pertinent description about your
cooperative.

24
 5. Secure bond from your accountable officer(s), normally the treasurer, or the
treasurer and the manager. The amount of the bond is to be decided upon by
the Board of Directors, based on the initial net worth of the cooperative which
includes the paid-up capital, membership fees and other assets of the
cooperative at the time registration

6. Register your cooperative Development Authority (CDA) you must submit four
copies each of the economic survey, by-laws and articles of cooperation, and
Bond of Accountable officer(s).

In every step, you may consult CDA, CDA emphasizes education as a key to
the success of cooperatives

Lesson 2:

Basic Organizational Chart of a Cooperative

Core bodies of a cooperative: General Assembly, Board of Directors, Manager, and

Employees

General Assembly: Owners of the cooperative

• Support the cooperative through patronage and capital investment.
• The highest body of the cooperative and the final authority in the management and
administration of the affairs of the cooperative

Board of Directors: Elected from and by the members

• Make the operating policies of the cooperative
• Recruit and hire the manager
• Oversee budgeting and financial processes
• Direct the cooperative towards the overall objectives

Manager: Hired by the Board of Directors

• Responsible for daily operations of the cooperative
• Hires and supervises employees

Employees: Hired by the Manager

• Do the production and marketing of product or services of the cooperative

To help the Board of Directors and the officers in managing the cooperative, it is important
to form various committees to handle the various affairs of the organization such as elections,
audit, credit and collection, membership, finance, and education and training. Each committee
will have a board member assigned to them as a liaison. You will learn more about how to
form committees and their tasks if you participate in the Management. COOP training after
you have set up your cooperative.

Rights of members
Rights are acquired on admission to membership. Rights of members refer to
fundamental rules of what is allowed or due to members based on the bylaws of the
cooperative. The rights are defined by members themselves and are also based on existing

25
cooperative legislation in the country. In this activity, you will look into the basic rights of
members so as to get some ideas on what you should include in your bylaws.

Some of the Rights of Members

1) Right to propose matters for discussions/participate in meetings

2) Right to be informed/access to information on affairs of cooperative
3) Right to vote
4) Right to voluntarily withdraw from the cooperative
5) Right to be elected to serve on the Board of Directors
6) Right to make use of facilities and services of the cooperative
7) Right to amend bylaws
8) Right to receive a patronage refund
Duties of members
Along with the rights, members also have duties and responsibilities. These duties and
responsibilities are also outlined in the bylaws of the cooperative. In this activity, you will
identify the main duties of members. This is a group activity.

Some of the duties of members

1) Patronize the services or products of the cooperative

2) Pay agreed share of capital and other dues
3) Attend required coop training
4) Participate in evaluating and selecting members of the Board of Directors/Exercise the right
to vote
5) Comply with production requirements and agreements (both quantity and quality)
BOARD OF DIRECTORS
The Board of Directors governs the operations of the cooperative on behalf of its
members. They are the leaders of the cooperative. Members place their trust, their needs, and
authority in a Board of Directors of their own choice. The members of the Board of Directors
are elected from and by the members.

Responsibilities of the Board of Directors

Responsibilities are the specific tasks or duties that the Board of Directors is expected
to do as a function of their role. The power to act on behalf of the cooperative is given to the
Board of Directors as a body, not to individual directors. They are required to act in the best
interest of the members.

Clear definition of responsibilities is essential to the successful performance of the

Board of Directors.
Core Responsibilities of the Board of Directors
1) Oversee preservation and management of cooperative assets
2) Inform members
3) Preserve the cooperative character of the organization
4) Establish cooperative policies
5) Hire and supervise manager/management team
6) Represent members
7) Assess the cooperative’s performance

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Officers of the Board of Directors
Depending on the cooperative laws of the country and the cooperative’s bylaws,
officers of the Board may include a chairperson, vice chairperson, secretary, and treasurer.
The chairperson and vice chairperson are usually elected from and by the members of the
Board. The secretary, treasurer, and other positions that may be needed by the cooperative
may be appointed or elected by the Board. Each officer has specific duties as detailed in the
cooperative’s bylaws.

To develop a clear understanding of the duties of each of the core officers of the
cooperative, answer the questions below. As each question is read, mark your answer
individually and then share with the group. The group should come to a consensus on the
answer before moving to the next question.

Qualifications of the Board of Directors

The number of directors depends on the cooperative and incorporation laws of the
country as well as
the nature and scope of operations of the cooperative. As a general rule, an effective Board
needs a minimum of five directors. It is advisable to have an odd number (such as 5, 7, 11,
13, 15) of directors to avoid tie votes. Election of directors usually involves the following
process:

• Another member must nominate the person for the position.

• The person nominated must say he/she is willing to vie for the position.
• The General Assembly must elect the person to the position.

The success of a cooperative depends, to a significant extent, on the quality of its

leaders. It is, therefore, very important that you carefully choose the members of the Board of
Directors.

Qualifications of Board Candidates qualifications of Board Candidates

• Honest and fair

• Accepted by the members for having good judgment and business sense
• Loyal to the cooperative
• Community leader, capable of working with people
• Successful in his/her own business operation
• No conflict of interest
• Knowledgeable about cooperatives and the job of a director, including listening to
members
• Willingness to attend regularly scheduled and special meetings of the board of
directors, as well as any director training seminars
• Experience in the business of the cooperative
• Active participation in cooperative affairs as a member
• Experience on other boards, working with community-based organizations
• Knowledge and understanding of finance and ability to read financial statements

THE MANAGER
The manager of the cooperative is selected by and accountable to the Board of
Directors. The manager implements the policy set by the Board of Directors. He/she is in-
charge of the overall operation of the cooperative as delegated by the Board. In many cases,
the manager also participates in board meetings as an active, non-voting participant.

27
 The manager is hired to operate the business and ensure that members and customers
are well-served. Often the manager is a non-member with sufficient qualifications.

