History of Cooperatives and State Policies OBJECTIVES = To discuss the salient points and developments in the Philippine cooperative history * To analyze how each salient development affected later the success or failure of the cooperative movement = To understand and discuss the state policies regarding cooperatives "= To appreciate that an understanding of the nature of man is absolutely necessary in the success of cooperatives = To single out and distinguish the fundamental principles underlying cooperatives and corporations = To identify and differentiate from each other the causes of the failure of the cooperative movement in the PhilippinesWee: practices, buy-outs to form monopolies, and exploitation of labor. Working hours were long and when workers became diseased, they were dismissed from employment and replaced by the excess farm labor that had flocked to the cities for employment. To save on wages, children were employed. The impoverished had poor-quality food and miserable living conditions. Scales and other measuring devices were tampered with and flour and other merchandise were laced with additives or adulterated to maximize profits. Many firms paid workers with chits, which were usable only in company stores. The less powerful, such as consumers, workers, and farmers, reacted to these practices and started to conduct business in a cooperative manner. Robert Owen, dubbed the father of cooperation, was a social reformer even though he was a manufacturer. He partly owned and managed the New Lanark cotton mills and, contrary to the practices of the day, he reduced working hours from 17 to 10 hours 2 day, improved the working and living conditions of workers by building better houses for his workers in the company premises, conducted adult education programs for factory workers and community residents, established the first infant (day care) school in England, banned the hiring of children below 10 years ‘old as factory workers, and sold quality goods at cost to the ‘community at company-owned stores. Feuding with his partners, hhe left New Lanark and went to New Harmony (Indiana) to found a cooperative community similar to New Lanark. He also established similar communities in Orbiston (Glasgow), Ralahine (County Cork), and Queenswood (Hamsphire). At around 1843, a worker strike failed in Rochdale, England. The workers sought to put the improvement of their lives under their control. They thought of putting up their own foodstoreinlieuof | the company store. After saving for about a year, the 28 workers (@annel weavers) opened their store at 31 Toad Lane just four ays before Christmas. They sold flour, sugar, butter, oatmeal, and, by force of circumstance, candles because the gas company refused to sell gas to the new co-op store. Since the members were busy earning their keep during the day, the store opened at night and the candies not used by the store were sold to the members. “The co-op store was named Rochdale Equitable Pioneers Society (REPS), the first successful consumer cooperative, which still exists today, 160 years after its establishment. The society is the Adulteration Rochdale Equitable Pioneers SocietyCooperation Bayanihan Cooperative corn mill Insurance cooperative Excess farm labor EES HISTORY OF COOPERATIVES Cooperative Development Cooperation is not a modern-day invention. It is as old as mankind itself, It is just absolutely impossible to think how man survived through the ages if they did not help one another: in hunting, in honey gathering, in putting up shelters and, later, in activities pertaining to agriculture. History books now tell us that Babylonians observed some form of cooperative farming. Religious practice in China encouraged the poor to practice a form of cooperative credit parallel to the present-day credit unions. In fact, there are words in languages and dialects all over the world that correspond to cooperation. In the Philippines the words such as bayanihan or tulungan (Tagalog), pabuhat or burulig. (Waray), pangkakasakey or mankakaibatau or panagtimpuyog (Panggalatok or Pangasinense), magtinabangan (Cebuano), pagkaykayisatau (Ilokano), luyo-luyo hunglonan or patarab lang-tabang (Bicolano), pamnisasanmetung (Kapampangan) are examples of the widespread presence in Philippine dialects of the concept of cooperative or a group of people working together in cooperation with each other for a common end. European history is replete with efforts at formalizing cooperative endeavors as an institution. Particularly in Britain, some government workers in dockyards organized a cooperative corn mill in reaction to the high prices charged at that time by proprietors of corn mills. Attempts were made, by the middle of the 18th century in Scotland, to utilize a cooperative form for business undertaking, a mixture of production and consumer cooperative