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The history of the cooperative movement concerns the origins and history of cooperatives. Although cooperative arrangements, such as mutual insurance, and principles of cooperation existed long before, the cooperative movement began with the application of cooperative principles to business organization.
The cooperative movement began in Europe in the 19th century, primarily in Britain and France, although The Shore Porters Society claims to be one of the world's first cooperatives, being established in Aberdeen in 1498 (although it has since demutualized to become a private partnership). The industrial revolution and the increasing mechanization of the economy transformed society and threatened the livelihoods of many workers. The concurrent labour and social movements and the issues they attempted to address describe the climate at the time. The first documented consumer cooperative was founded in 1769, in a barely furnished cottage in Fenwick, East Ayrshire, when local weavers manhandled a sack of oatmeal into John Walker's whitewashed front room and began selling the contents at a discount, forming the Fenwick Weavers' Society. In the decades that followed, several cooperatives or cooperative societies formed including Lennoxtown Friendly Victualling Society, founded in 1812. By 1830, there were several hundred co-operatives. Some were initially successful, but most cooperatives founded in the early 19th century had failed by 1840. However, Lockhurst Lane Industrial Co-operative Society (founded in 1832 and now Heart of England Co-operative Society), and Galashiels and Hawick Co-operative Societies (1839 or earlier, merged with The Cooperative Group) still trade today. It was not until 1844 when the Rochdale Society of Equitable Pioneers established the ‘Rochdale Principles’ on which they ran their cooperative, that the basis for development and growth of the modern cooperative movement was established. Financially, credit unions were invented in Germany in the mid-19th century, first by Franz Hermann Schulze-Delitzsch (1852, urban), then by Friedrich Wilhelm Raiffeisen (1864, rural). While Schulze-Delitzsch is chronologically earlier, Raiffeisen has proven more influential over time – see history of credit unions. In Britain, the friendly society, building society, and mutual savings bank were earlier forms of similar institutions.
Main article: Robert Owen Robert Owen (1771–1858) is considered the father of the cooperative movement. A Welshman who made his fortune in the cotton trade, 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. It was here that the first cooperative store was opened. Spurred on by the success of this, he had the idea of forming "villages of co-operation" 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 and in New Harmony, Indiana in the United States of America, but both communities failed.
Main article: William King (doctor) Although Owen inspired the co-operative movement, others – such as Dr William King (1786–1865) – 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 co-operatives 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 1 May 1828. This gave a mixture of co-operative 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, "We must go to a shop every day to buy food and necessaries - why then should we not go to our own shop?" He proposed sensible rules, such as having a weekly account audit, having 3 trustees, and not having meetings in pubs (to avoid the temptation of drinking profits).
The Rochdale Pioneers
Main article: Rochdale Pioneers The Rochdale Society of Equitable Pioneers was a group of 10 weavers and 20 others in Rochdale, England, that was formed in 1844. As the mechanization of the Industrial Revolution was forcing more and more skilled workers into poverty, these tradesmen decided to band together to open their own store selling food items they could not otherwise afford. With lessons from prior failed attempts at co-operation in mind, they designed the now famous Rochdale Principles, and over a period of four months they struggled to pool together one pound sterling per person for a total of 28 pounds of capital. On December 21, 1844, they opened their store with a very meager selection of butter, sugar, flour, oatmeal and a few candles. Within three months, they expanded their selection to include tea and tobacco, and they were soon known for providing high quality, unadulterated goods.
The English CWS and Co-operative Group
Main article: The Co-operative Group The Co-operative Group formed gradually over 140 years from the merger of many independent retail societies, and their wholesale societies and federations. In 1863, twenty years after the Rochdale Pioneers opened their co-operative, the North of England Co-operative Society was launched by 300 individual co-ops across Yorkshire and Lancashire. By 1872, it had become known as the Co-operative Wholesale Society (CWS). Through the 20th century, smaller societies merged with CWS, such as the Scottish Co-operative Wholesale Society (1973) and the South Suburban Co-operative Society (1984). By the 1990s, CWS's share of the market had declined considerably and many came to doubt the viability of co-operative model. CWS sold its factories to Andrew Regan in 1994. Regan returned in 1997 with a £1.2 billion bid for CWS. There were allegations of "carpet-bagging" - new members who joined simply to make money from the sale - and more seriously fraud and commercial leaks. After a lengthy battle, Regan's bid was seen off and two senior CWS executives were dismissed and imprisoned for fraud. Regan was cleared of charges. The episode recharged CWS and its membership base. Tony Blair's Co-
operative Commission, chaired by John Monks, made major recommendations for the co-operative movement, including the organisation and marketing of the retail societies. It was in this climate that, in 2000, CWS merged with the UK's second largest society, Co-operative Retail Services. Its headquarter complex is situated on the north side of Manchester city centre adjacent to the Manchester Victoria railway station. The complex is made up of many different buildings with two notable tower blocks of New Century House and the solar panel-clad CIS tower. Other independent societies are part owners of the Group. Representatives of the societies that part own the Group are elected to the Group's national board. The Group manages The Co-operative brand and the Co-operative Retail Trading Group (CRTG), which sources and promotes goods for food stores. There is a similar purchasing group (CTTG) for cooperative travel agents.
Co-operative communities are now widespread, with one of the largest and most successful examples being the Mondragón Cooperative Corporation in the Basque country of Spain. Co-operatives were also successful in Yugoslavia under Tito where Workers' Councils gained a significant role in management. In many European countries, cooperative institutions have a predominant market share in the retail banking and insurance businesses. In the UK, co-operatives formed the Co-operative Party in the early 20th century to represent members of co-ops in Parliament. The Co-operative Party now has a permanent electoral pact with the Labour Party, and some Labour MPs are Co-operative Party members. UK co-operatives retain a significant market share in food retail, insurance, banking, funeral services, and the travel industry in many parts of the country. Denmark has had a strong cooperative movement. In Colorado, the Meadowlark Cooperative administers the first and only private free land program in the United States, providing many services to its members who buy and sell together. In the United States there are over 29,000 co-operatives employing 2 million people with over $652 billion in annual revenue.
An agricultural cooperative, also known as a farmers' co-op, is a cooperative where farmers pool their resources in certain areas of activity. A broad typology of agricultural cooperatives distinguishes between agricultural service cooperatives, which provide various services to their individually farming members, and agricultural production cooperatives, where production resources (land, machinery) are pooled and members farm jointly. Examples of agricultural production cooperatives include collective farms in former socialist countries, the kibbutzim in Israel, collectively governed community shared agriculture, Longo Mai cooperatives and Nicaraguan production co-operatives. Worker cooperatives provide an example of production cooperatives outside agriculture. The default meaning of agricultural cooperative in English is usually an agricultural service cooperative, which is the numerically dominant form in the world. There are two primary types of agricultural service cooperatives, supply cooperative and marketing cooperative. Supply cooperatives supply their members with inputs for agricultural production, including seeds, fertilizers, fuel, and machinery services. Marketing cooperatives are established by farmers to undertake transformation, packaging, distribution, and marketing of farm products (both crop and livestock). Farmers also widely rely on credit cooperatives as a source of financing for both working capital and investments.
Why farmers form cooperatives
Cooperatives as a form of business organization are distinct from the more common investor-owned firms (IOFs). Both are organized as corporations, but IOFs pursue profit maximization objectives, whereas cooperatives strive to maximize the benefits they generate for their members (which usually involves zero-profit operation). Agricultural cooperatives are therefore created in situations where farmers cannot obtain essential services from IOFs (because the provision of these services is judged to be unprofitable by the IOFs), or when IOFs provide the services at disadvantageous terms to the farmers (i.e., the services are available, but the profit-motivated prices are too high for the farmers). The former situations are characterized in economic theory as market failure or missing services motive. The latter drive the creation of cooperatives as a competitive yardstick or as a means of allowing farmers to build countervailing market power to oppose the IOFs. The concept of competitive yardstick implies that farmers, faced with unsatisfactory performance by IOFs, may form a cooperative firm whose purpose is to force the IOFs, through competition, to improve their service to farmers.
Headquarters of Hokuren Federation of Agricultural Cooperatives in Sapporo, Japan A practical motivation for the creation of agricultural cooperatives is related to the ability of farmers to pool production and/or resources. In many situations within agriculture, it is simply too expensive for farmers to manufacture products or undertake a service. Cooperatives provide a method for farmers to join together in an 'association', through which a group of farmers can acquire a better outcome, typically financial, than by going alone. This approach is aligned to the concept of economies of scale and can also be related as a form of economic synergy, where "two or more agents working together to produce a result not obtainable by any of the agents independently". While it may seem reasonable to conclude that larger the cooperative the better, this is not necessarily true. Cooperatives exist across a broad membership base, with some cooperatives having less than 20 members while other can have over 10,000. While the economic benefits are a strong driver in forming cooperatives, it is not the sole consideration. In fact, it is possible for the economic benefits from a cooperative to be replicated in other organizational forms, such as an IOF. An important strength of a cooperative for the farmer is that they retain the governance of the association, thereby ensuring they have ultimate
ownership and control. This ensures that the profit reimbursement (either through the dividend payout or rebate) is shared only amongst the farmer members, rather than shareholders as in an IOF. In agriculture, there are broadly three types of cooperatives: a machinery pool, a manufacturing/marketing cooperative, and a credit union. Machinery Pool: A family farm may be too small to justify the purchase of expensive farm machinery, which maybe only used irregularly, say only during harvest; instead local farmers may get together to form a machinery pool that purchases the necessary equipment for all the members to use. Manufacturing/marketing cooperative: A farm does not always have the means of transportation necessary for delivering its produce to the market, or else the small volume of its production may put it in an unfavorable negotiating position with respect to intermediaries and wholesalers; a cooperative will act as an integrator, collecting the output from members, sometimes undertaking manufacturing, and delivering it in large aggregated quantities downstream through the marketing channels. Credit Union: Farmers, especially in developing countries, can be charged relatively high interest rates by commercial banks, or even not available for farmers to access. When providing loans, these banks are often mindful of high transaction costs on small loans, or may be refused credit altogether due to lack of collateral - something very acute in developing countries. To provide a source of credit, farmers can group together funds that can be loaned out to members. Alternatively, the credit union can raise loans at better rates from commercial banks due to the cooperative having a larger associative size than an individual farmer. Often members of a credit union will provide mutual or peer-pressure guarantees for repayment of loans. In some instances, manufacturing/marketing cooperatives may have credit unions as part of their broader business. Such an approach allows farmers to have a more direct access to critical farm inputs, such as seeds and implements. The loans for these inputs are repaid when the farmer sends produce to the manufacturing/marketing cooperative.
Agricultural supply cooperatives aggregate purchases, storage, and distribution of farm inputs for their members. By taking advantage of volume discounts and utilizing other economies of scale, supply cooperatives bring down the cost of the inputs that the members purchase from the cooperative compared with direct purchases from commercial suppliers. Supply cooperatives provide inputs required for agricultural production including seeds, fertilizers, chemicals, fuel, and farm machinery. Some supply cooperatives operate machinery pools that provide mechanical field services (e.g., plowing, harvesting) to their members. Problems faced by agricultural cooperatives There are many problems faced by these cooperatives but the five major ones are: 1. Tough competition from MNC's 2. They face a lot of government intervention i.e. the various policies and legislations that affect these cooperatives 3. Inadequacy of professional and dynamic managers with complete knowledge and understanding 4. Inadequacy of capital 5. The extent of participation by the members and method of empowerment of members should be revised
The first agricultural cooperatives were created in Europe in the seventeenth century in the Military Frontier, where the wives and children of the border guards lived together in organized agricultural cooperatives next to a funfair and a public bath. The first civil agricultural cooperatives were created also in Europe in the second half of the nineteenth century. They spread later to North America and the other continents. They have become one of the tools of agricultural development in emerging countries. Farmers also cooperated to form mutual farm insurance societies. Also related are rural credit unions. They were created in the same periods, with the initial purpose of offering farm loans. Some became universal banks such as Crédit Agricole or Rabobank.
A cooperative (also co-operative or co-op) is a business organization owned and operated by a group of individuals for their mutual benefit. A cooperative is defined by the International Cooperative Alliance's Statement on the Cooperative Identity as "an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through jointly owned and democratically controlled enterprise". A cooperative may also be defined as a business owned and controlled equally by the people who use its services or by the people who work there. Various aspects regarding cooperative enterprise are the focus of study in the field of cooperative economics.
Cooperation dates back as far as human beings have been organizing for mutual benefit. Tribes were organized as cooperative structures, allocating jobs and resources among each other, only trading with the external communities. In alpine environments, trade could only be maintained in organized cooperatives to achieve a useful condition of artificial roads such as Viamala in 1473. Pre-industrial Europe is home to the first cooperatives from an industrial context.
Robert Owen (1771 - 1858) was a social reformer and a pioneer of the cooperative movement.
Owen left New Lanark to pursue other forms of cooperative organization and develop co-op ideas through writing and lecture. without recognition of class conflict. often placed a greater strategic emphasis on confronting the larger scales of human organization. There are many different approaches to thinking about and building economic democracy. Meaning Cooperatives as legal entities A cooperative is a legal entity owned and democratically controlled by its members. they fought in the early 20th century to appropriate from the capitalist class the society's collective political capacity in the form of the state. or as its employees. which are divided among the members according to their participation in the enterprise. founded in 1844. England set up the society to open their own store selling food items they could not otherwise afford. Friendly Societies and consumer cooperatives became the dominant form of organization amongst working people in Anglo sphere industrial societies prior to the rise of trade unions and industrial factories. Though they regard the state as an unnecessarily oppressive institution. have been influenced by utopian socialism. Throughout the second half of the nineteenth century (and then repeatedly every 20 years or so) there has been a surge in the number of cooperative organisations. However. In the USA. to promote Owen's thinking. both in commercial practice and civil society. e. and share any surpluses on the basis of each members' cooperative contribution (as a producer. The principles challenged the idea that a person should be an owner of property before being granted a political voice. such as patronage. In the Anglo sphere. one vote was practiced in organisation decision-making. have gradually revised national accounting systems to "make visible" the increasing contribution of social economy organizations. In 1828. The cooperative movement has been fueled globally by ideas of economic democracy. Finland and Sweden. there are specific forms of incorporation for cooperatives. Friendly Societies established forums through which one member. Within ten years there were over 1. Marxists considered appropriating national and international-scale capitalist institutions and resources (such as the state) to be an important first pillar in creating conditions favorable to solidaristic economies. or through what came to be known as Leninism. a movement of friendly societies grew throughout the British Empire based on the principle of mutuality. including locally managed cooperatives. militarily and culturally mobilized in order to maintain an exploitable working class. labourer or consumer) rather than their capacity to invest financial capital. neither of which may be allowed under local laws for cooperatives. however.000 cooperative societies in the United Kingdom. With the declining influence of the USSR after the 1960s. from Newtown in mid-Wales. The key ideological influence on the Anglo sphere branch of the cooperative movement. Its services expanded to include assistance with savings and loans. operating to advance democracy and universal suffrage as a political principle. linked through confederations of unions. East Ayrshire. In some countries. following the 'Rochdale Principles'. they may also be unincorporated associations or business corporations such as limited liability companies or partnerships. is usually considered the first successful cooperative enterprise. and later in cooperative stores. Economic democracy is a socioeconomic philosophy that suggests an expansion of decision-making power from a small minority of corporate shareholders to a larger majority of public stakeholders. who as socialists have likewise held and worked for the goal of democratizing productive and reproductive relationships. The Rochdale Society of Equitable Pioneers. Both Marxism and anarchism. As they viewed the capitalist class to be prohibitively politically. socialist strategies pluralized. Members often have a close association with the enterprise as producers or consumers of its products or services. Cooperative communities were set up in Glasgow. having already set up a co-operative store in Brighton. committed to self-help in the welfare of working people. Anarchists are committed to libertarian socialism and they have focused on local organization. existed as far back as 1795. Cooperatives often share their earnings with the membership as dividends. . Indiana and Hampshire. cooperatives banded together to establish a number of social enterprise agencies which have moved to adopt the multi-stakeholder cooperative model. From the mid-nineteenth century. cooperatives are often organized as non-capital stock corporations under state-specific cooperative laws.4 In 1761. or 2. although ultimately unsuccessful. and subject to the constraints of various systems of national law) is the principle that an enterprise or association should be owned and controlled by the people it serves. As both state and church institutions began to routinely distinguish between the 'deserving' and 'undeserving' poor. some members to have a greater share of the control. though economic democratizes have not as yet established a fundamental challenge to the hegemony of global neoliberal capitalism. educational institutes. mutual organizations embraced these ideas in economic enterprises. Organizational and ideological roots The roots of the cooperative movement can be traced to multiple influences and extend worldwide. Scotland to selldiscounted oatmeal to local workers. which was based on voluntary cooperation. used as a model for modern co-ops. some investors to have a return on their capital that exceeds fixed interest. William King set up a newspaper. for example. The common thread (enacted in different ways. such forms are useful when the members want to allow : 1. emigration and education. the Fenwick Weavers' Society was formed in Fenwick. financial institutions and industrial enterprises. and his partners purchased New Lanark mill from Owen's father-inlaw David Daleand proceeded to introduce better labour standards including discounted retail shops where profits were passed on to his employees. cooperatives and communities. instead of according to the value of their capital shareholdings (as is done by a joint stock company). firstly amongst trades people. In 1810. over 80% of British working age men and 90% of Australian working age men were members of one or more Friendly Society.g. either through democratic socialism. Social economy In the final year of the 20th century. Cooperatives may take the form of companies limited by shares or by guarantee. postfeudal forms of cooperation between workers and owners. In the last 15 years (1994–2009) the EU and its member nations. The Cooperator. partnerships or unincorporated associations. that are expressed today as "profit-sharing" and "surplus sharing" arrangements. Marxists. Welsh social reformer Robert Owen. A group of 28 weavers and other artisans in Rochdale. Other events such as the founding of a friendly society by the Tolpuddle Martyrs in 1832 were key occasions in the creation of organized labor and consumer movements. Weinbren reports that by the end of the 19th century. was a rejection of the charity principles that underpinned welfare reforms when the British government radically revised its Poor Laws in 1834.
therefore. purchasing or housing cooperatives. The categories of disadvantage they target may include physical and mental disability. it may be a collective or mutual organization. Types of cooperative governance Retailers' cooperative A retailers' cooperative (known as a secondary or marketing cooperative in some countries) is an organization which employs economies of scale on behalf of its members to receive discounts from manufacturers and to pool marketing. Voluntary and Open Membership 2. community members or capitalist investors also own some shares. but which differs considerably from cooperatives that are subject to Anglo-American systems of law that require the cooperative (employer) to view (and treat) its worker-members as salaried workers (employees). rather than according to capital invested. or the retention of individual. control by worker-owners may be exercised through individual. and the majority of shares are owned by the workforce. Cooperation among Cooperatives 7. A worker cooperative. interest is limited to the bond rate and dissolution is altruistic (assets may not be distributed) the cooperative has legal personality and limited liability the objective is the general benefit of the community and the social integration of citizens those of type B integrate disadvantaged people into the labour market. democracy and equality. Gopalan. There are no outside owners in a "pure" workers' cooperative. in which workers and beneficiaries jointly participate in management decisions and receive discounts on the basis of sweat equity. although it refers to itself as a "nonprofit membership association. Depending on the structure. Autonomy and Independence 5. Membership is not always compulsory for employees. Social cooperative A particularly successful form of multi-stakeholder cooperative is the Italian "social cooperative".000. Volunteer cooperative A volunteer cooperative is a cooperative that is run by and for a network of volunteers. developmental disorders and problems with the law. volunteer-run consumer co-op or service organization. sexual orientation or abuse.5 Identity Cooperatives are based on the cooperative values of "self-help. They are legally defined as follows: no more than 80% of profits may be distributed. to achieve some goal. meaning that anyone who satisfies certain non-discriminatory conditions may join. only the workers own shares of the business. whose members are hotel operators. There are now more than 400 worker cooperatives in the UK. This system was advocated by the Indian communist leader A. In places like the UK.000 exist. Membership is open. impacting on the ability of leaders to enact democratic forms of management and counter the authority structures embedded in the dominant system of private enterprise centred around the entrepreneur." It gave up on the "cooperative" label after some courts insisted on enforcing regulatory requirements for franchisors despite its member-controlled status. In India. which is operated according to the principles of cooperative governance. consumer. That is the form of the Indian Coffee Houses. In this case the members of the cooperative are businesses rather than individuals. Member Economic Participation 4. The implications of this are far-reaching. for the benefit of a defined membership or the general public.coop domain names must adhere to the basic co-op values. "Type A" social cooperatives bring together providers and beneficiaries of a social service as members. The most basic form of volunteer-run cooperative is a voluntary association. collective or majority ownership by the workforce. collective or majority voting rights (exercised on a one-member one-vote basis). as this requires cooperatives to establish authority driven statutory disciplinary and grievance procedures (rather than democratic mediation schemes). Economic benefits are distributed proportionally to each member's level of participation in the cooperative. has the characteristic that the majority of its workforce owns shares. The Best Western international hotel chain is actually a retailers' cooperative. Cooperative Societies only became legal in Britain after the passing of Slaney's Act in 1852. In practice. there is a form of workers' cooperative which insists on compulsory membership for all employees and compulsory employment for all members. It is common for locally owned grocery stores. of which some 7. though hybrid forms exist in which consumers. . Democratic Member Control 3. K. They do not include other factors of disadvantage such as unemployment. Such legal entities have a range of social characteristics. but generally only employees can become members either directly (as shareholders) or indirectly through membership of a trust that owns the company. Education. common ownership (indivisible collective ownership) was popular in the 1970s.  Co-ops can sometimes be identified on the Internet through the use of the . The impact of political ideology on practice constrains the development of cooperatives in different countries. Spanish law permits owner-members to register as self-employed enabling worker-owners to establish regulatory regimes that support cooperative working. producer. A volunteer-run co-op is distinguished from a worker cooperative in that the latter is by definition employee-owned. They are distinguished from other forms of incorporation in that profit-making or economic stability are balanced by the interests of the community. A lodge or social club may be organized on this basis. equity and solidarity" and the seven cooperative principles: 1. drug and alcohol addiction. Cooperatives may be classified as either worker. Concern for Community Cooperatives are dedicated to the values of openness. Worker cooperative A worker cooperative or producer cooperative is a cooperative that is owned and democratically controlled by its "workerowners". "Type B" social cooperatives bring together permanent workers and previously unemployed people who wish to integrate into the labour market. self-responsibility. Organizations using . In 1865 there were 651 registered societies with a total membership of well over 200. whereas the volunteer cooperative is typically a non-stock corporation.coop gTLD. race. Suma Whole foods being the largest example with a turnover of £24 million. hardware stores and pharmacies. social responsibility and caring for others. for instance by a dividend on sales or purchases. Training and Information 6.
