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 Essen The ssenti tial al Char Charac acte teri rist stic icss of Co-o Co-ope pera rati tive ve Society The fol follow lowing ing are are the the some of the the defi defin nitio itions ns of coope oopera rati tive ve organizations. (1) International Labour Organization- "Cooperative is an association of pers person on usua usuall lly y of limi limite ted d mean means, s, who who have have volu volunta ntari rily ly join joined ed together together to achieve achieve a common common economic, economic, end through through the formation formation of a democr democrati atical cally ly contro controlle lled d busine business ss organi organizat zation, ion, make make equita equitable ble contribution to the capital required and accepting a fair share of risks and benefits of the undertaking." (2) Hubert Hubert Calve Calvestst- "Coope "Cooperat rative ive is a form form of organi organizat zation ion where wherein in 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 defi defini nies es coop cooper erat ativ ives es "as "as a soci societ ety y whic which h has has its its obje object ctiv ives es the 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 who gath gather er toge togeth ther er for for a com common mon econ econom omic ic need need and and try try to lift lift themselves from weakness into strength through business enterprise."
Characteristics of Co-operative Society Base ased on the abov bove defi defini nittions ions,, we can can deri deriv ve the the fol follow lowing ing characteristics of cooperative organizations. 1. Voluntary association: Ever Everyb ybod ody y havin aving g a comm common on inte intere rest st is free free to join join coop cooper erat ativ ivee 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 p er the Income Tax Act, 1961. 3. Democratic management: Equa Equali liti ties es is the the esse essence nce of coop cooper erat ativ ivee ente enterp rpri rise ses, s, gove govern rned ed by demo democr crat atic ic prin princi ciple ples. s. Ever Every y memb member er has has got got equa equall righ rightt over over the 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 coop cooper erat ativ ivee soci societ ety y or at the the time time of join joinin ing g as a memb member er of the 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 from the the surp surplu luss gene genera rate ted d by the the soci societ ety y on that that year year.. This This is an incentive extended by the society to its members. 8. Government control: All All the the coop cooper erat ativ ivee soci societ etie iess of the the coun countr try y are are regu regula late ted d by the the Govern Governmen mentt throug through h its its differ different ent rules rules and regula regulatio tions ns frame framed d from from time time to time time.. Coop Coopera erati tive ve socie societi ties es of the the coun countr try y are are requ requir ired ed to register themselves as per the Indian Cooperative Societies Act, 1912. Sometimes Sometimes different State Governments Governments also frame frame laws regarding 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 assi assist stan ance ce from from the the Centr Central al or Stat Statee Gove Governm rnmen entt or from from the the apex apex coop cooper erat ativ ivee inst instit itut utio ions ns like like stat statee and and cent centra rall coop cooper erat ativ ivee bank bankss operating in that state.
Objectives of Co-operative Society To enhan nhance ce and enco ncourag uragee the the cul cultura turall heri herita tage ge of North orthw west est Cameroon through quality craft production
-To -To impr improv ovee the the livi living ng stan standa dard rdss of craf crafts tsme men n by pool poolin ing g thei their r 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 These are forme formed d to elimi eliminat natee the middle middlemen men and capita capitalis listt groups 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 them themse selve lves. s. Its Its memb member erss get get divi divide dend nd on the the basi basiss of the the capi capita tall invested by them. Objects
(a) (a)
To purc purcha hase se the the raw raw mat mater eria ials ls and and oth other er fac facto tors rs at at most most economical prices.
(b)
To produce the goods at the most economical level.
(c)
To supervise the production most efficiently and effectively.
(d) (d)
To dis dispo pose se of the the surp surplu luss produ product ctio ion n to non mem membe bers rs at maximum prices.
(e) (f) (f) (g) ii.
To eliminate the middlemen and capitalists. To remo remove ve the the wor worke ker' r'ss grie grieva vance ncess in resp respec ectt of of wor worki king ng 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 whol wholee sale sale pric price. e. It thus thus elim elimina inate tess capi capita tali list sts, s, reta retail iler erss and and othe other r midd middle leme men n from from the the chan channe nell of dist distri ribu buti tion on and and memb members ers are 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 supplied to non-member non-memberss but they do not share in the profit profit of the society. Profit earned by the store are distributed among the members according according to the value of the purchases purchases conducted by the manager manager who is elected by the members. Generally its two types are popular in the world. (a)
Retail cooperative store.