Task of Managers
Tasks of Manager

• Organizes the work

• Approves deliveries from suppliers
• Supervises quality and output
• Prepares quotations
• Receives order
• Prepares invoices
• Receives payment
• Selects and hires workers
• Monitors inventory of stocks
• Ensures that all equipment is in good and safe condition
• Conducts training on workers’ safety and
• monitors adoption of safety procedures
• Participates in all board meetings
• Helps in recruitment of new members

How may become members of cooperative

If you are a Filipino, of legal age, you can be a cooperative member if you meet the
qualifications prescribed by the cooperative’s by-laws.
The board of directors act on application for membership.
A member may exercise his/her rights only after having paid the fees for membership
and acquired shares in the cooperative
What are the types of membership in a cooperative?
A cooperative has two kinds of members: regular members and associate members.
A regular member is entitled to all the rights and privileges of membership as stated in
the cooperative code and the cooperative’s by-laws.
An associate member has no right to vote or to be voted upon and is entitled only to
such rights and privileges provided by the cooperative’s by-laws.
https://www.slideshare.net/jobitonio/how-to-organize-a-primary-cooperative

What is the minimum number of members in a cooperative?

15 persons, natural person of legal age who are citizen of the Philippines
Can Government officers and employees join a cooperative?
Yes, provided that: any officer or employee of CDA shall be disqualified to be elected
or appointed to any position in a cooperative;
Elected officials of the government, except barangay officials, shall be eligible to
become officers, directors of the cooperatives;

28
 Any government employee may in the discharges of his/her duties as a member in the
cooperative, use official time provided that the operations of the office where he/she works are
not adversely affected.
Activity:
1. List 5 other duties that you think are very important and should be considered during the
preparation of the bylaws

2. List 5 other qualifications not on the list above that you think are very important
qualifications of board candidates

Assessment:
1. Which of the following who performs the duties of the chairperson if the chairperson is
absent or unable to perform his/her duties?
a. Manager
b. Vice Chairperson
c. Secretary
d. Treasurer

2. Who keeps the complete list of members and the records of all meetings of the Board of
Directors and the General Assembly?
a. Chairperson
b. Vice Chairperson
c. Secretary
d. Treasurer

3. Which of the following who pays all money transactions based on the recommendation of
the manager or the Board of Directors, and certifies the correctness of the cash position of the
cooperative in all financial statements and reports submitted to the Board of Directors?
a. Chairperson
b. Vice Chairperson
c. Secretary
d. Treasurer

4. Who prepares the notice and minutes of the meetings?

a. Chairperson
b. Vice Chairperson
c. Secretary
d. Treasurer

5. Who presides at meetings and makes sure that all the rules, policies and procedures are
followed?
a. Chairperson
b. Vice Chairperson
c. Secretary
d. Treasurer

6. Who has the custody of all the money and other financial documents of the cooperative?
a. Chairperson
b. Vice Chairperson
c. Secretary
d. Treasurer

29
7. Who is the official custodian of the cooperative’s bylaws, membership records, and other
official documents?
a. Chairperson
b. Vice Chairperson
c. Secretary
d. Treasurer

8.Which of the following is NOT a duties of a member?

a. patronize the services or products of the cooperative
b. Pay agreed share of capital and other dues
c. Attend required coop training
d. Establish cooperative policies

9. Which of the following refers to the owner of the cooperative?

a. general assembly
b. board of director
c. Manager
d. Employees

10. What is the minimum number of members in a cooperative?

a. 10 b. 15 c. 12 d. 5

Reference:

http://invest.cfo.gov.ph/pdf/part2/registration-of-cooperatives.pdf
. https://www.slideshare.net/jobitonio/how-to-organize-a-primary-cooperative

MODULE 4
COOPERATIVES AND SOCIO-ECONOMIC DEVELOPMENT

Overview:
Organizing a cooperative can be complex and simple. It requires an understanding of
the basic needs of the prospective cooperative members. It demands patience from the
organizer who must make the cooperative's long-term goals and objectives, and its visions a
real part of the members' lives

Lesson Objectives:
At the end of Module 4, the learner will be able to:
• Organize the formation of cooperatives

• Assist in the documentary requirements needed to register cooperatives

• Illustrate the organization structure & management of cooperatives

30
Course Materials:
Lesson 1: What is an economic survey?
An economic survey is a general statement describing the structure, purpose economic
feasibility of the proposed cooperative, area of operation, size of membership and other
pertinent data. It is in fact, a project feasibility study. The structure describes the kind of
cooperative being set up, whether it is primary, secondary or tertiary and whether it is a credit,
consumer, transport or any other type of cooperative.
The purpose defines the primary, secondary and other objectives of the cooperative.
The area of operation merely indicates the geographical or sectoral scope of the cooperative.
For example, a cooperative may operate in.
The most important part of the survey is the economic feasibility. Here the prospective
coop members estimate its incomes and expenses. It makes a projection of the possible
growth pattern of the cooperative over a certain period, preferably three years, and how this
growth generates income and incurs expenses; it tries to anticipate possible obstacles and
constraints and makes allowances for them.
Guidelines in preparing an economic survey
1. General Statement
- Type of cooperative
- Area of operation
- Field of membership
- Indicate the membership qualifications, size
- Structure of the organization
- Membership potential
- Indicate initial number of members and the projected increase
2. Rationale
- State the justification for the establishment of the cooperative
- Discuss the necessity for the formation of the cooperative
3. Goals and objectives
State the purpose of the cooperative, general and specific
4. Economic aspect
- State the background information on the economic situation of the
proposed area of operation in relation with the contemplated
business activity/activities of the cooperative.
- State the economic prospects, survival chances, competitiveness
and the probability of success of the proposed cooperative
- Basic assumption on the services of the proposed cooperative.
Projected volume of business/or capacity of its facilities to serve the
members.
- Market behavior of the proposal business activity/activities
- Demand and supply of the product to be marketed
5. technical aspect
- state the human power requirement of the proposed business
activity/activities if the cooperative and the organization’s capability to meet
those requirements
- expertise in the field that requires specialized trainings/experiences

31
 - machine capacity and its capability to cope with production
requirements of the business, taking into consideration the demand for the
product
6. Financial aspects
- source of capital and uses thereof as well the mobilization of such
funds
- illustrate in financial (peso value) form the assumption under economic
aspect.