including paid employees. pasta from durum wheat.000 members. The average size is 30 workers. In type B cooperatives at least 30% of the members must be from the disadvantaged target groups voting is one person one vote A good estimate of the current size of the social cooperative sector in Italy is given by updating the official Istituto Nazionale di Statistica (Istat) figures from the end of 2001 by an annual growth rate of 10% (assumed by the Direzione Generale per gli Ente Cooperativi). social or educational services various categories of stakeholder may become members. Swindon & Gloucester Co-op. They are sometimes described as a hybrid between traditional co-ops and limited liability companies. volunteers (up to 50% of members). with 267. BECs enable budding entrepreneurs to experiment with their business idea while benefiting from a secure income. Coop operates 1. 31. or gourmet cheese from goat’s milk. 7. but can stay and become a full member of the cooperative. The world's largest consumers' cooperative is the Co-operative Group in the United Kingdom. The first of these was set up in 1844 in the North-West of England by 28 weavers who wanted to sell food at a lower price than the local shops. This gives totals of 7. capital intensive industries. having both corporate members (mostly other consumers' cooperatives. and in Canada: Mountain Equipment Coop.519 trillion Yen (21.000 volunteers and 24. As of 2005. A well known example in the United States is the REI (Recreational Equipment Incorporated) co-op. According to Bio Suisse. BUSINESS AND EMPLOYMENT COOPERATIVE Business and employment cooperatives (BECs) are a subset of worker cooperatives that represent a new approach to providing support to the creation of new businesses. financial investors and public institutions.000 people.437 shops and employs almost 45. Employees can also generally become members. BECs thus provide budding business people with an easy transition from inactivity to self-employment. In 2001. The innovation BECs introduce is that once the business is established the entrepreneur is not forced to leave and set up independently. Euro Coop is the European Community of Consumer Cooperatives. Types of cooperatives . The volunteer board of a retail consumers' cooperative. The UK also has a number of autonomous consumers' cooperative societies.383 employees. They are now common in Canada where they operate primarily in agriculture and food services. Leg coop of Italy is arguably the world's biggest federation of cooperatives. Combined turnover is around 5 billion euro. such as the formerOxford. The cooperatives break into three types: 59% type A (social and health services). Japan has a very large and well-developed consumer cooperative movement with over 14 million members. 223.736.000 disadvantaged people undergoing integration. In fact.100 social cooperatives. is held to account at an Annual General Meeting of members Consumers' cooperative A consumers' cooperative is a business owned by its customers. beneficiaries. 33% type B (work integration) and 8% mixed. the Swiss organic producers' association. such as the East of England Co-operative Society and Mid-counties Co-operative. Like other business creation support schemes.000 paid employees. where their primary purpose is to add value to primary products. Switzerland's second-biggest supermarket chain.210 members and a turnover of €50Bn per year growing at a steady rate of 4. as a result of its origins as a wholesale society). Members vote on major decisions and elect the board of directors from amongst their own number. Coop accounts for half of all the organic food sold in Switzerland. For example producing ethanol from corn. The microenterprises then combine to form one multi-activity enterprise whose members provide a mutually supportive environment for each other. the Co-operative Group is something of a hybrid. New generation cooperative New generation cooperatives (NGCs) are an adaptation of traditional cooperative structures to modern. They were first developed in California and spread and flourished in the US Mid-West in the 1990s. retail co-ops alone had a combined turnover of 2.41%. but in a collective framework. Migros is the largest supermarket chain in Switzerland and has around 2 million of the country's 7. it merged with 11 cooperative federations which had been its main suppliers for over 100 years.184 billion US dollars [market exchange rates as of 15 November 2005]) in 2003/4. They open up new horizons for people who have ambition but who lack the skills or confidence needed to set off entirely on their own – or who simply want to carry on an independent economic activity but within a supportive group context. Coop is also a cooperative. and individual retail consumer members. which offers a variety of retail and financial services.6 type A cooperatives provide health. With its 414.2 million population as members.
In 1900. supply cooperatives bring down members' costs.000 people. Agricultural supply cooperatives aggregate purchases. Group equity or Zero equity housing cooperatives do not allow members to own equity in their residences and often have rental agreements well below market rates. chemicals. and the cooperative may be dissolved. In the case of electricity. but limit the sale price of their membership share to that which they paid. In Tanzania. Eight years . it has been proven that the cooperative method is helpful in water distribution. when the caisse populaire movement was started by Alphonse Desjardins in Quebec. a pioneer in the cooperative movement. each member is the sole owner of a homestead. When the building is finished. allow members to own some equity in their home. members may sell their shares in the cooperative whenever they like for whatever price the market will bear. many cooperatives were formed to provide rural electrical and telephone service as part of the New Deal. cooperatives are generally either generation and transmission (G&T) co-ops that create and send power via the transmission grid or local distribution co-ops that gather electricity from a variety of sources and send it along to homes and businesses. plowing. Profits are either reinvested into infrastructure or distributed to members in the form of "patronage" or "capital credits". Agricultural cooperative Grain elevators are used by agricultural cooperatives in the storage and shipping of grains. he opened North America's first credit union. Nowadays such self-building may be financed using a step-by-step mortgage which is released in stages as the building is completed. which provide various services to their individual farming members. The concept of financial cooperatives crossed the Atlantic at the turn of the 20th century. Agricultural marketing cooperatives are often formed to promote specific commodities. In the United States. Housing cooperatives come in three basic equity structures : In Market-rate housing cooperatives. Utility cooperative A utility cooperative is a type of consumers' cooperative that is tasked with the delivery of a public utility such as electricity. Main article: Building cooperative Members of a building cooperative (in Britain known as a self-build housing cooperative) pool resources to build housing. food processing. Agricultural production cooperatives are relatively rare in the world. much like any other residential property. By taking advantage of volume discounts and utilizing other economies of scale.7 Housing cooperative Co-op City in New York is the largest cooperative housing development in the world with 55. or have membership and occupancy rights in a not-for-profit cooperative (non-share capital co-op). Credit unions provide the same financial services as banks but are considered not-for-profit organizations and adhere to cooperative principles. and agricultural production cooperatives. The term may also refer to worker cooperatives in the building trade. water or telecommunications services to its members. normally using a high proportion of their own labour. distribution and sale. Agricultural marketing cooperatives provide the services involved in moving a product from the point of production to the point of consumption. This collective effort was at the origin of many of Britain's building societies. Limited equity housing cooperatives. Credit unions and cooperative banking The Co-operative Bank's head office in Manchester. and they underwrite their housing through paying subscriptions or rent. and known examples are limited to collective farms in former socialist countries and the kibbutzim in Israel. harvesting) to their members. Agricultural cooperatives or farmers' cooperatives are cooperatives where farmers pool their resources for mutual economic benefit. which however developed into "permanent" mutual savings and loan organisations. which essentially dividends are paid on a member's investment into the cooperative. fertilizers. A housing cooperative is a legal mechanism for ownership of housing where residents either own shares (share capital co-op) reflecting their equity in the cooperative's real estate. where production resources such as land or machinery are pooled and members farm jointly.g. grading. Some supply cooperatives also operate machinery pools that provide mechanical field services (e. packing. storage. transport. from his home in Lévis. Agricultural marketing includes a series of inter-connected activities involving planning production. When the people are involved with their own water. Supply cooperatives may provide seeds. Credit unions originated in mid-19th century Germany through the efforts of pioneers Franz Hermann Schulze-Delitzsch and Friedrich Wilhelm Raiffeisen. Agricultural cooperatives are broadly divided into agricultural service cooperatives. and distribution of farm inputs for their members. a term which persisted in some of their names (such as the former Leeds Permanent). which are often used by affordable housing developers. Market-rate co-ops are very common in New York City. and farm machinery. they care more because the quality of their work has a direct effect on the quality of their water.. The statue in front is of Robert Owen. growing and harvesting. fuel. Canada. storage. marking the beginning of the Movement Desjardins. Credit unions are cooperative financial institutions that are owned and controlled by their members.
Migros and Coop Bank in Switzerland and the Raiffeisen system in many Central and Eastern European countries. or it may refer to one in which managers and administration is elected by every worker-owner. there is a clear distinction between mutual savings banks (Sparbank) and true credit unions (Andelsbank). The UK Co-operative Group includes both an insurance provider CIS and the Co-operative Bank. Other important European banking cooperatives include the Crédit Agricole in France. collective or majority ownership by the workforce. and the travel industry in many parts of the country.950 active status federally insured credit unions. it is needless to say. has the characteristic that the majority of its workforce own shares. are joined together in the 'Urgenossen'. insurance. A remarkable development has taken place in Poland. such as the UK. funeral services. In practice. which were nationalized in Eastern Europe. Below is the section on the basic characteristics of workers' cooperatives: 1. cooperative societies find it advantageous to form cooperative federations in which all of the members are themselves cooperatives. Cooperative federations are a means through which cooperative societies can fulfill the sixth Rochdale Principle. and the majority of shares are owned by the workforce. and is larger than the country’s largest conventional bank. A worker cooperative. which was approved by the International Co-operative Alliance General Assembly in September 2005. The largest are workbased. cooperation among cooperatives. UK cooperatives retain a significant market share in food retail. The Cooperative Party now has a permanent electoral pact with the Labour Party.. and finally it can refer to a situation in which managers are considered. one vote" ownership and can be seen as a form of financial cooperative (although nine 'demutualised' into conventionally owned banks in the 1980s & 1990s). In traditional forms of worker cooperative. based on the ideas of Friedrich Raiffeisen. where the SKOK (Spóldzielcze Kasy Oszczednosciowo-Kredytowe) network has grown to serve over 1 million members via 13. allow workers’ democratic self-management and promote community and local development. credit unions are also established in the UK. and each member has one voting share. Italy and various European countries also have strong cooperative banks. therefore. Cooperative banking networks. The Association of British Credit Unions Ltd (ABCUL) represents the majority of British Credit Unions. the aim of a cooperative wholesale society is to arrange “bulk purchases. whose objective (according to Gide) is “to develop the spirit of solidarity among societies and. dignify human work. should be distinguished from retailers' cooperatives. A cooperative enterprise may mean a firm where every worker-owner participates in decision making in a democratic fashion. The oldest cooperative banks in Europe. which were the forerunners to the modern Co-operative Group. workers of the firm. in a word. Worker cooperative A worker cooperative is a cooperative owned and democratically managed by its worker-owners. all shares are held by the workforce with no outside or consumer owners. both noted for promoting ethical investment. British Building Societies developed into general-purpose savings & banking institutions with "one member. control by worker-owners may be exercised through individual. and treated as. They play an important part in mortgage credit and professional (i. organize production. to exercise the functions of a government whose authority. Retailers' cooperative A retailers' cooperative is a type of cooperative which employs economies of scale on behalf of its retailer members.e. Spain. This control may be exercised in a number of ways. if possible. national.” The best historical example of this was the English CWS and the Scottish CWS. but many are now offering services in the wider community. Retailers' cooperatives use their purchasing power to acquire discounts from manufacturers and often share marketing expenses. in order to contribute with their personal work and economic resources. 2. is conditioned by the existence of workplaces. CICOPA. banking. these have predominantly come in the form of cooperative wholesale societies. cooperatives may find it advantageous to form a parliamentary political party to represent their interests. In Scandinavia. and cooperative unions. Definition of worker cooperative Many definitions exist as to what qualifies as a workers' cooperative. with almost 90 million members and more than $679 billion on deposit. hardware stores and pharmacies to participate in retailers' cooperatives. It is common for locally owned grocery stores. Cooperative party In some countries with a strong cooperative sector. The Netherlands. Artisanal and Service Producers’ Cooperatives. sometimes referred to as retail cooperatives.. They have the objective of creating and maintaining sustainable jobs and generating wealth. collective or majority voting rights (exercised on a one-member one-vote basis).” Co-operatives UK and the International Cooperative Alliance are examples of such arrangements. Cooperative Union A second common form of cooperative federation is a cooperative union. Desjardins provided guidance for the first credit union in the United States. and has 29 members of parliament who were elected at the 2005 general election as Labour Cooperative MPs. and. regional and international structures. where there are now about 7. Historically. farming) credit. . Consumers' cooperatives. the International Organisation of Industrial. While they have not taken root so deeply as in Ireland. The British Cooperative Party and the Canadian Cooperative Commonwealth Federation are prime examples of such arrangements. work now as real cooperative institutions." Cooperative wholesale society According to cooperative economist Charles Gide. gives an 8-page definition in their World Declaration on Workers' Cooperatives. to improve the quality of life of the worker-members.8 later.000 branches. The British cooperative movement formed the Cooperative Party in the early 20th century to represent members of consumers' cooperatives in Parliament. The free and voluntary membership of their members. is purely moral. or the retention of individual. Federal or secondary cooperatives In some cases. with the ICA noting that "Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local.
with a board of directors and various grades of manager.. workers began organizing and controlling businesses for themselves. History of worker cooperatives Historically. Workers' cooperatives also follow the Rochdale Principles and values. such as those of the Knights of Labor in 19th century America.9 3. Starting in the 1830s. much less Federal laws. Salaries can be calculated according to skill. 5. Profits (or losses) earned by the worker's cooperative are shared by worker owners. Direct workers' cooperatives sometimes use consensus decision-making to make decisions. govern it and manage it. with all members allowed and expected to play a managerial role. Worker control can be exercised directly or indirectly by workerowners. "Labor is the hiring factor.g. Voting rights are not tied to investment or patronage in the workers' co-operative. This is a hierarchical structure similar to that of a conventional business. which are a set of core principles for the operation of cooperatives. although some casual or wage workers may be employed with whom profits and decision making are not necessarily shared equally. bakers. the majority – if not all . and in the usage and management of the means of production. or only. This structure is influenced by activist collectives and civic organizations. they can be considered to be businesses that make a product.and vote on . They shall be autonomous and independent. members of representative decision-making bodies (e. those who have invested proportionately more labour. This has resulted in repeated attempts to develop model rules that differentiate control rights from investment and profit-sharing rights. Their internal regulation is formally defined by regimes that are democratically agreed upon and accepted by the worker-members. Some workers' cooperatives also practice job rotation or balanced job complexes to overcome inequalities of power as well as to give workers a wider range of experiences and exposure to the different jobs in a work place so that they are better able to make decisions about the whole workplace.decisions on how the co-operative is run. so most worker cooperatives make use of traditional consumer cooperative law and try to fine-tune it for their purposes. to sell for profit where the workers are members or worker-owners. The worker-members’ relation with their cooperative shall be considered as different to that of conventional wage-based labour and to that of autonomous individual work. with the difference being that the board of directors is elected. ownership and decision-making power of a worker cooperative should be vested solely with the worker-owners and ultimate authority rests with the worker-owners as a whole. Even though there is no universally accepted definition of a workers' cooperative. worker co-operatives have to accommodate a range of interests to survive and have experimented with different voice and voting arrangements to accommodate the interests of trade unions. Salaries generally have a low ratio difference which ideally should be "guided by principles of proportionality. England. 4. For example. before the State and third parties. When the current cooperative movement resurfaced in the 1960s it developed mostly on a new system of "collective ownership" where par value shares were issued as symbolic of egalitarian voting rights. a Board of Directors) must be elected by the worker-owners (who in turn hire the management) and be subject to removal by the worker-owners. goal for their co-operative or they may follow the Rochdale Principles. worker cooperatives rose to prominence during the industrial revolution as part of the labour movement. recent developments in the co-operative movement have started to shift thinking more clearly towards multistakeholder perspectives. This implies that the majority of the workers in a given worker cooperative enterprise are members and vice versa.Any profit or loss after normal operating expenses is assigned to members on the basis of their labor contribution. 1993: 11) The formation of some workers cooperatives. Workers also often undergo a trial or screening period (such as three or six months) before being allowed to have full voting rights. or offer a service. the importance of capital should be subordinated to labour in workers' cooperatives. If exercised directly. Unlike with conventional firms. local authorities. Typically. worker-owners may not believe that profit maximisation is the best. 6. in their labour relations and management. or through attempts to mix individual and collective forms of worker ownership and control. were designed to "cope with the evils of unbridled capitalism and the insecurities of wage labor". workers' co-operatives are organized to serve the needs of worker-owners by generating benefits (which may or may not be profits) for the worker owners rather than external investors. Most early worker co-ops did not adhere to clear cooperative structures or ideologies. Workers' co-operatives have often been seen as an alternative or "third way" to the domination of labour by either capital or the state. Worker-owners work in the business. and garment workers. participation is based on one vote per worker-owner. all members meet regularly to make . As noted by theorists and practitioners alike. Additional cooperative structural characteristics and guiding principles further distinguish them from other business models. libertarian socialism and participatory economics. external solidarity and internal solidarity" (such as a two to one ratio between lowest and highest earner). Such structures may be associated with more radical political aims such as anarchism." (Adams et al. Internal structure Worker cooperatives have a wide variety of internal structures. This worker-driven orientation makes them fundamentally different from other corporations. and often are equal for all workers. therefore the voting and property rights are assigned to the people who do the work and not to capital. In some cases the members (workers) of the cooperative in fact "own" the enterprise by buying a share that represents a fraction of the market value of the cooperative. and only worker-owners can vote on decisions that affect them. As a general rule. a member may only own one share to .. In practice. In the United States there is no coherent legislation regarding worker cooperatives nationally. Workers cooperative were originally sparked by "critical reaction to industrial capitalism and the excesses of the industrial revolution. As employment moved to industrial areas and job sectors declined. If exercised indirectly.of the workers in a given worker cooperative enterprise are worker-owners. The Mondragon Bookstore & Coffeehouse is a good example of a workplace that does this. seniority or time worked and can be raised or lowered in good times or bad to ensure job security. Direct worker control ensures a formally flat management structure instead of a hierarchical one. As mentioned above. such as wages or hours of work. in 1844 and have formed the basis for the principles on which co-operatives around the world operate to this day." Nevertheless. worker cooperatives were formed by hat makers. Worker-owners control the resources of the cooperative and the work process. They were first set out by the Rochdale Society of Equitable Pioneers in Rochdale. even though the worker-members supply capital through membership fees and retained earnings. work shall be carried out by the members. Ideally. In short. regardless of the amount of shares or equity owned by each worker-owner.
