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Growth and Development of Cooperative Banks
Growth and Development of Cooperative Banks
India is a developing country facing number of problems, such as the population explosion, low productivity, inequalities, low living standards, inflation and so on. India consisting of 16% of the worlds population sustains only on .!% of land resource. "griculture sector is the only livelihood to the two#third of its population which gives employment to the $%% of wor& force and is a source of row material to large number of industries. "fter 6' years of independence ta&ing into concern these problems, the growth of the Indian economy is rather slow. (or the solution and for rapid economic development, it was necessary to accept a mixed economy as an economic system for the balanced growth of public and private sector together with a ma)or role for co#operative societies to contribute their nit in the process of economic development. In the context of globali*ation of rural development perspectives, the developing countries li&e India, needs to devote greater attention towards rural development. +he countrys economic structure is undergoing fundamental changes as a result of the policy of liberali*ation and de#regulation. +he ob)ectives of the new economic policy are to impart a new element of dynamism to agriculture, trade and industry, to encourage foreign investment and technologies for ma&ing Indian products competitive in the international mar&et to improve the performance of public underta&ing and to influence co#operatives, since co#operatives wor& as an essential part of the countrys economic structure. It is hoped that the co#operative movement will respond to the changes and develop firm self#discipline. ,o#operative movement in India is one of the largest movements in the world. ,o#operative movement has made tremendous progress in every aspects of the Indian economy. ,o#operative activities occupy a ma)or place in the sphere of the Indian economy. Initially, the co#operative movement was started with a limited scope of activities of rural credit but now it has entered in all fields of economic activity with social essence. -ow the movement which has covered 1'' per cent villages and %$ per cent rural households and functioning over $!$ thousand ,o#operatives of various levels with membership coverage of .6 million and wor&ing capital of .!,'',$$$ million Inclusive of credit and non#credit co#operative societies. It has been playing a significant role in disbursing agricultural credit, distribution of agricultural inputs, providing mar&et support, processing, etc. ,o#operative movement has been recogni*ed as an effective instrument for the economic development of the rural masses and for improvement in the socio# economic condition of the poor. +he co#operative movement in India had its origin else where and was introduced to this region by foreign rule. /ut even after independence, the movement continued in the planned economy. +he movement has been recogni*ed as an effective instrument for the economic development of the rural masses and for improvement in the socio#economic conditions of the neglected. In India co#operation had become a part of national policy and hence the Indian co#operative movement is sometimes ironically described not as a movement but only as a product of government policy. It spread and diversified with the encouragement and support of the government.
+he co#operative movement in India was basically organi*ed against the moneylenders to rescue farmers from the clutches of the poverty and indebtedness. +he need for agricultural credit through co# operatives felt because of rural indebtedness. +he Indian co#operative movement was initiated by the government0 it spread and diversified with the encouragement and support of the government. In this connection, observation made by -"/"12 in its "nnual 1eport, ''1# '' is0 3,o#operatives have contributed significantly to the growth of institutional infrastructure in the rural areas, private capital formation in the agriculture sector and distribution of farm inputs li&e fertili*ers, seeds etc.4 1 +he determination of 5overnment interest in co#operatives and the importance attached to them was reflected in the appointment of various committees regarding to review their development and functioning. +he cooperative sector in India is divided into two ma)or segments, vi*., the 6rban ,ooperative /an&s 76,/s8 and 1ural ,ooperatives. "s names indicate, 6,/s concentrate on credit delivery in urban areas, while 1ural ,ooperatives concentrate on rural areas. +he structure of the cooperative ban&ing sector in India. 9ince time immemorial, India has been, still continues to be and will remain in the foreseeable future, a land of village communities. :ith more than %'' million of its people living in rural areas and with its rural sector contributing about ; % of its gross domestic product at factor cost at the 1;;.#;! prices 75<I 1;;;9$8 , no strategy of socio#economic development of India that neglects the rural people and the rural areas can be successful. 1ural development is, therefore, a sine qua non of overall development in India. +he term, rural development, is a subset of the broader term =development, which is a sub)ective and value#loaded concept and hence difficult to define. >owsoever we define its development is a universally cherished goal of individuals, families, communities and nations all over the world. +he term, ?rural development@, connotes overall development of rural areas as revealed in improved quality of life of rural people. In this sense, it is a comprehensive and multidimensional process and phenomenon. It encompasses the development of agriculture and allied activities, village and cottage industries and crafts, socio#economic infrastructure, community services and facilities, and, above all, the human resources in rural areas. 5enerally spea&ing, development can be conceptualised as a non#decreasing set of desirable societal ob)ectives such as increase in real per capita income, improvement in income distribution 7equity8, political and economic freedom, and equitable access to resources, education, health care, employment opportunities, and )ustice 79ingh 1;;;aA;8.. 1ural development is influenced by a multitude of factors such as natural resources, human resources 7labour8, capital, technology, public policies, and institutions and organisations. "lthough the old school of institutionalists led by +horstein Beblen, Cohn 1. ,ommons, and Darl Earx emphasised the role of
1 5oI, "nnual 1eport
''1# '' , -"/"12.