Financial projection such as:

a. Projected balance sheet;
b. Projected income statement (profit and loss statement);
c. Projected cash flow; and
d. Return on investment (ROI)

What are the privileges of a Cooperatives

Cooperative registered under R.A. 9520 can enjoy the following privileges:

(1) Cooperatives shall enjoy the privilege of depositing their sealed cash boxes or containers,
documents or any valuable papers in the safes of the municipal or city treasurers and other
government offices free of charge, and the custodian of such articles shall issue a receipt
acknowledging the articles received duly witnessed by another person;

(2) Cooperatives organized among government employees, notwithstanding any law or

regulation to the contrary, shall enjoy the free use of any available space in their agency,
whether owned or rented by the Government;

(3) Cooperatives rendering special types of services and facilities such as cold storage, ice
plant, electricity, transportation, and similar services and facilities shall secure a franchise
therefor, and such cooperatives shall open their membership to all persons qualified in their
areas of operation;

(4) In areas where appropriate cooperatives exist the preferential right to supply government
institutions and agencies rice, corn and other grains, fish and other marine products meat,
eggs, milk, vegetables, tobacco and other agricultural commodities produced by their
members shall be granted to the cooperatives concerned;

(5) Preferential treatment in the allocation of fertilizers and in rice distribution shall be granted
to cooperatives by the appropriate government agencies;

(6) Preferential and equitable treatment in the allocation or control of bottomries of commercial
shipping vessels in connection with the shipment of goods and products of cooperatives;

(7) Cooperatives and their federations, such as market vendor cooperatives, shall have
preferential rights in management of public markets and/or lease of public market facilities,
stall or spaces;

(8) Credit cooperatives and/or federations shall be entitled to loans, credit lines, rediscounting
of their loan notes, and other eligible papers with the Development Bank of the Philippines,
the Philippine National Bank, the Land Bank of the Philippines and other financial institutions

32
except the Central Bank of the Philippines;

(9) Cooperatives transacting business with the Government of the Philippines or any of its
political subdivisions or any of its agencies or instrumentalities, including government-owned
and controlled corporations shall be exempt from pre-qualification bidding requirements; and

(10) Cooperatives shall enjoy the privilege of being represented by the provincial or city fiscal
or the Office of the Solicitor General, free of charge, except when the adverse party is the
Republic of the Philippines.

(11) Cooperatives shall enjoy the privilege of being represented by the provincial or city fiscal
or the Office of the Solicitor General, free of charge, except when the adverse party is the
Republic of the Philippines;

(12) shall have the preferential right in the management of the canteen and other services
related to the operation of the educational institution where they are employed: Cooperatives
organized by faculty members and employees of educational institutions Provided, That such
services are operated within the premises of the said educational institution; and

(13) The appropriate housing agencies and government financial institutions shall create a
special window for financing housing projects undertaken by cooperatives, with interest rates
and terms equal to, or better than those given for socialized housing projects. This financing
shall be in the form of blanket loans to qualified cooperatives, without need for individual
processing.

Lesson 2: The Agency’s Mandates, vision, Mission, powers and functions

MANDATE

Promote the viability and growth of cooperatives as instruments of equity, social justice and
economic development in fulfillment of the mandate in section 15, Article XII of the
Constitution.

VISION

An effective and efficient regulatory agency working towards the development of viable,
sustainable, socially responsive and globally competitive cooperatives.

MISSION

To ensure the safe and sound operations of cooperatives.

POWERS AND FUNCTIONS

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Developmental Functions

1. Formulates, adopt and implement integrated and comprehensive plans and programs
on cooperative development consistent with the national policy on cooperatives and
the overall socio-economic development plans of the Government;
2. Develops and conduct management and training programs upon request of
cooperatives that will provide members of cooperatives with the entrepreneurial
capabilities, managerial expertise, and technical skills required for the efficient
operation of their cooperatives and inculcate in them the true spirit of cooperativism;
and
3. Provides, when necessary, technical and professional assistance to ensure the
viability and growth of cooperatives with special concern for agrarian reform, fishery
and economically depressed sectors.

Regulatory Functions

1. Registers all cooperatives and their federations and unions, including their division,
merger, consolidation, dissolution or liquidation. It shall also register the transfer of all
or substantially all of their assets and liabilities and such other matters as may be
required by the Authority;
2. Requires all cooperatives, their federations and unions to submit their annual financial
statements, duly audited by certified public accountants, and general information
sheets; and
3. Orders the cancellation after due notice and hearing of the cooperative's certificate of
registration for non-compliance with the administrative requirements and in cases of
voluntary dissolution.

RA6939 has granted the CDA the powers, functions and responsibilities:

1. Formulate, adopt and implement integrated and comprehensive plans and programs
on cooperative development consistent with the national policy on cooperatives and
the overall socio-economic development plans of the Government;

2. Develop and conduct management and training programs upon request of

cooperatives that will provide members of cooperatives with the entrepreneurial
capabilities, managerial expertise, and technical skills required for the efficient
operation of their cooperatives and inculcate in them the true spirit of cooperativism
and provide, when necessary, technical and professional assistance to ensure the
viability and growth of cooperatives with special concern for agrarian reform, fishery
and economically depressed sectors;

3. Support the voluntary organization and consensual development of activities that

promote cooperative movements and provide assistance towards upgrading
managerial and technical expertise upon request of the cooperatives concerned;

4. Coordinate the efforts of the local government units and the private sector in the
promotion, organization and development of cooperatives;

5. Register all cooperatives, their federations and unions, including their divisions,
consolidations, dissolutions or liquidation. It shall also register the transfer of all or
substantially all of their assets and liabilities and such other matters as may be required
by the authority;

34
 6. Require all cooperatives, their federations and unions to submit their annual financial
statements, duly audited by certified public accountants, and general information
sheets;

7. Order the cancellation after due notice and hearing of the cooperatives certificate of
registration for non-compliance with administrative requirements and in case of
voluntary dissolution;

8. Assist cooperatives in arranging for financial and other forms of assistance under such
terms and conditions as are calculated to strengthen their viability and autonomy;