Participatory economics. is rooted within several intellectual or political traditions: The alleviation of alienation in the workplace. for example.varies by country government laws . the sector peaked at around 2. originally started by exploited beedi rollers. The following chart compares the commercial elements of capitalism.varies by country c) Except for closely held companies c) Only worker-members may own stock. Guild socialism. In 2008 Co-operatives UK launched The Worker Co-operative Code of Governance. socialism.000 enterprises. and tax treatment. Nobel Laureate Amartya Sen examined pay according to work and according to need. In the neoclassical version. Another very large network of worker coops is Kerala Dinesh Beedi. the sector contracted. a book in Malayalam. especially in regard to Marxist thought The encouragement of Participatory or direct democracy Radical but popular-democratic strategies for the overthrow of capitalism. Nobel Laureate James Meade examined behavior of an “inegalitarian” LMF. Economists have explained clustering of worker coops through leagues or “supporting structures” Regions where large clusters of worker cooperatives are found supported by leagues include Mondragón. and. Jones. Gopalan. for citizens. An attempt to implement the ICA approved World Declaration. distribution of profits. to increase a) To provide goods and services a) To maximize net and real worth of all value of shares. a review of the empirical economics literature is found in Bonin. Worker-ownership has been described as "a Third Way (centrism). particularly Emilia-Romagna. home of Mondragón Cooperative Corporation and in Italy. In the UK this system is known as common ownership. The Indian Coffee Houses in India were started by the Coffee Board in early 1940s. or firms where the state controls both labour and capital. the evidence indicates that worker cooperatives have higher productivity than conventional companies although this difference may be modest in size. he or she was given power to manage the coop. Evidence supporting such behavior is lacking however. The author of the book is Nadakkal Parameswaran Pillai one of the leaders of the ICH movement. and in 2001 ICOM merged with the Co-operative Union (which was the federal body for consumer cooperatives) to create Cooperatives UK. organization. Once brought in as a member. dividends. However the growth rate slowed. thus reunifying the cooperative sector. the Cooperative Union. K. but rather income per worker. Cooperating with other Worker Cooperatives Workers' cooperatives are also central to ideas of Autonomism. during British rule. The 'new wave' of worker cooperatives that took off in Britain in the mid-1970s joined the Industrial Common Ownership Movement (ICOM) as a separate federation. in the Basque Region of Spain.10 maintain the egalitarian ethos. after a period of time on probation usually so the new candidate can be evaluated. Libertarian socialism as well as others. such as within workers' cooperatives. It is based on US rules and regulations. Leagues provide various kinds of scale economies to make coops viable. This history is recorded in Coffee Housinte Katha. Generally. But as leagues need coops to start them the result is a chicken or egg problem that helps explain why few coops get started. The thrown-out workers then took over the branches. operational practices. Buoyed up by the alternative and ecological movements and by the political drive to create jobs. the objective of the LMF is to maximize not total profit." These distinctions are easily seen when measured by essential elements of commerce: purpose. while it was overshadowed by the consumer and agricultural types. such as laying off workers when output price rises so as to divide increased profits among fewer members. Political philosophy of workers' cooperatives The advocacy of workplace democracy. c) No stock anyone may buy stock one share per member d) Stock may be traded in the public d) n/a d) No public sale of stock market a) Stockholders a) State a) Worker members a) By Investors a) By state a) By worker members b) Policies set by stockholders or b) Policy set by government b) Policy set by directors elected by worker- . K. without "ownership" in the traditional sense. Mutualism. under the leadership of A. ownership. control. and cooperative worker-ownership. The classic theoretical contributions of such a “labor managed firm” (LMF) model are due to Benjamin Ward and Jaroslav Vanek. especially within anarchist thought. Peter Law examined LMFs that value employment as well as income. owners. Commercial Criteria Purpose Organization Corporations State-Owned Enterprises Worker Cooperatives Ownership Control a) To earn profit for owner. Some of these early cooperatives still exist and most new worker cooperatives follow their lead and develop a relationship to capital that is more radical than the previous system of equity share ownership. a) Organized and controlled by a) Organized and controlled by a) Organized and controlled by workerinvestors state members b) Incorporated under relevant b) Chartered by relevant level of b) Incorporated under relevant incorporation incorporation laws . sources of capital. An economic model: The labor-managed firm Economists have modeled the worker cooperative as a firm in which labor hires capital. several strains of anarchist thought. Syndicalism. Distributism. made up a small section of its own within the national apex body. In Britain this type of cooperative was traditionally known as a producer cooperative. due to a policy change. especially with the fullest expression of worker self-management. the mother tongue of A. In the mid 1950s the Board closed down the Coffee Houses. Autonomy and self control. and Putterman But alternative behavioral models have been proposed. But such a scenario implies “perverse” behavior. Comparison with other work organizations There are significant differences between ends and means between firms where capital controls labour. Gopalan and renamed the network as Indian Coffee House. India Indians own the largest worker cooperative in the world: Indian Coffee Houses. rather than capital hiring labor as in a conventional firm.
consumers' cooperatives are known as cooperative retail societies or retail co-ops. In practice consumers' cooperatives price goods and services at competitive market rates. oriented toward service rather than pecuniary profit. through which consumers' cooperatives collectively purchase goods at wholesale prices and. amount set by owner or a) n/a Board of Directors a) Owners or managers order a) Managers order production a) Workers set production schedules either production schedules and set wages schedules and set wages and Operating Practices through elected boards and appointed and hours. sometimes with union managers or directly through assemblies participation participation b) Working conditions determined by labour b) Working conditions determined b) Working conditions determined by law and assembly of worker-members. a) Special tax treatment in some Tax Treatment a) Subject to normal corporate taxes a) n/a jurisdictions members. Such difficulties can be mitigated by frequently providing member/owners with reliable educational materials regarding current business conditions. they are subject to the same problems typical of democratic government.) While some claim that surplus payment returns to consumer/owner patrons should be taxed the same as dividends paid to corporate stock holders. Governance and Operation Consumer cooperatives utilize the cooperative principle of Democratic member control. or one member/one vote. Alternatively. planners. own factories. Finance and approach to capital accumulation The customers or consumers of the goods and/or services the cooperative provides are often also the individuals who have provided the capital required to launch or purchase that enterprise. or by labour law and collective labour law and collective bargaining. managers. form cooperative federations. Large consumers' co-ops are run much like any other business and require workers. or by assembly of workermembers c) One person. others argue that consumer cooperatives do not return a profit by traditional definition. they may be members of cooperative unions. banks. Most consumer cooperatives have a board of directors elected by and from the membership. and customers to keep the doors open and the business running. distribute it to meet the consumer's social objectives. products. (Accumulated capital may be held as reserves. They operate within the market system. both financial and otherwise. or refund this sum to the consumer/owner as an over-payment. such as food co-ops. These may come in the form of cooperative wholesale societies. the consumer owned enterprise may retain this to accumulate capital in common ownership. in turn. or invested in growth as working capital or the purchase of capital assets such as plant and buildings. Consumers' cooperatives often take the form of retail outlets owned and operated by their consumers. The board is usually responsible for hiring management and ensuring that the cooperative meets its goals. independently of the state.) and selling price as financial gain for investors. Democratic functions. sometimes with union hours. In some countries. c) Voting on basis of shares held c) n/a d) Proxy voting permitted d) n/a a) Investors. insurance. as a form of mutual aid. may be codified in the bylaws or organizing document of the cooperative. As mutually owned businesses. internal dialogue between members and bargaining. Pursuit of social goals through consumer co-operatives January 1947 Co-op Magazine back cover designed as a promotional poster . However. in some cases. housing. Consumers' cooperatives may.11 board of directors. pension funds. and similar tax standards do not apply. clerks. Consumer cooperation has been a focus of study in the field of cooperative economics. whose members are retailers rather than consumers. Where a for-profit enterprise will treat the difference between cost (including labor etc. operating in areas such as health care. there are many types of consumers' cooperatives. utilities and personal finance (including credit unions). such as petitioning or recall of board members. each member of a society has a shareholding equal to the sum they paid in when they joined. a portion of which are set aside for reinvestment a) To members after funds are set aside for reserves and allocated to a collective account a) Limited to an interest-like percentage set by policy Consumer cooperative Consumer cooperatives are enterprises owned by consumers and managed democratically which aim at fulfilling the needs and aspirations of their members. Most consumer cooperatives hold regular membership meetings (often once a year). managers. one vote d) Proxy votes seldom allowed a) By members or lenders who have no equity or vote b) From net earnings. though they should not be confused with retailers' cooperatives. In smaller businesses the consumer/owners are often workers as well. Sources of Capital a) The state the public b) From profitable subsidiaries or by retaining all or part of the profits Distribution of Net a) To stockholders on the basis of a) To the State Margin number of shares owned CapitalDividends a) No limit. Consumers' cooperatives can differ greatly in start up and also in how the co-op is run but to be true to the consumers' cooperative form of business the enterprise should follow the Rochdale Principles. The major difference between consumers' cooperatives and other forms of business is that the purpose of a consumers' cooperative association is to provide quality goods and services at the lowest cost to the consumer/owners rather than to sell goods and services at the highest price above cost that the consumer is willing to pay. Problems Since consumer cooperatives are run democratically.
Because families who own their own homes have a greater stake in their neighborhoods. Consumer cooperatives provide most important products or services a person might need. In cooperative nursery schools and child care centers. Cooperatives often provide services to their communities that are not readily available from for-profit businesses. and government. distribution. including youth. Cooperatives also offer state of the art television and telecommunications services at competitive prices. Since the primary goal of cooperatives is to meet needs." Cooperative Federalists. Electric Cooperatives were formed by citizens in communities where the investor-owned power companies would not provide service. participate as aides in the classroom and serve on committees for such things as raising funds. nutritional labeling and the sale of bulk and natural foods. members receive all net savings left after money is set aside for operations and improvements.from a variety of political perspectives . This parental involvement cuts expenses so that the savings can be passed on to members. a growing number of credit unions are finding ways to serve low and moderate income households.12 Many advocates of the formation of consumer cooperatives . As many banks abandon low-income communities. a term coined in the writings of Beatrice Webb. Because credit unions serve the broad middle class. these cooperatives continue to find ways to provide better service at competitive prices. cooperative housing often provides significant savings over physically comparable rental or single-family housing. transparency. seniors and minorities. Food cooperatives have been pioneers in unit pricing. not generate profits. Because they have been able to provide high quality care at the lowest cost . Members control the business and provide capital for a strong and efficient operation. Housing Cooperatives: Over one million families are provided with pleasing and affordable places to live through housing cooperatives. greater product purity. Owned and controlled by residents. they can serve their members at low cost. and lower loan rates.have seen them as integral to the achievement of wider social goals. purchasing supplies and maintaining equipment. Price comparison surveys done by CBS This Morning and Mothers and Others for a Live-able Planet have found significant savings through food cooperatives. they can meet the needs of an increasing number of underserved communities. The Neo-Capitalist economic doctrine seeks to transfer the provision of almost all government provided public goods and the conversion of any large privately owned monopolies into consumer cooperatives CFA has long believed that cooperatives are a vital element in the American economy. Here are examples of some types of consumer cooperatives: Credit Unions: More than 9. Many cooperatives also provide cable TV. more than 100 million Americans participate in cooperatives. They anticipated such a development as bringing a broad set of benefits including economic democracy and justice. hire managers to administer the cooperative on a day-to-day basis. Using up-todate technology. Directors. than do competitors. education. Utility Cooperatives: Cooperatives provide electricity and telephone services to more than 30 million people. they offer enhanced services. The central principle of consumer cooperatives is member control and participation. this society shall proceed to arrange the powers of production. new energy cooperatives can provide consumers with the means to come together and find options for more competitively priced power for their homes. Housing cooperatives are an effective way to provide home ownership for low-income Americans. and at reasonable cost. who established one of the earliest consumer cooperatives in England in 1844. America’s first successful co-op was formed by Benjamin Franklin to provide insurance for homes. and financial benefits for consumers. and other advanced services. Cooperatives are successful because they provide valuable services and save consumers money. In other cases. they offer a wide range of services at prices that are usually lower than those of for-profit institutions. cooperatives enhance the level of competition in the marketplace by providing consumers with an alternative source of products and services. or assist other societies in establishing such colonies.000 food cooperatives. or in other words to establish a self-supporting home-colony of united interests. And. Internet access. Health Care Cooperatives: Cooperative health maintenance organizations (HMOs) provide comprehensive health care for more than one million Americans coast to coast. Thus. credit unions usually charge fewer and lower fees. And. These member/owners meet periodically to establish policy and elect directors. Nursery School and Child Care Cooperatives: Nursery school and child care cooperatives provide quality care for half a million families. Consumer cooperatives are businesses which belong to the people who use them. Through digital switching and transmission facilities. Today. Telephone Cooperatives provide rural Americans with telecommunications services comparable to those available to urban residents. parents determine policy. and various forms of wireless communications services. in turn. direct broadcast satellite TV. with increased opportunities for consumers to choose their electric supplier. expressed a vision that went far beyond the simple shop with which they began: "That as soon as practicable. The cooperative structure gives parents a real voice in their child’s education. Today. private economic development organizations and local governments are encouraging the development of housing cooperatives. the founding document of the Rochdale Pioneers. such as customer calling features. Food Cooperatives: Over three million Americans stretch their food dollars through membership in nearly 5. For example.000 credit unions supply financial services for over 86 million consumers nationwide. were advocates for the formation of federations of consumer cooperatives as means of achieving social reform.
Two-thirds of entrepreneurs start off as unemployed. The innovation BECs introduce is that once the business is established the entrepreneur is not forced to leave and set up independently. television satellites. They continue to receive unemployment benefit while developing a marketable product or service. food and housing services for student members. testing the market and establishing a client base. furniture restoration and organic horticulture to violin making. BECs allow a small business person to achieve control over their working life. forestry. these health care providers play an important role in our country’s health care system. the 'candidate business' works up their idea while remaining legally unemployed. and allow older people to work parttime. Business and employment co-operative Business and employment co-operatives (BECs) represent a new approach to providing support to the creation of new businesses. Other Consumer Cooperatives provide services such as mutual insurance. BECs enable budding entrepreneurs to experiment with their business idea while benefiting from a secure income. The micro-enterprises thus combine to form one multi-activity enterprise whose members provide a mutually supportive environment for each other. sharing in the ownership and management of the co-operative. and take part in its management. television satellites. It satisfies their common economic needs and ambitions while respecting the seven principles of cooperatives. two-thirds are aged between 30 and 50 and 53% are women. continuing to pay an administration charge of 10% of sales. The idea has also been adopted in Belgium. They continue to build up the business and receive training. Like other business creation support schemes.Salaried entrepreneur The entrepreneur agrees to a part-time employment contract with the BEC. Cooperatives on college campuses offer book. Policy relevance Business and employment co-operatives have aroused interest in various areas of policy-making: One of these is economic development in rural areas. WHAT ARE NEW GENERATION COOPERATIVES? New generation cooperatives are designed to enable producers to profit from the production and marketing of value-added products made from their raw commodities. a new generation cooperative is a distinct type of organization which is collectively owned and democratically controlled by its members. and in return pays over 10% of sales.5 million in 2005. Many of these and other cooperatives are locally owned and managed by members in communities across the country. Formed to enable members to process raw . but with the support of a group of people who are facing the same problems and want to pool their enthusiasm and expertise. the business can spin off as a totally independent entity. they remain technically unemployed but develop their business idea under the wing of the BEC. Stage 2 . Like all cooperatives. Intending entrepreneurs pass through three stages: First. At the end of 2005. they become a ‘salaried entrepreneur’ with the security of a part-time employment contract. administrative support.13 while satisfying the needs of their customers. BUSINESS AND EMPLOYMENT CO-OPERATIVES – A THREE-PHASE CAREER Stage 1 – Supported entrepreneur Initially. and open up new horizons for people who have ambition but who lack the skills or confidence needed to set off entirely on their own – or who simply want to carry on an in dependent economic activity but within a supportive group context. translation and web design. They help to overcome one of the most discouraging features of becoming self-employed – isolation.618 supported entrepreneurs plus 1. fishing and other industries that are supplied by producers. and funeral arrangements. The salary grows as the business grows. Next. buying clubs. BECs can help excluded groups such as ex-offenders to restart their working careers. but can stay and become a full member of the co-operative. Quebec. Morocco and Madagascar. and concern about how to raise the activity rate to counter the effect of an ageing population. Many of these and other cooperatives are locally owned and managed by members in communities across the country. The BEC handles the business administration and accounting.138 salaried entrepreneurs (including 60 member entrepreneurs). jewellery. since then a further 55 such enterprises operating in 100 locations across the country have sprung up. Stage 3 . Optionally. and funeral arrangements. economic activity and social life back to depopulated areas. Finally they become a self-sufficient business. Another is the regularization of informal work. the entrepreneur can choose to join the BEC as a full voting member. They thus lower the bar for becoming an entrepreneur. A third is demography. buying clubs. A BEC thus provides budding business people with an easy transition from inactivity to self-employment. Cooperatives on college campuses offer book. and social insurance coverage. New generation cooperatives are an option for use in agriculture. the 90 sites in the BEC network numbered 2. Other consumer cooperatives provide services such as mutual insurance. as BECs are a good way to support the so-called SOHO-SOLOs. BEC clients are in all sorts of activities from cookery. Sweden. but in a collective framework. professionals who migrate to the countryside to carry on their business at a distance – and in so doing bring valuable skills. if it looks like being a success. with a combined turnover of €16. industrial cleaning. food and housing services for student members. The first BEC was started in France in 1996.Member entrepreneur When the business is self-supporting.
has resulted in the creation of a new generation of cooperatives that differs from the traditional cooperative in four areas: 1. It is necessary to obtain feedback from all interested parties to determine interest. It is only by having committed informed members that a new generation cooperative can succeed. to producers banding together to strengthen their economic position by vertically integrating everything from purchasing their production inputs to marketing processed goods into retail markets. These resources include the number of existing and potential producers. the process to start a new generation cooperative begins with a group realizing they face a common challenge. In many cases. Members feel a greater degree of personal ownership and a stronger commitment to the cooperative because of the unique structure of new generation cooperatives. developing a new generation cooperative is the only way to get out from under the control of a monopoly or oligopoly. At this point the potential membership is in a position to consider how to proceed. and indications are that the project is feasible and viable. Distinct Features The continuing evolution of cooperatives to meet the changing economics in agriculture. a meeting with potential members and community leaders starts the process. By building value-added processing plants in their community to process local production. Following the meeting. forestry and other industries. DEVELOPING A NEW GENERATION COOPERATIVE Identify the opportunity Every new business venture begins with an idea. A two-way contract between the member and the cooperative requires each member to deliver. Determine the project need Once the need for a new generation cooperative is determined. Membership is open to anyone who can supply the raw commodity. 3. and how best to go about it. It could be a new product or service.14 commodities. the jobs and opportunities for additional economic spin-offs would give the next generation the choice of careers in their home community. the steering committee can then present it to the potential members of and investors in the cooperative. The survey should be designed to provide information to measure the concept. usually the producers of the raw commodity. and availability of transportation services to supply the raw product and to ship the processed products and by products. The Cooperatives Act of Manitoba allows for holders of investment shares to hold separate shareholders’ meetings and to elect a representative to the board of directors. The Cooperatives Act of Manitoba allows investment shareholders to receive more than the traditional token return on capital provided. up to a maximum set out by the Articles of Incorporation. Membership is limited to the number of special investment shares (delivery rights) required to be sold by the cooperative to its members in order to meet its processing capacity. The new generation cooperative model is well suited to assist in community development. a steering committee comprised of a combination of community leaders and producers can oversee the preparation of a feasibility study. Autonomy and independence are often the driving force behind these cooperatives. they should also gain the opportunity to profit from the processing and marketing of the value-added products produced by their new generation cooperative. It is primarily the financial structure and membership requirements that distinguish new generation cooperatives from the more traditional cooperatives. The distinction from the traditional cooperative arises from the evolution of people banding together to obtain goods and services at cost or to provide marketing services for their raw commodity production. and determine if people are willing to contribute financially to the project. Concern for community was behind some of the original new generation cooperatives. members should not only receive market prices for their produce upon delivery. an agreed-upon amount of the raw commodity for each delivery right (special investment share under Manitoba legislation) owned by the member. 2. The perceived opportunity or mutual need requires the strength provided by acting together to improve the chances of success. reviewed and amended by the steering committee. or a variation on an existing one. An industry expert independent of the cooperative should do the study. higher equity investments are required by members in order to establish a processing plant. These principles and their application by new generation cooperatives follow. Ingredients for success . the study only determines that the project is feasible. Often. the number of members is limited by the capacity of the cooperative to process the raw commodity and market the processed products and by-products within one of its operating cycles. These evolutionary cooperatives have expanded upon the seven basic principles of cooperation as approved by the International Co-operative Alliance. a survey of the people in attendance. with the total initial equity contribution being a major portion of the gross project costs. while still meeting the intention of the principles. Typically. Do a feasibility study If the interest to proceed is sufficient. evaluate the volume of business that may exist. service and marketing cooperatives may enhance their profitability. The community leaders can present the idea and its benefits to potential members. A significant equity investment is required by each member. and the cooperative to accept. The study should have local input regarding availability of resources within the immediate trading area. as well as by the processing capacity of the plant. Democratic control is still one member one vote. Education. fishing. it is not a guarantee of success. The results of the feasibility study will demonstrate the project’s potential for success. However. To encourage investment. training and information about cooperatives in general. The leaders saw them as one way to retain their children and grandchildren in the community by stopping the exporting of jobs necessary to retain these children. size and the available skills within the local labour force. It will provide information needed to make a sound decision on whether to proceed with the venture. However. Equity requirements and profit sharing are tied directly to patronage. however. 4. the amount presently produced as well as the potential production. Cooperation among cooperatives is respected by these cooperatives. The number of members is also limited to those who purchase delivery rights. The focus is on the value-added processing or manufacturing of raw commodities delivered to the cooperative by its members and the marketing of the resulting products. and the benefits of the new generation model are essential to the success of these cooperatives. and alliances with production. Member economic participation is based upon patronage. When the feasibility study has been completed. plus others identified as potential members or investors will help quantify interest.
