Cooperative Societies, A Great Lever for Start-up Wealth Builders
Co-operative enterprises provide the organisational means whereby a significant proportion of humanity is able to take into its own hands the tasks of creating productive employment, overcoming poverty and achieving social integration - Boutros Boutros Ghali.
Ahead of our weekly conversation, my Billionaire Friend had engaged me in a telephone chat revolving around feedback from readers on the topics we had featured up to that point. I relayed to him that virtually all had elicited comments, but the ones focusing on how employees can build wealth seem to have attracted more attention. I also told him my observation that the dominant issue among those who have shared their feedback with me was how to get the initial money to invest, given that there are competing demands for the take-home pay. After more reviews, my Billionaire Friend promised that he would focus on a subject that could address the concerns raised.
So, without wasting time, he announced that this week’s discussion would be on how wealth builders can use collective investment schemes (cooperative societies) as a lever for their wealth-building endeavours. He had touched on a point about this kind of investment in our past conversations, describing it as how employees can grow to become wealth builders through little drops of water from their savings, salaries and gradual investments. But he decided to discuss it in detail. He started the discussion this way: “In this conversation, we are going to discuss how an employee or a small-scale entrepreneur or an artisan can build wealth. One problem that comes to mind here is the problem of the high cost of capital in Nigeria, in terms of how small-scale enterprises can obtain capital at minimum cost. Currently, the cost of capital in Nigeria is friendly: inflation is in double digits and obtaining loans is very difficult. This is one major reason the concept of cooperative societies remains valid.
What is the utility of COOPERATIVE SOCIETIES?
“Cooperative societies are generally formed due to the limited resources of members, which limits the ability of members to appoint and retain competent management professionals and thus have to depend on their members who generally lack skills and experience. But this is resolved by the government’s supervision via cooperative inspectors and cooperative auditors that oversee the activities of cooperative societies. The auditors and cooperative inspectors are bankrolled by the state government to visit, check the books, give management advice, and ensure that the books are properly kept on all the financial activities of the cooperative societies.”
“The auditors are to audit the accounts of the societies in each state to ensure that the cooperative members adhere to the basic rules of cooperative governance and accounting and financial regulations.”
“The benefits of cooperatives are enormous. For one, it allows wealth-builders with little or zero capital to access capital. It also allows members with little production possibilities to harness in a joint communal effort to optimise their activities and helps them to gain economic sub-scale in selling their products and services and also in the supply of logistics for members. It also gives poor wealth start-ups the opportunity of building their wealth with minimum tax exposure and helps them to invite experts where necessary to advise them on how to manage their operations. Cooperative societies afford members the opportunity of accessing resources such as land, labour, entrepreneurship and professional experts that would not be affordable for individual members of such societies. It is for this reason that cooperative societies have helped to build the wealth of communities and nations.”
“A few years ago, I visited Malaysia. I was pleasantly surprised to find that the palm kernel farms extending into thousands of acres on both sides of my travel route were being farmed under cooperative movements and I was informed on my trip that at that time (some thirty years ago), Malaysia, under its cooperative movement activities, had not only become the world’s largest palm oil producers but was also researching and producing pilot vehicles that were utilising the diesel fuel produced from palm oil. Incidentally, palm oil seeds were taken from Nigeria to be farmed in Malaysia at about the time of her independence.”
“Again, on another visit to Thailand, I was surprised to learn that the large rice fields from which Nigeria was importing the bulk of its rice for consumption, were produced by cooperative societies in that country. The cooperative societies acquire land and jointly produce under different acres that are cleared by the government for them and the cooperative societies buy their tools and light machinery for the production of those large amounts of rice that many countries of the world, including Nigeria, consume. There are many examples to draw from about the importance of building wealth by start-up wealth-builders with minimum access to capital and minimum resources for building wealth.”
“Cooperative movements began in Europe in the Nineteenth Century primarily in Britain and France. The industrial revolution and the increasing mechanisation transformed society and enhanced the livelihood of many workers. This is what led to the first formation of cooperative societies in the world. In 1844, the Rochdale pioneers founded the modern cooperative movement in Lancashire, England to provide an affordable alternative to poor quality and adulterated food and provisions using any surplus to benefit their community. This Rochdale Cooperative Movement has since grown, metamorphosed into many forms of the same body and has spread around the world including Nigeria. Cooperative societies are now business organisations of different trades and goals that are voluntarily formed by members to help themselves in their different trades and wealth-building objectives. They have the characteristics of being open with a democratic structure in which each member has one vote per their business meetings and has an equitable and fair distribution of their economic results. Cooperatives do not declare profits and their operations are not taxable.”
