Co-Operatives

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. It is a voluntary association of ten or more members residing or working in the same locality, who join together on the basis of equality for the fulfilment of their economic or business interest. The basic feature which differentiates co-operatives from other forms of business ownership is that its primary motive is service to the members rather than making profits.

ICD views cooperatives as important in improving the living and working conditions of women and men globally as well as making essential infrastructure and services available even in areas neglected by the state and investor-driven enterprises. It was estimated that in 2012 approximately one billion people were members of at least one cooperative and that the turnover of the largest three hundred cooperatives in the world reached $2.2 trillion – which, if they were to be a country, it would make them the seventh largest.

The International Co-operative Alliance was the first international association formed by the cooperative movement. It includes the World Council of Credit Unions. A second organization was formed later in Germany, the International Raiffeisen Union. In the United States, the National Cooperative Business Association (NCBA) serves as the sector's oldest national membership association. It is dedicated to ensuring that cooperative businesses have the same opportunities as other businesses operating in the country and that consumers have access to cooperatives in the marketplace. A U.S. National Cooperative Bank was formed in the 1970s. By 2004, a new association focused on worker co-ops were founded, the United States Federation of Worker Cooperatives. Such legal entities have a range of social characteristics. Membership is open, meaning that anyone who satisfies certain non-discriminatory conditions may join. Economic benefits are distributed proportionally to each member's level of participation in the cooperative, for instance, by a dividend on sales or purchases, rather than according to capital invested. Cooperatives may be classified as -

  • Worker cooperative.
  • Consumer cooperative
  • Social cooperative
  • Housing cooperatives
  • Agriculture cooperative

Earth and Metrological Science –

  • Matters of policy, coordination and schemes relating to the Ocean, Meteorology. Seismology, Marine Environment, Atmosphere and Earth Sciences.
  • Research including Fundamental Research and Technology Development.
  • Surveys to Map, Locate and assess Living and Non-Living Marine resources.
  • Development of appropriate skills and manpower.
  • International collaboration and cooperation.
  • Marine Environment on the high seas

Cooperative principles are the seven guidelines by which cooperatives put their values into practice -

  • Open, voluntary membership.
  • Democratic governance.
  • Limited return on equity.
  • Surplus belongs to members.
  • Education of members and public in cooperative principles.
  • Cooperation between cooperatives.

Cooperatives values, in the tradition of its founders, are based on "self-help, self-responsibility, democracy, equality, equity and solidarity." Co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

Social Economy –

Cooperatives traditionally combine social benefit interests with capitalistic property-right interests. Democratic oversight of decisions to equitably distribute assets and other benefits means capital ownership is arranged in a way for social benefit inside the organization. External societal benefit is also encouraged by incorporating the operating-principle of cooperation between co-operatives. The cooperative movement in India has made remarkable progress, working more than 600,000 cooperatives and 250 million members, making it the largest cooperative movement of the world. Cooperatives have a huge network and unparalleled reach, with 100% coverage in 500,000 villages. Cooperatives play a pivotal role in the mainstream of Indian economy, particularly in the fields of agriculture & rural credit, distribution of agricultural inputs, storage, fertilizer, marketing, labour, micro finance and housing and cooperatives are working towards inclusive growth, cooperative ideals and cooperative organization are more effective in meeting their people centered objectives. Cooperative provides third highest employment after private sector and government jobs. Social economy attempts to suitably blend economic feasibility with social reality. The cooperatives in India emphasize on equitable distribution of value amongst stakeholders.

The Social Economy Includes -

Service to members or the community rather than only generating profits and seeking financial returns

  • Social assets of community organizations
  • Social enterprises including co- operatives and revenue-generating programs of non profit groups
  • Credit unions and social financing organizations like community loan funds
  • Training and skills development enterprises
  • Autonomous management (not government controlled)
  • Democratic decision making
  • Primacy of persons and work over capital
  • Based on principles of participation, empowerment and individual and collective responsibility.