where the cooperative stocked weaving supplies as, well as family consumption goods. Towards the end of the 18th century, attempts to set up a form of mutual insurance were undertaken to remedy the conditions of the poor. In America, Benjamin Franklin is attributed with the establishment of an insurance cooperative that still exists today, although organized at around the middle of the 18th century. As industrialization progressed in England, the socio-economic and working conditions of workers deteriorated. As feudalism slowly crumbled down, capitalism began to show its ugly side: the widening gap between rich and poor, unscrupulous businessFreidrich Wilhelm Raiffeisen first specimen of the modern-day cooperatives, Learning from the experiences of previous cooperatives and capitalist enterprises, and reacting especially to capitalist practices, the society drew up the principles under which they operated their store so they can be consistently applied and emulated or followed by others wanting to put up similar stores, These principles later evolved into the universally accepted cooperative principles. Ataround the same time in Germany, Freidrich Wilhelm Raiffeisen, mayor ofa small town called Flammersfeld, germinated the seeds of the practical brotherhood of men, which we call today the credit Schulze-Delitach | union or credit cooperative. Simultaneously, a young lawyer by the name of Schulze-Delitzsch was working on a credit union plan for small businessmen in the cities, similar to what Raiffeisen was Raiffeisentype rural | doing in the rural areas. The conditions in Germany at that time _sgricutural cooperative Creal ‘were similar to what economists now call a depression. The urban centers and cities were crowded with unemployed men who before had been able to earn their bread with honest work but were now reduced to begging, destitution and actual starvation. To make matters worse, a drought struck, and there ensued a two-year crop failure. In a desperate effort to keep their lives together and continue living as families, the townspeople had gotten themselves hopelessly in debt to loan sharks or usury practitioners, Raiffeisen sought financial help from the well-to-do of the community, but doles were merely stopgaps. itunion | Raiffeisen thought of the problem hard and long, and decided the only recourse was for the people to help themselves. So he set up his first credit union based on the following ideals: that only members of the credit union could borrow from it, that low interest loans would be approved only for provident and productive purposes, and that the member's character was the most important security for his loan. He insisted that all the members in the credit union have a common bond of interest to hold them together. Indeed, credit unions or credit cooperatives still operate on these principles today. Raiffeisen is regarded as. the father of credit cooperatives. .mi COOPERATIVES IN THE PHILIPPINES Pre-Spanish Period Not much is known about formal cooperatives in the early history of the Philippines. What is known, however, is that the dialect terms for cooperation or cooperative undertaking pre-dated the arrival of the Spaniards. The Chinese cooperative concepts may also have been introduced to the Filipinos, since Chinese trading Boats at that time did not carry all the goods of one trader. It ‘was a prudent practice that a trader would distribute his goods in proportion to the number of trading boats sailing to minimize losses in case the boat sank or fell prey to pirates. Under such an ‘arrangement, each trader lost only a proportionate part of his 00s, and not the entire lot which would have been the case ifit were carried by one boat alone. Spanish Colonial Period Spain was still feudal at the time that capitalism was laying to ‘waste the vestiges of feudalism in England, Spain, although it ‘ould later give the world an innovative cooperative concept ‘22d approach in Mondragon Corporacion Cooperativa, did set bequeath the Philippines with a cooperative legacy. When She Spanish colonization of the Philippines transformed the ‘Sesicultural economy into a feudal economy, guilds or gremios ‘sere organized in the country, especially towards the end of the Spanish era. The gremios later transformed themselves into labor SSzions, and today, in wharves in the provinces, the offices of the sociation of stevedores or longshoremen are still referred to as )Bremios and the association as gremio obrero. The middle-class Faipinos, or iltustrados, who have studied and traveled in Europe, ‘et wind of the cooperative developments there, and upon their setarn home, tried to set up cooperatives. Dr. Jose P. Rizal, the Sational hero, organized different cooperatives in Dapitan in 42896; he even asked permission from the Spanish authorities to ‘slow him to go to Sabah to organize an