Is it time to disrupt coops
Cooperatives, popularly known as coops, are both social and business organizations, organized for the purpose of putting up capital to undertake an agreed upon business that caters to the needs of the owners themselves. Coops in the agricultural sector, farm and fish businesses doing their own marketing activities, market-vendors , and even farming in the urban setting will find the formation of Service Coops helpful and necessary during this time of pandemic. Canteen concessionaire operators, consumer goods marketing and distribution, car owners tricycle operators and even motorbike owners affiliated with delivery services, can organize the more popular Credit Coops that can provide loans at very affordable and easy to pay terms. There are those who offer multiple services. They are called Multi-Purpose Cooperatives.
Currently, coop operations are guided by the rules and regulations promulgated by the Cooperatives Development Authority as mandated by Republic Act 9520, known as The Philippine Cooperative Law of 2008.
Over the past 10 years, the CDA has done a lot to purge pseudo cooperatives, provided stricter rules on training and management, assistance in organizing new coops, and audit of existing ones. Reporting and operations monitoring requirements allows coops to immediately address their weaknesses.
There are big coops capitalized with millions in pesos as they have been in business 10,20,or even more years. But there are also small ones, capital fully reliant on the small contributions by members, hence besieged by funding and management problems, trying to survive pressures to comply with both coop practices to offer basic services and rules by the CDA.
The big questions at this point is: As an economic institution have they really impacted the lives of its members? How big have they contributed to the GNP of the country? Are they achieving the real objectives why cooperatives are organized and established which is to go into activities for the benefit of its contributors . Should disruptions be adopted in the coop sector? In businesses, disruptions have produced a lot of challenging and interesting growth in operations and in profits. Examples of disruptions in businesses are: the AIRBNB concept which now completes with fully furnished condos or resorts to cater to short-term staycations; Grab and Uber are another example of disruptions in the transportation industry. Airline reservations, ticketing and check-in procedures are another case of disruptions. Wikipedia describes disruptions as “an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established marketleading firms, products, and alliances.”
Is it time to disrupt how coop recruitment is being done. Shouldn’t membership be opened more to individuals with already viable business, or those with viable business plans? As of now focus is on individuals engaged in livelihood or with small sources of income, struggling employees, market vendors and the like that need additional capital for their operations. Once accepted, they are required to contribute to their subscribed capital according to their capacity to pay but this takes time. And since credit is based on their capital contribution, loans remain to be small and used only for micro or small business ventures,
Another area where disruptions can be made is in the area of credit granting and monitoring. As practiced, credit is based only on the amount contributed by the member. After approval is made a loan is availed, a member is on his own and therefore, many times, the real intent of the loan is not fulfilled. Many times, this practice results in delinquency.
Last major area that needs to be disrupted is the matter of coop Investments. Credit coops, for instance, cannot invest on new ventures. If they wish, they have to organize a new coop for that matter so it goes around again with the tedious process of registering a new coop, training people, building again a capital base before the new venture is addressed. Reason is because the law is very strict on how their Net Income contribution will be allocated. And while observing that, other more pressing needs in the community where they operate remain to be unresolved but coops cannot invest to help.
Why cant coops operate among their members a business similar to Grab or Angkas? Why can’t local traders or small businesses in the town who are members of the coop band together and support moves to create townwide food delivery system and help members earn at least a day’s earning to pay for their food costs? Feasible? Why not? There are more than 100 small enterprises in one locality that are into food, trading, services, gifts, fresh produce, buy and sell that needs people to deliver orders by their co-members in the same location ?
So, is it time we look into Disruptions?