5overnment of India 71;;;8 Economic Survey (1999-2000). Fconomic 2ivision, Einistry of (inance, -ew 2elhi.
.9ingh, Datar 71;;;a8 =9ustainable 2evelopmentA 9ome 1eflections, Gresidential "ddress, Indian Journal of Agricul ural
Economics, $!718.
institutions in economic development, the neo#classical economists did not assign any place to institutions in their theories 79ingh 1;;;aA.$81. >owever, of late, as a result of failure of neo#classical economics to explain international and Intra#national differences in economic development, it is now widely recognised that institutions and organisations are an important aid to development. +he economic life of a community ta&es place in a milieu of institutions and organisations0 the former embodying the rules of the game and the latter denoting formal or informal structures comprising groups of individuals having common interests. +hey together largely determine the economic structure of the community and set the rules in which the economic game is played. <rganisations affect rural development in many different ways including provision of production inputs and services, reduction of transaction costs, enhancement of bargaining power of rural producers vis# H#vis those to whom they sell their produce and from whom they buy production inputs and services, facilitating investments and savings and bringing the two together, and so on. Baidyanathan 71;;6A !$1#$I8 examines in detail the institutional imperatives of agricultural development in India. >e highlights the crucial importance of institutional reforms, particularly in the domain of public systems for sustained agricultural development. +here are many forms of organisations such as public 7government8 agencies, sole proprietorships, partnerships, companies, co#operatives and charitable trusts that can and are, in fact, serving the needs of rural people in India. 5overnment intervention in the rural sector in India can be traced to the last quarter of the 1;th century. 9ince then, the government has expended thousands of crores of rupees on agricultural and rural development programmes and is, by all accounts, the biggest agent of rural development. ,o# operatives also have played an important role in promoting agricultural and rural development in India, particularly in the field of credit, processing, and mar&eting. +he dairy co#operatives of 5u)arat and sugar co#operatives of Eaharashtra are good examples of co#operatives that can promote and sustain rural development. 5andhi)i saw a great virtue in co#operation as an instrument of rural development. >e assigned specific roles to co#operatives in the field of agriculture commending the promotion of co#operative farming and thereby preventing further fragmentation of land holdings. >e also advocated the establishment of other types of co#operatives such as credit co#operatives, weavers@and spinners@co#operatives and dairy co# operatives. Gt. Cawahar Jal -ehru, the first Grime Einister of India, also had a strong faith in the co. operatives. >e wanted India to be =convulsed with the co#operative movement. 9ardar Ballabhbhai Gatel, the first 2eputy Grime Einister and >ome Einister of India, had grate faith in co#operation as a means of promoting farmers @wellbeing. >e was the prime source of guidance and assistance for the Dheda 2istrict 19ingh, Datar 71;;;a8 =9ustainable 2evelopmentA 9ome 1eflections, Gresidential "ddress, Indian Journal of Agricul ural
Economics, $!718. Baidyanathan, ". 71;;68 ="gricultural 2evelopmentA Imperatives of Institutional 1eform, Economic and !oli ical "ee#ly, 9pecial -umber, 9eptember, pp. !$1# !$I.