Owen-type of cooperative, Sebich, unfortunately, was denied by the Spanish administrators. Ensilio Jacinto, in San Pedro, Laguna, organized cooperatives 1898. A flow-over effect of the gremios saw, in 1902, during the American colonial period, Isabelo de los Reyes heading Gremio obrero Dr. Jose Rizal MustradoUnion Obrero Democrata Alphonse Desjardins cooperative association which eventually became the | MINDALERT1 Union Obrero Democrata, | During the Spanish era, Filipinos ‘were preoccupied with revolutionary concerns, which constrained the first Philippine labor federation (Scott, 1992). | caoperathe organizing. Aside fromthe above actor whatother However, the seeds of | facers god tthe lctistar efit st cooperativism failed to | organizing cooperatives considering prosper, perhaps due to the | Me copeatve enronment during revolutionary fervor and activities that preoccupied Filipinos at the close of the 19th century. Culturally, also, under the Spanish regime, Filipinos were not used to being paid for rendering efforts on cooperative basis; food partaken after helping aneighbor, say, transfer his whole house to another location was enough recognition for efforts rendered. Economic benefit or gain ‘was not well associated with cooperative work. American Colonial Period The Americans were well acquainted with European types of cooperatives. As mentioned earlier, Benjamin Franklin organized in the United States, as early as the middle of the 18th century, a cooperative insurance that is still operating today. The Canadian who introduced Raiffeisen-type co-ops into Canada, Mr. Alphonse Desjardins, a Montreal legislative reporter, also started the first credit union in the United States: the Ste. Marie Parish Credit Union in Manchester, New Hampshire, in 1909. ‘The conquering American soldiers who later formed part of the colonial government, the 600 Thomasites teachers who came to “educate” the Filipinos on the American ways, as well as the administrators of the colonial government were all acquainted with cooperatives. Irish-American missionaries and teachers initiated the emergence of the Raiffeisen-type rural agricultural cooperatives in the Philippines. In 1907 in the first Philippine Assembly, [Link] Barreto of Zambales presented a bill through the efforts of Governor Teodoro Sandiko of Bulacan, providing for the organization of rural credit cooperatives, This bill was intended to help the people in the rural areas overcome the control of usurers who were really impoverishing the people. Unfortunately,the upper chamber of the Philippine Legislature, the Philippine Commission, disapproved the bill. In 1914, Rep. Rafael Corpuz presenteda similar bill, and this time both houses approved it. The Bill became, on February 5, 1915, Act No. 2508, otherwise known as the Rural Credit Law. The Bureau of Agriculture administered the law and implemented the creation of rural credit cooperative associations, which were tasked to pool funds cooperatively in order to extend credit to their members at reasonable terms. The loan, however, was extended exclusively for agricultural operations and the amount available to farmer-members depended on the amount of savings they had accumulated in the ©o-op. Another law that helped in the propagation of cooperatives was Act No. 2818, passed in 1919. It provided an appropriation fone million pesos for rice and corn production to members of rural credit associations. It was during this time that cooperative organization became easier due to state assistance. Thus, by the end of 1926 there were 544 rural credit cooperatives organized im 42 provinces. Adthough the Rural Credit Law nurtured the productive capacities lefthe farmer-members, it was, however, realized that productive SScentives would not go much further if farmer-producers were met able to sell their produce. Hence, on December 9, 1927, Be Cooperative Marketing Law (Act No. 3425) was approved 24 enacted into law by the American colonial government. HB sought the formation of state-initiated farmers’ marketing Seoperatives, imposed government control and intervention in ‘sperating cooperatives, and empowered the Bureau of Commerce 24 Industry to organize farmers into marketing cooperatives. ‘By 1939, the total number of rural credit cooperatives reached Hs peak at 570 associations, with an aggregate membership of £55,000 individuals and resources of P 3,376,400. In addition, ‘Seconds show there were 160 marketing cooperative associations Seablished, with a total membership of approximately 5,000 members. Siotwithstanding the benefits of rural credit cooperatives, there Seas no real, widespread enthusiasm among farmers to organize Seaselves into marketing associations, Culturally, Filipinos are ‘eet prone to saving. The land is so rich and plants so plentiful Sixt trip to the forests or communal public lands