Co-operative Organization -Types and Characteristics

Subject: Business Studies

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Overview

The co-operative organization is a voluntary association of person having limited resources and common needs.Co-operative organization are formed to help their member to improve the economy standard.They provide different kinds of services product for their member.The co-operative organization is formed with the feeling of each for all and all for each.The main motive of the co-operative organization is to provide service to their member rather than to earn a profit.

Co-operative Organization -Types and Characteristics

Co-operative Organization

The co-operative organization is a voluntary association of person having limited resources and common needs. The co-operative organization is formed to help their member to improve the economy standard. They provide different kinds of services product for their member. The co-operative organization is formed with the feeling of one for all and all for one. The main motive of the co-operative organization is to provide service to their member rather than to earn a profit.

The co-operative organization is formed to solve the problems which have arisen from modern industrialization. The industrialization has created a gap between poor and rich. The poor people are helpless because they don't have economic resources but the development of co-operative organization have provided people some opportunities to collect a small amount from poor and this amount is used to address financial needs of their members. A co-operative organization is formed on the principle of self-help through mutual help.

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According to H.M Kunzru, " Co-operative is self-help as well as mutual help."

According to the Nepal Co-operative Act 2048, "A society is constituted in order to provide services and facilities for the economic and social development of its member.”

According to Henry Calvert, "Co-operative is a form of organization wherein persons voluntarily associate together as human beings on the basis of equality for the promotion of the economic interests of themselves."

In conclusion, a Co-operative organization is a voluntary association of people having limited economic resources. Cooperatives are formed by taking the similarities in the locality, needs etc. These organizations are formed to help and promote the living standard of their member. There are different kinds of a co-operative: creditor, co-operative producer, agriculture, marketing society etc.

 

Types of Co-operatives

In our society different co-operatives are established to provide various facilities for their members. On the basis of activities involved, co-operatives are classified into different types:

  1. Producer's co-operative Society
  2. Industrial co-operative Society
  3. Consumer's co-operative Society
  4. Saving and credit co-operative society
  5. Marketing co-operative society
  6. Farming co-operative society
  7. Housing co-operative society
  8. Miscellaneous co-operative society

Producer's Co-operative Society:

It is an association of small members of producers. It has limited resources and they cannot expand their business individually. Producers co-operative helps its member in the supply of raw materials, purchase of the modern machinery, provide skilled human resources. This co-operative also helps in producing high-quality goods and services.

Industrial Co-operative Society:

They are the association of producers who are engaged in manufacturing. This co-operative helps their members to develop competitiveness in terms of product as small industries face difficulty to compete in a market because of industrialization. They are formed to help small manufacturer in purchasing raw materials, processing them to the finished product as well as marketing the product. This co-operative contact with different government agencies for their promotion.

Consumer's Co-operative Society:

They are the association between final consumers. Consumers are the person who finally consumes the product. They are formed to get the product at a minimum possible price. They directly purchase a product from the manufacturer and provide to their members. The main objective of these co-operatives is to eliminate the role of the middleman (wholesaler and retailer). This co-operative consults about consumer health and price of a product. They provide a quality product at a reasonable price.

Co-operative Credit Society:

Generally, we understand co-operatives as a co-operative credit society. This co-operative collects a small amount of saving (daily or monthly basis) from their members. This collection is further utilized to provide the loan to their members at the time of difficulty. It helps to eliminate the problems of the high-interest rate charged by money lenders. They encourage saving habit of members. These co-operative also help the member to get loan facilities at the appropriate rate of interest.

Co-operative Marketing Society:

It is an association of small producer and manufacturer to sell their output at a fair price. They come together to promote their output in the market. The market co-operative performs various activities related to market like marketing research, sampling, grading, processing, warehousing etc. for the benefit of their members. The main objective of marketing co-operative includes:

  • Providing the fair price to members product
  • Promoting members output in the market

Farming Co-operative Society:

They are the voluntary association of farmers to help each other in their problems. They unite together and form co-operatives. These organizations are established to eliminate difficulties in agriculture farming. Their objectives are to promote the living standard of a farmer by increasing agriculture productivity and by providing the real or actual price for agriculture output of farmers. They help their members in getting improved seeds, regular fertilizers, technological assistance, modern tools as well as equipment. The co-operative farming society can be divided on the basis of their objectives such as better farming society, tenant farming society, joint farming society etc.

Housing Co-operative Society:

This co-operative society is established with the objectives to provide housing facilities to their members. These co-operative collect small amount from the members and the collected amount is utilized either for the construction of house or purchase of land. They purchase big land area from the municipality or other bodies at a cheaper price and construct houses at very low cost. As a result, of these people having limited income and resources can afford housing facilities.

Miscellaneous Co-operative Society:

Besides, above co-operative society, other cooperatives can be established to meet the need of the general public. These co-operatives may be wholesalers’ cooperatives, retailer’s co-operatives, poultry co-operatives, cold storage, fisheries, sugarcane producer’s co-operatives, marketing co-operative society etc.