9. Establish extension offices as may be necessary and financially viable to implement

this Act. Initially, their shall be extension offices in the Cities of Dagupan, Manila, Naga,
Iloilo, Cebu, Cagayan de Oro and Davao;

10. Impose and collect reasonable fees and charges in connection with registration of
cooperatives;

11. Administer all grants and donations coursed through the Government for cooperative
development, without prejudice to the right of cooperatives to directly receive and
administer such grants and donations upon agreement with the grantors and donor
thereof;

12. Formulate and adopt continuing policy initiatives consultations with the cooperative
sector through public hearing;

13. Adopt rules and regulations for the conduct of its internal operations;

14. Submit an annual report to the President and Congress on the state of the cooperative
movement; and

15. Exercise such other functions as may be necessary to implement the provisions of
cooperative laws and, in the performance thereof, the Authority may summarily punish
for direct contempt any person guilty of misconduct in the presence of the Authority
which seriously interrupts any hearing or inquiry with a fine of not more than Five
hundred pesos (P500.00) or imprisonment of not more than ten (10) days, or both.
Acts consisting indirect contempt as defined under Rule 71 of the Rules of Court shall
be punished in accordance with the said rule.

Lesson 3: Selected Provisions of RA 9520 and RA 6939

ORGANIZING A PRIMARY COOPERATIVE (Art. 10)

The following may organize a primary cooperative
• Fifteen (15) or more natural persons who are Filipino citizens
• Of legal age (18 years old)
• Having common bond of interest
• Residing or working in the intended area of operation
• Have completed a Pre-Membership Education Seminar (PMES)

35
TERM( "ART. 13)
A cooperative shall exist for a period not exceeding fifty (50) years from the date of registration
unless sooner dissolved or unless said period is extended.
ARTICLES OF COOPERATION( "ART. 14)
All cooperatives applying for registration shall file with the Authority the Articles of
Cooperation which shall be signed by each of the organizers and acknowledged by them
before a notary public.BY-LAWS Each cooperative to be registered under this Code shall
adopt by-laws not inconsistent with the provisions of this Code. 36
REGISTRATION"ART. 16
A cooperative formed or organized under this Code acquires juridical personality from
the date the Authority issues a certificate of registration under its official seal.
CERTIFICATE OF REGISTRATION("ART. 17)
A certificate of registration issued by the Authority under its official seal shall be
conclusive evidence that the cooperative therein is duly registered unless it is proved that the
registration thereof has been cancelled.
AMENDMENT OF ARTICLES OFCOOPERATION AND BY-LAWS "ART. 18
Unless otherwise prescribed by this Code and for legitimate purpose, any provision or
matter stated in the articled of cooperation and by-laws may be amended by two-thirds (2/3)
vote of all the members with voting rights.
MEMBERSHIP ("ART. 26)
KINDS OF MEMBERSHIP
REGULAR MEMBERS A regular member is one who has complied with all the membership
requirements and entitled to all the rights and privileges of membership.
ASSOCIATE MEMBERS An associate member is one who has no right to vote nor be voted
upon. Provided, that an associate member who meets the minimum requirements of regular
membership, continues to patronize the cooperative for two (2) years, and signifies his/her
intention to remain a member shall be considered a regular member.
GOVERNMENT OFFICERS AND EMPLOYEES("ART. 27)
Any officer or employee of the Authority shall be disqualified to be elected or appointed
to any position in a cooperative. •All elective officials of the Government shall be ineligible to
become officers and directors of cooperatives. •Any government employees or official may, in
the discharge of his duties as member in the cooperative, be allowed by the head of office
concerned to use official time for attendance at the general assembly, board and committee
meetings of cooperatives as well as cooperative seminars, workshops, technical meetings and
training courses locally or abroad.
APPLICATION FOR MEMBERSHIP( "ART. 28)
An applicant for membership shall be deemed a member after approval of his
membership by the Board of Directors and shall exercise the rights of member after having
made such payments to the cooperative. In case membership is refused or denied by the
board of directors, an appeal may be made to the general assembly and the latter’s decision
shall be final.

36
LIABILITY OF MEMBERS ("ART. 29).
A member shall be liable for the debts of the cooperative to the extent of his
contribution to the share capital of the cooperative.
TERMINATION OF MEMBERSHIP("ART. 30)•
A member of a cooperative may, for any valid reason, withdraw his membership from
the cooperative by giving a sixty (60) day notice to the board of directors.• The death or insanity
of a member in a primary cooperative •Membership in the cooperative may be terminated by
a vote of the majority of all the members of the board of directors: •do not patronized any of
the services of the cooperative •Continuously failed to comply with his obligations, i.e.
delinquency in loans
REFUND OF INTERESTS ("ART. 31)
All sums in accordance with the by-laws to be due from a cooperative to a former
member shall be paid to him either by the cooperative or by the approved transferee, as the
case may be, in accordance with this Code.