(b)
Wholesale cooperative store.
Objects
1.
To eliminate the retailers, capitalists and wholesalers.
2.
To promote the welfare of the members.
3. To supply supply the daily necessities necessities of life to its members members at market market price. 4. To increase increase the purchasing purchasing power an standard standard of living 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 indi indivi vidu dual al memb member erss and and arra arrang nges es to supp supply ly the the prod produc uctt at high highes estt possible price. The profit of the sale of the ~ products is distributed amon among g the the cont contri ribu buti ting ng prod produc ucer erss acco accord rdin ing g to thei theirr indi indivi vidu dual al contribution to the pool. This kind of society is particularly useful for
the the smal smalll prod produc ucer erss and and agri agricu cult ltur uris ists ts.. It can can be form formed ed in two two organization according to the local condition of the country i.e. (a)
Single purpose society
(b)
Multi purposes society
Objectives
1. To eliminate eliminate the middlemen middlemen who are liable liable of the high cost of marketing. 2.
To pool together the output of the individual members.
3.
To grade and process of the pooling products of the members.
4.
To dispose of the product at the maximum price.
5.
To adjust supply to demand.
6.
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 ordina ordinary ry policy policy holder holders. s. These These are other other two two forms forms of cooper cooperati ative ve Insurance i.e. 1.
Mutual office
2.
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)
To strengthen the financial position of the company.
(b)
To decrease true amount of premium.
(c)
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
v.
1.
To provide insurance facilities to its members.
2.
To charge the low rate of premium.
3.
To promote the welfare of the members.
4.
To encourage the habit of thrift and investment.
Housing Cooperative society
It is an asso associ ciat atio ion n of midd middle le and and low low inco income me grou groups ps of peop people le.. 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 society one must buy at least one share of the society. 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)
Housing Building Society
(2)
Land Society
(3)
Finance Society
Objectives
1. 2.
To receive deposits from its members. To make make loan loanss to its its memb members ers for for the the cons constr truc ucti tion on of house at low rate of interest.
3.
To render technical services for its members.
4.
To purchase building materials at economical rate.
5.
To perform perform the welfare welfare activitie activitiess as water water supply, supply, roads, roads, sewerage, electricity etc.
vi. Cooperative Farming Society
This form of Society is formed with the object of obtaining the benefits of larg largee scal scalee farm farming ing and and maxi maximi mizi zing ng agri agricu cult ltur ural al prod produc ucts ts.. 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.
Cooperative collective farming Society.
2.
Cooperative joint farming society.
3.
Cooperative better farming society.
4.
Cooperative tenant farming society.
Objective
(a)
To consolidate holding.
(b)
To introduce new technique of cultivation.
(c)
To improve the irrigating system.
(d)
To increase the area under agricultural operations.
(e) To make necessary necessary steps for the improveme improvements nts of the standard standard of living of the farmers. (f)
To increase the production per acre.
(g)
To provide seeds manures and implements to its members.
(h)
To dispose of agricultural output.
vii. Credit Cooperative Society
Cred Credit it coop cooper erat ativ ivee soci societ ety y is the the volu volunt ntar ary y assoc ssocia iati tion on of .the .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 are also lso giv given to membe embers rs for unpro nprodu duct ctiv ivee pur purpose poses. s. Credi reditt cooperative society may be divided into two types: (1)
Agricultural Credit Society
(2)
Non-agricultural credit Society
Objects
(a)
To get rid of the pressure of money lenders.
(b)
To provide the financial facilities for short term to its members.
(c)
To keep the minimum rate of interest on loan.
(d) (f)
To develop the habit of thrift and saving among the members. To encourage the habit of mutual aid.