the development of a business plan and an equity campaign. a members meeting is necessary. the use of a disclosure document may be required in lieu thereof. accountants. and have purchased the special investment . Incorporation of a new generation cooperative When enough potential members. A disclosure document is a less formal document that discloses the risks and conditions associated with the purchase of shares in the new generation cooperative.15 Although there are many ways to develop a new generation cooperative. After incorporation Once the incorporation process is complete. the incorporators are usually the first directors and the only members until new members are approved by the board. It is also used as the marketing and information package given to potential shareholders. The decision to proceed should be made by those people who have either invested funds towards the project. voting members elect directors. An Offering Statement is required when: a) The amount of the membership requirement exceeds $1. community leaders and industry experts. If the decision is made to proceed with the venture. and a decision is made to proceed based on the probability that the project will be a success as outlined by the business plan. The support of the membership is essential. In Manitoba. A prospectus must be filed with the Securities Commission when investment shares are being sold to the public. and investment shares where this option is being considered. held as soon as possible after incorporation. When members have committed to deliver the volumes of raw product. Once the membership approves the business plan. In Manitoba. research and development costs. break-even volumes. At this point. The business plan A business plan is a document providing a complete description of the operations of the proposed new generation cooperative. the amount of share capital required.000 in membership shares and/or loans b) special investment shares (delivery rights) are being issued c) investment shares are being issued to members only. the required securities filings and the filing of Articles of Amendment can be done to reflect the decisions made on the capital structure. and set out financial requirements of membership. The members require the information in the business plan to enable them to decide if they are willing to risk investing equity in the project. At the first meeting of members and potential members. such as lawyers. This is also the time to sell membership shares and collect membership fees to provide the new generation cooperative with some working capital until the business plan is brought to the membership for approval. the Offering Statement. the special investment shares or delivery rights. the Articles of Incorporation can be amended to include the proposed share structure and the Offering Statement and/or Prospectus can be filed with the appropriate authorities (or requests can be made for exemptions to the filing requirements). banking arrangements for lines of credit. For the most part. preparation of the business plan.000 per member and collecting a membership fee. It must also address all issues relevant to the project. approve bylaws. The plan must include financial projections for capital costs. the key areas to address are the organizational structure and the business plan. They have the knowledge and experience to develop reasonable and appropriate organizational structures and sound business and financial plans. to achieve the volumes of business outlined in the feasibility study. production costs. are prepared to provide start-up equity. incorporation requirements include the following minimum standards: three individuals or two corporations willing to act as incorporators three individuals willing to act as first directors approval of the proposed name at the Office of the Registrar of Cooperatives completion of a name reservation at the Companies Office completion of Articles of Incorporation The approved Name Reservation from the Companies Office. and The ability of the board and management to launch and develop the project successfully. and maintaining contact with the membership as the project proceeds. Prepare for business launch Once the business plan has been approved. inventories. The board is then in a position to make presentations to the individuals or organizations for financing. The Securities Commission has rules and regulations regarding situations where an exemption may be granted or use of a disclosure document is permitted. including details about the competency of the proposed management team. sales volumes. it is time to proceed with the incorporation of the new generation cooperative. commitments and all other pertinent information about the venture. Potential members should be encouraged to join before the meeting in order to have the right to vote at the meeting. It is important that the presentations explain: why investments in the new generation cooperative should be made. cooperatives require assistance from experienced outside resources. and if required. working capital loans to cover receivables and inventories. This leaves the details for the investment shares and special investment shares until after the business plan is completed and approved by the members. marketing opportunities. operating expenses. The business plan would be presented to the membership by the board of directors with the support of the consultants responsible for its preparation. the seriousness of the proponents of the project. The Offering Statement must be filed with the Registrar of Cooperatives. Once the board of directors approves the business plan. however. must be submitted to the Registrar of Cooperatives together with the required fees. the incorporation process may be expedited by restricting the share capital option to simply issuing membership shares and/or loans for less than a total of $ 1. leaders should be identified (for consistency) to run the membership and equity drive. Articles of Incorporation. A request for exemption from filing an Offering Statement can be made to the Registrar. or are prepared to sign commitment letters to assure that the next stage will have enough financial support to cover costs incurred in the incorporation process. there are certain steps and processes adopted by many successful developers of cooperatives. An exemption may be granted. mortgages on the capital assets. The funds received from the membership shares and fees are used to cover the costs of applying for funding for assistance in developing the new generation cooperative. receivables. The bylaws must be submitted to the Registrar of Cooperatives within 30 days of this meeting. the costs associated with attracting producers into membership. The share capital requirements must set targets for each category the membership shares.
single-family dwellings. and rural communities also gain from the spin-offs and local economic development.3 billion. For more information on how farmers are dealing with these changes. suburban. thereby providing a greater return to producers. In the event that there is any significant deviation from the business plan. and offers training and organizational development assistance to housing co-ops across the country. They needed fair marketing organizations that would not cheat them out of the profits of their work and they needed fairly priced farm inputs. townhouses. These co-ops share many of the key attributes of traditional co-operatives including democratic control based on one vote per member. Coopérative Fédérée de Québec and several of its member co-ops process about 25 per cent of all meat in that province. With all the changes that have occurred in the agricultural marketplace over the past 20 years. In 2002. many farmers have decided they need to be closer to the consumer. Total membership in agricultural co-ops as 389. Co-ops cost 19 per cent less to operate than municipal or private non-profit housing and 71 per cent less than public housing (owned by the federal or provincial governments). Most housing co-operatives are members of the Co-operative Housing Federation of Canada. electing a board of directors from among their peers or serving on the board themselves. Co-op Fédérée controls half of the retail poultry market and 65 per cent of the slaughtering market in Quebec. Farm supply co-ops. Co-operatives linked with the BC Tree Fruit Marketing Board account for the largest fruit and vegetable co-op Marketing effort in Canada. Cooperatives are continually evolving to meet the changing needs of people and communities. Norfolk Fruit Growers in Ontario and Scotian Gold in Nova Scotia also have substantial market shares in their regions. Co-operatives provided the solution. based on certain eligibility requirements. and 57 per cent of all poultry and eggs produced in Canada. They create a community in the co-op by welcoming new members. Marketing co-ops accounted for 80 per cent of revenues. And you can live there for as long as you like if you keep to the by-laws that you and your co-op neighbors have put in place. To do this they are forming new generation co-ops. co-ordinates group buying among co-operatives. hiring and training staff and commencing of business operations. The major changes facing agriculture and rural communities can be grouped into three broad categories: market specifications. acquiring or building facilities. About a quarter of a million Canadians live in some 2. They are found in downtown. supply farm inputs. as well as new types of services related to the production and marketing of new types of fibre products alpaca. the members should be consulted before further commitments are made. led by Scotsburn Co-op Limited and Farmers’ Co-op Dairy Limited. This will involve hiring management. agriculture co-ops reported combined revenues of $14 billion. Co-ops members control the governance of their co-operative. Ontario’s Gay Lea Foods Cooperative Limited reached record sales of $272. and converted lofts. such as the development of biofuel production facilities.176 housing co-ops found in every one of Canada’s provinces and territories. Vineland Growers Co-operative has the distinction of being the longest continually run farm co-operative in Ontario.677 with 67 per cent of that reported by farm supply co-ops. Collectively their volume of business in 2003 was $9. which sets the monthly housing charges and determines how much the co-op will spend on property upkeep and other maintenance issues. about 39 per cent of milk products. Some co-op households in Canada pay a monthly charge geared to their income. Government funds cover the difference between this payment and the co-op’s full charge. Housing co-ops offer more security at a lower cost than renting. Agricultural Co-ops Revitalizing Our Rural Communities One hundred years ago most Canadians lived and worked on farms. a tied contract. Agricultural product marketing co-ops exist in all provinces and provide significant economic benefits to the member-farmers they serve. refer to Producer Adaptation to the New Agriculture: Application of the Co-operative Model to Changes in Market Specifications. according to a 1992 Canada Mortgage and Housing Corporation study of federal co-operative housing programs.500 people. environmental and food safety requirements. and village settings in every form imaginable: new apartment buildings. feed and seed. Coops offer affordable housing because they are homes that can never be resold. Farm supply co-operatives reported revenues of $4.16 shares required by the business plan. With facilities located throughout the Niagara Peninsula’s fertile fruit belt. Yet new generation co-ops also have attributes that distinguish them from traditional co-ops including: a commitment to process commodities into higher-value products. In a housing co-op. Co-operatives market 22 per cent of all western grains and oilseeds.238 households and have book value assets of over $5. Atlantic Canada’s dairy cooperatives. distribution of earnings based on use of service or sales to the coop. There are also a number of newly incorporated co-operatives that focus on value-added agriculture. There are over 1. ACA Co-operative Association Limited has a leading role in poultry processing in Nova Scotia. including Co-op Atlantic. hemp. organizing social events. In 2002.7 billion. A members meeting should be held to confirm that the equity and delivery targets have been achieved and to obtain approval of the membership to continue the project. Co-operatives in Ontario and in the four western provinces provide selling services for replacement and finished cattle.6 million. In recent years. agricultural co-operatives have started to market non-traditional farm commodities. particularly dairy. a membership limited to those who purchase delivery rights. and a board of directors elected by the membership. Examples of marketing co-ops: In the dairy sector during 2000.1 per cent from 2000. Federated Co-operatives Limited and GROWMARK. it provides service to more than 300 members. accounted for $443 million in revenues. llama. Residents are members who have a voice and a vote in decisions about their housing. a national apex organization which works with government on behalf of housing co-operatives and their members. and service access issues.300 agricultural co-ops in Canada employing over 3. such as fertilizers and chemicals. up 12. members have the right to make decisions that affect their homes. These co-ops represent approximately 128. such as organic dairy. Housing co-ops provide homes that are secure. and publishing a newsletter. in-fills. many housing co-operatives have built accessible units specifically to serve people with disabilities. you are welcome. The co-operative business model is a good vehicle for this type of industry as the primary producers who will supply the feedstocks can benefit from on-going ownership. The coops operate on a non-profit basis.6 billion. They vote on the co-op’s annual budget. It doesn’t matter who you are: if you want to live in a co-op and you are ready to accept the terms of membership. housing co-operatives are more than a roof over their heads. In fact. Regulation and Service Access . co-operatives accounted for 59 per cent of the market share. and alfalfa pellets. Yet housing co-ops still cost less to operate than other types of housing. and higher levels of equity investment by individual members. affordable and filled with a sense of community in a world that is becoming more impersonal. the new generation cooperative is ready to launch the project. setting out producer delivery rights and obligations. Housing Co-ops For many Canadians. Inc. and grains and oilseeds. Housing co-ops are an alternative to other types of accommodation because they are controlled by their residents not by an outside landlord.
providing a variety of products and services to more than 1. Worker co-ops employ almost 9. and environmentally responsible manner. GROWMARK. to large multi-store organizations. There is no limit to the type of business that can be established as a worker co-op. all members have an equal say in the way the business is run and in the decisions affecting their everyday work lives.coop/pdf/Resources/speechpresentations/producerAdaptationversion2ENG. airline ticket agencies. FCL is Canada’s largest non-financial co-operataive and in 2005. which let them develop their business sense by taking part in the management of the business while at the same time exercising control over the direction in which the co-operative is headed. Members combine their skills. FCL retail co-operatives paid a combined total of more than $1. One of the most unique retail systems is found in Canada’s North. employees form a co-operative to buy shares in an existing business. marketing of northern crafts and tourism.000 with revenues of $553 million and assets of $343 million. more than 184 multi-stakeholder co-operatives . Retail co-ops provide services in food. and community support.000 people. such as creating jobs for themselves. Being responsive to co-op members is also good business. In 2005. Arctic Co-operatives Limited (ACL) provides leadership and expertise to 33 member co-operatives in the Northwest Territories and Nunavut. In 2006. providing employment for more than 18. producers. FS branded and related products and services include crop inputs. feed and animal health products.000 individual co-op members. energy products. Inc is a regional co-operative that provides agriculture-related products and services to farmers and rural residents in the Midwest and Northeastern United States and Ontario through local FS member co-operatives and by GROWMARK subsidiaries. entertainment. training and education. he offered his employees an opportunity to buy the business collectively. The surplus earnings or “savings” generated by each retail co-op belongs to the members and can be repaid in cash or allocated to members’ equity accounts. helpful. This enables them to have a voice at the board of directors table.000 members. Within three years. work wear.500 members. travel. They aim to improve the lives of working people and increase democracy in the workplace through worker ownership and control. Whatever their size. the employees decided to purchase the firm and create a worker cooperative. communication.6 million with more than 454. hotels. Another Western Canada co-op retailer UFA Cooperatives Limited. Together. The worker-members say they are happy with their jobs. Co-op Atlantic posted over $500 million in consolidated sales. These benefits include equity and patronage dividends. retail. worker co-operatives are becoming more prominent. providing a community service. financial management. and cable television services. pet care supplies. trust. distribution. Worker co-operatives have their roots in the 19th century as a response to excesses in industrial capitalism and less-thanideal working conditions.200. Another type of co-op that is gaining popularity is the multistakeholder co-operative. hardware. 1.000 member families. UFA has 35 farm supply stores throughout Alberta and over 120 petroleum outlets in Alberta. GROWMARK supplies and serves 21 local agricultural coops. Natural health foods (bulk) co-ops are selling their products in both retail and wholesale markets. Co-op Atlantic is the second largest coop wholesaler in Canada. When the owner of the Quebec piemaking company Au Royaume de la Tarte retired in 1998. or increasing democracy in the workplace. Calgary Co-operative Limited.pdf). often in proportion to hours worked by members and with limited return on shares.17 (www. and close to 90. From its Ontario headquarters in Kitchener. These retail co-operatives and their branches operate in more than 500 communities. Because they develop the policies that determine the co-op’s daily and long-term operation. clothing. sales reached $4. consumer co-ops benefit their members. In Canada there are close to 330 worker co-ops in sectors as diverse as forestry.000 customers. wholesaling and distribution. agricultural supplies. which in turn represent close to 35. Arctic Co-operatives works side-by-side with the Arctic Co-operative Development Fund to support new co-op development. The co-operative’s assets are collectively owned and surplus earnings are allocated to the workers according to policies established by the co-op. personalized service. operational and technical support. located throughout Atlantic Canada and the Magdalen Islands. The main purpose of worker co-ops is to provide employment for their members. Student supply co-ops have gained a strong foothold. Each member pays a membership fee or purchases a membership share.coopscanada. serve over 200. consumers. This presentation examines the ways in which co-operatives can be used as a mechanism to deal with the changes underway in the three areas of major change identified above. taxi and cartage services. fishing.8 billion. Retail co-ops vary in size and sophistication from small buying clubs. investors and/or other possible stakeholders. These diverse co-op businesses provide their communities with services such as general retailing. Co-op Atlantic provides its member co-ops with a wide variety of services. British Columbia and Saskatchewan. a member-owner of FCL and owned itself by the people of Calgary and vicinity. In a worker co-op. and hardware. and experiences to achieve mutual goals. such as hiking. ACL serves its members by providing systems for collective purchasing and distribution. consequently. Worker Co-ops With the shortage of stable and satisfying jobs. and co-operation are vital elements in the co-op’s success. and the determination of educated and informed people to have more control over their employment and. as well as consumer related products such as lawn and garden care. MEC has over two million members and in 2006 had annual sales and services totaling $225 million. including merchandising.4 billion.8 billion in patronage dividends to members in cash. commercial and residential rental units. Over the last 10 years. Almost non-existent a decade ago. in which a few families pool grocery orders and buy from wholesale outlets. These co-ops have a total membership in excess of 13. The worker/ shareholder co-operative shares many of the same features as a worker co-op but in this model. mountaineering and kayaking. Consumer Co-ops: In a world dominated by “big box” stores and mammoth retail chains.498 people with 94 per cent working on a full-time basis. grain handling. lumber. marketing. their lives and communities. has a nearly 40 per cent share of its local market. new types of worker co-operatives have emerged. and many other consumer products and services. property management. sales had more than doubled and the number of employees had grown from 25 to 38. information technology. the co-op had revenue in excess of $1. quality products. petroleum products. and management advice and support. interests. Liking their jobs and working conditions. Its 135 member co-ops. For example. manufacturing. and home care. both in terms of operations and consumer targets. Federated Co-operatives Limited (FCL) provides central marketing services including manufacturing. no matter how many shares he or she has purchased. publishing. petroleum delivery. Membership is made up of different classes of members such workers. at the lowest reasonable price and in an informative. as well as administrative services to its member owners − 280 retail co-operatives located throughout Western Canada. Specialization in the retail co-op sector is growing. Since the 1970s. and technological and human resource development services. Mountain Equipment Co-op (MEC) has been providing a full line of products and services for self-propelled wilderness-oriented activities. co-operatives offer an alternative for consumers. FCL and its member retail co-operatives are united as the Co-operative Retailing System (CRS). each member has one vote. especially in Quebec where nearly 85 are active and represent sales of $134. That represents a lot of money going back into Canadian communities. These co-ops obtain many of their products from wholesale co-op distributors.500 employees. In recent years.