MODEL COOPERATIVE
ORGANIZATIONAL STRUCTURE

GENERAL ASSEMBLY

AUDIT & INVENTORY BOARD OF DIRECTORS ELECTION

COMMITTEE
COMMITTEE

Secretary* Treasurer*

CREDIT & EDUCATION and MEDIATION & ETHICS

COLLECTION TRAINING CONCILIATION COMMITTEE
COMMITTEE COMMITTEE COMMITTEE

MANAGEMENT
STAFF

MANAGER

Accountant or Cashier

Bookkeeper

37
ADMINISTRATION
COMPOSITION OF THE GENERALASSEMBLY (ART. 32)
The General Assembly shall be composed of such members who are entitled to vote
under the Articles of cooperation and By-laws of the cooperative.
POWERS OF THE GENERAL ASSEMBLY(ART. 33)
The General Assembly shall be the highest policy- making body of the cooperative.
The general assembly shall have the following powers:
• To determine and approve amendments to the articles of cooperation and by-laws
• To elect or appoint the members of the board of directors, and to remove them for
cause.
• To approve developmental plans of the cooperative
MEETINGS ("ART. 34)
A regular meeting shall be held by the general assembly on a date fixed in the by-laws,
or if not so fixed, on any date within ninety (90) days after the close of each fiscal year.
Provided, that notice of regular meetings shall be sent in writing, by posting or publication, or
through other electronic means to all members of record. Whenever necessary, a special
meeting of the general assembly may be called at any time by a majority of the board of
directors or as provided for in the by-laws.
QUORUM("ART. 35. )
Quorum shall consist of at least twenty-five percent (25%) of all the members entitled
to vote
VOTING SYSTEM("ART. 36)
Each member of a primary cooperative shall have only one (1) vote. (one man-one
vote policy)
COMPOSITION AND TERM OF THEBOARD OF DIRECTORS("ART. 37)
The direction and management of the affairs of a cooperative shall be vested in a board
of directors which shall be composed of not less than five (5) nor more than fifteen (15)
member selected by the general assembly for a term fixed in the by-laws but not exceeding a
term of two (2)years and shall hold office until their successors are duly elected and qualified,
or until duly removed for cause.
POWERS OF THE BOARD OF DIRECTORS("ART. 38")
The board of directors shall be responsible for the strategic planning, direction-setting
and policy-formulation of the cooperatives.
DIRECTORS ("ART. 38)
Any member of a cooperative , who has the right to vote and possess all the
qualifications provided in the by-laws shall be eligible for election as director. The members of
the board of directors shall not hold any other position directly involved in the day to day
operation and management of the cooperative. Any person engaged in a business similar to
that of the cooperative or who in any way has a conflict of interest with it, is disqualified from
election as a director of said cooperative.

38
MEETING OF THE BOARD ANDQUORUM REQUIREMENTS("ART. 40)
Regular meetings of the board of directors shall be held at least once a month. Special
meetings of the board of directors may be held at any time upon the call of the chairperson or
a majority of the members of the board. A majority of the members of the board shall constitute
a quorum for the conduct of business. Directors cannot attend or vote by proxy at board
meetings.
. VACANCY IN THE BOARD OFDIRECTORS("ART. 41)
Any vacancy in the board of directors, other than expiration of term, may be filled by
the vote of at least a majority of the remaining directors. Otherwise, the vacancy must be filled
by the general assembly in a regular or special meeting called for the purpose. A director so
elected to fill a vacancy shall serve only the unexpired term of his predecessor in office.
OFFICERS OF THE COOPERATIVE("ART. 42)
The board of directors shall elect from among themselves the chairperson and vice-
chairperson and elect or appoint other offices of the cooperative from outside of the board. No
two (2) or more persons with relationships up to the third degree of consanguinity or affinity
nor shall any person engaged in business similar to that of the cooperative shall serve as an
appointive office.
DEGREE OF RELATIONSHIP
The prohibition on relationship by consanguinity and affinity within the third civil degree
applies within each category since the Code says no two or more persons within the third civil
degree of consanguinity or affinity shall serve as elective or appointive officers in the same
board. For purposes of clarity hereunder are the degree of relationships covered under the
said prohibition.
DEGREE OF RELATIONSHIPI. RELATIONSHIP BY CONSANGUINITY 1. First Degree
Parent to Child 2. Second Degree Grandparent to Child Brother to Sister 3. Third Degree
Uncle to Child Aunt to Child Great grandparent to Child
DEGREE OF RELATIONSHIPII. RELATIONSHIP BY AFFINITY1. First Degree Parent-in-law
to Daughter –in –law2. Second Degree Brother –in-law to sister-in-law3. Third degree Great
grandparent-in-law to Daughter/Son-in-law to Uncle/Aunt-in-law to Niece/Nephew-in-law
OFFICERS OF THE COOPERATIVE("ART. 42 )
The officers of the cooperative shall include:• Members of the board of directors• Members of
the different committees created by the general assembly• General manager• Secretary•
Treasurer• Other positions as maybe provided for in the by-laws
COMMITTEES OF COOPERATIVES ("ART. 43)
The By-laws shall provide for the creation of the following committees:1. Audit committee -
elected by GA2. Election committee - elected by GA3. Mediation and Conciliation committee
- appointed4. Ethics committee - appointed by BOD5. Education committee - appointed by
BOD6. Other committees as may be necessary for the conduct of the affairs of the cooperative
(ex. Credit committee) 63
FUNCTIONS, RESPONSIBILITIESAND TRAINING REQUIREMENTS OFDIRECTORS,
OFFICERS ANDCOMMITTEE MEMBERS
The functions and responsibilities of the directors, officers and committee members,
as well as their training requirements, shall be in accordance with the rules and regulations
issued by the Authority.

39
COMPENSATION("ART. 46) In the absence of any provision in the by-laws fixing their
compensation, the directors shall not receive any compensation except for reasonable per
diems.
REMOVAL OF ELECTED OFFICERS( ART. 50)
All complaints for the removal of any elected officer shall be filed with the board of
directors. Such officer shall be given the opportunity to be heard. Upon finding of a prima facie
evidence of guilt, the board shall present its recommendation for removal to the general
assembly. An elective officer may be removed by ¾ votes of the regular members present and
constituting a quorum, in a regular or special general assembly meeting called for the purpose.
RESPONSIBILITIES, RIGHTS AND PRIVILEGES OF COOPERATIVES
ADDRESS("ART. 51) Every cooperative shall have an official postal address to which all
notices and communications shall be sent. Such address and every change thereof shall be
registered with the Authority.
BOOKS TO BE KEPT OPEN (ART. 52).
Every cooperative shall have the following documents ready and accessible to its
members and representative of the Authority for inspection:1. A copy of this Code and all other
laws pertaining to cooperatives;2. A copy of the regulations of the Authority3. A copy of the
articles of cooperation and by-laws of the cooperative4. The books of the minutes of the
meetings of the General Assembly, board of directors and committess5. Share books6.
Financial Statements
REGISTER OF MEMBERS AS PRIMAFACIE EVIDENCE ("ART. 54)
Any register or list of members or shares kept by any registered cooperative shall be
prima facie evidence of the following particulars entered therein:1. The date on which the
name of any person was entered in such register or list as member2. The date on which any
such person ceased to be a member.
BONDING OF ACCOUNTABLE OFFICERS ( ART. 56)
Every director, officer and employee handling funds, securities or property on behalf
of any cooperative shall be covered by a surety bond to be issued by a duly registered
insurance or bonding company for the faithful performance of their duties and obligations.
Upon filing the application for registration of a cooperative, the bonds of the accountable
officers shall be required by the Authority.
TAX TREATMENT OFCOOPERATIVES ("ART. 60.)
Duly registered cooperatives under this Code which do not transact any business with non-
members or the general public shall not be subject to any taxes and fees imposed under the
internal revenue laws and other tax laws..
CAPITAL, PROPERTY AND FUNDS
CAPITAL("ART. 71.) The capitalization of cooperative and the accounting procedures shall
be governed by the provisions of this Code and the regulations which shall be issued.
SHARE CAPITAL( "ART. 71). The term ‘share’ refers to a unit in a primary cooperative the
par value of which may be fixed at any figure not more than 1000 pesos. The share capital of
the cooperative is the money paid or required to be paid for the operations of the cooperative.
The share capital consist of:• Common share capital-issued to regular members• Preferred
share capital-issued to associate members
CAPITAL SOURCES ("ART. 71).. Cooperative registered under this Code may derive their
capital from any or all of the following sources:1. Members’ share capital2. Loans and