“Cooperatives produce surpluses which are distributed equitably and fairly amongst members. It is a type of business entity which is formed by mainly economically weak sections of society to enhance their economic positions, the performance of their economic activities, and derive economic sub-scale advantages in their trades and businesses. They also prevent the exploitation of their component members by stronger business competitors.”
“There are different forms of cooperative societies: retail cooperatives, workers cooperatives, producer cooperatives, service cooperatives, housing cooperatives, and thrift and credit cooperatives. Examples of these different types of cooperatives can be found in credit, agric, fishing multipurpose activities. Cooperatives enhance and encourage thrift and savings mobilisation among their members towards extending credits to themselves for productive purposes and enhancing their communal development.”
“In Nigeria, cooperative societies are governed by the Nigerian Cooperative Society Act which provides for the registration of cooperatives. Such registration costs only N10,000 for registration. After payments, members get letters of recognition which serve as a licence for operations for three years before getting their certification as legal entities as cooperatives. The Nigerian Cooperative Society Act is a federal law which grants powers to governors of each state for the establishment of directorates for cooperatives in charge of regulating and directing cooperatives.”
“Start-up wealth-builders are usually confronted with the problem of raising capital especially when staunch start-up wealth-builders are employees or artisans or owners of small-scale enterprises. Capital is necessary for wealth builders to produce goods and services which leads to creating goods and services for generating wealth. Capital is the core of wealth building and economic development. It is that specific factor of production that increases the wealth builder’s ability to generate increasing value in business financial assets that are held by wealth owners which can be used to create further wealth and acquire assets to leverage growth and build their financial stability. Capital is that part of wealth used for further production of wealth. It is required by wealth builders to purchase assets and resources that are needed to build wealth. Capital is all the financial resources that wealth owners use to fund their operations and assets for producing products and services towards generating further wealth. In the absence of capital, there will be no wealth builders. In other words, without capital wealth cannot be built. Capital is the blood of the four main factors of land, labour and entrepreneurship. Without capital, it would be difficult to utilise the benefits of land and labour and of course, entrepreneurship would be impossible. Hence, wealth-builders of all forms and types form cooperative societies for realising their economic and social needs as members. Such cooperative societies produce goods and services for the benefit of members as a common business entity of entities to eliminate avoidable exploitation by middlemen in trade and commerce and also protect the rights of cooperative members, both producers and consumers. In such cooperative societies, members have equal voting rights with structures that encourage members to contribute and share responsibilities under a limited liability structure.”
“Examples of successful cooperative societies in the world include the Credit Agriculture group of France, ZEN-NOH, which can be interpreted as the National Federation of Agricultural Cooperatives of Japan, and so on. On a personal note, you would recall in one of the past conversations that I related how I had to set up a cooperative society in my workplace as an executive director. I obtained a loan from that cooperative to add to my savings and housing allowances to build a multi-story building. On completion, I collected as rent four times my capital exposure for building the multi-story building. That is an example of an employee. Another example is the 1844 group of 28 artisans, I mentioned earlier, that was working in the cotton mills in the town of Rochdale northern England, who formed the first cooperative movement and named it the Rochdale Equitable Pioneers Society.”
“Cooperatives, therefore, provide huge benefits for start-up wealth-builders with little access to funding the cost of loan capital or building enough savings to invest and having access to the tools of production in terms of machinery and other parts of production. It serves as a good form of limited liability that attracts zero-taxation to the organisation and gets government backing in terms of providing support services free of charge in building such cooperatives for the wealth-building benefits of the members of the cooperative societies.”
Thus far… I can’t wait to catch up with you next week.
“The benefits of cooperatives are enormous. For one, it allows wealth-builders with little or zero capital to access capital. It also allows members with little production possibilities to harness in a joint communal effort to optimize their activities and helps them to gain economic sub-scale in selling their products and services and also in supply of logistics for members” “Again, on another visit to Thailand, I was surprised to learn that the large rice fields for which Nigeria was importing the bulk of its rice for consumption, were produced by cooperative societies in that country.The cooperative societies acquire land and jointly produce under different acres that are cleared by the government for them and the cooperative societies buy their own tools and light machinery for the production of those large amounts of rice that many countries of the world, including Nigeria, consume”