Management of Cooperatives

Philosophical and
Theoretical Foundations
of Co-operatives

Equality
Ownership
Employme
nt
Efficiency
Price

According to United States Department of Agriculture

(USDA),
Cooperative is;
User-owned

and

User-controlled

business

distributes benefits on the basis of use.

that

According to The International Co-operative Alliance

(ICA), Cooperative is;
Autonomous association of people united voluntarily
to meet their common economic, social or cultural
needs and aspirations through a jointly-owned and
democratically-controlled enterprise.

Uniqueness of Cooperative
Ownership:Cooperatives are owned and democratically controlled by
their members-the people who use the co-ops services or buy its goodsnot by outside investors; Co-op members elect their board of directors
from within the membership.
Dividends:Return surplus revenues (income over expenses and
investment) to members proportionate to their use of the cooperative,
not proportionate to their investment or ownership share.
Social Impact:Are motivated not by profit, but by service-to meet
their members needs or affordable and high quality goods or services.
Mutual Help:Pay taxes on income kept within the co-op for investment
and reserves. Surplus revenues from the co-op are returned to individual
members who pay taxes on that income.

Cooperative in Different Sectors

Prime Objective

Retail consumer coops: Safe goods at fair prices

Farmers cooperatives: Quality farm inputs at fair prices; To market farm

produce to achieve a stable market and the best returns from the market

Workers Cooperative: Employment on terms acceptable to the workers [direct

involvement in decision-making]

Housing cooperative: Quality housing at a reasonable cost;

Credit Union: Facilities for saving and borrowing at fair rates of interest, and
assistance in managing personal financial affairs

Community cooperative: Provide services to members of a specific community

Dairy cooperative: Timely services and market to milk producers for their

WHY COOPERATIVES FAIL OR THRIVE?

Reasons for Failure of Cooperatives
Poor selection of directors, especially those who fail to support their
cooperative;
Members who join but never use their cooperative and bypass it for a
small gain elsewhere;
Members who use cooperatives but fail to take responsibility.
Each member must be ready to accept responsibility when asked, or
as the need arises.
Every member should have an equal opportunity to be president of the
cooperative;
Members who never ask questions and who let a few persons make
policy;

Reasons for Failure of Cooperatives

Directors who fail to attend Board meeting and take unanimous
decisions;
Lack of consistent membership education about the problems
cooperative faces;
Not supporting the cooperative with enough money [risk capital] to get
the job done;
Low-cost management it is the most expensive item for a cooperative;
High priced management is usually the least expensive item;
Errors in financial policy, such as over-extension of credit, too little
capital;
Poor accounting records, delayed Audit Reports, non-compliance of
reports;
Lack of financially sound, systematic programme for reimbursement of

Why Cooperatives Thrive

Provide goods and services needed by members;
Where members provide risk capital and transact business on
cash terms;
Use all major fixed assets at the 75% level, or more;
Have members who do the majority of their business with the
cooperatives;
Keep administration and overhead costs low;
Offer more individualized and Specialised services, especially in
marketing;
Maintain an open line of communication with members;
Select and develop a quality management team;
Elect business-oriented directors;

Why Cooperatives needed?

Working model of socialism
Rural Development
Patriotism in entrepreneurship
Ethical Business Practice
Inclusive Development Vs. Growth
Socio-economic Development of India

7 PRINCIPLES Of COOPERATIVE
1. Voluntary And Open Membership
2. Democratic Member Control
3. Members' Economic Participation
4. Autonomy And Independence
5. Education, Training And Information
6. Cooperation Among Cooperatives
7. Concern For Community

Outreach of Cooperatives worldwide

There are more than 1 billion members of co-operatives

worldwide.
Employ over 100 million people that 20% more than
multinational enterprises.
Co-operatives worldwide have a turnover of $1.1 trillion dollars;
Securing the livelihood of 3 billion people - thats half the
worlds population.

Outreach of Cooperatives in India

Rural Network (Villages covered)
100%
Coverage of rural households
71%
Agri Fertilizer, Sugar, Wheat, Animal feed
50%
Retail fair price shops
20%
Storage facility
65%
Direct employment in India (1% of global)
Million
Source: National Resource Centre, NCUI.

EVOLUTION OF COOPERATIVES IN INDIA

Legacy of moneylenders
Pooling resources for solving common problems (informal cooperation)
Agitation at Poona and Ahmednagar against moneylenders
Deccan Agriculture Relief Act (1879), Land Improvement Loan Act (1883)
and Agriculturists Loan Act (1884)
In 1892, Frederick Nicholsons German visit, Raiffeissen Report/Model
Cooperative Society Act, 1904 (1st Cooperative Act)

EVOLUTION OF COOPERATIVES IN INDIA

Cooperative Society Act, 1904
Classification of society; Rural and Urban
Organizing and Controlling by Govt. Registrar
One-man, One-vote
Loan to non-members on fix-asset
Non-credit Cooperative in Urban only
Unscientific classification of society (Rural and Urban)
No agency to supervise
Unlimited liability in Rural Credit Cooperatives

EVOLUTION OF COOPERATIVES IN INDIA

Cooperative Society Act, 1912
Scientific classification of society; Rural and Urban
Registration of all types of Cooperatives in Rural and Urban
Formation of Central Financing and Supervision Committee
Limited liability in Rural and Urban Cooperatives

