1
An introduction to
cooperatives
-GUARTE, MARK ANTHONY P.
-GUIBAO, RETCHEL
-SALON, HELEN GRACE B.
-GRUMO, EMILY
Groups of individuals around the world
and throughout time have worked together
in pursuit of common goals.
Although the word “cooperative” can be
applied to many different types of group
activities, in this publication the term
is used to reference a formal business
model, which has relatively recent
origins.
The earliest cooperative associations were
created in Europe and North America during
the 7th and 18th centuries.
The pioneers of the Rochdale Society in 19th-
century England are celebrated for lunching
the modern cooperative movement. The unique
contribution of early cooperative organizers
in England is codifying a guiding set of
principles and instigating the creation of
new laws that helped foster cooperative
business development. Today, cooperatives
are found in nearly all countries.
What is a cooperative?
According to the International Co-
operative Alliance (ICA): a cooperative is an
autonomous association of persons united
voluntarily to meet their common economic,
social, and cultural needs and aspiration
through a jointly owned and democratically
controlled enterprise.
Essential elements of cooperatives
The ICA definition recognizes the essential
element of cooperative: membership is
voluntary. Coercion is the antithesis of
cooperation. Persons compelled to act contrary
to their wishes are not truly cooperating. True
corporation with others arises from a belief in
mutual help; it can’t be dictated. In Authentic
cooperatives, persons join voluntarily and have
the freedom to quit the cooperative at any time.
The forced collective prevalent in the former
Soviet Union, for example, were not true
cooperative
United States Department of Agriculture (USDA) in
1987: a cooperative is a user-owned, user-controlled
business that distributes benefits on the basis of use.
3 primary cooperative principles
User ownership
User control
Proportional distribution of benefits
USER OWNER
The user owner principle implies that the people who
use the co-op (members) help finance the co-op and
therefore, own the co-op.
Members are responsible for providing at least some of
the cooperative’s capital.
The capital contribution of each member should be in
equal proportion to that member’s use (patronage) of
the co-op.
USER CONTROL
User control means that members of the co-op govern
the business directly by voting on significant and long-
term business decisions and indirectly through their
representatives on the board of directors.
Cooperative statutes and bylaws usually dictate that
only active co-op members (those who use the co-op)
can become voting directors, although non-members
sometimes serve on boards in a nonvoting, advisory
capacity.
Only co-op members can vote to elect their board of
directors and on other cooperative.
- Voting rights are generally tied to membership status-
usually one-member, one-vote- and not to the level of
investment in or patronage of the cooperative.
- Cooperative law in a number of states in the US and in
other countries, however, also permits proportional
voting. Instead of one vote per member, voting rights
are based on the volume of business the member
transacted the previous year with the cooperative.
For example, a grain cooperative might permit one
vote to be cast for each 1,000 bushels of grain
marketed the year before, but any single member
would be limited to a maximum of ten votes.
Democratic control is maintained by tying voting rights
to patronage. Equitable voting rights, or democratic
control ( as written in the ICA definition), are a
hallmark of cooperatives.
Distribution of benefits on the
basis of use
Describes the principle of proportionality, another key
foundation for cooperatives. Members should share the
benefits, costs, and risks of doing business in equal
proportion to their patronage.
The proportional basis is fair, easily
explained( transparent ), and entirely feasible from an
operational standpoint. To do otherwise distorts the
individual contributions of members and diminishes
their incentives to join and patronize the cooperative.
CO-OP BENEFITS
Better prices for goods and services
Improved services
And dependable sources of inputs and markets for
outputs.
Most cooperatives also realize annual net profits, all or
part of which are returned to members in proportion to
their patronage (thus, they are aptly called patronage
refunds). Cooperatives can also return a position of
their profits as dividends on investment.
Today, some co-op leaders and scholars consider this
devidend restriction arbitrary and harmful to
cooperatives. From their perspective, the 8%
maximum makes investing in cooperatives less
attractive than investing in other forms of business. It
makes cooperatives less competitive as well, especially
in the agricultural processing sector, which requires a
lot of capital for start-up and growth. An overview of
the federal laws that govern cooperatives in the US .
Why cooperate?
People who organize and belong to cooperatives do so
for a variety of economic, social, and even political
reasons. Cooperating with others has often proven to
be satisfactory way of achieving one’s own objectives
while at the same time assisting in achieving theirs.
