A cooperative organization is an association of persons, usually of limited means, who have voluntarily joined together to achieve a common economic end through the formation of a democratically controlled organization, making equitable distributions to the capital required, and accepting a fair share of risk and benefits of the undertaking.
The word ‘co-operation’ stands for the idea of living together and working together. Cooperation is a form of business organization the only system of voluntary organization suitable for poorer people. It is an organization wherein persons voluntarily associate together as human beings on a basis of equality, for the promotion of economic interests of themselves.
Characteristics of Cooperative Organization
The following are the characteristic features of a cooperative organization as a form of business organization:
- Voluntary Association
A cooperative society is a voluntary association of persons and not of capital. Any person can join a cooperative society of his free will and can leave it at any time. When he leaves, he can withdraw his capital from the society. He cannot transfer his share to another person.
The voluntary character of the cooperative association has two implications:
(i) None will be denied the right to become a member and
(ii) The cooperative society will not compete anybody to become a member.
- Spirit of Cooperation
The spirit of cooperation works under the motto, ‘each for all and all for each.’ This means that every member of a cooperative organization shall work in the general interest of the organization as a whole and not for his self-interest. Under cooperation, service is of supreme importance and self-interest is of secondary importance.
- Democratic Management
An individual member is considered not as a capitalist but as a human being and under cooperation, economic equality is fully ensured by a general rule—one man one vote. Whether one contributes 50 rupees or 100 rupees as share capital, all enjoy equal rights and equal duties. A person having only one share can even become the president of cooperative society.
Capital of a cooperative society is raised from members through share capital. Cooperatives are formed by relatively poorer sections of society; share capital is usually very limited. Since it is a part of govt. policy to encourage cooperatives, a cooperative society can increase its capital by taking loans from the State and Central Cooperative Banks.
- Fixed Return on Capital
In a cooperative organization, we do not have the dividend hunting element. In a consumers’ cooperative store, return on capital is fixed and it is usually not more than 12 p.c. per annum. The surplus profits are distributed in the form of bonus but it is directly connected with the amount of purchases by the member in one year.
- Cash Sale
In a cooperative organization “cash and carry system” is a universal feature. In the absence of adequate capital, grant of credit is not possible. Cash sales also avoided risk of loss due to bad debts and it could also encourage the habit of thrift among the members.
- Moral Emphasis
A cooperative organization generally originates in the poorer section of population; hence more emphasis is laid on the development of moral character of the individual member. The absence of capital is compensated by honesty, integrity and loyalty. Under cooperation, honesty is regarded as the best security. Thus cooperation prepares a band of honest and selfless workers for the good of humanity.
- Corporate Status
A cooperative association has to be registered under the separate legislation—Cooperative Societies Act. Every society must have at least 10 members. Registration is desirable. It gives a separate legal status to all cooperative organizations just like a company. It also gives exemptions and privileges under the Act.
Types of Cooperatives
Cooperatives may be formed in all walks of life. Some of them are concerned with the moral and social uplift of a weak section of the people, while many of them combine some business activity with service to members.
The principal types of business cooperatives are:
- Cooperative Credit Societies
Cooperative Credit Societies are voluntary associations of people with moderate means formed with the object of extending short-term financial accommodation to them and developing the habit of thrift among them.
Germany is the birth place of credit cooperation. Credit cooperation was born in the middle of the 19th century. Rural credit cooperative societies were started in the villages to solve the problem of agricultural finance.
The village societies were federated into central cooperative banks and central cooperative banks federated into the apex of state cooperative banks. Thus rural cooperative finance has a federal structure like a pyramid. The primary society is the base. The central bank in the middle and the apex bank in the top of the structure. The members of the primary society are villagers.
In the similar manner urban cooperative credit societies were started in India. These urban cooperative banks look after the financial needs of artisans and labour population of the towns. These urban cooperative banks are based on limited liability while the village cooperative societies are based on unlimited liability.
National Bank for Agriculture and Rural Development (NABARD) has been established with an Authorised Capital of Rs. 500 crores. It will act as an Apex Agricultural Bank for disbursement of agricultural credit and for implementation of the programme of integrated rural development. It is jointly owned by the Central Govt. and the Reserve Bank of India.
- Consumers’ Cooperative Societies
28 Rochedale Pioneers in Manchester in UK laid the foundation for the Consumers’ Cooperative Movement in 1844 and paved the way for a peaceful revolution. The Rochedale Pioneers who were mainly weavers, set an example by collective purchasing and distribution of consumer goods at bazar rates and for cash price and by declaration of bonus at the end of the year on the purchase made.
Their example has brought a revolution in the purchase and sale of consumer goods by eliminating profit motive and introducing in its place service motive. In India, consumers’ cooperatives have received impetus from the govt, attempts to check rise in prices of consumer goods.
- Producers’ Cooperatives
It is said that the birth of Producers’ Cooperatives took place in France in the middle of 19th century. But it did not make satisfactory progress.
Producers’ Cooperatives, also known as industrial cooperatives, are voluntary associations of small producers formed with the object of eliminating the capitalist class from the system of industrial production. These societies produce goods for meeting the requirements of consumers. Sometimes their production may be sold to outsiders at a profit.
There are two types of producers’ cooperatives. In the first type, producer-members produce individually and not as employees of the society. The society supplies raw materials, chemicals, tools and equipment’s to the members. The members are supposed to sell their individual products to the society.
In the second type of such societies, the member-producers are treated as employees of the society and are paid wages for their work.
- Housing Cooperatives
Housing cooperatives are formed by persons who are interested in making houses of their own. Such societies are formed mostly in urban areas. Through these societies persons who want to have their own houses secure financial assistance.
- Cooperative Farming Societies
The cooperative farming societies are basically agricultural cooperatives formed for the purpose of achieving the benefits of large scale farming and maximizing agricultural output. Such societies are encouraged in India to overcome the difficulties of subdivision and fragmentation of holdings in the country.