What and Why Co-operatives?

Cooperatives Meaning and Definition

Dictionary Meaning: Run collectively based on economic cooperation

Definition : a commercial enterprise owned and managed by and for the benefit of members

Objectives of Cooperative Society

  • Render service rather than making profit
  • Mutual help instead of competition
  • Self help instead of dependence

Characteristic Features 

  • Open membership: The membership of a Co-operative Society is open to all those who have a common interest. A minimum of ten members are required to form a co-operative society. The Co–operative societies Act does not specify the maximum number of members for any co-operative society.
  • Voluntary Association: Members join the co-operative society voluntarily, that is, by choice. A member can join the society as and when he likes, continue for as long as he likes, and leave the society at will.
  • State control: To protect the interest of members, co-operative societies are placed under state control through registration. While getting registered, a society has to submit details about the members and the business it is to undertake. It has to maintain books of accounts, which are to be audited by government or independent auditors.
  • Sources of Finance: In a co-operative society capital is contributed by all the members. However, it can easily raise loans and secure grants from donors/financial institutions after its registration.
  • Democratic Management: Co-operative societies are managed on democratic lines. The society is managed by a group known as “Board of Directors”. The members of the board of directors are the elected representatives of the society. Each member has a single vote, irrespective of the number of shares held.
  • Service motive: Co-operatives are not formed to maximize profit like other forms of business organization. The main purpose of a Co-operative Society is to provide service to its members. For example, in a Consumer Co-operative Store, goods are sold to its members at a reasonable price by retaining a small margin of profit. It also provides better quality goods to its members and the general public.
  • Separate Legal Entity: A Co-operative Society is registered under the Co-operative Societies Act. After registration a society becomes a separate legal entity, with limited liability of its members. Death, insolvency or lunacy of a member does not affect the existence of a society. It can enter into agreements with others and can purchase or sell properties in its own name.
  • Distribution of Surplus: Every co-operative society in addition to providing services to its members, also generates some profit while conducting business. Profits are not earned at the cost of its members. Profit generated is distributed to its members on the basis of members’ participation in the business of the society.
  • Self-help through mutual cooperation: Co-operative Societies thrive on the principle of mutual help. They are the organizations of financially weaker sections of society. Co-operative Societies convert the weakness of members into strength by adopting the principle of self-help through mutual co-operation. It is only by working jointly on the principle of “Each for all and all for each”, the members can fight exploitation and secure a place in society.

Types :

  • Consumers’ Co-operative Society: These societies are formed to protect the interest of general consumers by making consumer goods available at a reasonable price.They buy goods directly from the producers or manufacturers and thereby eliminate the middlemen in the process of distribution.
  • 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, tools and equipment, machinery, etc.
  • Co-operative Marketing Society: These societies are formed by small producers and manufacturers who find it difficult to sell their products individually. The society collects the products from the individual members and takes the responsibility of selling those products in the market.
  • Co-operative Credit Society (Saccos): These societies are formed to provide financial support to the members. The society accepts deposits from members and grants them loans at reasonable rates of interest in times of need.
  • Housing Co-operative Society: These societies are formed to provide residential houses to members. They purchase land, develop it and construct houses or flats and allot the same to members. Some societies also provide loans at low rate of interest to members to construct their own houses.
  • Investment Co-operatives: Formed for purposes of investment.
  • Multipurpose Co-operatives: They deal with more than one activity. Ministry discourages their registration.
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