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Co-operative Society

Definition of Cooperative Society

A cooperative society is essentially an association of person who join together on a voluntary basis for the furtherance of their common economic interests.

The Essential Characteristics of Co-operative Society

The following are the some of the definitions of cooperative organizations. (1) International Labour Organization- "Cooperative is an association of person usually of limited means, who have voluntarily joined together to achieve a common economic, end through the formation of a democratically controlled business organization, make equitable contribution to the capital required and accepting a fair share of risks and benefits of the undertaking." (2) Hubert Calvest- "Cooperative is a form of organization wherein persons voluntary associates together as human beings on the basis of equality for the promotion of the econo interests of themselves." (3) The Indian Cooperative Societies Act, 1912 - Section 4 of this Act definies cooperatives "as a society which has its objectives the promotion of economic interest, its members in accordance with cooperative principles." Cooperative Society is that society which has been registered under the Cooperative Societies Act, 1912, or under any other law for the time being in force in any state registration of cooperative society." (4) Mr. Talmaki - "Cooperative society is an association of the weak who gather together for a common economic need and try to lift themselves from weakness into strength through business enterprise."

Characteristics of Co-operative Society

Based on the above definitions, we can derive the following characteristics of cooperative organizations. 1. Voluntary association: Everybody having a common interest is free to join cooperative society. There is no restriction on the basis of caste, creed, religion, colour, etc. Anybody can also leave it at any time after giving due notice to the society. That is specialty of any cooperative society. There should be minimum of 10 members to for cooperative society but there is no maximum limit for the membership. 2. Separate legal entity: A cooperative society after registration is recognised as separate legal entity by law. It acquires an identity quite distinct and independent of its member can purchase, dispose its own assets, can sue and also can be sued. The income of cooperative society is legally taxable as per the Income Tax Act, 1961. 3. Democratic management: Equalities is the essence of cooperative enterprises, governed by democratic principles. Every member has got equal right over the function management of that society. As such each member has only single voting right irrespective of the number of shares held or capital contributed by them. In case of cooperative society, no member detects the terms and conditions of the functioning because "one man one vote" is the thumb rule. 4. Service motive: The main objective being formation of any cooperative society is for mutual benefit through self-help and collective effort. Profit is not at all in the agenda of the cooperative society. But if members so like, they can take up any activities of their choice to generate surplus in order to meet the day-to-day expenses. 5. Utilisation of surplus: The surplus arising from the operation of business is partly kept in a separate reserve and partly distributed as dividend among the members. According to Indian Cooperative Societies Act - 1912, each society must transfer at least one-fourth of its profits to general reserve.

6. Cash trading: One exception in the cooperative society is that like other business if never go for credit sales. It sells the goods on the basis of cash only. Hence, the cooperative society hardly come across with the financial hardship because of non-collection of sales dues. Members can only purchase on the basis of credit, which is an exception to the present rule. 7. Fixed rate of return: All members are supposed to contribute capital for the formation of a cooperative society or at the time of joining as a member of the cooperative ^society. In return to the capital invested, the members are assured of a fixed rate of return maximum to the extent of 9 per cent per annum on the sum deployed by them. This amount is being paid from the surplus generated by the society on that year. This is an incentive extended by the society to its members. 8. Government control: All the cooperative societies of the country are regulated by the Government through its different rules and regulations framed from time to time. Cooperative societies of the country are required to register themselves as per the Indian Cooperative Societies Act, 1912. Sometimes different State Governments also frame laws regarding the registration and functioning of cooperative societies for their states. 9. Capital: The capital of the society is raised from its members by way of share capital. However, the major part of finance is raised by the society through taking loan from the Government or by accepting grants and assistance from the Central or State Government or from the apex cooperative institutions like state and central cooperative banks operating in that state.

Objectives of Co-operative Society

To enhance and encourage the cultural heritage of Northwest Cameroon through quality craft production

-To improve the living standards of craftsmen by pooling their resources. -To facilitate the collection and marketing of crafts through cooperative efforts. -To promote the exportation of Cameroonian crafts. -To seek funding and technical assistance from donors. -To provide lucrative employment to school graduates. -To fight against child labor. -To promote gender equality in our society.