results in the Reece Rural Credit Law ‘Cooperatve Marketing Taw (PA No. 3435) Not a nation of saversConsumers Cooperative League First credit union I ——— ny production or gathering of food or something of value: wild abaca, wild bananas, wild mushrooms, honey, wild hogs, firewood for sale, charcoal for sale, fattan, wild fruits, etc. Camote, cassava and other root crops, leafy vegetables, fruit trees, bananas are easily cultivated and readily available. Neither does the extended-family value help Filipinos think long-term: relatives are most certainly ready to respond in case of crop failure or food shortage or crises. Saving for the future or planning the future does not definitely sit well with rural Filipinos. Their term of reference is short; so are their future projections, very much unlike the Western frame of mind where summer planning and provisions are needed to survive the winter. Thus, even the national saving rate is certainly very low. The middle class, though, does save since education has made them realize the importance of saving and planning forthe future. At the same time that the Bureau of Commerce and Industry was nursing the growth and expansion of marketing cooperatives, it embarked on the development of another type of cooperative in the Philippines, the consumer cooperatives. The Bureau ‘sponsored the formation of the Consumers Cooperative League of the Philippines that was formally organized on October 18, 1938. Nevertheless, there were already existing consumer cooperatives operating quite successfully prior to the launching of this project. In this group may be mentioned the Consumers Cooperative Association organized on October 20, 1916, among the faculty, students and employees of the College of Agriculture of the University of the Philippines at Los Bafios, and the Dumaguete Consumers Cooperative Association in 1936, sponsored by professors of Siliman University. ‘The year 1938 is significant in the development of privately initiated cooperative organizing. The Rev. Allen R. Huber, a Christian minister, organized his church membership in Vigan, Tlocos Sur, into a credit union. The suiccess of the credit union inspired other Christian churches in the region to look up to the Vigan experience as a role model. ‘ The fact that the Bureau of Commerce and Industry promoted and organized various types of cooperatives stressed the need for a law specifically designed to treat cooperatives as a special type of corporate organization. In the middle of the 1990s, thethe Concept existing laws on the different types of cooperatives, under which cooperative organizations registered, were considered insufficient to meet the different concerns and needs of cooperatives. In 1940, the cooperative movement gained momentum when ‘Commonwealth Act No. 65, otherwise known asthe Cooperative Law, was enacted. This law provided for the organization of all types of cooperatives, allowing 15 or more persons to form = cooperative, which, for the first five years of its operation, ‘eas exempt from all taxes and government fees. The National ‘Trading Corporation (NTC) was created to take charge of the formation, organization and supervision of cooperatives or sputual-aid associations. The law also established a National ‘Cooperative Fund (NCF). Through the NTC, the government ‘2s to act as wholesaler of consumer and capital goods and as a marketing agency to cooperative societies. The agency supplied ‘essential commodities to cooperativesat reasonable prices under ‘2 soft-term agreement. Term privileges included free delivery, consignment, and a 30-day credit for orders. ‘Commodity organizations were created for farmers in theindustries S$2ch as abaca and other fibers, rice and corn, tobacco and coconut fe aid farmers with credit, modern agricultural technologies, [precessing, warehousing, marketing and exportation. The need. x closer supervision of the growing movement and economic ‘Setvity of cooperatives compelled the government to organize a ‘Separate office to handle cooperatives. Hence, in 1941, the National ‘Gooperative Administration (NCA) was established and absorbed "Be functions of the NTC, including the National Cooperative Fand (NCF). Under the NCA much headway was accomplished ‘elong cooperative education. The promotion and organization ‘ef cooperatives continued and intensified. In spite of the efforts 'Szerted, the progress of the cooperative movement was cut short Seth the outbreak of World War Il. Japanese Colonial Period ‘During the short-lived Japanese occupation, another attempt was ‘Sade to revive the cooperative movement as a means of helping be masses. The food shortage during the Japanese occupation Became severe in urban areas including Manila and caused ‘he number of cooperatives to increase rapidly. The Japanese- Rimnreneens | cooperative Law Cooperatives to