earn profits and to make their own decisions about distributing surplus. A group of motivated persons who share common problems is needed. or the state. 7th principle: concern for community Cooperatives work for the sustainable development of their communities through policies approved by their members. taking into account the interests and needs of members as well as the entrepreneurial goals of the cooperative enterprise. Another mandate of the organization is to encourage the development of more worker co-ops. They must be able to provide the services and goods required by the members. and democratically control. Cooperatives can only develop as autonomous self-help organizations when they are able and allowed to operate as business institutions geared to succeed in market competition. national. Worker co-ops in Canada are represented nationally by the Canadian Worker Co-operative Federation (CWCF). seven principles of cooperatives were agreed by which Cooperatives put their values into practice: 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. If members’ competence and motivation is low. including governments. 4th principle: autonomy and independence Cooperatives are autonomous. Members decide upon the services to be provided and benefit from what is produced or obtained by the cooperative.g. elected representatives. land. training and information Cooperatives provide education and training for their members. Many provide home care services to seniors and people with health problems. etc. Conditions needed to create a cooperative. produce) to the development of the cooperative. • the cooperative needs to produce visible and tangible (economic and social) benefits for members. services. market their own goods. social. the capital of their cooperative. regional. they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy. racial political. 2nd principle: democratic member control Cooperatives are democratic organizations controlled by their members. self-help organizations controlled by their members. benefiting members in proportion to their transactions with the cooperative and supporting other activities approved by the membership.g. • there are no legal or political restrictions on groups being able to elect their own leaders. the promotion of complicated and complex cooperative organizations does not make sense. and employees so that they can contribute effectively to the development of their cooperatives. possibly by setting up reserves. if any. or raise capital from external sources. part of which at least would be indivisible. They usually receive limited compensation. Module 1 Page 6 5th principle: education. • there is no alternative to cooperative self-help . Cooperative organizations are based on several fundamental conditions: • existing problems and constraints cannot be solved individually. without gender. This group was founded in 1991 to provide a voice for worker co-ops on the national stage and to encourage communication among individual worker co-ops. With financial assistance from Human Resources Development Canada. Seven principles of cooperatives At the congress of the International Cooperative Alliance in Manchester in 1995. and international structures. • the cooperative has motivated.) outweigh the duties of membership (e. time. outweighing the costs involved in cooperation.18 were incorporated in Quebec by 2003. markets. A major . labour.e. managers. loans. etc. If they enter into agreements with other organizations. 3rd principle: member economic participation Members contribute equitably to. They inform the general public -particularly young people and opinion leaders-about the nature and benefits of co-operation. decision making and control or evaluation processes of their cooperative. Men and women serving as elected representatives are accountable to the membership. 6th principle: co-operation among cooperatives Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local. Essential conditions for continued success of cooperative organizations There are a number of conditions which are essential if a cooperative is to continue to be successful after the initial enthusiasm of starting up. equipment etc. inputs. The fund and resources available through the Co-operative Development Initiative work in conjunction with the Worker Co-op Development Network. Cooperatives are participative self-help organizations in that the members are also co-owners and have both the rights and obligations of participating in goal-setting. In primary cooperatives embers have equal voting rights (one member one vote). • the structure and management of the organisation correspond to the capabilities of its members. • the advantages of membership (access to goods. It is essential for successful work that s/he be reliable and has charisma. experienced and dynamic managers who are able to plan and implement business policies. a social institution. • at least one person amongst the group has leadership ability and takes the initiative to represent the group. help cannot easily be provided from family. a worker co-op development fund designed to create new and expand existing worker-owned co-operatives in all regions of Canada. Members allocate surpluses for any of the following purposes: developing their cooperative enterprise. on capital subscribed as a condition of membership. Contribution of resources such as money. • members participate as both users and owners. who actively participate in setting their policies and making decisions. There should be incentives for them to contribute their own resources (capital. CWCF owns and manages Tenacity Works. or religious discrimination. which provides the development capacity for worker co-ops.). and cooperatives at other levels are also organized in a democratic manner.
market oriented conditions and increasing member demands. • participation in the decision-making processes of the cooperative organisation as a member in the general assembly. • they can offer new services / access to external resources / services not otherwise available. implementation. contribution of capital. processing. • assisting farmers in improving and increasing their agricultural production. State any assumptions made which would need to be checked. The groups should consider in particular the following points making suggestions where possible or listing questions which need to be answered. Some cooperative organizations consider it legitimate to allow nonmembers to make use of cooperative services where for example this allows for greater economies of scale or helps to attract new members. to earn profits and to make their own decisions about distributing surplus and to carry out numerous other business activities in the members’ interests. by facilitators or cooperative promoters from representative organizations of cooperatives. i. or being ready to receive the products delivered by the farmers themselves.g.g. • providing training to members to improve and maintain the quality of their produce. The potential which cooperatives have for achieving desirable economic and social conditions must be understood as the potential they have for reaching the objectives of and for satisfying the needs and interests of their own members rather than directly influencing society in general. do not have a say in the running of the cooperative. This means a need to learn new production methods. Or. for information. by sharing the surplus earned during the year by the cooperative enterprise. This can be achieved through increased participation. or as an entity charged with special responsibilities by a government. Main steps and activities in forming a cooperative (Adapted from DGRV 1990:35) . to market their own goods. • avoiding linked markets. members need to be clear what they expect to achieve through the cooperative. and • participation in the produced benefits (output participation). or. section meetings.g. control and exchange of services and goods. collect the goods at the farm gate. packing. in the form of a patronage refund. and should not play a role as a governmental agency. what is the purpose and is this the best way to achieve such a goal? An objective of a marketing cooperative for example might be to assist the interested farm households in marketing their produce on a sustainable basis. i. prices and availability of inputs. They can at best be assisted. • controlling products with regard to quantity and quality. by members of established cooperative organizations.e.19 reason for the failure of cooperatives is the lack of participation of members. seems most effective when it results from efforts of members themselves. and in particular. interest on share capital. or NGOs. bulk purchase) • reducing transaction costs e. work groups. Government intervention to precipitate or control such a process in most cases has proven counter-productive. It is extremely important that members act as both users and owners in the development of cooperative organizations through participation at three levels: • participation in provision of resources (input participation) e. a number of issues need to be discussed. therefore they must offer advantages over the alternatives.e. or the use of joint facilities and services. also need to be flexible and able to change with the circumstances. thus providing increased income and improved living conditions. committees or as an elected leader on the board. self-financing and self-reliance is strengthened and not undermined. plan organise and implement all activities related to this objective. i. communication and information provided the organization’s core activities are efficient in meeting members needs. Development of cooperatives from other self help organizations There have been many attempts by government to promote the development of indigenous self help organizations into formal cooperatives. Non-members do not have this advantage. as with any business organisation. To be attractive. • reducing uncertainty concerning e.e.g. storage and delivery. Cooperatives. new methods of organisation and management. Non-members. Cooperative organizations will have advantages over their competitors when they can either provide the same services/activities at lower costs through: • economies of scale (e. quality and quantity of produce customers want. delivery of produce. more formally. but also owners of the cooperative organizations they also participate in forming and steering their own organisation which means they can help ensure it meets their needs and share its profits or distributed earnings.equity capital and joint liability Forming and organising a marketing cooperative In considering whether or not to form a cooperative. member loyalty and commitment. Ideally. Government’s should not otherwise intervene in the internal organisation or operations of a cooperative. Potential advantages of cooperative organizations Farmers and rural household can either produce inputs themselves or buy them. governments have provided too many regulations and controls on the activities of cooperatives for them to be able to function effectively. labour. • arranging contracts with the customers. At present. This means ensuring that legally. ❐ Objective and activities of the Cooperative ❐ Facilities needed by the cooperative ❐ Membership ❐ Management of the Cooperative ❐ Finance . Such a process however. where for example the purchasing of inputs or the marketing of produce are linked to the provision of loan facilities. groups are allowed to elect their own leaders. however. they should act only to create the general framework conditions needed so that cooperative autonomy. Before going into detailed plans. It should be clearly understood that cooperative organizations should not act in any sense as agencies of government. and should leave all attempts to improve efficiency and to comply with cooperative principles and values to the members themselves. cooperative organizations all over the world are facing the task of transforming and adjusting themselves to a new economic and political environment. The cooperative would then need to design. ways to help maintain or increase. The role of government and external assistance in promoting cooperative organizations In many cases. either informally. For example: • market surveys and studies to explore what kind. Cooperatives are one way individuals buy inputs and services. Since members are not only clients. • preparing the produce for delivery to the customers.
This is likely to result in members being unhappy with the results and apathetic about their involvement in the cooperative. iii Finance • are members able to contribute their own resources to the cooperative (cooperative shares)? • how many members will join. providing their produce in the needed quantity and quality on a sustained basis? A plan needs be prepared stating the finances required and where it will come from to finance the planned activities. to make statutes regarding all matters necessary for the functioning of the cooperative organisation and for achieving its objectives. storage rooms? Will they be rented or constructed with own means? • what equipment is needed: transport facilities. They are the internal legislation of the cooperative. Outside resource persons may be needed at this stage particularly someone familiar with the process and the legal requirements. Cooperatives are free. it may happen that a few members create and impose their own rules and run the cooperatives according to their own style and for their own benefit. processing and marketing? • what will be the activities of the cooperative? • what will be the advantages of becoming a member? ii Regulations • what permission is needed to set up and run a cooperative business? • what will any permits cost? • are there favourable conditions which will favour the cooperative development process. pack and deliver them etc. technical training staff. e. Cooperative movements. When a cooperative is in its formative stages.g. accountants. packaging and handling equipment? • what staff are needed (office clerks. favourable credit conditions etc? • what internal regulations (‘statutes’ or ‘by-laws’) need to be agreed by the founding members in order to get a clear understanding of the cooperative group and its activities? Contact the local authorities to review the law and statutes regarding cooperatives in the area. the founder members have the task of fulfilling all the conditions which are necessary if the cooperative is to have a sound foundation. It may be more practical for a sub group to be formed to gather the information needed & draft the statutes. skills and experience needed? Step 2: Prepare the cooperative statutes/by-laws The results of the discussions on the above points need to be written into cooperative statutes or by laws which are the interpretation of the cooperative law for that particular cooperative. If statutes are not properly discussed. office equipment. storage facilities. and with how many shares (paid up)? • how much working capital is needed? how much will be available? (cash money. liabilities)? • are the member households able to. Model statutes may be available which could guide this process. The founder members will need to formulate the statutes of the cooperative themselves.)? v Marketing • how can customers needs be identified? • what are the possible outlets for sale of members produce? • can long term contracts be made with such suppliers and customers? • who are the competitors in the region? vi Management • who will run the activities of the marketing cooperative? • how will they be chosen? • are the persons elected trustworthy and honest? • do they have conflicting interests while performing other activities of their own? • do they have the knowledge. However model statutes are intended as guidelines only. Statutes regulate not only the existence of a cooperative. the fact that they exist. governments or other institutions often make available a set of model statutes as a guide to help the founder members to formulate statutes for their specific cooperative. for discussion by all the founder members. Contents of the cooperative statutes/by-laws The statutes are most important basis for the legal relations between the member and the cooperative and consequently should be as detailed as possible. does not mean that they should be imposed on the founder members. government assistance programs. labourers to receive the products. Some cooperatives include the relevant aspects of cooperative law within the statutes even though these are already prescribed by the cooperative .20 Step 1: Hold an initial discussion meeting An informal meeting of those interested in forming a cooperative first needs to be held to discuss the following (non-exhaustive) list of points: i Interests of members and prospective members • what is the purpose of the cooperative business? what will be its scope? • what are the common interests of members in forming a cooperative? • what are the needs and interests of members for supply. New cooperatives often accept model statutes without discussing their contents section by section which means that members do not understand the meaning of the statutes or whether they are needed for their particular cooperative. but also the direct relationship between the cooperative society and its members. and interested in. within the limits of the cooperative law. iv Facilities • which facilities are needed: offices.
multi-purpose. Apart from the legal requirements in relation to the name it is advisable to choose a reasonably short name which is easy to remember.g. It’s location should also be part of the name. because: • members may not be able to understand the complexity of the issues which call for a decision. Membership Cooperatives are only as strong as their members make them. If so. the number is ten though this varies from country to country. too many people). In many countries. a cooperative needs to have a certain number of members which has to be set out in the statutes. The cooperative can only carry out activities which work towards the objectives for which it was formed. in this way they are able to obtain all necessary legal information from one document. A name should also be able to survive changes which may take place as the cooperative develops. A period of notice should be foreseen (e. A specific statement would then detail the goals of the society. • processing and packaging the produce before sale as needed. the minimum number may be too few to function effectively as a business.who can become a member • termination of membership . The cooperative therefore needs to look at all its intended activities when defining its objectives. production. Since cooperative members often have easier access to the statutes than to the law. Organs of the cooperative i The General Meeting of members The general meeting of members is the supreme organ of the cooperative. To qualify for registration. to pronounce and also to identify the cooperative with.21 law. e. Members need to understand the rules governing operations of a cooperative if they are to play these two roles successfully. While a member in principle has the right to use the services of the cooperative.g. The objectives of the cooperative should include a general statement as to the purpose of the cooperative. marketing. The cooperative should not feel. For example. The statutes should be divided into following main headings: Firm(name) & Location of business(residence) A cooperative must be recognisable by its name. Members need to be aware of their dual role. • maintaining a system for collecting the produce from the farms. (e. members must be farmers and exercise their profession and business. e. In many cases. especially. e. “to market the farm produce of its members”.when can a membership be ended • transfer of member’s share capital • death of a member • exclusion of a member • arrangements between member and cooperative • rights of the members • obligations of the members In some cases. • building and maintaining storage facilities.g. For example • investigating the markets to determine what products of what quality and quantity customers want. there needs to be provision for membership to be cancelled. • the organisation of the meeting may make effective decision making difficult (e. a marketing cooperative should not only market the products of its members. it may be decided that non-members will also be allowed to make use of some or all of the services of the cooperative. • marketing the produce to gain the best price possible. if the heir fulfils the requirements laid down in the statutes.g. However. The economic function should also be evident in the name. purchasing. • one group may dominate the meeting preventing effective discussions. This provision is of importance as cancellation of membership by the cooperative is not otherwise possible (though members themselves may cancel their membership). through which the cooperative can fulfil its purpose. e. an expansion of activities and business. integrated agricultural cooperative etc. Membership can be inherited. members may not be in a position to participate effectively in the decision-making process for example. The Objective A cooperative unites people who have at least one common interest which is usually articulated as a problem which the members would like to solve. low incomes rather than lack of markets for a particular crop). In defining the objective. and • advising the members on how to improve their produce and grow different products to suit the market. These activities or functions of the cooperative can be identified once the nature of all the problems of its members has been defined and the necessary measures for solving these agreed. that just because it has the minimum required membership. This means that the general meeting makes all basic decisions regarding the structure and operation of the cooperative and any decisions made at a general meeting override decisions made in any other forum. The main points that should be included in the statutes concerning membership are: • acquisition of membership . as both owners and customers of the cooperative. three months to one year) for membership to be cancelled.g. Membership should be linked to pre-requisites and if these become no longer valid at some point. • the cooperative has grown so big that the management keeps all the information to itself. however. this should also be written into the statutes but as an additional character only as opposed to the main purpose of the cooperative. in the early stages of cooperative activities. but also show the members new or better methods of improving the quality of their products. Matters related to membership must. it should begin operations.g. reducing the importance of the role of the members in decision-making In order to ensure that members participate actively in meetings and are able to make . the cooperative itself cannot force the member to use the services if no provision is made for this in the statutes. be regulated with utmost care. For example. ‘Arango district agricultural marketing cooperative’. it is important that the members consider what the root problems are first before deciding how to solve them. therefore.g.
In such a seminar it would also be possible to invite “resource persons” such as bank officials and local decision-makers. The following provisions may be included in the by-laws/statutes: • duties and obligations of the control board • joint meetings of the management committee and the control board. minimum or maximum age. However. The statutes should also make provisions for any statutory reserves required by law. • what is the composition. by paying them a form of dividend on members’ money which exceed the statutory requirements.one vote”. The joint liability beyond equity should at least be as high as share equity which increases the credit worthiness of the cooperative. Some restrictions on who is eligible may be written in to the statutes. At these seminars members could be informed in detail and discuss the issues on which decisions need to be made at the general meeting. or as deposits etc. ii The Management Board The management board (management committee or board of directors) is responsible for running the cooperative. As the business and needs of the members expand. members can be informed extensively but left to form their own opinion. Members can be induced to make larger contributions towards the financing of the cooperative where it is seen to be to their benefit. and any other reserves (voluntary reserve fund) thought necessary. The amount of the business share must be calculated to guarantee the smooth running of the cooperative business. thus acting on behalf of the members without having to consult them on every issue. e. as form of borrowed capital (loans from the members) on which an interest must be paid.g. Such “seminars” should be an integral part of the statutes. These seminars could be held together with the meeting. • how any extra money is to be treated. it is suggested that the cooperative organises discussion seminars prior to the general meeting. The control board should consist of at least three members elected by the general meeting. or as an honorary occupation depending on the size of the cooperative and amount of work involved. A minimum sum (or percentage) should. The following aspects of the management committee of the cooperative organisation may be defined in the by-laws: • who is responsible for the management of the cooperative organisation • who represents the cooperative organisation • what are the tasks and obligations of the management committee • who reports to the control board. Thus. It is advisable to act jointly to guarantee the control of the management. duties. Members’ participation in the financing of the cooperative should not however be restricted to share contributions and payments into the reserve. the seminar must have an official end and the meeting a formal beginning. Borrowed funds form another source of cooperative’s financing. It should consist of at least two members who can be asked to act on behalf of the cooperative either jointly or individually. minutes In smaller cooperative organisations it is usual for all members to have equal voting rights “one member .22 effective and informed contributions. for example. who are in a position to analyse issues from all sides.from the members. if they are unable to vote personally. and • how to calculate the value of non-peculiar contributions -such as labour.g. It may be useful to allow members to transfer their voting rights to another member. It must also be decided for which period the board is elected (usually between two years and five years). It may be written into the statutes that the equity capital can be paid in instalments rather than all at one time. obligations and service regulations of the management committee? • which decisions need the approval of the control board? • when should the management committee participate in meetings of the control board? iii The Control Board While the management board (also called Supervisory Board) is responsible for running the cooperative. The statutes should clearly define: • which members’ money form a part of the cooperative’s self-financing. Surplus should be distributed according to the transactions with the cooperative and may be according to the paid-up shares of the members. The cooperative should assess which issues need prior discussions in this way. as a part time job. e. or whether the board can act more independently. The management board may carry out its activities as their main work. The statutes should spell out whether the board can act and take decisions only on the explicit authority and approval of and by the members. however. more and more time will be needed and it may become necessary to employ a full time manager. matters which need the approval of the control board • composition and election procedures • constitution and decision-making Equity capital and joint liability Equity capital (ownership capital) must be determined in the statutes.. The statutes need to clarify . relative etc. The statute may contain the following provisions for the general meeting: • pursuance of membership rights • period of time and location of the meeting • convocation and agenda • chairmanship of the meeting • subjects for decision-making • majority requirements • discharge of committee members • voting and elections • right to demand information • records. the purpose of the control board is to exercise the members’ control over the decisions made by the Management Board. however. should be laid down in the statutes. The functions of the control board also. Distribution of any net surplus needs to be decided by the general meeting. at the general meeting (despite the possibility that some members may own more shares than others). be fixed. a certain level of education or professional experience etc. In many cooperatives the functions can be carried out on a part-time basis with perhaps one or two paid clerks to assist the board.
the establishment of subcommittees and rules for voting. consider grain elevators. and thus gain greater product recognition. agricultural cooperatives can also be a big benefit. of Pakistan. These are often used for storing or drying grain. It buys seed in bulk. a cooperative is a group of individuals who have come together to pool resources for a specific purpose. • the purpose of such borrowed funds and • which sources of funds are acceptable. but it does so in a way that is specific to farmers. they cannot make optimum use of their resources. For example. and then sells that seed to farmers as needed. agricultural cooperatives often do even more for the membership. Finally. and which many consumers mistakenly assume are owned by major corporations. Record books and record keeping should be mentioned in the statutes when it comes to setting formalities as regards: • which books should be made available to those entrusted with the supervision and any other supervising body • which books the general membership has access to. While managing Limited resource base. along with a small up charge for administrative duties and facility upkeep. it may at times offer better deals than farmers could find at a traditional gas station. annual balance sheet and situation report. This may include pooling resources to buy seed. or farmers' co-op. and commercial banks and cooperatives are the only sources of mark-up free production credit for them. An agricultural cooperative. Members are allowed to sell through a cooperatively owned brand name. CHAPTER – 1 INTRODUCTION Background of Study Small farmers numerically abound in Punjab’s Agriculture. The small farmers primarily need funds to meet their production requirements. the organization will then distribute the grain and beans based on contracts that have already been bought on the commodities market. the statutes should make provisions for details such as invitations. loss coverage etc. To understand the usefulness of an agricultural cooperative. While most such efforts are local. does what all other cooperatives do. but also their personal vehicles. it was replaced by mark-up free credit for small farmers. What is an Agricultural Cooperative? In general terms. and • which bodies or persons can make entries into the books or make alterations Other provisions may include accountancy regulations such as the dates of the financial year. which is used to build an elevator and store the grain for all the members. This will help the members and the organs to protect their obligations and rights. store grain. the cooperative serves as a discount retailer. In such a situation agricultural credit is one of the most effective means by which their invest able fund could enhanced. The Agricultural Development Bank Pakistan also did not extend any interest-free loan to farmers as it is heavily involved in development loans. Subsequently. or barge. farmers may also use a local agricultural cooperative. When it comes time to buy seed. Marketing may be done by an agricultural cooperative as well. dissolution and splitting of cooperative organisations need to be regulated as well. The commercial banks came in the field for agricultural credit in 1972-73. 71 per cent were small having operational area less than 12. such efforts are so successful that they result in product brands that receive national recognition. In 1979. 1985 and 1986). they belong to an agricultural cooperative.5 acres. The non-institutional sources are neither sufficient nor reliable to meet credit needs of farmer making it necessary for the Government to operate in this field and extend credit to farmers through its agencies. calling and chairing of meetings. Step 3: Hold a conference to establish the marketing cooperative When all the above points have been thoroughly discussed and understood by those wishing to form a cooperative. The share of mark-up free loans in total agricultural loans going to small farmers in Pakistan was 01 per cent in 1984-85 (Govt. merger. Often. There are two main sources of agricultural credit: Institutional and non-institutional. whereas the needs of small and marginal farmers differ from the objectives of development loans. The site may serve as the central location for farmers delivering their grains and beans. but most small farmers do not have the resources or time to purchase and build one of these structures on their own. After this has taken place the leaders of the cooperative should apply for the registration certificate with the appropriate authority. In this case. While these essential farming services are important. The cooperative is a non-profit organization.23 matters such as: • any extra liability which may be imposed on the members when the cooperative borrows money externally. some cooperatives offer gasoline and diesel fuel where farmers can go to not only fill up their farm machinery. and therefore does not need to charge any more than what the seed costs. (iii) commercial Banks. on occasion. Distribution may be done by truck. The Government agencies which provide credit to farmers are (i) the Revenue Department: (ii) the agricultural Development Bank of Pakistan. they are hardly in a position to adopt modern technology which needs investment of additional funds. During the first two years of their operation. depending on the location. or even help with marketing efforts. the Government introduced interest-free credit programme. The revenue Department did not involve itself in this activity as it was loaning basically at the time of famine and distress. Proceedings and regulations Cooperative law only contains general regulations for the functioning of the cooperative. and (iv) the federal bank for Cooperatives. Unless they are able to apply modern technology.54 million farms. The money they put in with their membership. Once at the agricultural cooperative's location. rail. In order to avoid misinterpretations. sell grain. Due to the fact that the cooperative is a non-profit organization. recommendations for dealing with violations and grievances should be made. an establishing conference needs to be arranged to agree to or amend the statues and legally establish the cooperative. out of 2. The liquidation. their contribution rose from zero to 31 per cent in total agricultural credit . When it comes time to sell the product the seed produces. According to 1980 Agricultural Census of Pakistan. an agricultural cooperative is involved in all of these matters. Therefore. • who gives the authority to borrow and to whom this authority should be granted.