,o#operative Eil& Groducers@6nion Jimited, popularly &nown as "E6J, which later became a model of co#operative dairy development in India. Development Approa !e" In terms of the development approaches used vis#H#vis co#operatives as development instruments, the literature points broadly to three experiences. In the first experience, mainly in the +hird :orld, co# operatives were used in primary export sectors, which were very important to the local economy. +he rationality of centralised macro planning gave politicians the power to decide policy ends and planners the power to decide means or policy interventions to realise these ends 7>yden, 1;II8 1. Glanners in the state provided 3blue prints4 or models for the role of co#operatives in agrarian reform and farmers on the ground were forced into these socially engineered co#operative relations. In the main these co#operatives where largely state controlled and where conveyor belts of state policy, rather than understood as institutions that needed to be nurtured in a wider web of political and economic relations. In an attempt to reclaim the autonomy of co#operatives as development instruments, a &ey theme in the literature has pointed to a @green house approach 7>yden, 1;II8. In this approach, rather than organising people for purposes beyond their comprehension and interest, the greenhouse approach focuses on factors which help local efforts grow on their own. +hus, rather than insisting on implanting organisational models, irrespective of whether or not they fit the political economy of a given society, the green house approach ta&es as its starting pointing what exists on the ground and encourages organisational development from below or from within. +o this extent, this approach recognises the richness of institutional forms and origins that exist in the global co#operative movement. >owever, beyond this, green house development of co# operatives is about a philosophy of incubating a 3self#help4 culture0 informal co#operatives are nudged to become formal co#operatives. +his would happen by reclaiming the autonomous nature of co#operatives, while at the same time, empowering and strengthening apex organisations to perform a host of support functions for primary co#ops. (rom a -orthern donor perspective the green house approach is useful and allows donors to wor& closely with national apex organisations in the +hird :orld. +hree problems emerge from this approach. (irstly, the assumption that the organic &nowledge of people outside any informal self#help group is less than those in it, is not necessarily the case. +his means wor&ing with people that have not formed any &ind of informal co#operative does not mean that a co#operative cannot grow even from very 3formal beginnings4 particularly if the process capacitating the co#operative is empowering. 9econdly, the state cannot be ignored completely in the context of co#operative development. +he state in any country is crucial for the development of a co#operative movement. >owever, the challenge is finding the right balance between state control and complete non #intervention. (inally, in the context of liberalisation the greenhouse
1 >yden 5. 71;II8 A$$roac%es o &o-o$era ive 'evelo$men ( )lue$rin versus *reen%ouse in "ttwood 2.:. and /avis&ar /.9.
71;II8 "%o S%ares+ &o-o$era ives and ,ural 'evelo$men <xford 6niversity GressA 2elhi
approach to cooperative development produces weeds and sic& plants that are basically capitalist enterprises that undermine the essential founding principles and philosophy of cooperatives. " third approach in the literature to co#operatives in development can best be termed the 3transformation from below4 approach 7:ainwright, 1;;!8 1. +his approach proceeds with the understanding that co#operatives are part of social movements in which the organic &nowledge of its members is crucial for its development and existence. +his however, does not preclude political relationships with parties or 3new vanguards4. +his party#to movement relationship is not one#sided or instrumentalised and it provides co# operatives with a political and strategic role to advance transformation from below such that control of the economy and development is a central driving force. +ransformation through cooperatives means socialising economic relationships and changing the basis of overall economic coordination. In Jega Italy, this existed in the relationship between the Italian ,ommunist Garty and the co#operative movement. +ogether with support from the state the co#operative movement in Jega was able to advance wor&er ta&e#overs and buy outs and even new co#operatives were established in a host of economic sectors. "lso in /ra*il currently, the :or&ers Garty is supporting the Jandless :or&ers Eovement by using its positioning in local and provincial state legislatures to open up bloc&ed spaces for advance. THE GENESIS AND EVOLUTION OF CO-OPERATIVES " co#operative is a form of organisation that is widely prevalent in developing countries including India. It has great potential as an instrument of rural development. ,o#operation as an ethical norm has been eulogised all over the world since time immemorial. "s a mode of social behaviour, it is manifest in countless activities of people performed for the purpose of achieving a common goal. (rom the philosophical perspective, co#operation and its opposite, competition, are two basic tendencies of human behaviour and both co#exit in every individual. ,o#operation can emerge under highly diverse situations and accordingly there are several theories propositions that see& to explain why people do and do not co# #operate 79ingh 1;;6a8 . +he origin of formal co#operation in the form of a co#operative organisation is traced to Furope, particularly, Fngland, (rance and 5ermany, in the mid#nineteenth century. 1obert <wen of Fngland, ,harles (ourier of (rance, and >err (.:. 1aiffeisen and >err (ran* 9chul*e of 5ermany are considered as the founding fathers of the modern co#operation 7,raig 1;I'A.I, Eadan 1;;!A $# %8 .. In 1I!!, a group of people in 1ochdale, Fngland, formed the 1ochdale 9ociety of Fquitable Gioneers to obtain higher wages from their employers and to set up a co#operative store. +he 1ochdale 9ociety became the model for similar stores and related enterprises throughout the world. "round the same time, (ourier established =phalanxes in (rance and 1aiffeisen and 9chul*e pioneered and implemented the idea of co# 1 :ainwright >. 71;;!8 Argumen s -or A .e/ 0ef 1 Ans/ering %e -ree 2ar#e ,ig% /lac&wellA 6D and 69"
9ingh, Datar 71;;6a8 =+he Fmergence and 9urvival of ,o#operationA " 1eview of 9ome +heoretical propositions, in 1. 1a)agopalan 7ed.8 ,ediscovering &oo$era ion. Bol. III3 Institute of 1ural Eanagement, "nand.