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borrowings including deposits3. Revolving capital which consists of the deferred payment of
patronage refunds or interest on share capital4. Subsidies, donations, legacies, grants, aids
and such other assistance from any local or foreign institution whether public or private.
LIMITATION ON SHARE CAPITALHOLDINGS ("ART. 73). No member of a primary
cooperative other than a cooperative itself shall own or hold more than ten percent (10%) of
the subscribed share capital of the cooperative.
ASSIGNMENT OF SHARE CAPITALCONTRIBUTION OR INTEREST("ART. 74) No
member shall transfer his shares or interest in the cooperative or any part thereof unless: • He
has held such share capital contribution or interest for not less than 1 year • The assignment
is made to the cooperative or to a member of the cooperative • The board of directors shall
approve such assignment.
CAPITAL BUILD-UP("ART.75)
The by-laws of every cooperative shall provide for a reasonable and realistic member capital
build-up program to allow for continuing growth of the members ’investment in their
cooperative as their own economic conditions continue to improve.
ALLOCATION ANDDISTRIBUTION OF NET SURPLUS
NET SURPLUS("ART. 85.) Every cooperative shall determine its net surplus at the close of
every fiscal year. The net surplus shall not be construed as profit but an excess of payments
made by the members for the loans borrowed or goods and services availed by them and
which shall be deemed to have been returned to them if the same is distributed as prescribed
herein.
DISTRIBUTION OF NET SURPLUS ( ART. 86)
Net surplus of every cooperative shall be distributed as follows:1. Reserve Fund –at
least 10% of net surplus. Provided, That, in the first 5 years of operation after registration, this
amount shall not be less than 50% of the net surplus.2. Education and Training Fund-shall not
be more than 10% of the net surplus.3. Community Development Fund-shall not be less than
3% of the net surplus. Optional Fund (Land and Building)- shall not exceed 7% of the net
surplus.5. The remaining net surplus shall be made available to the members in the form of •
Interest on share capital • Patronage refund
REPORTS REQUIRED FOR COOPERATIVE
REQUIRED REGULAR REPORTS
The following reports shall be submitted to the Authority:
1. Cooperative Annual Performance Report (CAPR)
2. Audited Financial Statement duly stamped “Received” by BIR
3. Socio Audit Report
4. Performance Report
5. List of Officers and Trainings undertaken/complete
Filing all registered cooperatives shall file with the Authority a copy of the required reports
either through personal, registered mail, courier or electronic means, within 120 days from the
end of every calendar year.
REQUIRED REGULAR REPORTS The following reports shall be submitted to the Authority:
1. Cooperative Annual Performance Report (CAPR)

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2. Audited Financial Statement duly stamped “Received” by BIR
3. Socio Audit Report
4. Performance Report
5. List of Officers and Trainings undertaken/completed
End of module 4

Question for evaluation:

1. Illustrate the model organizational structure of cooperative.
2. How to organize primary cooperative?
3. Discuss the allocation of net surplus.

Reference:

http://www.fao.org/tempref/docrep/fao/005/x0475e/x0475e03.pdf
http://invest.cfo.gov.ph/pdf/part2/registration-of-cooperatives.pdf

MODULE 5
TOOLS FOR PLANNING AND ORGANIZING COOPERATIVE ACTIVITIES

Overview:
Planning refers to deciding on goals, tasks and resource use before starting the
implementation and ensuring that the right things are done at the right time and in the right
way (effectively and efficiently). There are a number of planning tools which are appropriate
to the specific requirements of organizing and planning activities within cooperatives. They are
intended to make certain processes easier to foresee; help to exclude negative unexpected
results; assist in finding finance and generally assist optimal resource utilization (financial,
technical and human).

Lesson Objectives:
At the end of Module 5, the learner will be able to understand and explain:
• State the key planning actions which form the core of strategic cooperative
management
• Carry out a SWOT analysis and apply it to the cooperative situation
Course Materials:
Lesson 1: Strategic Cooperative Management

Setting objectives and operational goals

When starting a cooperative or when situational changes force a fundamental re thinking,
cooperative members need to find a shared common purpose or main objective, as well as

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a hierarchy of sub-objectives. Together with managers they should then try to agree on
specific targets and, eventually, to plan the relevant activities accordingly. The decision as to
whether vegetable retailing or provision of transport should be the cooperative’s main
occupation must be decided before any other plans can be made.

Two analytical tools can prove useful at this stage:

• the “Logical Framework Analysis” (Log-Frame), which is normally used for project
development, can help in turning problems into objectives, and
• “SWOT” analysis which helps analyze strengths and weaknesses within an
organization and identify opportunities and threats. This can therefore help translate a
vision into a feasible operational plan.