The rest was pre-empted by different influential persons in the rural areas. After getting delivery of fertilizer. whether these loans actually benefited the loanees and achieved the purpose for which these were granted. generally in the form of chemical fertilizers. (ibid) details are five in Annexure. Thus MCL’s of cooperative members and of societies are fixed in each season. Step-2 When at least 10 farm households are ready to join together to form on agricultural cooperative society and to buy shares of the society worth at least Rs.92 Million in 1984 –85. Step-4 After the Sub-Inspector’s or Inspector’s report either the Assistant Registrar of the area or the concerned Circle Registrar registers the society. Procedure for Establishing Primary Cooperative Credit Society At present.000 for a farm of 12. they can fill application form for the registration of the society and apply to the Circle Registrar.24 in Pakistan (ibid). Organization of Study The study is organized into 7 chapters. Step-3 Before the application is considered for registration of the society. Although commercial banks’ mark-up free credit was meant for small farmers.) in 1984-45. The procedure for setting up new cooperative credit societies is explained step by step as below:Step-1 Most important step in establishing a new agricultural credit cooperative society is ‘cooperation among farmers’. Moreover. but the small farmers could acquire only 40 per cent of it. Since the Punjab was the main recipient of this credit. Chapter 4 presents a profile of sample agricultural cooperative credit societies. it seems appropriate to explain here the procedure of getting a society registered and obtaining a loan.g. to find out as to whom the benefits of the cooperative loans accrued. . Government of Punjab. Crop input needs of members differed by season so do their MCL’s. The mark-up free credit disbursed by commercial Banks has already been examined by the Punjab Economic Research Institute. it can apply for a loan up to its MCL from the concerned branch of PCB. the procedure is so simplified that the representative of the society can get its loan sanctioned within a short time. their share in 1984-85 was 45 per cent (ibid) Cooperative societies are concentrated in Punjab (e. 92 per cent of total agricultural cooperative societies were in Punjab. In this meeting he collects information about the members and the accuracy of the entries regarding their farm size. In the light of the findings about commercial banks. and Chapter 5 examines the flow of cooperative credit to agriculture.1000 and are also willing to pay membership fee. Procedures for obtaining Cooperative Credit The amount of credit given to a society by the Provincial Cooperative Bank (PCB) determined by adding up MCL’s of its individual members. the function of agricultural credit disbursement is being done mainly by primary ‘cooperative thrift and credit societies’ which are established on single village basis. Once the MCL of a society is fixed.10. the Sub-Inspector or Inspector of Cooperatives of the area visits the village and calls meeting of the members of the groups intending to form a society. and in it. The Punjab Economic Research Institute undertook this study with due deference to the directive of the Planning and Development Department. in the flow of cooperative credit to the small farmers to see the impact of cooperative loans on the fertilizer use levels of the small farmers to evaluate the impact of cooperative loans on the crop yields of the loanees to suggest policy measures to improve the system of cooperative loans in Punjab Since this study is going to see the flow of cooperative credit.5 acres for two crop seasons in a year. specially on the sue of fertilizer and crop yields. Punjab’s share in cooperative agricultural credit disbursement in the country was 93 per cent. Chapter 6 deals with the economic impact of the credit. Theoretically. examines the cooperative movement in Pakistan in historical perspective. the share of `genuine loans’ was only 23 percent. it was considered worthwhile to examine whether the mark-up free cooperative agricultural credit was reaching the small farmers – the target group. Chapter 3 explains the methodology followed for data collection for this study.e. the present study was done in this province. The amount of such loans disbursed in Punjab was Rs. Whereas the limit of a member mainly depends on its crop-input needs. The study (Khan and Sarwar. This meeting is held at some common place so that other households from the village could also participate. In Chapter 7 a summary of the major findings and policy recommendations of the study has been given. Chapter 2. which follows the introduction. if any. Thus the next section gives information in this regard.1495. the society is supposed to distribute the fertilizer among its members. as mentioned above. Government of the Punjab to conduct a study on interest free credit through Agricultural Cooperative Credit Societies in the Punjab. the maximum is Rs. The Institute had also received a request from the Cooperatives Department. 1986) discovered that almost all the credit disbursed by commercial banks to agriculture was mark-up free. Once at least 10 farm households are ready to join together to solve their Economic (related to agricultural production) problems on self-help basis they can form an agricultural credit cooperative society. and briefly introduces methods of data analysis applied in this study. Objectives of the Study The specific objectives for the study are outlined as follow: to estimate the proportion of cooperative loans reaching the small farmers in Punjab to identify the shortcomings. The application from is in Urdu and explains in detail the purposes and functions of the society. i. The loan to a society is given in kind. The society then affiliates itself with the Provincial Cooperative Bank for the purpose of obtaining loans.
the Governor of the State Bank of Pakistan. was issued on 15th March. the Cooperative Development Board was established in 1962 with the purpose of creating the required capacity for development planning and project preparation on the one hand. the FBC provided increasing amounts to PCB’s and they in turn extended loan able funds to cooperative societies. The programmes run by the Board were either abolished or transferred to private businessmen. the Federal Bank of Cooperative (FBC) was established with a share capital of Rs. The main points of the Order were: 1. after the partition many of its management staff migrated to India. The movement progressed quite steadily in British India. The amount of this credit in Punjab was Rs. etc.610. The communities respectively recommended for “patient and persistent education of member’s. the Punjab Province also experienced a fast growth in agricultural cooperative credit. In pursuance of this policy. the autonomy of the movement was curtailed and the control of the bureaucracy increased The Cooperative Societies Reforms Order. four provisions of Pakistan and the State Bank of Pakistan.495. the Punjab Government appointed a Cooperative Inquiry Committee in 1952 to review the position of the Cooperative movement.43 million in 1976-77 to Rs. Moreover. In 1966. No individual would be a member of a Central Banks. The committee suggested to change primary cooperative societies into Cooperative Development Societies. Later on. agricultural cooperative credit increase from Rs. No trader would be a member of an agricultural credit or marketing society. and as a result the cooperative movements in all the four provinces were united. The function of these societies was not only to effect disbursement of credit. Moreover. Since the managing committees of the central banks were dominated by traders. the status of the Registrar was raised as recommended by the Commission.25 CHAPTER-2 Cooperative Movement in Pakistan Historical Perspective British Period The cooperative movement was started in British India with the coming into force of the Cooperative Credit Societies Act.G. The cooperative movement branched out into diverse fields of commercial activities such as processing of agricultural produce. The committee also favoured the idea of secondary associations at tehsil level. The number of agricultural credit societies and their membership also increased. Thus. 1904.10. In pursuance of these policies. due to inefficiency in commercial operations and complaints about willful mismanagement. Additionally. But this could not meet the credit needs of the small farmers.85. Previously. Abdul Qadir.92 million in 1984-85 . but also to organize the distribution of agricultural inputs such as fertilizer. they could also undertake development work like installation of tube wells and building of officers. 1.6. The scope of the cooperative movement was also widened through the Act which also provided for their involvement in activities other than credit. Thus the Registrar of One Unit of West Pakistan had to face different sets of laws and regulations. During the Second World War it was used to distribute food grains and other consumer goods. One of the recommendations of the Commission was to vest more powers with the Registrar of Cooperative Societies. The main objective of this Act was to help small farmers by providing them agricultural credit at low rates of interest on self-help basis. and Cooperatives were given bigger role in helping the farming community. whose are of operation was more than a village. and of promoting self-management within the movement. Still another ordinance declared the members of Managing Committee to be public servants as defined in the Pakistan Panel Code and they were covered by the anti-corruption laws.1. In 1959. The Board was quite successful in implementing several development schemes for agricultural credit supply. Saraiya – were appointed to review the position and to suggest a development plan for the movement.50 acres.94 million in 1976-77 which rose to Rs. The main purpose of this bank was “to provide credit facilities to the Provincial Cooperative Banks (PCB’s) and regulate their operations”. and to make the cooperative system simple by merging Central Cooperative Banks into a Provincial Cooperative Bank. FBC introduced various changes in the system of cooperative credit disbursement as a result of which the system was simplified.000 which was raised to rS. 3. an All India Cooperative societies Act was passed to facilities the organization of secondary level societies in the form of federations of primary societies in order to provide financial and administrative support to primary units. 1972. the Cooperative Board was abolished. 2. in 1912. No person would be a member of the Managing Committee of a Cooperative Bank for consecutive terms. The committee recommended among other things that the Central Cooperative Bank should gradually withdraw from commercial loaning to individuals and should also exclusive individuals form their membership. Later on two committees – one headed by Sir Edward Maclagan in 1914 and the other in 1945 headed by R. But in 1953-54.200 million. Therefore. During the late 50’s one unit was created. Most recommendations of the Commission were implemented. the Government of Pakistan appointed a Credit Inquiry Commission. Initially. A crash programme was also introduced to achieve faster growth in cooperative credit. Post-Partition Developments Although. the structure of the movement was different in Sindh Compared with the Punjab and NWFP. marketing and processing. seed and pesticides and arrange for the marketing of agricultural produce.19 million in 1984-85. it took more than a decade to prevent the central banks from giving loans to individuals for trading.95. In order to help the movement ‘in its extensive and more technical role. the ordinances issued by the Government in this per gave more powers to the Registrar to recover over dues as arrears of land revenue. god owns. who did not understand the purpose of the Government directive for the cooperative movement to withdraw from commercial activities. more than two In 1976. After its establishment. which was headed by Mr. the maximum amount of markup free loan was fixed equal to Rs. the Government directed that the movement be withdrawn from the Commercial field and assigned its traditional task of helping the farmer in agricultural production and marketing. The Government constituted another committee in 1963 to examine the working of the cooperative movement and to suggest plans for its reorganization and improvement. Also. the movement came forward and helped the nation in its difficult time. procurement and distribution of food grains and consumer goods and financing of wholesale and retail trade. and in Baluchistan it was almost non-existent. 1972. As a result of these ordinances. Similarly. The shareholders of this bank were: Federal Government. after this the cooperative movement had not only to channel credit to the farmer.000 for a small farmer having farm size up to 12. the Government decided to provide mark-up free loans to small farmers through cooperatives in 1978-79. but they were also supposed to provide banking facilities to their members.
EHL have subsequently been appointed as agents for procurement of arecanut from this UT. the movement reached a level of 969 Coop. it discusses the concept of cooperation and illustrates that the contradictions in the ideology and practice are more significant in explaining the limitations of cooperatives to serve as an instrument of development. MIS and improvement/diversification of plantation produce “has a total allocation Rs. Unemployment Problem With a view to provide employment opportunities. By analyzing the area of agricultural credit. Conceptual Framework .1. especially due to the lack of their recognition. The first Cooperative Society under the name “Rangachang Cooperative Land Syndicated Ltd.26 COOPERATIVE MOVEMENT The history of the Co-operative Movement in a & N Islands dates back to the year 1926 with the framing of Coop.05 lakhs. the educated unemployed youths were motivated to form Coop. The scheme was in existence from 1-8-2002 to 31-102002.9. South Andaman in the year 1946. Safeguarding Vegetable Growers The department has taken initiative to safeguard the interest of the vegetable growers and 7 retail outlays for vegetable have been opened at various places. Havelock Diglipur. The tribals viz. Second. The movement gained momentum only in the post independence period with the implementation of the colonization scheme of the Govt. The new scheme viz “Assistance to cooperative Societies for implementation of 5th PSS. During the said period 852733 Kgs. An attempt to fulfill a range of these conflicting objectives simultaneously has eventually led to a broad based disenchantment with the cooperative movement. Cooperatives and Development: Lessons from the Punjab Experience INTRODUCTION Traditionally. of arecanut purchased. Societies Rules under the Cooperative Societies Act 1912 since promulgated by the A & N Island Coop. the paper points out the implications of the past experience for the future role of cooperatives in Punjab. The Cooperative movement also plays a predominant role in the development of tribal communities of A & N Islands. Further under the scheme the proposal to provide 50 Copra driers to various co-operatives organized by the growers against which 45 Co-operative Societies have benefited.03 alone. This paper highlights two sets of issues with respect to cooperative development. 1973 and Rules 1974. There exists substantial trade-off in the realization of many of these goals. Societies have been registered during 2002-2003 and 6 in 2003-2004. Societies to undertake Govt contract works. The department has already undertaken the construction works of wholesale vegetable Market at phoenix Bay to provide warehousing facilities to the vegetable cooperative societies at an estimated cost of Rs. and Onges life style and economic stay fully is dependent on the plantation produce like coconut and arecanut. Societies Regulation. Societies in different sectors with membership of 73185 with a Share Capital of Rs. including economies of scale and social control over resource allocation and mobilisation. and transportation of goods. Sentinalees. of India rehabilitating of refugees of the east Bengal in various part of the A & N Islands. safe guard the interest of the growers of agriculture plantation produce. Jarawas. At present. The sector wise growth of cooperative movement in the territory of A & N islands is as under: Market Intervention Scheme The market intervention scheme has been introduced as per the directions of the Govt.346. Altogether 67 Cooperative Societies are functioning in the Nicobar district. The other tibals viz. Introduction Of A New Scheme The department of Cooperation has come up with a new scheme exclusively for the benefit of the farmers of the Copra. these various objectives are not mutually consistent. the paper points out that in the absence of various external and internal prerequisites.09 crores has been envisaged for 2002. this paper illustrates various dilemmas and contradictions and the preconditions necessary for credit cooperatives to reach the rural poor effectively. Societies have been formed by the educated unemployment youth of which 28 Coop.78.57 lakhs of which 103 Cooperative societies were organized and registered during the year 2002-2003. tourism sector. It is therefore necessary to weigh their relative importance in the felt needs and priorities of a particular community at any given point of time if performance of cooperatives is to be evaluated in an appropriate context. Arecanut and other plantation produce taking into the consideration the fact that even if GOI withdraws the MIS. First. The produces are being marketed through the Cooperative Societies organized by the tribals in their areas. cooperatives tend to be inefficient relative to other forms of traditional institutions even after receiving subsidies and other types of assistance. Over the years. thus neither achieving efficiency nor development. These were allotted to vegetable growers of Neil. 243 Coop. However. Finally. For the current year the work of procurement arecanut has been allotted to ANIFPDC Ltd. of India for the benefit of the agricultural farmers.. supply of stationeries. of arecanut were procured and the government accepted 204857 kgs. funding of a local scheme will be possible in order to protect. Andamanese.” was organized and registered with the local inhabitants of the Rangachang. cooperatives have been expected to serve a broad set of socio-political and economic objectives ranging from self-help and grass-root participation to welfare and distribution. in which cooperatives have traditionally been most active in the Punjab. and the work has already been completed and has been allotted on hire to 8 cooperative societies. Nicobarese. & Hut Bay Islands. and Shompens are yet to be brought under the Cooperative fold.91 crores (5 years period) & Rs.
and this is one of the main reasons why cooperatives often remain ineffective in benefiting their members. The idealistic ideologists however conceived of cooperatives as an instrument to effect the transformation of the capitalist system. The British administration in the sub-continent set up various commissions of inquiry. cooperatives in Punjab covered only 15 percent of the rural population in 1936-1937. These two acts have remained a model for cooperative legislation not only in pre-partition. Thus out of a total of 27054 primary societies in 1945. the Federal Bank for Cooperatives is entrusted the task of assisting the federal and the provincial Governments in formulating schemes for the development and revitalization of the movement. for onward disbursement to the primary societies are released by the Federal Bank for Cooperatives on the approval of the State Bank of Pakistan and also on the guarantee provided by the Government of the Punjab. In addition. cooperatives in Punjab have virtually acted as an instrument of the governments’ agricultural policy during the past fifty years. Thus. The Punjab Cooperative Bank. Total number of primary societies in the . in practice. Different conceptions that emerged in the process of evolution of cooperative thinking can be broadly placed in two major categories: the pragmatic and the idealistic. it is left with a very limited role as a development bank. This position.27 The basic principles underlying modern cooperatives developed in Britain and Western Europe during the 19th century. Primary cooperative societies have been established at the base level of the cooperative movement in the Punjab. undertake research on problems of rural credit and other matters having a bearing on the development of the cooperatives and assist the provincial Cooperative Banks in preparing their seasonal development lending programmes and undertaking appraisals as well as feasibility studies of projects covered by such programmes. benefits arising from undertaking a cooperative enterprise are to be distributed in proportion to the contributions made by individual members. The broader concept of cooperation. However. The Bank except providing loans to provincial banks. a cooperative credit societies Act was passed in 1904 and was supplemented by another Act in 1912. but also in the post independence. however slightly changed in subsequent years. Thus in 1945. improved seed. acknowledges the inter-action between economic and socio-political power and. According to this concept. The initial setbacks were overcome soon and cooperatives. At the base or operational level in the villages are established primary societies. The advances by the Punjab Cooperative Bank to the credit societies increased considerably between 1970 and 1997. The growth of primary societies both agricultural and non-agricultural for the years 1980 through 1997 is given in Table 2. For borrowings. In the first category may be placed the conception that the primary aim of cooperatives is to help improve economic conditions of those who stand to lose if they individually face powerful interests and privileged competitors.39 million in 1997. As a result. the Punjab Cooperative Bank mainly depends on the Federal Bank for Cooperatives. Instead. On the other hand. under government patronage. The creation of Pakistan in 1947 in general and division of Punjab in particular affected the institution of cooperatives. Cooperatives and Development Cooperative movement in the Punjab is largely derived from the ideas and value judgments that brought forth the movement in the sub-continent in 1904. They held that cooperatives were fundamentally non-capitalistic and could co-exist with capitalism only at the risk of becoming capitalistic themselves. in the latter half of the last century. especially the poor. as also of the other provincial Cooperative Banks. on the other hand. making it difficult to supplement its own resources and with no savings of its own. Thus cooperation is not an instrument to transform capitalist system and replace it by some contrasting alternative. recognizes the frequent need either for structural change or for political mobilisation for cooperatives to be able to benefit their members. Among recommendations made by these commissions was the proposal that the government enter the business of credit supply through the introduction of cooperative credit societies. DEVELOPMENT OF COOPERATIVES IN PAKISTAN PUNJAB Organizational and Operational Features of Cooperatives There is a two tier cooperative structure in the Punjab. chemical fertilizers and other inputs to the farm sector. European cooperatives. were entrusted to funnel credit. The Federal Bank for Cooperatives was established in 1976 at the national level with the object of providing financial assistance to the provincial Cooperative Banks in all the four provinces of Pakistan. The bulk of the loans provided by the Federal Bank for Cooperatives to the Punjab Cooperative Bank are advanced for financing seasonal agricultural operations. amongst the primary agricultural societies. The pragmatists perceive cooperatives as entirely voluntary organizations formulated with a view to deriving economic benefits for its members through a common enterprise on the basis of two important criteria: mutual cooperation and self-help. has generally failed in realising other objectives. a little under 19 percent of the rural population came under the fold of this institution in Punjab. Punjab.13 million in 1970 to Rs 4117. Exponents of this view conclude that unlike. expected to operate on commercial lines. organized at the provincial level. those in developing countries are frequently expected to cope with far too many constraints. its distinctive institutional form is designed to mitigate inequalities and harshness of capitalistic system altering the distribution of its benefits in the process of making it more workable. The progress of cooperatives in United Punjab may be judged by analyzing performance of societies in terms of their growth and coverage granted to rural population. Even in subsequent years this position did not change considerably. The loans to the Punjab Cooperative Bank. membership and working capital of cooperatives was suddenly cut short and the institution was worst hit at all its levels. Nevertheless. These societies are concentrated in rural areas and within those in the field of agricultural credit. about 81 percent of primary societies in 1938 were agricultural and only 19 percent were urban societies. indicating that cooperatives remained primarily agriculture oriented up to the end of the third decade of the present century. Thus out of 26873 primary agricultural societies in 1945 as many as 17603 (about 66 percent) were agricultural credit societies. has not been successful in mobilising savings especially from the rural areas. The total number of primary societies in the united Punjab increased from 699 (with 693 as agricultural and only 6 as non-agricultural societies) in 1910 to 23476 in 1938 (with 19057 as agricultural and 4419 as non-agricultural societies). with some 55 percent recovery of loans from societies during the year 1997. some 77 percent were classified as agricultural and 23 percent as non-agricultural societies. therefore. The number. the Federal Bank has served merely as a channel of credit catering for the credit requirements of the Punjab Cooperative Bank. EVOLUTION OF COOPERATIVES IN PUNJAB Debt-peonage and chronic credit shortage were among the chief causes of low agricultural incomes and productivity in the Indian sub-continent. the cooperatives generally remained confined to the sphere of credit. in turn are affiliated to the Punjab Cooperative Bank. These societies.1. The total advances made by the Punjab Cooperative Bank to the primary agricultural societies increased from Rs 165. In that respect.