Features of Co-operative Organization

  1. Voluntary association:
    The co-operative organization is established for the common purpose. All the members co-operate for each other’s benefit. There is no individual interest of the member in co-operation.

  2. Open membership:
    The membership of co-operative is open to all who have similar interests. A minimum amount is required for membership. There is no restriction on membership on the basis of gender, race, caste, religion, nationality etc.

  3. Mutual relation:
    Co-operatives are formed on the belief of unity is the strength. The relationship between members is mutually beneficial. They are closely related and help each other in their problem.

  4. Service motive:
    The activities of co-operatives are carried on with the motive of service, not for profit. Co-operative organization purchase goods and product and provide to their members by adding the minimum amount of profit which is needed for the management of an organization.

  5. Cash transaction:
    The co-operative organization gives importance to the cash transaction. They do not provide their product and service in credit. The transaction is carried in cash to avoid the problems of bad debt, the difficulty of collection and other expenses.
  6. Democratic management:
    In a co-operative organization, all the member have an equal chance to get involved in the management of the business. The board of directors is elected at the general meeting of shareholders. All the member can represent themselves in the board of director’s election if they meet the minimum criteria.

  7. Separate legal status:
    The co-operative organization is a separate legal entity. It will have separate existence after registration. It can purchase and sell the asset in its own name. The shareholders and co-operative organization are two different component.

  8. Distribution of profit:
    All the co-operative organization will distribute their profit to shareholders in the form of the dividend. A co-operative organization is required to create a reserve fund from 1/4 of its profit. After the end of each fiscal year, they distribute their profit to their member.

  9. Equality:
    All the co-operative organization provides equal respect to their members. They do not discriminate any member on the basis of gender, caste, religion, richness, and poorness etc. Membership is open to all. Each member has equal and single voting rights.

  10. Fulfillment of common needs:
    Co-operative are formed to solve the common problem or needs of the members. Its main objective is to help the member in difficulty. E.g: Agriculture co-operative help to solve common needs of farmers like quality seeds, fertilizers equipment, technological needs of the farmer.

 

 

 

 

 

References:

Khanal, Soma Raj, Surendra Thapa Aslami and Sitaram Dhakal. Business Studies. Kathmandu: Taleju Prakashan, 2067.

Pant, Prem R., et al. Business Studies. Kathmandu: Buddha Academic Publishers and Distributors Pvt. Ltd., 2010.

 

 

 

 

 

 

Things to remember
  1. The co-operative organization is a voluntary association of person having limited resources and common needs.
  2. There is no restriction on membership on the basis of gender, race, caste, religion, nationality etc.
  3. This co-operative society which is established with the objectives to provide housing facilities to their members is called housing co-operative society.
  • It includes every relationship which established among the people.
  • There can be more than one community in a society. Community smaller than society.
  • It is a network of social relationships which cannot see or touched.
  • common interests and common objectives are not necessary for society.
Questions and Answers

Co-operative organization is a voluntary organization which prefers development of mortality of members to earn money.   The co-operative organization is formed to help their member to improve the economy standard. They provide different kinds of services product for their member. The motto of this organization  is "one for all" and all for one". It is democratic organization which is operated for providing services to its members,

A co-operative organization is formed with the aim of working together for common benefit. The industrialization has created a gap between poor and rich. The poor people are helpless because they don't have economic resources but the development of co-operative organization provide people opportunities to collect a small amount from poor and this amount is used to address financial needs of their members.  In fact, a co-operative organization works for service and common welfare rather than maximizing profit.

According to Nepal co-operative act 2048, "A society is constituted in order to provide services and facilities for the economic and social development of its member”

According to Henry Calvert, "Co-operative is a form of organization wherein persons voluntarily associate together as human beings on the basis of equality for the promotion of the economic interests of themselves."

From the above  definition, Co-operative organization is the form of organization where in persons voluntarily associate together as a business being a basis of equality for the promotion of the economic interest of themselves. It is a voluntary association of persons with same interest. It is based on the principles of equality, mutual help, democracy, service, and sacrifice.


The main  features/characteristics of co-operative organization are:

  • Voluntary Association
  • Open membership
  • Mutual relation
  • service motive
  • Cash transaction
  • Democratic management
  • Separate legal status
  • Distribution of profit
  • Equality
  • Fulfillment of common needs/motive

The various types of co-operative organization are: 

  • Producer's co-operative Society
  • Industrial co-operative Society
  • Consumer's co-operative Society
  • Saving and credit co-operative society
  • Marketing co-operative society
  • Farming co-operative society
  • Housing co-operative society
  • Miscellaneous co-operative society

Different types of co-operatives are formed with different motives and objectives. On the basis of activity involvement, co-operatives are classified into different types of co-operative are explained below:

  • Producer's co-operative Society
  • Industrial co-operative Society
  • Consumer's co-operative Society
  • Saving and credit co-operative society
  • Marketing co-operative society
  • Farming co-operative society
  • Housing co-operative society
  • Miscellaneous co-operative society

    Producer's co-operative Society:
    A producer's co-operative is established by the small-scale producers for supplying raw materials, tools, equipment, and other items of production to its members. This co-operative also help to its member in the production of the product in higher quality and better quality.
    Its objective are to supply raw materials regularly, improve the quality of the product, and to secure economy of large scale  production.