Types of Co-operatives Society

The following are the main types of cooperative enterprises: i. Producer Cooperative Societies These are formed to eliminate the middlemen and capitalist groups from the industrial production. Its main purpose is to produce goods for the requirements of its members. Surplus productions are also supplied to out riders in the open market at profit. All the necessary activities .as production, management and marketing are performed by the members themselves. Its members get dividend on the basis of the capital invested by them. Objects (a) (b) (c) (d) To purchase the raw materials and other factors at most economical prices. To produce the goods at the most economical level. To supervise the production most efficiently and effectively. To dispose of the surplus production to non members at maximum prices.

(e) (f) (g) ii.

To eliminate the middlemen and capitalists. To remove the worker's grievances in respect of working conditions, wages etc. To arrange for the democratic control of the industrial unit. Consumer Cooperative Societies

The society is the voluntary association of ordinary people formed with the object of obtaining daily requirements of the members. It directly purchases the goods at large scale from the producer or wholesalers at whole sale price. It thus eliminates capitalists, retailers and other middlemen from the channel of distribution and members are in a position to make their purchase at cheater rate. Anyone can become member by purchasing one share of the society. Sometimes goods are also supplied to non-members but they do not share in the profit of the society. Profit earned by the store are distributed among the members according to the value of the purchases conducted by the manager who is elected by the members. Generally its two types are popular in the world. (a) (b) 1. 2. Retail cooperative store. Wholesale cooperative store. To eliminate the retailers, capitalists and wholesalers. To promote the welfare of the members.


3. To supply the daily necessities of life to its members at market price. 4. To increase the purchasing power an standard of living of the members of the society. iii. Marketing Cooperative Society It is the voluntary association of producers formed for the object of arranging the disposal of their output. It pools together the output of the individual members and arranges to supply the product at highest possible price. The profit of the sale of the ~ products is distributed among the contributing producers according to their individual contribution to the pool. This kind of society is particularly useful for

the small producers and agriculturists. It can be formed in two organization according to the local condition of the country i.e. (a) (b) Single purpose society Multi purposes society

Objectives 1. To eliminate the middlemen who are liable of the high cost of marketing. 2. 3. 4. 5. 6. To pool together the output of the individual members. To grade and process of the pooling products of the members. To dispose of the product at the maximum price. To adjust supply to demand. To provide storage facilities to its members.

7. To procure the information relating to market for the member's product. 8. To provide the financial facilities to its members. iv. Insurance Cooperative Society This type of cooperative society is formed for the objects of providing group insurance facilities to its members. It makes the contract with sound insurance company on collective terms and conditions and thus pay lower premium rate to insurance company as compared with ordinary policy holders. These are other two forms of cooperative Insurance i.e. 1. 2. Mutual office Self concern.

In the Mutual office, the policy holders are the owners and the profit of the insurance company is utilized in the following ways: (a) (b) (c) To strengthen the financial position of the company. To decrease true amount of premium. To distribute bonus to its members.

Self concern

Cooperative society is organized to provide insurance facilities like the private insurance company and issued policy to its members for reasonable amount. Object 1. 2. 3. 4. v. To provide insurance facilities to its members. To charge the low rate of premium. To promote the welfare of the members. To encourage the habit of thrift and investment.

Housing Cooperative society

It is an association of middle and low income groups of people. Generally it is formed in urban areas. The main purpose of this form of society is to protect its members against exploitation by landlords. It not only grants financial assistance to its members but also achieve the economics of purchase of building material in bulk. In order to become a member of the society one must buy at least one share of the society. The liability of the member is limited to his capital contributed. It is also called "Building Society" and may be divided into three types i.e. (1) (2) (3) Objectives 1. 2. 3. 4. 5. To receive deposits from its members. To make loans to its members for the construction of house at low rate of interest. To render technical services for its members. To purchase building materials at economical rate. To perform the welfare activities as water supply, roads, sewerage, electricity etc. Housing Building Society Land Society Finance Society

vi. Cooperative Farming Society This form of Society is formed with the object of obtaining the benefits of large scale farming and maximizing agricultural products. It is

basically agricultural. cooperative which is confined to agricultural countries. Its members generally relate to the formers including those owing land. The cooperative forming are of the following types: 1. 2. 3. 4. Objective (a) (b) (c) (d) To consolidate holding. To introduce new technique of cultivation. To improve the irrigating system. To increase the area under agricultural operations. Cooperative collective farming Society. Cooperative joint farming society. Cooperative better farming society. Cooperative tenant farming society.