These measures enhanced the supply of farm credit. indicating that the institution of cooperatives in the Punjab remained centred in the sphere of credit. This trend continued in the subsequent period. The sudden increase in number of credit societies in the Punjab did not lead to the provision of sufficient credit to the subsistence farmers. As such. this does not imply that those who needed credit did really get it. (a) The relative importance of credit Cooperatives among institutional sources of finance.000 agricultural Cooperatives in Pakistan.6 The provision of interest free credit through cooperatives was abandoned by the government during mid 1980s and emphasis was once again laid on consolidation rather than expansion of agricultural credit cooperatives during late 1980s through 1997. but unfortunately it was misused partly because it was operated through incompetent functionaries of the cooperative department. as much as 50 percent were dormant. The Government of the Punjab introduced the interest-free lending policy in 1978. out of 34543 societies as many as 50 percent were found to be inactive undertakings in 1984. The Government of the Punjab made many attempts to establish large-sized viable primary units at the base level of cooperatives. and (d) The welfare effects of cooperative credit distribution. Data on the working of agricultural credit societies in the Punjab are presented in Table 4. only after 1975 did the share of cooperative credit amongst the institutional sources increased once again. Nevertheless. cooperatives advanced loans at concessional lending rates i. Many societies were established overnight just to impress the superiors up the line with the successful implementation of the Government directive. The Report of the National Commission on Agriculture (1988) recorded that out of 45.12 million in 1960 to Rs 130. many Cooperatives in the Punjab were regarded as economically non-viable.28 Punjab rose from 41533 in 1980 (with 23515 as agricultural credit and 18018 as non-agricultural credit cum urban cooperatives) to 48097 in 1997 (with 35381 as agricultural credit and 12776 as non-agricultural credit cum urban cooperatives). yet only 6 percent of the total farm households reported membership.11 One way of gauging the spread of cooperative idea. Thus the experience of the late 1970s is atypical and needs explanation. and of the remaining. The number of credit societies increased at the rate of approximately 1 percent a year during 1960 through 1975. according to the survey are common in the Punjab. There are two reasons for such a pattern. Total working capital . probably only 5 percent were genuine. 75. For the farm households this proportion was 30 percent for under 0. (b) The absolute importance of cooperative credit in relation to the total credit needs of farmers. First. as against 65 percent of the total farm households in the Punjab. however share of cooperative credit amongst institutional credit ranged between 21 and 30 percent during the years 1985-97. The incentive of providing interest free loans from late 1970s until mid 1980s (later however. As such. at a markup of 14–16 percent per annum) to members of societies was a good step. whereas it was 44 percent for the 60 hectares and above category.9 Despite the increase in the number of societies. Interest free loans provided by these societies were generally misutilised or misdirected to non-productive uses. The Agricultural Development Bank of Pakistan was thus established in 1961. The relative importance of cooperative credit among institutional sources of finance can be judged from the data presented in Table 3. (c) The extent of local participation in. Nevertheless. Consequently. The Rural Credit Survey of Pakistan (1975) concluded that only 4 percent of the rural households in Pakistan were enrolled in the movement. with that the total supply of credit in the farm sector increased. the advantages that were visualized at the time of conceiving these schemes were frustrated4. These findings support the earlier view that insufficient credit was available from institutional sources and that farmers depended more on non-institutional sources to fulfill their credit needs. The estimated total credit needs of farmers in the Punjab have never been fully met from the available supply of institutional credit.5 hectare category. The cooperative societies. As against this. Again in 1971. and used cooperatives as a vehicle to funnel interest-free credit into the farm sector. viable and active undertakings. This argument obtains support from the findings of the Rural Credit Survey (1985). is to examine the quantum and composition of working capital available to societies. the number of credit societies increased from 23515 in 1980 by about 50 percent in 1997. as the number of societies increased from 12658 in 1975 to 23515 in 1980. showing an increase of 86 percent over the said period.5 This shows that access to credit was generally higher amongst large sized farm holdings. The survey recorded that 27 percent of all the rural households including the farm and non-farm households had some recourse to institutional credit. the credit societies did not provide sufficient credit. It is against this background that the experience of agricultural credit societies in the Punjab is now studied in detail through an examination of the following aspects.7 The Rural Credit Survey of 1985 revealed that only 1 percent of households in the smallest sized farm category reported cooperative membership but this proportion increased to 13 percent in the largest size of farm category of 60 hectares and above. all commercial Banks entered the business of rural finance.10 According to a study conducted by the Centre for Administrative Research and Development studies in the Punjab. and the share of cooperative credit among the institutional sources of finance declined from around 60 percent in 1966 to about 8 percent in 1975. The share of cooperative credit in total institutional credit was significant during the years 1950 through 1966. and support for agricultural credit societies. from Rs. the survey revealed that 34 percent of the under 0. the attempts made by the department to promote the institution of cooperatives were too insignificant to persuade prospective members in rural areas to join the societies. to measure the extent to which farmers began to participate in the cooperatives.e. but these attempts generally met little success. the farming population found it unattractive to join cooperatives. and partly through political pressure.8 These statistics would imply that the institution of cooperatives in the Punjab was largely centred within bigger farm households who controlled the management of societies and imposed restrictions on the entry of new members (with small holdings). a policy of expansion rather than consolidation was pursued by the department from 1977 through 1980. There was a significant increase in the formation of credit societies after 1975. The measures taken by the government in the late 1970s and in subsequent years resulted in increased provision of cooperative credit to the farm sector. Second. This was mainly attributed to the policy of the Government in the country which showed interest in developing and expanding the role of the cooperative credit movement. On a provincial basis. first the share of credit provided by the Agricultural Development Bank increased. the provision of cooperative credit was not sufficient. Thus about 73 percent of primary societies in the Punjab in 1997 were agricultural credit and only 27 percent were non-agricultural credit cum urban societies. primarily to make use of Cooperatives provisions to themselves.49 million in 1966 or by some 174 percent. Many more credit societies in the Punjab were established under the directive of the Government. followed by that of the commercial Banks (after 1971-72). New societies were generally formed by the departmental officials without any regard to the principles of cooperation.5 hectare farmers’ category in the Punjab had recourse to institutional credit. The underlying trend shown by the data reveal that societies generally remained small-sized.
Its objectives are largely distributional (e. Between 1990 and 1997 the situation became rather worst. as a share of total institutional lending increased from 8 percent in 1975 to some 26 percent in 1997.14 It was revealed in one study that 86 percent of the committee members (as well as the large farmers) in societies were loan defaulters as against 37 percent ordinary members. concessional lending cannot be profitable in a commercial sense. and have not been able to grow as an autonomous ‘self-help’ institution. The credit limit has had no relevance to either the needs of the farmer or to his repayment capacity. .g.g. Even though cooperatives are sponsored by the government.20 This dependency on the Government for the establishment and support of Cooperatives has created a dilemma for the self-reliance of societies. It was after 1978 that MCL for a member farmer of credit societies was set at Rs 6000 per annum for the purchase of improved farm inputs. Moreover. Thereafter there was a quantum jump in loans advanced by societies. their activities have little effect on the existing patterns and trends of economic activity and their performance has little relevance to the wider context of social and economic change and the general development strategy.44 million in 1954 to Rs 79.85. which increased from Rs 979.88 million in 1975. Those who were already in more fortunate positions took advantage of the cooperative services. without Governmental financial support and consequently some degree of Government control. the percentage share of borrowed funds (loans and deposits held) of societies ranged between 42 and 61 percent. chemical fertilizers and pesticides were actually diverted towards short-term interest bearing investments. there came about a manifold increase in the working capital available to the credit societies after 1975. through smart forgery new loans created in fictitious names were adjusted against the ‘old’ loans. as already noted. And this was not at all that bad. However. Moreover.8. Cooperatives and Development Dominated Cooperatives and annexed government funds for their own purposes. The overall average repayment to loan ratio for 1954– 97 stayed at roughly 0. Since 1984 loans to a member in a society are advanced on per acre basis. in contrast during 1975-80 ratio of repayment exceeded from less than 0. cooperative credit. It was recognised that. paternal system) by self-reliance and community initiative. cooperatives would have not become properly established. were able to show high recovery rates. The membership of societies increased throughout 1954–97 and it is logical to expect that the members in fact received loans of a lesser share of the maximum credit limit. The impact of the community structure upon the Cooperatives was stronger than the impact of the cooperative upon the community structure.18 Effectiveness of Cooperatives as a Tool of Development The reports of the official Government inquiries and appraisals by independent researchers19 indicate that Cooperatives have not achieved the development goals set for them by economic planners.4 to a little above 0. Contrary to this argument critics12 suggest that funds meant for disbursement of loans for improved seed. The proponents of the institution of cooperation contend that a cooperative is not supposed to be a commercial business venture or a profit making enterprise. It may be seen that the ratio of repayment of loans advanced was not at all bad especially during 1954–65. It may be noted that during the period 1947 through 1975. Total loans advanced by societies increased from Rs 11. If it was assumed that member farmers in a society actually received the maximum loan amount prescribed. Of course. Further. The data on the number of loan beneficiaries of the credit societies for the period. 15 An important task which the Department of Cooperation in the Punjab is expected to undertake is the regular audit and inspection of Cooperatives. the others were not able to do so—the result—a gulf between the better-off and the ordinary members to the access of cooperative services—leading to greater economic inequalities. the disadvantaged of the community benefited less or not at all. This practice has often made it more difficult to undertake the audit task effectively.99 million in 1980 to Rs 3725. between 1970–75. And this in part is attributed to the shortage of trained and experienced staff in the department.4. It tended to stay fairly high.17 As a result the cooperatives have been made entirely dependent on the cooperative field staff. The evidence has established that much of the credit advanced by Cooperatives was not used for productive purposes. through this practice members in societies. Similarly the MCL of a society was fixed by the central cooperative banks irrespective of the need of the credit society.5 percent of the total membership could have been provided with the maximum prescribed amount of loan-able funds from the societies.44 million in 1997. The large farmers and politically strong farming groups in Punjab were reported to have credit to cultivators was advanced on the basis of maximum credit limit (MCL). a practice contrary to the cooperative ideals. this assumption is too simplistic but it does place the amounts loaned in proper perspective. 1947 through 1997 were not available from departmental sources on regular basis. Even productivity considerations in Cooperatives have posed a dilemma. Of course. Credit societies borrowed between 83 and 89 percent during the years 1980 through 1997. their inability to generate enough capital of their own or to recover loans. Many defaulting members in societies were claimed to be expelled and their debts recovered as arrears of land revenue. as only about 2. The evidence has proved that there was unequal distribution of the benefits of rural Cooperatives within rural communities. Field studies16 undertaken in the Punjab have established that a large number of societies remain un-audited. Past experience suggests that concessional lending to members was a disincentive insofar as optimal productive use of cooperative credit was concerned. The higher recovery of loans by societies was (among other factors) attributed to strict adherence by the department to the administrative discipline of societies. Thus the Cooperatives were not effective in bringing about structural change in the communities. Overtime the Government has remained liberal in providing subsidized agricultural credit. Another way of assessing the performance of credit societies was to evaluate their lending business. The maximum credit limit (MCL) has been fixed Rs 5000 per acre with a markup of 14–16 percent. The maximum credit limit prescribed for the farmers for the irrigated and non-irrigated areas was fixed at Rs 1000 and Rs 600 respectively. then the number of loan beneficiaries could only have been between 4 and 15 percent of the total membership during the years 1954–75. The working capital in societies was largely derived from the borrowings (that is loans and deposits held) rather than the share capital and reserve funds. besides making big illegal earnings. the primary societies nevertheless often have had at their disposal only limited supplies of credit because of their failure to follow prescribed conditions. Relevant statistics on the lending business of societies are presented in Table 4. the management committee members themselves are often incompetent and often unable to record correct entries. While some cooperative members (generally members of the management and other better-off farmers in societies) took undue advantage of cooperative credit and other services.76 million in 1975. However. providing welfare to its members by ensuring provision of subsidized loans). The Cooperatives are so dependent on state assistance that it is unlikely that they would survive without Government support and replace the traditional dependency system (e. achieved through cooperative action.51 million in 1960 to Rs 143. And.29 available to credit societies increased from Rs 46. the ratio dropped to less than 0.
no substantive development of cooperatives was made until 1955 when a small amount of financial assistance was provided with the Aid Program. Failure could be attributed to rejection of the cultural transplant due to incompatibility. mostly in the form of Governor’s Ordinances and later in the form of Regulations of Presidential ordinances. commercial and cooperative developers started to do business. After the creation of Pakistan. In the Pre-Partition days. in the mid 1990s a scandal involving housing cooperatives that deprived thousands of people of the money they had invested in housing co-operatives forced the Punjab government. stop the registration of new co-operatives. The co-operative movement gained some momentum during the 1960s. a series of laws. The fact that the institution in question is not the product of purely local forces but has instead been transplanted from quite different time and place adds a further dimension to the complexity. This would seem to be a principal pre-requisite for institutional change to occur and cooperatives to be enabled to create a cohesive group oriented to local socio-economic improvements. housing co-operatives had had a modest start. However. through the National Accountability Bureau. In the province of Punjab. the Karachi Co-operative Housing Societies Union was founded as a central cooperative organisation by 24 primary housing co-operatives. cooperatives also need to have strong links with outside agencies. Independence had created a large influx of migration into the new state. Hyderabad (23) and Sukkur (1).) until the 1970s at which time. since there was no other civil organization dedicated to the cause. This report played a vital role in the governmental and civil thinking. Such a review should consider possible specific adjustments to cooperative methods and procedures to meet some of the individual problems already identified. To support these initiatives. The act authorised provincial governments to appoint the Registrars of Co-operative Societies and allowed for only registered co-operatives to provide credit could be registered. At this time. assist the cooperators in adopting new technology. Unless the outside agencies ensure the training of the local leaders. housing was the responsibility of the government through Urban and Housing Development and several trust organizations (LIT. The act was changed with the Co-operative Societies Act 1912 permitting the registration of co-operatives having other objects than only providing financing. As the state was unable to provide adequate housing for its population. need profound social economic and structural transformation of the rural society. etc.operative Banks were established providing loans to agricultural and non-agricultural co.operatives but unfortunately there is no indication of the number of housing co-operatives.400 acres of land to the union for township development. Either the credit system itself needs to be changed or else the objectives should be changed so as to reduce emphasis on social goals of redistribution or relief of mass poverty and leave these goals to other kinds of programmes. Refugees and rural migration contributed to the growing number of urban poor. The housing co-operatives in the province of Sindh have played a vital role in solving the ever increasing housing problems in the province. But equally it could be attributed to government manipulation of the institution. Various provinces established Committees of Enquiry which ultimately promoted the co-operative movement and the passing of Co-operative Acts in several provinces. and the Department of Cooperation. audit cooperative accounts regularly and discipline those responsible for defaults and irregularities. there is still a necessity for the government to play an active role in promoting the idea of cooperation. political and economic considerations are woven together. HOUSING CO-OPERATIVES IN PAKISTAN History Co-operatives were introduced. in effect. Housing co-operatives have also developed in the North West Frontier Province as indicated in the statistics section below. housing co-operatives can be found in every part of Karachi. there are different types of co. to reimburse the swindled members. As such cooperatives will bring success only when these are introduced into communities which have more flexible socio-economic structures. In the province of Sindh there were 46 housing co-operatives located in Karachi (22). by the adoption of the Co. become the preserve of the middle and upper class and their effectiveness in the community remains slight. A radical alternative to the reform of the existing cooperative institutions would be a policy seeking to evolve wholly new kinds of local organisation—‘units of rural action’ that could more effectively stimulate peasant participation and in particular more effectively involve the poorer members of the local community. This will however. In spite of the risks of being interpreted as imposing an alien structure on local communities. A ban imposed by the Chief Minister in 1997. Even though co-operatives were introduced in the province of Baluchistan in 1950. Co. In the Capital Territory of Islamabad. cooperatives. To be effective. housing was a major problem for millions of people. to serve a particular and conceivably ill-suited objectives given the circumstances prevailing in agricultural input and output markets in the 20th century Punjab. the result of financial assistance from the government. The promotion of co-operation was done exclusively by the government in the sub-continent. and more a clear indication that the annexation of the cooperative concept to serve misguided and insensitive government policies creates organisations which are cooperatives in name only. in what is today the Pakistan Republic. Context . co-operatives were transferred to the provinces giving them the power to make any appropriate laws to administer and develop co-operatives. RIT. To sum up. there is no point in expecting any success from any type of cooperative. Cooperatives will not prove successful in the communities where class and caste structures are inegalitarian. squatter settlements soon appeared and were largely tolerated by government. Alternatively. the state leased out 1. or to its association with the colonial past. Industrialisation and urbanization accentuated the situation. it could be due to the absence of necessary preconditions linked to opportunities for development and their perception by participants. such as the secondary and apex cooperatives. provide sufficient credit and other requisites.operative Credit Societies Act of 1904 whose aim was to finance Indian small farmers. however. were promulgated with the aim to ensure the security of public funds and properties owned by the co-operatives. The Maclagan Committee Report on Co-operation published in 1915 provided substantial and constructive proposals for cooperative development.operatives. Under the Government of India Act of 1919. Other housing cooperatives such as the Pakistan Employees Co-operative Housing Society Limited also received land from the state. there is a pressing need for a serious review of cooperative policy. the largest city in Pakistan. Co-operators took the responsibility of developing much needed housing by using the township approach as there was no governmental agency equipped at that time to face the challenge. with particular emphasis in Karachi. When Pakistan was created in August 1947.30 CONCLUSIONS AND LESSONS It is by no means a straightforward matter to identify causes of inadequacies of institutional performance when social. Empirical research has established that cooperatives failure has been less a demonstration of the irrelevance of cooperative principles to the pursuit of development. In 1949.