The two tools have complementary but different purposes. While SWOT analysis focuses
the discussion on possible avenues to take, the Log frame analysis can be used as a follow-
up to determine actual operational targets, input needs, time horizons and indicators for
controlling and monitoring of internal and external factors of success. The Log-Frame is also
much more geared towards assessing the operational side of the organization, whereas
SWOT analysis, helps assess the state of and plan for organizational development. On the
other hand, the less quantifiable areas, such as organizational culture or incentive systems,
can turn out to be important organizational strengths on which to build. In a Log-Frame these
are not given much recognition.

Setting targets
The next step, setting of targets, represents the pre-feasibility stage and helps
determine which operational outputs could be achieved and with which activities and inputs.
The final outcome of this stage is a general selection of operations. In our example certain
fundamental economic decisions would be taken at this stage, for example, which vegetable
crops to produce, how much of each to produce and where to market them etc.

Outputs
Refer to services or products (including patronage refunds etc.), over which members
should decide. The cooperative managers and leaders tend to limit their control over the
activities which should lead to the production of these outputs.

Before operational plans can be made, members need to be aware that certain outputs
may be mutually exclusive or compete with each other. For example, increased patronage
refunds often mean less dividends. The advantages and disadvantages of competing outputs,
or of various operational alternatives could be listed, prioritized and decided upon.
Alternatively, interested members could form a work group and follow it through to the next
stage - discovering and deciding on operational alternatives to achieve these outputs.

To generate each of these outputs requires a series of activities. Cost, time and
productivity are the criteria leading the choice of alternative activities. It is therefore important
to explore these options with managers as well as staff and members. By so doing, there will
also be the added effect of increasing the ownership of the activities chosen hence
enhancing their sustainability.

The planning process will need to identify all the inputs required to generate the
outputs defined. Input planning must therefore take account of the true capabilities of the
cooperative enterprise, its contributing members and any outside sources. The combination
of desired outputs, certain activities and the inputs foreseen to be necessary then form a
particular operational plan.

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Feasibility study
Having chosen an operational plan, e.g, a particular production process, the next step would
be to complete a feasibility study. This helps to decide whether the plan is practical. Referring
to our earlier example, this could mean deciding the quantity of crops to grow and what further
processing would be done, whether to employ permanent or temporary staff etc.

Such a feasibility study would assess aspects such as:

• the availability of resources, both human and material;
• whether they are sufficient in quality and quantity;
• whether the financial resources of the cooperative enterprise and members are
sufficient for the planned production;
• possibilities of substituting finance with labor or material resources;
• whether the collective knowledge of the group is adequate for the endeavor;
• whether there is sufficient demand in the expected markets (including competition);
• calculations of the cost of operations and the expected revenues and profits to be
obtained.
• analysis of risks

Planning implementation of activities

The next step is to develop a management or business plan. Its level of complexity will
depend on the size and ambitions of the cooperative. In large cooperatives, separate divisions
might each make their own plan. Negotiations would then take place between divisional
managers and top managers about the allocation of available resources and, finally, all
divisional plans would be taken together to form one overall business plan for the cooperative
as a whole.

A business plan is essentially a set of guidelines for the group enterprise. Despite the fact
that such a business plan is usually prepared by mangers, it should not become the guide to
implementation without at least the involvement of members’ leaders, representatives or a
general members’ meeting.

The main contents of such a “business plan” should be:

• a statement of main and sub-objectives
• specific targets for various activities and phases (what will be achieved in the first
month, after six months etc. - see Logical Framework below)
• assignments of responsibilities (who does what, when, how?) A clear statement of
responsibilities will help to ensure that the objectives and targets above are realized.
In small cooperatives this might largely concern members and leaders, in larger
cooperatives it would lead to a set of job descriptions and role profiles.

It is important to stress that the plan must not become a goal in itself. The group should
maintain an understanding that some improvements will always be possible and some
changes are likely to be necessary

Planning tools for strategic management

In addition to the Logical Framework Analysis and the SWOT analysis which are
appropriate in complex planning situations, there are various other tools which can be used to
acquire information, decide upon alternatives and/or prepare implementation.

The choice of tool to be used depends on the issue being dealt with and frequently
also with the stage of planning being considered. While some tools are only suitable for
planning financial matters, others can be used specifically to plan responsibilities and

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allocation of physical inputs. Budgets, balance sheets, stock records, sales forecasts, and
work process plans are examples of organizational tools which can be used in financial as
well as in physical planning procedures. They are the basic instruments to plan inputs (=
resource utilization) with and will often also entail expectations of physical outputs.

Economic and financial planning and reporting tools would include:

• profit and loss statements;
• investment analysis;
• source and application of funds statements;
• cash flows;
• (year end) balance sheets,
• cost calculations
• calculation of break-even points.

These tools help prepare decisions, plan physical activities and processes.

As planning proceeds, the need for information develops from the general to the
specific. While a vision contains fairly general statements (the “what could be” type), a strategy
document includes a more detailed description of results, both, in physical and in economic
terms.

To finalize the preparation of management and activity plans, as well as complete

feasibility studies and cost-benefit impact analysis, a SWOT analysis and studies based on a
set of financial and economic tools may prove useful.

The choice of which of them is used will depend on the specific circumstances. When
the aim of the study is to convince outsiders, such as an external funder, it might be useful to
enquire as to their standard procedure and requirements.

The business plan needs to be a reference document for the organization itself. It
should help members, leaders, staff, funders and, in some cases, clients understand “what is
expected to happen, and how”. Depending on the enterprise and its projected activities, the
plan would include:
• activity plans and time schedules,
• market research report,
• break-even analysis,
• material and financial budgets,
• a forecast profit and loss statement,
• forecast source and application of funds statement,
• forecast balance sheets,
• forecast cash-flow,
• predicted results reports.

These documents can then be used to both steer and monitor implementation. On the
one hand, they can help setting up the systems and responsibilities for recording data on what
is going to happen and what is happening. On the other hand they specify which data staff
needs to collect and examine (controlling) regularly in order to keep on track of plans or to
adjust them (self-evaluation of staff).

A full and regular reporting of results, showing a comparison between what was supposed
to be achieved and what has been achieved forms the basis for participative monitoring and
evaluation as well as providing useful guidance for how activities could be continued.