(e) To make necessary steps for the improvements of the standard of living of the farmers. (f) (g) (h) To increase the production per acre. To provide seeds manures and implements to its members. To dispose of agricultural output.

vii. Credit Cooperative Society Credit cooperative society is the voluntary association of .the financially weak persons organized with the object of providing short term financial requirements to them. This society performs important role in the rural areas where the dishonest money lenders have been exploiting simple villagers by charging high rate of interest. The Funds of the society consist of (a) Membership fees, (b) Dispose of shares (c) Deposits from members and non-members (d) Loan from govt. and semi govt. The liability of members is unlimited. This assists the society in raising funds and ensures that every member will take keen interest in the activities of the society. The society prefers the poorer members in granting loan and charges low rate of interest from them. Generally the society advances the amount for productive purposes but some loans

are also given to members for unproductive purposes. Credit cooperative society may be divided into two types: (1) (2) Objects (a) (b) (c) (d) (f) To get rid of the pressure of money lenders. To provide the financial facilities for short term to its members. To keep the minimum rate of interest on loan. To develop the habit of thrift and saving among the members. To encourage the habit of mutual aid. Agricultural Credit Society Non-agricultural credit Society

Principles of Co-operatives
Some of the principles of co-operative are discussed as follows: I. Voluntary Membership: Everyone is at liberty to enter or leave the co-operative society as and when he likes. Nobody is compelled to join a co-operative society. The members are also free to use or not to use the services of the society. Though there is no limit on the membership of the societies, sometimes certain limits are imposed to keep the society as a workable group. Consumer co-operatives, insurance societies etc. may limit membership to a number which is properly manageable. Voluntary member is the main ingredient of co-operation. Everybody willing to join a society is allowed to do so. Voluntary membership has been responsible for the success of co-operatives movement. II. Political and Religious Neutrality: The membership of a co-operative society is opened to all irrespective of religion, caste, creed, colour or political affiliation. The co-operative movement can attract a large membership only by staying out of politics where people have divided opinions. Co-operatives represent universal brotherhood and it should not lose its path in political contradictions. There is no place for caste or discrimination in cooperative . The primary aim of co-operatives is to serve its members.

So, co-operative societies are neutral as far as political and religious affiliations are concerned. III. Democratic Management: The management of a co-operative society is always on democratic lines. All the members of a society elect a body of persons to conduct and control the day-to-day working of the society. The members frequently meet and give guidelines to its executive. The management is elected through one man one-vote system. The day-to-day work is conducted by expert persons but the ultimate control lies with the members. In a co-operative, democracy is more than a system, it is a condition of its business success. Co-operative business stands or falls with democracy. IV. One Man, One Vote: In co-operative societies every member is given one vote irrespective of his contribution towards their basis of number of shares held by a person. So persons having large number of shares control the organization. In a co-operative, nobody can control the society on the strength of his wealth. All members have equal voice in the management of the society. V. Service Motive: The primary objective of co-operative societies is to provide service to their members. The aim is not to earn profits as is the case in all other forms of organizations. The service of members is the fundamental object of co-operative societies. The societies earn a small amount of profit to cover up administrative expenses. The profit is generally earned when goods are sold to non-members.

Advantages of Co-operative Society

1. Easy to form:
The formation of a cooperative society is very simple as compared to the formation of any other form of business organizations. Any ten adults can join together and form a cooperative society. The procedure involves in the registration of a cooperative society is very simple and easy. No legal formalities are required for the formation of cooperative society.

2. No obstruction for membership:

Unless and otherwise specifically debarred, the membership of cooperative society is open to everybody. Nobody is obstructed to join on the basis of religion, caste, creed, sex and colour etc. A person can become a member of a society at any time he likes and can leave the society when he does not like to continue as ; member.

3. Limited liability:
In most cases, the liabilities of the members of the society is limited to the extent of capital contributed by them. Hence, they are relieved from the fear of attachment of their private property, in case of the society suffers financial losses.

4. Service motive:
In Cooperative society members are provided with better good and services at reasonable prices. The society also provides financial help to its members < the confessional rates. It assists in setting up production units and marketing of produces c small business houses so also small farmers for their agricultural products.