The rapid population growth makes any development plan obsolete very soon after its completion forcing organisations and the state to remain constantly vigilant to the situation. Registration of housing co-operatives is done through the Registrars and the Provincial Co-operative Housing Authorities have the authority to oversee and take control when co-ops fail to comply with their own by-laws. At completion. Pakistan is the seventh most populous countries in the world. the Union has developed land for 4. the yearly estimated housing demand was 570. There are four provinces and two territories in Pakistan: the provinces of Baluchistan (Quetta). the inability to maintain standards of business efficiency.000 units every year. 2. It should be noted that each province and territory have co-operative departments with the responsibility to promote as well as to monitor any type of co-operative development. These deficiencies have enabled some housing cooperators more concerned with self interest to sully the name of housing co-operatives in Pakistan. challenges that come as much as from inside the movement than from the difficult socioeconomic conditions facing the country. 84 public amenities. The scarcity of urban land creates serious difficulties and vertical development results which must be promoted and supported by the state.notified katchi abadis also referred to as slums that will not be regularised because the state either wants the land back for development or deems the land to be ecologically unsafe.800 residential units.operatives and societies. Statistics As of July 2009.income families. These housing co-operatives have built close to 13 million of houses and/or units. >>To develop the land such as site design. Moreover.9 million of members. pollution. partnership and joint stock company as different forms of business organisation. electric lines etc. The problem is too big to be solved by the government alone. nearly 180. A pioneer of the co-operative housing movement in Pakistan and a member of ICA. So far. However. the current political instability disturbs the affairs of co-operative organisations adding to the difficulty for their development. The consequences of this situation is that almost half of the total urban population now lives in squatters or informal settlements as it was already indicated in the National Housing Policy 2001. these ISDs are subdivided in two categories: the notified hatchi abadis that have been earmarked for regulation and can obtain a 99-year lease and the development of infrastructure and the non. the land will provide homes to 3 million people in addition to commercial facilities. building of roads. there are 2. The lack of funding is expressed in two ways: no capital and a real difficulty of mobilizing savings which will imply a change in attitudes more amenable to saving. for the most part: overcrowded. Actual supply was 300. financial assistance through grants. >>To provide and maintain sanitary and other services and levy charges on the member societies and individual plot owners until the land is transferred back to the local authority. including management and accounting education. Other similar projects are currently taking place in other cities of the Sindh province. particularly in rural areas. In 2008. housing co-operatives have played a vital role in many parts of the country and their work has brought better living conditions to thousands of people. Measures that have been identified include: legislative reforms to provide security of tenure by conferring title to people living in slums and informal settlements and conferring ownership rights to women. Good ethics and management practices are essential to see the housing co-operative movement grow. and no security of tenure. This can create serious setbacks for any new undertaking. Finally. Co-operative Society So far you have learnt about sole proprietorship. But despite real and considerable progress. such as roads and highways. The Union went into a very difficult period where its resources were dilapidated and the democratic functioning was corrupted. water sewage lines. electricity. poor building construction leaving inadequate protection from weather extremities. water. as well as in other provinces. KCHSU does work in kachi abadi by financing housing co-ops to build houses. the Union is back working with the same principles of its founders. under the supervision of the Registrar Co-operative Societies and the support of its members. In addition to these difficult socioeconomic conditions. the lack of education facilities. 5. capital . The Karachi Cooperative Housing Societies Union Ltd (KCHSU) is a major player in the province of Sindh whose mandate includes: >>To acquire land from the government and other agencies on lease and to sub-lease to members. inadequate sewerage. You must have noticed that besides many differences among them in respect of their formation. the Union has 1. drainage. and fifth in Asia. Katchi Abadi Departments were implemented in the provinces of Sindh and Punjab to regularise the phenomenon of informal settlements but have not achieved much success. The Co-op Housing Movement There is no national organisation of housing co-operatives in Pakistan and the scope of co-operatives vary widely from province to province. As indicated.000 households in different parts of Pakistan are facing evictions due to several government projects.000 units. the co-op housing movement is confronted by serious challenges to be able to effectively improve the quality of life of Pakistanis. the co-op housing movement is confronted by serious internal problems.500 houses and 8 schools have been built. and 750 commercial amenities. The housing conditions in Pakistan are. illiteracy. reasonable building costs through market regulations. stores. These slums and squatter settlements also called katchi abadis can be divided in two types: “settlements established through unorganized invasions of state lands” that happened at the time of partition for which most have been regulated in the 1960s and “informal subdivisions of state land (ISD)”. adequate environmental measures to ensure a healthy and safe place to live such as roads. the United Nations Economic and Social Commission for Asia and the Pacific. The lack of money remains a real barrier to development. etc. operation.31 Housing remains under the jurisdiction of the provinces. The urban population in Asia is growing at an annual rate of 3%. In Karachi alone. A concerted effort must be made involving legislative reforms and providing adequate support to housing co-operatives. 650 katchi abadis are listed.000 units leaving a shortfall of 270. Furthermore. After 3 years of hard work (2004-2007). As an example. Punjab Lahore). sewage. Sindh (Karachi) and North West Frontier (Peshawar) and the Islamabad Capital Territory and the Federally Administered Tribal Areas. mortgages facilities and financial mechanisms such as micro-credit in place to help low. along with other examples of badly administered housing co-operatives and illegal acts from unscrupulous board members. Some leaders have indicated that the following weaknesses have slowed down the progress of the co-op movement in the country: the absence of strong leadership. according to UNESCAP. >>To design and/or construct necessary facilities such as school. Today. housing co-operatives do get together in some occasions. New development approaches are not always well received and changing the mentality can be a lengthy process.608 housing co-operatives in Pakistan with close to 1.853 acres (Karachi Development Authority Scheme # 33) have been allocated to 130 housing co. such as Hyderabad and Sukkur.200 housing co-operative members.
all producers of milk of a village joined hands. This was possible because of their joint effort. So those who want to work together with some common economic objective can form a society which is termed as “co-operative society”. Village Service Co-operative Society and Urban Cooperative Banks are examples of co-operative credit society. There are many others in your village and also in the nearby village who face a similar problem. as he does not have money to go to the town to sell milk. Housing Co-operative Society: These societies are formed to provide residential houses to members. He is now enjoying a good life. Individually it would not have been possible either to sell or produce any milk product in that village. state the characteristics of a co-operative society. Somebody may tell him to sell the milk in the nearby town or city. Co-operative Marketing Society: These societies are formed by small producers and manufacturers who find it difficult to sell their products individually. and assess the suitability of co–operative society form of business organisation. not. What should he do? He is faced with a problem. Just think it over. Haryana Handloom. you are not the only person facing this problem. they differ with regard to the nature of activities they perform. utilize them in the best possible manner. Now they can buy goods directly from the producers and sell those to members at a cheaper price. (ii) Through housing co-operative societies members may get _______ at low rates of . Thus. It works on the principle of self-help as well as mutual help. etc. tools and equipments. Nobody joins a cooperative society to earn profit. The Employees’ Housing Societies and Metropolitan Housing Co-operative Society are examples of housing co-operative society. The society collects the products from the individual members and takes the responsibility of selling those products in the market. Suppose a poor villager has two cows and gets ten litres of milk. This process continued for a long time. Co-operative Credit Society: These societies are formed to provide financial support to the members. Without profit it is impossible for them to survive and grow. Followings are different types of cooperative societies that exist in our country. Handloom societies like APPCO. In the above example. The learner told him. Do you have any solution for him? One day that poor villager met a learner of NIOS who had earlier read this lesson. Fill in the blanks with suitable word(s) in the following statements: (i) A co-operative society works on the principle of self-help as well as _______. One day somebody suggested that instead of selling only milk why not produce other milk products like ghee. They produced quality milk products and found a very good market for their products not only in the nearby town but in the entire country. Bayanika. Kendriya Bhandar. one common similarity is that they all engage in business activities to earn profit. It is a voluntary association of persons who work together to promote their economic interest. you see. collected the surplus milk at a common place and sold milk and milk products in the market. pool their individual resources. who was not able to sell five litres of milk in his village. the consumers of a particular locality can join hands to provide goods of their daily need and thus. He told everybody about this new idea and formed a group of milk producers in his village. What can he do with the surplus? He may want to sell the milk but may not find a customer in the village. The term co-operation is derived from the Latin word co-operari. They pool available resources from the members. you will be able to: explain the meaning of co-operative society. develop it and construct houses or flats and allot the same to members. By selling the milk in the nearby town they were all able to earn money. Types of Co-operative Societies Although all types of cooperative societies work on the same principle. Some societies also provide loans at low rate of interest to members to construct their own houses. Meaning of Co-operative Society Let us take one example. Again he finds it difficult. People come forward as a group. After studying this lesson. Apna Bazar and Sahkari Bhandar are examples of consumers’ co-operative society. where the word co means ‘with’ and operari means ‘to work’. Of course first you have to deduct all the expenses from the sale proceeds. Although some amount of profit is essential to survive in the market. Let us know more about them. In a similar way. A poor villager. is now selling milk and milk products throughout the nation. Do you think it would have been possible on the part of a single consumer to buy goods directly from the producers? Of course. After consumption by his family everyday he finds a surplus of five liters of milk. cheese. Producers’ Co-operative Society: These societies are formed to protect the interest of small producers by making available items of their need for production like raw materials. their main intention is not to generate profit and grow. Why don’t you all sit together and find a solution to your common problem? In the morning you can collect the surplus milk at a common place and send somebody to the nearby town to sell it. discuss the advantages and disadvantages of a co-operative society. identify different types of co-operative societies. In the same way people can form other types of co-operative societies as well. They buy goods directly from the producers or manufacturers and thereby eliminate the middlemen in the process of distribution. form a cooperative society. and derive some common benefit out of it. and sell them in the market at a better price? All of them agreed and did the same. describe the procedure of formation of a co-operative society. are examples of producers’ co-operative society. Co-operative Farming Society: These societies are formed by small farmers to work jointly and thereby enjoy the benefits of large-scale farming. They had formed a co-operative society for this purpose. Again in the evening. utilise the same in the best possible manner and the benefits are shared by the members. How did it happen? Who made it possible? This is the reward of a joint effort or cooperation. you can sit together and distribute the money according to your contribution of milk. Gujarat Co-operative Milk Marketing Federation that sells AMUL milk products is an example of marketing co-operative society. The society accepts deposits from members and grants them loans at reasonable rates of interest in times of need. co-operation means working together.32 contribution as well as liabilities. That villager agreed to what the learner said. Lift-irrigation cooperative societies and Pani-panchayats are some of the examples of co-operative farming society. butter. They purchase land. Consumers’ Co-operative Society: These societies are formed to protect the interest of general consumers by making consumer goods available at a reasonable price. machinery. The main objective is to provide support to the members. etc. After that they did not face any problem of finding a market for the surplus milk. But there are certain organisations which undertake business activities with the prime objective of providing service to the members. Let us know about them.. Why is the price cheaper? Because they buy goods directly from the producer and thereby the middlemen’s profit is eliminated. milk powder etc.
Profit generated is distributed to its members not on the basis of the shares held by the members (like the company form of business). consuming. State control: To protect the interest of members. (v) Pani-panchayats and lift-irrigation co-operative societies are example of _____ cooperative society. Application with the signature of all members Name. Names. Limited Liability: The liability of members of a co-operative society is limited to the extent of capital contributed by them. insolvency or lunacy of a member does not affect the existence of a society. The Co–operative societies Act does not specify the maximum number of members for any co-operative society. Profits are not earned at the cost of its members. Formation of a Co-operative Society A Co-operative Society can be formed as per the provisions of the Co-operative Societies Act. can form a Co-operative Society. a major part of the profit is paid as purchase bonus to members on the basis of goods purchased by each member from the society. It also provides better quality goods to its members and the general public. A co-operative society is a _____ association of individuals who come together to achieve common _____ objectives. At least ten persons having the capacity to enter into a contract with common economic objectives. addresses and occupations of members. (iii) Small producers who find it difficult to sell their products individually may form____________ co-operative society to sell their produce. For example. Service motive: Co-operatives are not formed to maximize profit like other forms of business organisation. After scrutiny of the application and the bye–laws. address and aims and objectives of the society. (iv) Consumers’ co-operative societies help to eliminate ________ in the process of distribution of goods. Separate Legal Entity: A Co-operative Society is registered under the Co-operative Societies Act. The main purpose of a Co-operative Society is to provide service to its members. It can enter into agreements with others and can purchase or sell properties in its own name. Any competent person can become a member at any time he/she likes and can leave the society at will. and leave the society at will. but on the basis of members’ participation in the business of the society. after the formation of the society. However. A minimum of ten members are required to form a cooperative society. The society is managed by a group known as “Board of Directors”. While getting registered. Self-help through mutual cooperation: Co-operative Societies thrive on the principle of mutual help. Mode of admitting new members. Let us discuss its characteristics. in a consumer co-operative store only a small part of the profit is distributed to members as dividend on their shares. Death. Voluntary Association: Members join the co-operative society voluntarily. Open Membership: Persons having common interest can form a co-operative society. Any ten adults can voluntarily form an association and get it registered with the Registrar of Co-operative Societies. (v) Profit is shared amongst members on the basis of member’s ____________ in the business of the society. like farming. continue for as long as he likes. The members of the board of directors are the elected representatives of the society.33 interest to construct their own houses. Advantages of Co-operative Society A Co-operative form of business organisation has the following advantages: Easy Formation: Formation of a co-operative society is very easy compared to a joint stock company. Unlike sole proprietors and partners the personal properties of members of the co-operative societies are free from any kind of risk because of business liabilities. It is only by working jointly on the principle of “Each for all and all for each”. a society has to submit details about the members and the business it is to undertake. For example. etc. (iv) The books of accounts of the society are audited by __________ auditors. the member may specify the maximum number of members. goods are sold to its members at a reasonable price by retaining a small margin of profit. (iii) They have a separate ____ from the members. It has to maintain books of accounts. They are the organisations of financially weaker sections of society. However. co-operative societies are placed under state control through registration. with limited liability of its members. Open membership: The membership of a Co-operative Society is open to all those who have a common interest. Democratic Management: Co-operative societies are managed on democratic lines. Characteristics of Co-operative Society A co-operative society is a special type of business organisation different from other forms of organsation you have learnt earlier. Each member has a single vote. A joint application along with the bye-laws of the society containing the details about the society and its members. Democratic Control: A co-operative society is controlled in a democratic manner. This committee is accountable to all the members of the society. has to be submitted to the Registrar of Co-operative Societies of the concerned state. which are to be audited by government auditors. it can easily raise loans and secure grants from government after its registration. A member can join the society as and when he likes. in a Consumer Co-operative Store. the members can fight exploitation and secure a place in society. by choice. The members cast their vote to elect their representatives to form a committee that looks after the day-to-day administration. the registrar issues a Certificate of Registration. also generates some profit while conducting business. Share capital and its division. that is. . Fill in the blanks with suitable word (s) relating to co-operative societies. 1912. For example. (ii) Their motive is to provide ____ to the members. in a village credit society the small farmer having one share has equal voting right as that of a landlord having 20 shares. Sources of Finance: In a co-operative society capital is contributed by all the members. weaving. irrespective of the number of shares held. Co-operative Societies convert the weakness of members into strength by adopting the principle of self-help through mutual co-operation. Distribution of Surplus: Every co-operative society in addition to providing services to its members. After registration a society becomes a separate legal entity.
(iii) Professional managers do not prefer to work in co-operative societies because they do not get adequate ______ . etc. the co-operative form of business organisation also suffers from various limitations. Due to this. large scale co-operative societies like IFFCO. Co-operative societies may be classified as follows: . etc. at anytime. The government encourages and supports the formation of co-operative societies by providing subsidies and exemptions. The main motive is to provide service to the members. loans subsidies. Membership of co-operative societies is voluntary and open to all. (v)There may be rigidity in cooperative societies due to excessive control and regulation by _______. with a minimum of ten members. insolvency. Its aim is to serve the interest of the poorer sections of society through mutual help. because of limited capital they are not able to get the benefits of professional management. Again.. lunacy or resignation of any of its members. The society is managed by one person only. etc. 1912. exemption in tax. ego clash. In certain situations when it is not possible to achieve the target by individual effort. In text Questions State whether the following statements about co-operative societies are true or false: Any competent person can become a member of a society. Dependence on Government: The inadequacy of capital and various other limitations make cooperative societies dependant on the government for support and patronage in terms of grants. Government’s assistance is often inadequate for most of the co-operative societies. loans at low rates of interest. The members or their elected representatives are not experienced enough to manage the society. Again due to low rate of return the members do not invest more capital. an application along with bye-laws of the society has to be submitted to the Registrar of Co-operative Societies. the government sometimes directly interferes in the management of the society and also audits their annual accounts. Such help may be provided in the form of capital contribution. Housing co-operatives. (ii) Co-operative Societies are formed to provide service rather than maximizing _______. Lack of Motivation: Every co-operative society is formed to render service to its members rather than to earn profit. Limited Capital: The amount of capital that a cooperative society can raise from its member is very limited because the membership is generally confined to a particular section of the society. For registration. subsidies in repayment of loans. It works on the principle of self help through mutual cooperation of members. Let us learn these limitations. But it is often seen that there is a lot of friction between the members because of personality differences. State Assistance: Both Central and State governments provide all kinds of help to the societies. are formed to achieve the common economic objectives of the members. KRIBHCO etc. This does not provide enough motivation to the members to put in their best effort and manage the society efficiently. It is democratically managed and it has a separate legal existence. Let us now sum up– Advantages •Easy formation •Open membership •Democratic Control •Limited Liability •Elimination of Middleman’s Profit •State Assistance •Stable Life Disadvantages •Limited Capital •Problems in Management •Lack of Motivation •Lack of Cooperation •Dependence on Government •Business Studies Suitability of Co-operative Societies You have learnt that the main objective of co-operative form of business organisation is to provide service rather than to earn profit. Limitations of Co–operative Society Besides the above advantages. (iv) Large co-operative societies like KRIBHCO and IFFCO serve the whole ______. Problems in Management: Generally it is seen that co-operative societies do not function efficiently due to lack of managerial talent. The co-operative society is the only alternative to protect the weaker sections of the society and to promote the economic interest of the people. Generally co-operative society is suitable for small and medium size business operation. The liability of the members is unlimited. What You Have Learnt A co-operative society is a voluntary association of individuals having common needs who join hands for the achievement of common economic interest. However. middlemen’s profit is eliminated.34 Elimination of Middlemen’s Profit: Through co-operatives the members or consumers control their own supplies and thus. Marketing co-operatives. are also found in India. It can exist for long due to a legal entity separate from its members. A cooperative society can be formed under the Co-operative Societies Act. Its existence is not affected by the death. collective effort in the form of a co-operative society is preferred. The selfish attitude of members may sometimes bring an end to the society. Stable Life: A co-operative society has a fairly stable life and it continues to exist for a long period of time. etc. Lack of Co-operation: The co-operative societies are formed with the idea of mutual co-operation. In text Questions Fill in the blanks with suitable word (s) : (i) The co-operative society suffers due to limited capacity of members to contribute _________.
They encourage saving habit among members.formed to eliminate the role of middlemen and supply high quality goods and services at reasonable price to consumers. 3) Co-operative marketing society . is the priority. It is ideal where service motive. then visit the office and find out: (a) What is the purpose of the society? (b) Who are the members of the society? (c) What are the activities of the society? (d) Does the society face any problems in its operations? . There is democratic management based on ‘one-man.What is meant by marketing co-operative society? 6.What are the activities undertaken by a housing co-operative society? 3. The societies have stable life and they enjoy government patronage! They suffer from insufficient capital.35 1) Consumers’ co-operative society . tools. and not profit. Co-operative societies are suitable in protecting exploitation of weaker sections of society and promoting their economic interest. Excessive government regulation and control may also pose problems for them.formed to achieve economies of large scale farming and maximization of agricultural output. 6)Housing co-operative society. problems in management and conflict among members.What are the causes of conflict and lack of motivation among members of a cooperative society? Activity For You Is there any co-operative society in your locality? If yes. 5) Co-operative Society. 5. Membership is open to all and members have limited liability.Give the difference between ‘Producers co-operative society’ and ‘Marketing cooperative society’. There is lack of motivation in members due to absence of direct reward for individual effort.formed to ensure a favorable market for small producers to sell the output and get a good return on sale. one vote’. 7. equipment etc.formed to provide residential houses to members by constructing them or providing loans to members to construct their own houses.What is the meaning of ‘Co-operative society'? 2. 4) Co-operative credit society .formed to help producers to procure raw material.formed to provide financial help to members through loans at low interest rates. giving one example each.What information and documents have to be submitted to the Registrar at the time of registration of a co-operative society? State the functions of co-operative credit societies.Co-operative farming society .What is meant by democratic management of co-operative societies? 4.! Co-operative societies are easy to form and have a stable life.Give two examples each of consumers’ co-operative societies and producers’ cooperative societies. 8. State the types of co-operative credit societies. Terminal Exercise 1. 2) Producers’ co-operative society .
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