    Industrial Co-operative Society:
    They are the association of producer who are engaged in manufacturing. This co-operative helps the member to the developed competitiveness of the member product in the market because of industrialization small industries has difficulty to complete in a market. They are formed to help small manufacturing in purchasing raw materials, processing them to the finished product as well as marketing in a product. This co-operative contact with a different government agency for their promotion.

    Consumer's co-operative Society:
    A consumer's co-operative is established by the consumers for selling consumer goods at reasonable prices to its members and outsiders. It establish a direct relationship with the producers or wholesalers to buy goods in bulk and sell the goods at fair prices. The main objective of these co-operatives is to eliminate the role of the middleman (Wholesaler, and retailer) this co-operative organization consult about consumer health and price of a product. They provide a quality product at reasonable price. 

    Saving credit co-operative society:
    A credit co-operative is established with an objective to develop and promote the saving habits of the members. Such co-operatives provide a loan at lower rate of interest to its members for productive activities.  This collection further utilizes to provide a loan to their member at the time of difficulties. It helps to eliminate the problems of the high-interest rate charged by money lenders. It also provides technical and financial assistance to its members.

    Marketing co-operative society
    A marketing co-operative society is established  by small farmers or small-scale producers for selling their products at fair prices. The market co-operative performs a various activity related to market like marketing research, sampling, grading, processing. Warehousing etc. for the benefit of their member. Its main objectives to provide the fair price for member product, promote members output in the market.It also provides the facilities of transportation, warehousing, processing, and packing to its members.

    Farming Co-operative Society:
    This co-operative society which is established with the objectives to provide housing facilities to their members is called housing co-operative society. These co-operative collect a small amount from the member. They used to purchase big land area from the municipality or other bodies at a cheaper price and construct houses at very low cost. As a result, of these people having limited income and resources can afford housing facilities.

    Housing Co-operative Society:
    A housing co-operative is established by the people of limited means for providing residential accommodation to its members. These co-operative collect a small amount from the member. The collected amount is utilized either for the construction of house or purchase of land.

    Miscellaneous co-operative Society:
    Besides, above co-operative society, other cooperatives can be established to meet the need of the general public. Farming co-operative, single purpose co-operative, bee-keeping co-operative, dairy-co-operative, and labour co-operative are some examples of the miscellaneous co-operatives.

The main features of co-operative organization are:

  • Voluntary Association
  • Open membership
  • Mutual relation
  • service motive
  • Cash transaction
  • Democratic management
  • Separate legal status
  • Distribution of profit
  • Equality
  • Fulfillment of common needs/motive

Voluntary Association:
 A co-operative society is a voluntary organization of the economically weaker people. There is no individual interest of the member in co-operation. A person can join and leave the organization at any time by giving a due notice to the organization.

Open membership:

In a co-operative organization, membership is open to all the adults without any discrimination. There is no restriction on membership on the basis of gender, race, caste, religion, nationality etc. Thus, good harmony among the members is ensured.

Mutual Relation:
The relationship between member is mutually beneficial. Due to mutual relation and co-operation, even the  members with limited means can launch bigger projects for their social and economic growth.

Service motive:
The main objectives of a co-operative organization is to provide better service and convenience to all the members. profit. This organization gives services, supply goods at reasonable prices, etc. to its members and the basis of working is "each for all and all for each".:

Cash transaction:
 A co-operative organization sells goods to its members on the cash basis onlyThe transaction is carried in cash to avoid the problems of bad debt, a difficulty of collection and other expenses. Aa a result, such policy, the organization performs its business successfully even with limited capital.

Democratic Management:
The management of the co-operative organization is based on democracy principles. The board members are democratically elected by the annual general meeting according to the principle of one member,one vote.

Separate legal status:
A co-operative organization is a separate legal entity. It performs all transactions like purchase and sales of assets and properties in its own name.
.The shareholders and co-operative organization are two different component.

Distribution of profit:
The aim of the organization is not to earn the profit. Earning profit is the secondary aim of the society. .A co-operative organization is required to create a reserve fund from 1/4 of its profit.After the end of each financial year, they distributed their profit to their member.

Equality:
All members of a co-operative organization have an equal right in its management. There is no discrimination between members due to caste, religion, investment, and political thought. Membership is open to all and has equal voting rights.

Fulfillment of common needs:
Co-operative are formed to solve the common problem or needs of the member. Its main objective is to help the member in difficulty.Eg: Agriculture co-operative help to solve common needs of farmers like quality seeds, fertilizers equipment technology needs of the farmer.

 

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