alleviate conomie sufferingrise to social among certa the war. The the economs cooperative: creation R.A (CAO) in x placed unde ‘the mandate {mmr Pisin inecons | sponsored government of Pres. Laurel, largely through the initiative of then Minister of Economic Affairs, Pedro Sabido, exerted efforts to organize consumers’ cooperatives to help alleviate the economic suffering of the people, especially those living in Manila. Agriculture-based cooperatives were linked to urban-based cooperatives because of the high demand for food. With the intensive training of the managers under the direction. of Dr. Pablo N. Mabbun, there was great expectation from the co-op program, but the project was cut short with the arrival of the American liberation forces. Commonwealth Period Cooperative organizing or strengthening reached a feverish phase zca | after the war; through the supervision of the Emergency Control = ‘Administration (ECA), cooperatives were tapped primarily forthe Jy [Link].73 | distribution of relief goods. Commonwealth Act No. 713 revived Bai the National Cooperative Administration (NCA). Cooperatives were registered as fast as they came without proper orientation of members. No investigation was conducted before cooperatives were registered due to lack of personnel. The more than 1500 cooperatives then organized and tapped by ECA became dormant, when the relief goods distribution program ended. The formation of cooperatives continued at a slow pace due to difficulties co-ops not relief | encountered in the procurement of basic commodities following organizations |} jt eration. Further, the organizing of co-ops for relief purposes implanted the seeds of misconception that cooperatives are dole-dishing organizations. In addition, the withdrawal of all tax exemptions and other privileges under Republic Act No. 89 ‘weakened the movement in 1946. To consolidate the cooperative movement, the government, in 1047, transferred the merchandising functions of the NCA over cooperatives to the Philippine Relief and Trade Rehabilitation pratra | Administration (PRATRA). At this time, in pursuance of Republic ‘Act No. 51 and implemented through Executive Order No. 93 in 1947, the NCA was converted into a new entity: the National Cooperatives and Small Business Corporation (NCSBC). Post-Independence Period ‘The devastation wrought by the war upon the economy imposed. untold economic hardship on the population. The situation gavecee rise to social discontent and eventual strengthening of dissidence among certain guerilla factions that fought the Japanese during the war. The government embarked on various programs to restore the economy to normalcy and this included special measures for cooperatives. One measure adopted for cooperatives was the creation R.A. No. 364, of the Cooperative Administration Office (CAO) in 1950 through to replace the NCSBC. ‘The new body, placed under the Department of Commerce and Industry, had the mandate to promote, organize, and oversee the cooperative movement. Three cooperative laws influenced the creation of, the CAO, namely, the Rural Credit Cooperative Association ‘Act, the Cooperative Marketing Law, and the Cooperative Law. Farther, R.A. No. 583 created the Small Farmers Cooperative Doan Fund. Another measure adopted was the creation of the Agricultural ‘Credit and Cooperative Financing Administration (ACCFA) in 3952 through Republic Act No. 821, also known as the Agricultural ‘Cooperative Law. ACCEA’s tasks included extending assistance to ‘small farmers in securing liberal credit, promoting the effective ‘groupings of farmers into cooperative associations, enabling them market their agricultural commodities efficiently, and placing sgriculture on an equal economic footing with other industries. ‘A unique feature of R.A. No. 821 was the extension of credit to Semmers without collateral except their productive capacity. This Exxze-scale program of rural financing, funded by USAID with g>vernment counterpart, was to be carried out through various pes of loans, each loan serving a specific need of a farmer or ‘ef a cooperative. As a matter of marketing policy, the ACCFA extend loans only to members of Farmers Cooperative Marketing “Associations (FACOMAs). More than 400 FACOMAS, capitalized ‘2 P5 million and representing 200,000 farmers, were organized. ‘However, ducto the political and electoral motivations attendant Se their creation, the FACOMAs were monumental failures with ‘eexy low repayment rate. “The lessons of the FACOMA fiasco prodded cooperative leaders to ‘s=think cooperative development strategies. Most leaders of the ‘op movement thought that there was a necessity to separate ‘he administrative supervision for agricultural cooperatives from ‘een-agricultural cooperatives. So, in 1957, the Non-agricultural ‘Cooperative Law was enacted into law as R.A. No. 