2.what is a cooperative

7/31/2019 2.What is a Cooperative

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What is a Cooperative?

A cooperative is a duly registered association of persons, with a common bond of interest who havevoluntarily joined together to achieve a lawfulcommon social or economic end, and makingequitable contributions to the capital required and

accepting a fair share of the risks and benefits of theundertaking in accordance with universally acceptedcooperative principles.

By forming a cooperative, you pool money, human

resources and talent to build capital, and worktogether to produce more goods and raise incomes.Through cooperatives, you can look for other sources of loans at low interest rates instead of

borrowing from informal lenders or usurers. Thecoo erative can also be a mechanism for marketin



Objectives of Cooperatives

• The primary objective of everyCooperative is to provide goods andservices to its members and thus enable

them to attain increased income andsavings, investments, productivity andpurchasing power and promote amongthem equitable distribution of net surplus

through maximum utilization of economiesof scale, cost-sharing and risk-sharingwithout however, conducting the affairs of

the cooperative for eleemosynary or charitable ur oses.



What are the purposes in Organizing a

Cooperative?

• To encourage thrift and savings mobilizationamong the members;

• To generate funds and extend credit to themembers for productive and provident purposes;

• To encourage among members systematicproduction and marketing;

• To provide goods and services and other requirements to the members;

• To develop expertise and skills among itsmembers;

• To acquire lands and provide housing benefits for the members;



• To insure against losses of the members;

• To promote and advance the economic,social and educational state of the members;

• To establish, own, lease or operate

cooperative banks, cooperative wholesale

and retail complexes, insurance and

agricultural/industrial processing enterprises,

and public markets;

• To coordinate and facilitate the activities of cooperatives; and

• To undertake any and all other activities for

the effective and efficient implementation of



Cooperative Principles

• Open and Voluntary membership- membership in a

cooperative shall be voluntary and available to allindividuals regardless of their political, racial or religious background or beliefs.

• Democratic Control- cooperatives are democraticorganizations. Its affairs shall be administered by

persons elected or appointed in a manner agreedupon by members.

Members of primary cooperatives shall haveequal voting rights on an one-member-one voteprinciple, while a secondary or tertiary cooperative

shall have voting rights as delegate of members-cooperatives, but such cooperatives shall have onlyfive (5) votes. The votes cast by the delegates shall bedeemed as votes cast the members thereof.



• Member Economic Participation- members

contribute equitably to and control the capital of their cooperative.

• At least part of that capital is usually the commonproperty of the cooperative. Members usuallyreceive limited compensation, if any, on capitalsubscribed as a condition of membership.

• Members allocate surpluses for any or all thefollowing purposes: developing their cooperative,possibly by setting up reserves, part of which atleast would be indivisible; benefiting members inproportion to their transactions with thecooperative; and supporting other activities as aapproved by the membership.



• Autonomy and Independence-cooperatives are autonomous, self-help

organizations controlled by their members. If they enter into agreements with other organizations (including governments) or raise capital from external sources, they doso on terms that ensure democratic controlby the members and maintain their cooperative independence.

• Education, Training and Information-cooperatives provide education and training

for their members, elected representatives,managers, and employees so they cancontribute effectively to the development of their cooperatives. They inform the general

public-particularly young people and opinionleaders about the nature and benefits of



• Cooperation among Cooperative -

cooperatives serve their members more

effectively and strengthen the cooperativemovement by working together through

local, national, regional, and international

structures.• Concern for the Community-

cooperatives work for the sustainable

development of their communities throughpolicies approved by their members.



Cooperative Practices

• Capital Formation - Starting a new

cooperative can create a need for substantialcapital. A problem develops when trying tooperate with limited membership equitycapital. The task of financing a newcooperative with member equity alone isusually impossible. Therefore, the bestsource of additional funds needed is frommembers in the form of: a) membership feeor purchase of stock; b) agreement towithhold portion of net earnings profits); c) byassessment based on units of products sold

or purchased.



• Cash Trading - This is business done on

a cash and carry basis. The customer enjoys at least the use of the goods and

services for the cash payment he/she

gives. Cash trading promotes equalitysince anybody with cash can enjoy the

service patronage. This practice can train

members to observe the habit of balanced

spending. Furthermore, the cooperativewould be able to avoid bad debts and

stabilize business operations. Finally, it is

a way of increasing growth.



• Constant expansion - As organizations,

cooperatives have to grow for community

services. Expansion is a must. It is done

intensively and extensively. New members

should be recruited to accumulate more

capital and savings to support operation of the expanded business and services

which in the long run will provide more

benefits for them. However, members inthis regard should undergo continuous

education and training to learn various

management practices/techniques and



• Quality standardized goods -

Cooperatives are intended to develop

communities through the production of

high quality goods and provision of better

services. Cooperatives could help by

patronizing only standardized productsand services of high quality. Hence,

different types of cooperatives will strive to

improve their goods and services to standcompetition with business establishments.

This in turn will be instrumental in

improving life in the country.



• Cooperative wholesale business orinterlending (cooperative bank). Cooperatives

can be organized with enough people and capital.They respond to the needs of the community.Needs arise when there are people. Theexpansion of membership may result in wholesale

business. In fact, to be effective, wholesalebusiness, interlending (cooperative bank), couldbe done by primary societies. Defects from retailbusiness could be avoided.

• The benefits from the wholesale areconsiderable. Members can market and acquirethe goods and services at the right price andquality. They can even lower and raise savings.They can also influence the production of badly

needed goods and services;



• Minimize expenditures - A significant factor favoringthe growth of cooperative is its being a communityproject. Its’ officers do not receive remuneration. If they get compensation, it is only in the form of allowances, per diems, or honoraria. When auditshows that the cooperative is not capable or can affordthe minimum wage, only employees get paid regularly.The government can give exemption. Furthermore,

laws may allow exemption from income and salestaxes. Minimizing expenses should not be taken as aremedy to cover up the weaknesses of the system. Itis not to be conceived as a form of dole-outs, butrather , it should be considered as motivation to make

the movement stand on its own and soon attain itsobjectives. Once its objectives are achieved, themovement can take its rightful place in thedevelopment of the country.



Cooperative?

• Credit Cooperative:promotes thrift and savings

among its members and creates funds in order togrant loans for productive and provident purposes.

• Consumer Cooperative:The primary purpose is toprocure and distribute commodities to members andnon-members.

• Producers Cooperative:undertakes joint productionwhether agricultural or industrial.

• Marketing Cooperative:engages in the supply of production inputs to members, and markets their products.

• Service Cooperative:engages in medical and dentalcare, hospitalization, transportation, insurance,housing.

• Multi- Purpose Cooperative:combines two (2) or more of the business activities of these different types

of cooperatives.

Wh t th C t i f



What are the Categories of

Cooperatives?

• Primary - The members of which are

natural persons of legal age.

• Secondary - The members of which are

primaries.

• Tertiary - the members of which are

secondaries upward to one (1) or more

apex organizations.

Wh t th ki d f b hi



What are the kinds of membership

in a Cooperative?

• A regular member is entitled to all the

rights and privileges of membership as

stated in the Cooperative Code and the

coops’ by laws.

• An associate member has no right to

vote and be voted upon and is entitled

only to such rights and privileges providedby the cooperative’s by laws.

2.what is a cooperative

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