Farmers create farm supply and marketing
cooperatives to help them maximize their net profits.
This requires both effective marketing of their
products for better prices as well as keeping input costs
as low as possible.
Consumer cooperatives are established to sell the
products a group of consumers want but cannot find
elsewhere at affordable prices. The consumer members
are primarily interested in improving their purchasing
power- quantity of goods and services they can buy
with their income.
Buyers organize bargaining associations and labor
unions to negotiate collectively with management and
owners. In some cases, employees form worker-owned
cooperatives. As the name suggests, a worker-owned
cooperative is owned and controlled by its employees.
Cooperative management and
development
Must be progressive in adapting the changes
brought by the business climates, and responsive to
their member’s changing needs. Members, the
board of directors, and management each have
responsibilities within the cooperative. Strong,
viable cooperatives require all 3 groups to do their
share.
Although capital, employees, business
volume, and good management practices
are all very important for successful
operations, a co-op’s members are its most
important asset
Cooperative success also hinges on effective member
education and communication. Indeed, preoviding
education, training, and information to members is one of
the seven cooperative principles adopted by the ICA. The
unique education needs cooperatives and the essential
elements for a successful education and communication
program are also discussed in chapter 6
Cooperative financing is also critical and in today’s
complex cooperative organizations it can be quite
complicated.
Adequate capital- is one of the fundamental
principles of sound business operation and at the same
time one of the biggest challenges facing cooperatives
today.
Financing options must be consistent with principles
of cooperation as well as with federal and state laws.
As with other business forms, coopertives should be
established only to meet a well-defined need in the
market.
Before cooperatives are created, advance research
should be done by a steering committee to ensure
sufficient support by other potential members in the
community.
A good feasibility study, strong membership drives,
and a comprehensive business plan are essential
ingredients.
Cooperative in
the Philippine:
An Introduction
A cooperative is a duly registered association of persons
with a common bond of interest, who have voluntarily
joined together to achieve a lawful common social or
economic end, making equitable to contribution to the
capital required and accepting a fair share of the risks
and benefits of the undertaking in accordance with
universally accepted cooperative principle.
The declared purpose of the law governing
cooperatives (Republic Act 6938, also known as the
Cooperative Code of the Philippines) is to foster the
creation and growth of cooperatives as a practical
vehicle for promoting self-reliance and harnessing
people power towards the attainment of economic
development and social justice. The law provides
important benefits to the cooperative and its
empowered members, based on our experience in
handling client-cooperatives.
The following are the declared principles
of cooperativism:
Open and voluntary membership. Membership in a
cooperative is voluntary and available to all
individuals regardless of their social, political, racial or
religious background or beliefs.
Democratic control. Cooperatives are democratic
organizations. Their affairs are administered by
persons elected or appointed in a manner agreed upon
by the members. Members of primary cooperatives
have equal voting rights on a one-member-one-vote
principle.
Limited interest in capital. Share capital shall receive a
strictly limited rate of interest.
Division of net surplus. Net surplus arising out of the
operations of a cooperative belongs to its members and shall
be equitably distributed for cooperative development
common services, indivisible reserve fund, and for limited
interest on capital and/or patronage refund in the manner
provided by law.
Cooperative education. All cooperatives shall make
provision for the education of their members, officers and
employees and of the general public based on the principles
of cooperation.
Cooperation among cooperatives. All cooperatives,
in order to best serve the interest of their members and
communities, shall actively cooperate with other
cooperatives at local, national, and international levels.
There are different kinds of cooperatives. In general, these are: (1) Credit
cooperative, which promotes thrift and savings among its members and
creates funds in order to grant loans for productivity; (2) Consumer
cooperative, the primary purpose of which is to procure and distribute
commodities to member and non-members; (3) Producers cooperative, which
undertakes joint production whether agricultural or industrial; (4) Service
cooperative, which engages in medical, and dental care, hospitalization,
transportation, insurance, housing, labor, electric light and power,
communication and other services; and (5) Multi- purpose cooperative, which
combines two or more of the business activities of these different types of
cooperatives. In terms of membership, cooperatives are classified as: (a)
Primary, wherein the members are natural persons of legal age; (2) Secondary,
the members of which are primaries; and (3) Tertiary, the member of which
are secondaries upward to one or more apex organizations. Cooperatives
whose members are cooperatives are called federations or unions.
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