2023. Under this, cao ACCFA usa FACOMA | ‘ Non-agricultural Cooperative LawAddreing soi Pr JSS Code of Agrarian Reforms Cooperatives politicized ‘under Martial Law 12 law two prominent big credit unions got incorporated, namely, San Dionisio Credit Cooperative (assets: P200M) and the Baguio- ‘Benguet Credit Cooperative (assets: P300 M). One good feature of this law was the requirement that private employers grant the cooperative office space free of charge. Under the presentlaw, this privilege is extended only to government employees. This law also created the Philippine National Cooperative Bank (PNCB), tasked to provide financing to non-agricultural co-ops; but as cooperative fate would have it, mismanagement closed the PNCB after only ten years of operation with the resultant insolvency. In 1967, the cooperative movement got a shot in the arm when the Catholic Church, overflowing with fervor in implementing the calls of the Second Vatican Council, resolved, through the National Rural Congress called for the purpose of addressing social injustice and poverty issues, to organize cooperatives in the parishes. Each diocesan social action center implemented the call and thousands of cooperatives were organized. The co-ops organized were steeped in the values of cooperative education, self-reliance, and voluntarism. Side by side with cooperative building was the pursuance of the social action centers of adult eduication or learning as a means of liberation and empowerment. The latter complemented the efforts at cooperative organizing. In 1969, the Code of Agrarian Reforms, R.A. No. 6389, decreed that credit, agricultural supplies, and marketing activities of the land reform beneficiaries should be coursed through cooperatives. When President Marcos imposed martial law, cooperatives became actively politicized. The martial law regime wanted to use the cooperative form as an instrument for the success of the Bagong Lipunan or New Society. Presidential Decree (P.D.) No. 1 created the Bureau of Cooperative Development (BCOD) under the Department of Local Government and Community Development (DLGCD) as a replacement of CAO. [Link]. 175, together with Letter of Instruction (L.1.) No. 23, became the legal basis for cooperatives, With the declaration that the whole of the Philippines is a land reform area, pre-cooperatives and ‘cooperatives were used to prepare the farmer beneficiaries for the exercise of land ownership and to extend to the farmers services13 previously availed of from the landlords. The pre-cooperatives ‘were called the Samahang Nayon (SN), which were incubator stages for the farmer-beneficiaries of land reform so they will learn the concepts, principles, technical skills, management, and ‘other rudimentary cooperative skills needed to run a full-fledged cooperative, the Kilusang Bayan (KB). Ten SNs comprised one KB. Because of the local government initiative and the promise ‘ef government support and financing (P50,000 credit), SNs spushroomed overnight, with weak or no cooperative foundation. ‘The SNs, however, had inadequate or no cooperative education; ‘sehat predominated were the talks of the promised start-up capital or outside financing. When the financing came, those sho were able to avail of certain amounts did not return to pay the loan. No wonder this program failed miserably. Of the more ‘than 22,000 registered SNs, only around a thousand were left at she end of the Marcos regime in 1986. Programs like this created the impression, especially in urban poor communities, that ‘cooperatives have a component external financing or start-up smoney. And even to this day, urban poor communities still ask ow much is the support money coming from the organizer. One ‘successful cooperative program of the dictatorial regime, however, ‘eas the establishment of electric cooperatives. Although they are ‘ect cooperatives inthe strict sense that the concept of cooperative $5 used in R.A. No. 6938 (Cooperative Code of the Philippines), ‘ey somehow brought the blessings of electricity to rural areas SSroughout most of the country. On the negative side were the politicians, who soon encroached into electric cooperatives, fed pushed for the appointment as general managers of their ‘political protégées, with the result that most electric cooperatives ‘soon found themselves in the red. Today, there are some electric ‘ssoperatives that have re-incorporated under the Cooperative ‘Code and are real cooperatives. ‘During the martial law years most external and foreign funding ‘agencies did not trust the government to channel funds to the Sntended beneficiaries: the marginalized sector of society. There srere fears that the government would use these funds to prop sep the sagging finances of the bankrupt martial law regime or ‘at support money would be lost simply to corruption, These external funding