This is usually done using accounting data, and by regularly preparing

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 • activity reports;
• stock level and inventory reports;
• income and sales statements;
• profit and loss statements;
• budgetary variance reports;
• source and application of funds statements;
• revised short- or long-term sales forecasts and market predictions;
• balance sheets for the previous and current period;
• a forecast profit and loss account for next period;
• proposed expenditure budgets for next period;
• forecast cash flow for next period.

Reports on confirmed stock records (inventories), staffing, including current and envisaged
levels, staff turn-over, absenteeism, training undertaken and envisaged, and social benefits
provided help define a better picture of what is happening, how closely this matches initial
plans and goals, and take better informed decisions.

The Logical Framework

The Logical Framework is one of many tools which could help a planning exercise,
providing guidance for transforming an idea into a well thought realistic plan.

The Logical Framework Method (Log-Frame) is an analytical tool for objectives-

oriented planning and management. It is based on the concept that activities, input use and
outputs are not the ultimate measures of success, but rather contributions to the realization of
the main and immediate objectives.

Strengths, Weaknesses, Opportunities and Threats: SWOT analysis

A SWOT analysis (Swanson & Myers, 1992 Chapter IV - Tools, p.IV-1) can help the
cooperative gaining a better understanding of both internal issues and the external factors,
allowing better decision making. It looks at the organization from four different angles:

Strengths
Internal characteristics such as skills and resources which, if mobilized or used more
effectively, can benefit the organization.

Weaknesses
Internal characteristics which limit the potential of the organization such as, for
example, insufficient resources or skills

Opportunities
External factors which are expected to improve the organization’s competitive
position, and which should be fully exploited

Threats
External disadvantages which are expected to hinder the organization’s planned
Progress.

It contributes to the process of transforming visions into plans by giving a

summarized picture of the cooperative’s internal and external potential to achieve
organizational and/or program objectives or operational goals. It also helps to focus on the
cooperative’s unique strengths and opportunities.

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Using a SWOT analysis

A SWOT analysis can be used in the planning of organizational development,

highlighting the areas with the greatest potential for the cooperative. It can look at the
organization as a whole or focus more specifically on one program/activity. It can serve as a
starting point to assess and compare the feasibility of a range of potential programs and
activities. When used to choose between a range of potential programs or activities it can
replace more complicated and protracted Cost- Benefit-Analysis.

Apart from its direct results, the preparation of a SWOT analysis can itself prove a
positive and worthwhile exercise. When conducted in a group, it helps all involved to share a
common picture as to the co-op’s chances for success and possibly critical influences or
developments, therefore contributing to fostering a shared perspective of goals.

A SWOT analysis involves four main steps:

• Identification of strengths and weaknesses
• Identification of opportunities and threats
• Setting priorities
• Formulating strategy statements

SWOT Analysis – example

SYSTEM STRENGHTS WEAKNESSES

Marketing 1. Store is in a good location
2. Our prices are competitive
3. We have a steady & loyal
following
OPPORTUNITIES
1. New housing development to be
built nearby in coming year
2. Space opening up nest door for
possible expansion of coop’s
space.
3. Economy is on the upswing
1. Lack a well-thought out plan
2. Store is overcrowded, so sales
opportunities are lost
3. Must draw from a very wide
geographic area to generate
sufficient sales
THREATS
1. Customer base starting to move
out of our neighborhood
2. Competitor putting in similar
product line to ours
3. Experienced marketing manager
leaving the coop

Identification of strengths and weaknesses

When working with a cooperative group, participants should be encouraged to

highlight at least three relevant strengths and three relevant weaknesses. This can be done
by brainstorming for example, followed by an exercise in priority ranking. Great care should
be taken to listen to all views.

Identification of opportunities and threats

Issues to analyze include:
• What external threats and opportunities does the organization, the planned program
or activity face in the next two to three years?
• What external changes can you foresee which will significantly affect the activity,
program or organization itself?

External factors include:

• Competitors’ action
• Industrial trends

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 • Economic developments
• Demographic trends
• Technological and legislative changes

This assessment is often more difficult than the internal one since it involves anticipation of
possible events and judgement of their likelihood, often with not much concrete information
available and therefore building on what, at the most, remain well educated guesses.
Carrying out this analysis as a team has the benefit of building on several people’s opinions,
ideas and perspectives.

Setting priorities
The third step in the SWOT Analysis is to look at all the elements identified, and
prioritize them. The group should select the three or four which appear most important for
the immediate future.

Looking at the example outlined above, the priorities chosen might be:
• he co-op lacks a clear marketing plan (weakness)
• Space is opening up next door for possible store expansion (opportunity)
• Co-op’s prices are competitive (strength)
• Experienced marketing manager is leaving the co-op (threat)

There is often a danger in overlooking strengths since they relate to aspects which are
already going well. It can be assumed that they therefore do not need further consideration
and can be neglected. On the contrary, it should be stressed that adequate consideration is
given to them in setting priorities since one of the purposes of this exercise is to build on
strengths.

Formulating strategy statements

The fourth step is to develop a specific strategy for the program or activity analyzed.
This must begin with the strengths and opportunities identified. The strategy statement should
outline what direction the organization should pursue or which way the program/activity should
be approached, given the particular strengths and opportunities identified.

Keeping in mind that a strategy statement describes a desired state of affairs, no

detailed action plans should be attempted at this stage. Staff involved in the activity being
planned should always be involved in this process, to both ensure full understanding of the
strategy and bring about a sense of ownership. The statement must, of course, be consistent
with the overall mission or vision statement and any higher ranking strategic statements to
which the organization has committed itself.

Activity:

1. What are the major opportunities and threats in the cooperative that you can
expect to participate in? If you are already pursuing a cooperative, give the
opportunities and threats in this business.

Assessment:
1. What is a SWOT analysis?
2. What are the purpose of a SWOT analysis?
3. Differentiate the logical framework and the SWOT analysis

Reference:

http://www.fao.org/tempref/docrep/fao/005/x0475e/x0475e03.pdf

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