Co-operatives

WE ARE still discussing the forms of private-sector businesses. Our focus today is co-operatives.

A co-operative is a business organisation that is owned and operated by its members who have similar interests and objectives and who pool their resources together to establish the cooperative for their mutual benefit.

The first co-operatives were agricultural cooperatives, e.g., farm co-operatives, where tools, seedlings and other materials were bought in bulk at low costs for farming purposes. The agricultural products were sold at reasonable prices and the profits shared among the members of the co-operative.

Membership in a co-operative is gained by buying shares. These shares are usually of low value. Irrespective of the number of shares owned, however, each shareholder only has one vote at the society’s general meeting.

A board of management is elected to operate the business on behalf of its members. Profits are distributed among members.

Apart from selling shares, the co-operative may raise funds by borrowing from commercial banks, development banks and co-operative banks.

The co-operative is based on five cooperative principles as follows:

1. OPEN MEMBERSHIP

It is open to all 16 years and over on the payment of a small fee. However, for certain types of co-operatives there is a restriction where certain skills are required.

2. DEMOCRATIC CONTROL

All members are equal and the business is run for the benefit of all.

3. LIMITED INTEREST ON SHARE CAPITAL

This is so since there are usually many persons contributing relatively small amounts of share capital.

4. DISTRIBUTION OF PROFITS TO BENEFIT ALL EQUALLY

Profits should be shared in such a way as to prevent one member gaining at the expense of others. Therefore, profits are distributed in accordance with the amount of share capital invested.

5. PROMOTION OF EDUCATION

Members of the co-operative should be educated on the principles of the co-operative so that the business can be run efficiently.

There are five main types of co-operatives: 1. Consumer co-operatives: these buy goods and services at wholesale prices and sell to their members at lower than regular prices.

2. Producer co-operatives: these purchase raw materials at low costs, produce and then sell to make reasonable profits.

3. Financial co-operatives: members pool their personal savings so that they are able to qualify for credit at low interest rates from financial institutions.

4. Services: members are provided with services which, under normal circumstances, they would not be able to access because of the high costs involved, e.g., housing and healthcare.

5. Worker co-operatives: members are allowed to determine and control their choice of employment and the co-operative will find employment for them.

LEGAL ASPECTS

Any group of people wishing to form a cooperative must register with the Registrar of Cooperative Societies. They must pay a registration fee.

ADVANTAGES OF CO-OPERATIVES

1. Membership is open.

2. The form of management is democratic.

3. Guaranteed markets are available for members.

4. Co-operatives incur little or no advertising costs.

5. Members benefit from economy of scale in bulk buying.

6. Employment is created within the organisation.

7. They benefit from advantages in taxation.

8. Many co-operatives are useful as agents of the government.

DISADVANTAGES OF CO-OPERATIVES

1. Management is often poor and inexperienced.

2. Over democratisation may lead to inefficiency.

3. Lack of capital hampers the progress of cooperatives.

4. Conflicts sometimes arise because in some instances, members are both employers and employees.

That’s it folk. Keep working hard. I will be with you again next week.