agencies, therefore, channeled their support for cooperative education, organizing, and financing to non- Kilusang Bayan Electric cooperativesCooperative Code of the Philippines ; Canteens as teacher ‘cooperatives 14 governmental organizations (NGOs), people's organizations (POs), social action centers of the church, and organized labor. During President Corazon Aquino’s administration, R.A. No. 6939, the Cooperative Code of the Philippines, became the law ‘on cooperatives. The Code further reinforced the agrarian-reform cooperatives in its special provisions section on the matter. ‘The administration, through the KABISIG People’s Movement, harnessed the capabilities of NGOs, POs, and cooperative organizations in addressing poverty. The same was true with the succeeding administration of President Fidel Ramos; development programs used cooperatives as a medium for advancing socio- economic progress. Despite the efforts exerted by the private sector in organizing cooperatives, there are still failures. This is inevitable because of the freedom and democracy practiced in the cooperative sector; cooperative fervor is not enough: after registration, only then do operational problems arise and lack of cooperative education, inexperience, and lack of management sense spell the difference. For this reason, the CDA has weeded out nonviable registered cooperatives and de-listed them from the register of cooperatives. ‘A cooperative is considered to have ceased operations if for two consecutive years it has not filed its annual reports and audited financial statements. The same sanction holds true for failure to operationalize within two years after registration or failure to operate fortwo successive years. The CDA has found out the most problems among registered cooperatives arise from compliance with reportorial requirements because organizers do not discuss these things during the organization of the co-ops. To address cooperative failures the National Association of Cooperative Education (NACE) was founded in 1996. Also in 1996, the Department of Education, Culture and Sports (DECS), through Order No. 55 provided that all school canteens in primary and secondary schools should be converted into teacher cooperatives. However, judging from reports on television about complaints regarding school canteens, it seems that the teachers themselves need cooperative education. Cooperatives have gone a long way since it started in the Philippines. Some cooperatives have won seats in the House of Representatives as party list. representatives.The future of cooperatives in the country is bright. The Polytechnic University of the Philippines now offers a course on cooperatives, making cooperative work a profession. The University of Santo Tomas offers a subject on cooperatives in its Business Administration course, as well as in its Entrepreneurship with Ethics Education Towards Equity course, as an alternative Basiness form of preference. ‘Cooperatives are prepared to meet the challenges of competition. They have a captive market that is loyal to the business of the ooperative and cannot be weaned away by competition unless [price differences make the co-op uncompetitive. This fact should Be exploited by cooperatives to forestall the devastating effects ef globalization, trans-national companies and big business ‘encroachments into the economy. Economies of scale can be ‘addressed by cooperation among cooperatives or by selling to ‘son-members if it is operationally profitable even if the co-op Becomes subject to taxes. Traditional cooperatives that hire non- seember employees may solve unionization threats or problems ‘By allowing the employees to become either regular or associate ‘smembers, The Supreme Court ruling that cooperative members, Being owners of the cooperative, cannot set up a labor union “s=zinst themselves will now apply to these employees. Of course, workers’ cooperatives the Supreme Court ruling is always ‘pplicable and they may not organize a union. Botwithstanding the prospects of a bright future, cooperatives ‘Sail face diverse problems, and major factors contribute to the ‘EFicalties in institutionalizing cooperatives. Fisstis the lack of training and education. This deficiency invariably Beads to weak leadership, mismanagement, lack of capital, lack of seembership support, graft and corruption, insufficient volume ‘ef business, perceived lack of government support, and lack of Seformation and practical know-how on principles, nature and ‘eperation of cooperative organizations. ‘Lack of education and training results in weak leadership because sembers will not know how to act, much more project avision, in ‘en activity that they are ignorant of. Management may beaslail but one does not know cooperatives and its conceptual ramifications, ‘ene will not be able to know the parameters of