EVOLUTION OF COOPERATIVES IN INDIA

Sir Edward Mac Legan Committee 1914
Found:
(1) illiteracy and ignorance of the masses
(2) misappropriation of funds
(3) extensive nepotism
(4) delay in granting loans

Recommendations:
(1) Punctual repayment
(2) Services to members only

(3) Raising capital from savings

(4) Member awareness &

(5) co-operative movement as a Govt. movement.

education
Proper implementation could not be done due
(5) Monitoring of beneficiary
World War - I

EVOLUTION OF COOPERATIVES IN INDIA

1919: co-operation became provincial subject (growth in no and size)
1929: witnessed a worldwide economic depression (ruined cooperatives)
1934: started co-operative Land Mortgage Banks (improved credit)
1942: Multi-Unit Cooperative Societies Act (expansion in multi. Province)
1945: All India Co-operative Planning Committee (sustained World WarII)

Committee on Co-operation (1964)

Chairman: Shri Ram-Nivas Mirdha
Objectives:
1. To lay down standards and criteria by which the genuineness of
cooperative societies of various types may be judged and to suggest
measures for clearing out non-genuine societies and preventing their
registration.
2. To review the existing cooperative laws, rules and practices with
a view to locating the loopholes in cooperative institutions and
recommend measures for the elimination and prevention of such
vested interests.
3. To examine the factors hindering self-reliance and self-regulation
in the cooperative movement and to suggest appropriate remedies.
http://books.google.co.in/books?

Committee on Co-operation (1964)

Findings Recommendations:
1. Deliberately accelerated pace of expansion Vigilant administration
and supervision
2. Model with tremendous potential Require Financial, Admin and
supervisory inputs
3. Rectification of State Laws Enforcing 7 Principles of Cooperative
4. Unclear frame-work Sound Model for socialistic pattern of
cooperative
5. Inactive / False cooperative Pre-registration performance criteria
http://books.google.co.in/books?

Rural Credit Review

Failure to control unorganized Rural Credit system
Formation of RBI by British Govt. in 1935 for Agri Credit
Development
In 1952, Cooperative Bank share was 3.3 % and 0.9% of
Commercial Banks
Vs. Moneylenders
Transformation of Imperial Bank of India to SBI, to strengthen
Rural Credit Channel
Formation
Allin India
Rural
Credit
Review
Committee
1966 to
Agricultural of;
Credit
India: Status,
Issues
and Future
Agenda*
- Dr. Rakesh Mohan,

All India Rural Credit Review

Committee 1966-69

Chaired by: Shri B. Venkatappiah

Objectives:

To review the supply of rural credit

To make recommendations for improving the flow of agricultural
credit
To review the after effect of RBI and SBI
Recommendations implemented:
Agriculture as priority sector for providing credit
Commercial Banks as allies of Cooperative Credit Banks
Decentralized credit planning through the District Lead Bank
This has helped Green-Revolution in 1970s in India
Agricultural Credit in India: Status, Issues and Future Agenda* - Dr. Rakesh Mohan,

Committee on
Organization of Co-operatives for Rural Poor
1990
Chaired by: Shri Sankam S.R. (Secretary, Department of Rural
Development)
Objectives:
To review the supply of credit to rural masses
To protect the poor from economic exploitation
Findings and Recommendations:
High dependency on Money Lenders
Credit on repaying capacity, Not on land and security
Develop saving capacity by SHGs (self-help-groups)
https://books.google.co.in/books?
id=aLz7uJjLjJ8C&pg=PA77&lpg=PA77&dq=Committee+on+Organization+of+Cooperatives+for+Rural+Poor+1990&sou

National Policy on Cooperatives - 2002

Why it needed:
Role in socio-economic development
Expansion of cooperatives in different sectors
Regional Imbalances
To Revamp and streamline existing initiatives

https://books.google.co.in/books?
id=aLz7uJjLjJ8C&pg=PA77&lpg=PA77&dq=Committee+on+Organization+of+Cooperatives+for+Rural+Poor+1990&sou

National Policy on Cooperatives - 2002

What it is:
Based on the Manchester statement of International Cooperative Alliance 1995
Accountable to their members and contribute to the
national economy
Declared as distinct economic sector
Enable to set up holding companies / subsidiaries
Enter into strategic partnership
Venture into futuristic areas like insurance, food processing
http://shodhganga.inflibnet.ac.in/bitstream/10603/2502/8/08_chap

The 97th amendment to the Constitution; grants citizens the

fundamental right to form cooperative societies.

Amendment to the Constitution in respect of Cooperative

Societies
The salient features of the proposed amendment to the Constitution are
as follows:
1. Insertion of new article 43 B in Part IV of the Constitution providing for
the State obligation to promote voluntary formation, autonomous
functioning, democratic control and professional management of
the cooperative societies.
2. Integration of cooperative societies on the principles of
voluntary formation, democratic member control, member
economic participation and autonomous functions.

Amendment to the Constitution in respect of Cooperative

Societies
6. Organizing General Body meeting of every cooperative society within
a period of 6 months close to the financial year;
7. Access to the books, information and the accounts of the
cooperative society;
8. Filing of the returns by every cooperative society within six months of
year end
9. Free, fair, impartial and timely elections of cooperative societies by
the State Election Commission or by any other appropriate and
independent body
10. Audit of the cooperative societies to be carried by the auditors from