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 ingredient of co-operation. co-operation. Everybody Everybody willing willing to join 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 move moveme ment nt can can attr attrac actt a larg largee memb members ershi hip p only only by stay stayin ing g out out of politics where people have divided opinions. Co-operatives represent univ univer ersa sall brot brothe herh rhoo ood d and and it shou should ld not not lose lose its its path path in poli politi tica call contra contradic dictio tions. ns. There There is no place place for caste caste or discrim discrimina inatio tion n 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 The manag manageme ement nt of a co-ope co-operat rative ive societ society y is always always on democr democrati aticc lines. All the members of a society elect a body of persons to conduct and and cont contro roll the the day-t day-too-da day y work working ing of the the soci societ ety. y. The The memb member erss frequently meet and give guidelines to its executive. The management is elected through one man one-vote system. The day-to-day work is cond conduc ucte ted d by expe expert rt pers person onss but but the the ulti ultima mate te cont contro roll lies lies with with the the members. In a co-operative, democracy is more than a system, it is a condition condition of its business success. success. Co-operati Co-operative ve business business stands stands or falls 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 adults can join together together and form a cooperativ cooperativee society. society. The procedure 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
obstru obstruction ction for memb membersh ership: ip:
Unle Unless ss and and othe otherw rwis isee spec specif ific ical ally ly deba debarr rred ed,, the the membe embers rshi hip p of cooperative cooperative society is open to everybody. everybody. Nobody is obstructed 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 Coope Cooperat rative ive socie society ty member memberss are provid provided ed with with bette betterr good good and services at reasonable prices. The society also provides financial help to its its memb member erss < the the conf confes essi sion onal al rate rates. s. It assi assist stss in sett settin ing g 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 exis existe tence nce.. New New memb member erss m< join join and and old old memb member erss may may quit quit the the soci societ ety y but but soci societ ety y cont contin inue uess to func functi tion on unle unless ss are are othe otherw rwise ise all all members unanimously decided to close the same.
7.
Economic operations:
The operation carried on by the cooperative society economical due to the the elim elimin inat atio ions ns of middl iddlem emen en.. The serv servic ices es of middl iddlem emen en are 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 are very very less less.. Furth urther er,, the the econ econom omie iess of scal scalee-m ma prod produc ucti tion on 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 meet meetin ing g the the dayday-to to-d -day ay admi admini nist stra rati tion on cost cost of the the soci societ ety. y. The procedure for distribution of profit that some portion of the surplus is spen spentt for for the the welf welfar aree of the the memb member ers, s, some some port portio ion n kept kept rese reserv rvee 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 achiev achievee their their object objective ivess succes successfu sfully. lly. There Therefor fore, e, the societ societies ies are given financial loath lower rates. Government also extends many type of subs subsid idie iess to coop cooper erat ativ ivee soci societ etie iess stre streng ngth then enin ing g thei theirr fina financi ncial al stability and sustainable growth in future.
Disadvantages of Co-operative Society: Desp Despit itee many many an adva advant ntag ages es,, the the coop cooper erat ativ ivee soci societ ety y suff suffer er from from certain limitations c drawbacks. Some of these limitations, which a cooperative form of business has are as follows:
1. Limited resources: resources: Cooperative Cooperative societies financial strength strength depend on the cap contribute contributed d 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 The cooper cooperati ative ve societ society y does does not maint maintain ain any secrec secrecy y in busine business ss because the affairs of the society is openly discussed in the meetings. But secrecy is very important for the success of a busines ness 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: Gove Govern rnme ment nt put put thei theirr nom nominee inee in the the Board oard of mana manage geme ment nt 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 cooper cooperati atives ves put some restri restricti ction on on the rate rate of return return.. Absenc Absencee of relationship between work and reward discourage the members to put their maximum effort in the society.
7.
Disputes and differences:
The The mana manage geme ment nt of the the soci societ ety y cons consti titu tute tess the the vari variou ouss type typess 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 usual sually ly manag anaged ed by member mberss and the the membe embers rs may lack 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: Inte Interf rfer eren ence ce by poli politi tica call part partie iess may may come come in the the way way of prop proper er functioning of co-operative societies.
Reference: Co-operative Society http://en.wikipedia.org/wiki/Cooperative
The essential characteristics of Cooperative of Cooperative Society http://www.preservearticles.com/201101193582/characteristics-of-cooperative-society.html
Advantages and Disadvantages of Co-operative Society http://www.lexvidhi.com/article-details/advantages-and-disadvantages-of-co-operativesociety-471.html
Objectives of cooperative society http://bamendahandicraft.wordpress.com/objectives/
Types of cooperatives society http://i2biz.blogspot.com/2009/08/types-of-cooperative-societies.html
Principles of Co-operatives http://www.publishyourarticles.org/knowledge-hub/business-studies/co-operativeorganisation.html
The Advantages and Disadvantages of Cooperative Society http://www.preservearticles.com/201101193579/advantages-and-disadvantages-ofcooperative-society.html
The Limitations of Cooperative Societies http://www.preservearticles.com/2012010319698/what-are-the-advantages-andlimitationsof-cooperative-societies.html