Economically Stable –

Cooperatives tend to have a longer life than other types of enterprise, and thus a higher level of entrepreneurial sustainability. This resilience has been attributed to how cooperatives share risks and rewards between members, how they harness the ideas of many and how members have a tangible ownership stake in the business. Additionally cooperative banks build up counter-cyclical buffers that function well in case of a crisis and are less likely to lead members and clients towards a debt trap .This is explained by their more democratic governance that reduces perverse incentives and subsequent contributions to economic bubbles.

TYPES OF COOPERATIVES –

Worker Cooperative –

A worker cooperative is a cooperative that is owned and self-managed by its workers. A cooperative enterprise may mean a firm where every worker-owner participates in decision-making in a democratic fashion, or it may refer to one in which management is elected by every worker-owner, and it can refer to a situation in which managers are considered, and treated as, workers of the firm. In traditional forms of worker cooperative, all shares are held by the workforce with no outside or consumer owners, and each member has one voting share. In practice, control by worker-owners may be exercised through individual, collective, or majority ownership by the workforce. A worker cooperative, therefore, has the characteristic that the majority of its workforce own shares, and the majority of shares are owned by the workforce. Below is the section on the basic characteristics of workers' cooperatives:

  • They have the objective of creating and maintaining sustainable jobs and generating wealth, to improve the quality of life of the worker-members, dignify human work, allow workers' democratic self-man agement and promote community and local development.
  • The free and voluntary membership of their members, in order to contribute with their personal work and economic resources, is conditioned by the existence of workplaces.
  • As a general rule, work shall be carried out by the members. This implies that the majority of the workers in a given worker cooperative enterprise are members and vice versa.
  • The worker-members' relation with their cooperative shall be considered as different from that of conventional wage-based labour and to that of autonomous individual work.
  • Their internal regulation is formally defined by regimes that are democratically agreed upon and accepted by the worker-members
  • They shall be autonomous and independent, before the State and third parties, in their labour relations and management, and in the usage and management of the means of production.

Consumer Cooperative –

A consumers' cooperative is a business owned by its customers. Employees can also generally become members. Members vote on major decisions and elect the board of directors from among their own number. Consumer cooperatives are also known as retail cooperatives. Consumer cooperatives utilize the cooperative principle of democratic member control, or one member/one vote. Most consumer cooperatives have a board of directors elected by and from the membership. The board is usually responsible for hiring management and ensuring that the cooperative meets its goals, both financial and otherwise. Democratic functions, such as petitioning or recall of board members, may be codified in the organizing document of the cooperative. Most consumer cooperatives hold regular membership meetings (often once a year). As mutually owned businesses, each member of a society has a shareholding equal to the sum they paid in when they joined. Many advocates of the formation of consumer cooperatives – from a variety of political perspectives – have seen them as integral to the achievement of wider social goals. Since consumer cooperatives are run democratically, they are subject to the same problems typical of democratic government. Such difficulties can be mitigated by frequently providing member/owners with reliable educational materials regarding current business conditions. In addition, because a consumer cooperative is owned by the users of a good or service as opposed to the producers of that good or service, the same sorts of labour issues may arise between the workers and the cooperative as would appear in any other company.

Social Cooperative –

Social cooperatives exist to provide social services such as the care of children, elderly and disabled people, and the integration of unemployed people into the workforce. A particularly successful form of multi-stakeholder cooperative is the social cooperative; "Type A" social cooperatives bring together providers and beneficiaries of a social service as members. "Type B" social cooperatives bring together permanent workers and previously unemployed people who wish to integrate into the labour market. They are legally defined as follows:

  • Not more than 80% of profits may be distributed, interest is limited to the bond rate and dissolution is altruistic.
  • The cooperative has legal personality and limited liability
  • The objective is the general benefit of the community and the social integration of citizens
  • Type B integrates disadvantaged people into the labour market. The categories of disadvantage they target may include physical and mental disability, drug and alcohol addiction, developmental disorders and problems with the law.
  • Type A cooperatives provide health, social or educational services
  • Various categories of stakeholder may become members, including paid employees, beneficiaries, volunteers (up to 50% of members), financial investors and public institutions.
  • In type B cooperatives at least 30% of the members must be from the disadvantaged target groups

Housing Cooperative –

A Housing cooperative, is a legal entity, usually a cooperative or a corporation, which owns real estate, consisting of one or more residential buildings; it is one type of housing tenure. Housing cooperatives are a distinctive form of home ownership that has many characteristics that differ from other residential arrangements. The corporation is membership-based, with membership granted by way of a share purchase in the cooperative. Each shareholder is granted the right to occupy one housing unit. A primary advantage of the housing cooperative is the pooling of the members' resources so that their buying power is leveraged, thus lowering the cost per member in all the services and products associated with home ownership.