5. Democratic management:
The cooperative society is managed by the elected members from and among themselves. Every member has equal rights through its single vote but can take active part in' the formulation of the policies of the society. Thus all member are equally important for the society.

6. Stability and continuity:

A cooperative society cannot be dissolved by the death insolvency, lunacy, permanent incapability of the members. Therefore, it has stable life are continues to exist for a longer period. It has got separate legal existence. New members m< join and old members may quit the society but society continues to function unless are otherwise all members unanimously decided to close the same.

7. Economic operations:

The operation carried on by the cooperative society economical due to the eliminations of middlemen. The services of middlemen are provided by the members of the society with the minimum cost. In the case of cooperative society, the recurring and non-recurring expenses are very less. Further, the economies of scale-ma production or purchase, automatically reduces the procurement price of the goods, thereby minimizes the selling price.

8. Surplus shared by the members:

The society sells goods to its members on a nominal profit. In some cases, the society sells goods to outsiders. This profit is utilized for meeting the day-to-day administration cost of the society. The procedure for distribution of profit that some portion of the surplus is spent for the welfare of the members, some portion kept reserve whereas the balance shared among the members as dividend on the basis of this purchases.

9. State patronage:
Government provides special assistance to the societies to enable them to achieve their objectives successfully. Therefore, the societies are given financial loath lower rates. Government also extends many type of subsidies to cooperative societies strengthening their financial stability and sustainable growth in future.

Disadvantages of Co-operative Society:

Despite many an advantages, the cooperative society suffer from certain limitations c drawbacks. Some of these limitations, which a cooperative form of business has are as follows:

1. Limited resources:
Cooperative societies financial strength depend on the cap contributed by its members and loan raising capacity from state cooperative banks. The membership fee is limited for which they are unable to raise large amount of resources as their members belong to the lower and middle

class. Thus, cooperative are not suitable for the large scale business which require huge capital.

2. Inefficient management:
A cooperative society is managed by the members only. They do not possess any managerial and special skills. This is considered as major drawback of this sector. Inefficiency of management may not bring success to the societies.

3. Lack of secrecy:
The cooperative society does not maintain any secrecy in business because the affairs of the society is openly discussed in the meetings. But secrecy is very important for the success of a business organization. This paved the way for competitors to compete in more better manner.

4. Cash trading:
The cooperative societies sell their products to outsiders only in cash. But, they are usually from the poor sections. These persons require to avail credit facilities which is not possible in the case of cooperatives. Hence, marketing is a shortcoming for the cooperatives.

5. Excessive Government interference:

Government put their nominee in the Board of management of cooperative society. They influence the decision of the Board which may or may not be favorable for the interest of the society. Excessive state regulation, interference with the flexibility of its operation affects adversely the efficiency of the management of the society.

6. Absence of motivation:
The members may not feel enthusiastic because the law governing the cooperatives put some restriction on the rate of return. Absence of relationship between work and reward discourage the members to put their maximum effort in the society.

7. Disputes and differences:

The management of the society constitutes the various types of personnel from different social, economical and academic background. Many a times they strongly differs from each other on many important issues. This becomes detrimental to the interest of the society. The different opinions and disputes may paralyses the effectiveness of the management.

Limitations of Co-operative Societies

It however suffers from the following limitations.

1. Limited resources:
Societies cannot raise huge amounts as capital because the members may not be able to invest more.

2. Limited scope:
As the resources are limited the chance of expansion is limited.

3. Inefficient management:
It is usually managed by members and the members may lack experience and managerial capacity.

4. No secrecy:
Secrets cannot be maintained by business.

5. Lack of co-operation:
Sometimes the members may not have unity among themselves which might affect the business of co-operatives.

6. No credit facility:
Since credit facilities are not offered to members usually, the members may not be interested in buying goods for cash.

7. Political interference:
Interference by political parties may come in the way of proper functioning of co-operative societies.

Co-operative Society

The essential characteristics of Cooperative Society

Advantages and Disadvantages of Co-operative Society

Objectives of cooperative society

Types of cooperatives society

Principles of Co-operatives

The Advantages and Disadvantages of Cooperative Society

The Limitations of Cooperative Societies