one’s actions. imcnens Cooperative work as ‘profession Captive market Lack of edueation and training=, —~— Psnino con ‘safegu Lack of sdequat te ards Directors and cooperative finance officers who lack education and training would not know how to tap different sources of eapital, which is readily available to cooperatives, internally. Insufficient volume of business is deficiency in marketing know how. Lack of education and training results in lukewarm or no membership support because training and orientationreshapethe attitudes and frame of mind of members to support an enterprise that they co-own and goes after a member's welfare, Cooperatives serveand donot exploit members, Often, governmentis perceived not to support cooperatives because co-ops do not know what to expect from the CDA. Theagency does provide alot of services to support the cooperative movement, especially on co-op education. Its personnel are very supportive of cooperators and give advice on problems liberally. Lack of education and training results in the deterioration or even eventual dissolution of the cooperative, especially when information withheld concerns the universally accepted cooperative principles, the very foundation of cooperatives Without the principles, there is no cooperative. Uneducated members would not know what to expect and what is proper, find, hence, will not check acts of graft and corruption committed by officers. Cooperatives are founded on ethics and morals. Education initiates the officers into the true nature of man, one that is created in the image and likeness of God. Acknowledgement of this fact — taking the spiritual dimension ofhuman beings into ‘consideration — makes officers appreciate the concept ofhuman persons and respect the dignity of man and compel them to work for love of neighbor because of their love for God. ‘A second hindrance to the institutionalization of cooperatives jg the absence of adequate safeguards against unscrupulous officers who take advantage of their positions to grant loans to themselves and their compadres. It is the duty of the board to adopt a policy that will safeguard the money of the members ‘To proteet members’ investments, the credit committee has the duty to balance the service component of the cooperative against the collectability of a loan . The audit committee should take jnto account the security given for each loan and examine the character profile ofthe borrower. Even ifthe borrower isan officer fr a compadrre of an officer, there are certain procedures to beEs = followed so the funds or capital of members do not getdissipated. There should be enough check-and-balance systems in aco-op to. insure its proper operation. Third is the improper use of credit by borrowers who utilize borrowed funds for non-prescribed purposes. The board should ‘be strict in investigating the improper usage of loan proceeds 2nd sanctions should be meted out immediately, observing Gane process. Admittedly, it is very hard to monitor this since sooperatives do not have mechanisms to monitor compliance with teen purposes, but when talks about improper usage reach the Seoperative, investigation should be promptly conducted. The fourth factor centers on defective security given for loans ‘ebtained from co-ops. Security must be commensurate in amount ® the loan sought. Security that i8 less in value than the loan btained is an invitation to delinquency in payments. A more Faluable security, except for'character loans, answers for non- ‘Psment of obligations and encourages redemption of the security Sthout sacrificing cooperatives’ capability to service the needs efmembers. Fiih is political interference, particularly in the collection overdue accounts. In the provinces, this is really the case Seben a cooperative becomes politicized or accepts donations Gem politicians. Effort should be exerted so that political SSterference can be avoided, including forgoing solicitations from pebticians. Ssh is inability to establish adequate marketing facilities. To Ssblish a cooperative and make it produce its output might (Be easy. Learning a technology could also be easy. But finding a to sustain production is hard. Cooperatives that produce Aistribute outputs should be well grounded on marketing Pemaiples and strategies. Cooperatives should put extra emphasis the study and mastery of marketing. there is ineffectiveness or inadequate supervision of the ment agency or agencies entrusted with the development promotion of cooperative organizations. The private sector id have the primary concern in promoting and developing sg and competent cooperatives. Government participation, if =r, should come in only as a last resort, and should be limited Improper use oferodit Defective or Inadequate security Political interference Lack of adequate marketing facilities Tnadequate government support