Another key element is that the members, through their elected representatives, screen and select who may live in the cooperative, unlike any other form of home ownership. Housing cooperatives fall into two general tenure categories: non-ownership (referred to as non-equity) and ownership (referred to as equity or strata). In non-equity cooperatives, occupancy rights are sometimes granted subject to an occupancy agreement, which is similar to a lease. In equity cooperatives, occupancy rights are sometimes granted by way of the purchase agreements and legal instruments registered on the title.

The word cooperative is also used to describe a non-share capital co-op model in which fee-paying members obtain the right to occupy a bedroom and share the communal resources of a house that is owned by a cooperative organization. There are two main types of housing co-operative financing methods, market rate and limited equity. With market rate, the share price is allowed to rise on the open market and shareholders may sell at whatever price the market will bear when they want to move out. In many ways market rate is thus similar financially to owning a condominium, with the difference being that often the cooperative may carry a mortgage, resulting in a much higher monthly fee paid to the cooperative than would be so in a condominium. The purchase price of a comparable unit in the cooperative is typically much lower, however. With limited equity, the cooperative has rules regarding pricing of shares when sold. The idea behind limited equity is to maintain affordable housing. A sub-set of the limited equity model is the no-equity model, which looks very much like renting, with a very low purchase price and a monthly fee in lieu of rent. When selling, all that is re-coupe is that very low purchase price.

Agriculture Cooperative –

An agricultural cooperative, also known as a farmers' cooperative, is a cooperative where farmers pool their resources in certain areas of activity. A broad typology of agricultural cooperatives distinguishes between agricultural service cooperatives, which provide various services to their individually farming members, and agricultural production cooperatives, where production resources (land, machinery) are pooled and members farm jointly. There are two primary types of agricultural service cooperatives, supply cooperative and marketing cooperative. Supply cooperatives supply their members with inputs for agricultural production, including seeds, fertilizers, fuel, and machinery services. Marketing cooperatives are established by farmers to undertake transportation, packaging, distribution, and marketing of farm products (both crop and livestock). Farmers also widely rely on credit cooperatives as a source of financing for both working capital and investments.

In agriculture, there are broadly three types of cooperatives: a machinery pool, a manufacturing/marketing cooperative, and a credit union.

  • Machinery Pool: A family farm may be too small to justify the purchase of expensive farm machinery, which may be only used irregularly, say only during harvest; instead local farmers may get together to form a machinery pool that purchases the necessary equipment for all the members to use.
  • Manufacturing/marketing cooperative: A farm does not always have the means of transportation necessary for delivering its produce to the market, or else the small volume of its production may put it in an unfavourable negotiating position with respect to intermediaries and wholesalers; a cooperative will act as an integrator, collecting the output from members, sometimes undertaking manufacturing, and delivering it in large aggregated quantities downstream through the marketing channels.
  • Credit Union: Farmers, especially in developing countries, can be charged relatively high interest rates by commercial banks, or even not available for farmers to access. When providing loans, these banks are often mindful of high transaction costs on small loans, or may be refused credit altogether due to lack of collateral - something very acute in developing countries. To provide a source of credit, farmers can group together funds that can be loaned out to members. Alternatively, the credit union can raise loans at better rates from commercial banks due to the cooperative having a larger associative size than an individual farmer. Often members of a credit union will provide mutual or peer-pressure guarantees for repayment of loans. In some instances, manufacturing/marketing cooperatives may have credit unions as part of their broader business. Such an approach allows farmers to have a more direct access to critical farm inputs, such as seeds and implements. The loans for these inputs are repaid when the farmer sends produce to the manufacturing/marketing cooperative.