Cooperative Society

Published Apr 7, 2024

Definition of Cooperative Society

A cooperative society, or simply a cooperative, is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility, and caring for others.

Example

An illustrative example of a cooperative society is a credit union. Credit unions are member-owned financial cooperatives that provide credits, banking services, and other financial services to their members. Members of a credit union share a common bond, such as working in the same industry or living in the same community. Profits made by the credit union are returned to members in the form of reduced fees, higher savings rates, and lower loan rates.

Another example is a farm cooperative where farmers pool their resources in certain areas of activity. For instance, they may jointly own machinery for harvesting their crops, share storage facilities, or collectively market their produce to ensure better pricing than they could achieve individually.

Why Cooperative Societies Matter

Cooperatives play a crucial role in the global economy by empowering individuals and communities. They promote the fullest possible participation in the economic and social development of all people. Cooperatives are centered on community development and social responsibility, which makes them unique compared to other forms of businesses.

By facilitating better access to goods, services, and opportunities, cooperatives help in reducing poverty, creating jobs, and promoting social integration. They can be particularly important in rural areas, where they help in organizing agribusiness activities, thus contributing significantly to food security. Moreover, cooperatives work on principles that ensure democratic functioning and management, giving each member, regardless of the amount of capital they have invested, equal voting rights.

Frequently Asked Questions (FAQ)

What are the principles guiding cooperative societies?

The principles of cooperative societies include voluntary and open membership, democratic member control, member economic participation, autonomy and independence, education, training, and information, cooperation among cooperatives, and concern for community. These principles help ensure that cooperatives operate in a manner that is aligned with their members’ best interests while also contributing positively to the community.

How do cooperative societies differ from other types of businesses?

Cooperative societies differ from other types of businesses in their ownership, governance, and distribution of profits. In a cooperative, the users or members are the owners, which contrasts sharply with corporations that are owned by shareholders. Governance in a cooperative is democratic, typically adhering to the principle of one member, one vote, regardless of the amount of capital or number of shares an individual holds. Finally, profits in cooperatives are distributed among members according to their use of the cooperative’s services, not according to the shares they own, which is the case in conventional corporations.

What challenges do cooperative societies face?

Challenges faced by cooperative societies include financial constraints, limited managerial skills, and competition from more capital-intensive businesses. Additionally, maintaining member interest and participation in the management of cooperatives can be difficult, especially as the size of the cooperative grows. Regulatory challenges and the need for effective governance structures also pose significant obstacles to cooperative development. Despite these challenges, cooperatives remain a vital part of the economy, offering a distinct model for doing business that prioritizes mutual help, democracy, and social responsibility over profit maximization.

Through their unique approach to business, cooperative societies demonstrate the power of collective action and shared ownership, playing a significant role in creating more equitable and sustainable economies.