. ,raig, C.5. 71;I'8 =Eanaging ,o#operative <rganisations, ,o#operative (uture 2irections Gro)ect, :or&ing Gaper -o. !,
+he ,o#operative ,ollege of ,anada, 9as&atoon, 9as&atchewan, ,anada.
operative ban&s in 5ermany. 9ubsequently, in other Furopean countries also, co#operatives emerged primarily as people@s response to their exploitation by moneylenders and traders. :ith the emergence of co# operative movement in Furope, the International ,o#operative "lliance 7I,"8 was established in 1I;$. Its main responsibility was to coordinate the activities of affiliated co#operative federations in various parts of the world. Fstablishment of communism in 6991 and subsequently in other countries was instrumental in promoting government#directed or parastatal cooperatives. 9ome co#operatives failed and some others succeeded. 2espite their failures and wea&nesses, co#operatives have survived over time and now control significant shares of mar&ets in many developed and developing countries including mar&et#oriented economies. (or example, in 69", cooperatives command %' per cent of the fluid mil& mar&et, I' per cent of the fresh fruits mar&et, .$ per cent of agricultural credit of all types, and .' per cent of the grains and oilseeds mar&et 72wivedi 1;;6A% .8.1 In most developing countries including India, co#operatives were promoted by their governments as instruments of rural development. In India, than&s to the /ritish legacy, the co#operative form of organisation was born in 1;'! consequent upon the enactment of the ,o#operative ,redit 9ocieties "ct. 9ubsequently, a more comprehensive act, the ,o#operative 9ocieties "ct, was enacted in 1;1 . +his "ct provided, in er alia, for the creation of the post of 1egistrar of ,o#operative 9ocieties, registration of co# operative societies for various purposes, and audit. 6nder the Eontaque#,helmsfort 1eforms effected in 1;1;, co#operation became a Grovincial 9ub)ect and the provinces were authorised to ma&e their own co# operative laws. 6nder the 5overnment of India "ct 1;.$, =co#operative societies were treated as a 9tate 9ub)ect. In order to facilitate the establishment of co#operatives having membership from more than one Grovince, the 5overnment of India enacted the Eulti#6nit ,ooperative 9ocieties "ct, 1;! . Jater a more comprehensive ,entral legislation, the Eulti#9tate ,o#operative 9ocieties "ct, 1;I!, was enacted by Garliament with a view to consolidate different laws governing the same types of cooperative societies. "fter India attained Independence in "ugust 1;!%, co#operatives assumed greater significance as an instrument of socio#economic development and became an integral part of India@s (iveKear Glans. +he "ll India 1ural ,redit 9urvey ,ommittee 1eport, 1;$! recommended an integrated approach to cooperative credit and emphasised the need for viable credit co#operative societies by enlarging their area of operation, encouraging rural savings, and diversifying their business. +he ,ommittee also recommended that the government should contribute to the share capital of the co#operatives. In 1;$I, the -ational 2evelopment ,ouncil 7-2,8 adopted a 1esolution on -ational Golicy on ,o#operatives. 9ubsequently, in Canuary 1;$;, the :or&ing 5roup on ,o#operative Golicy set up by the Einistry of (ood and "griculture, 5overnment of India, recommended a blueprint for implementing the -2,@s 1esolution. +he 5overnment of India has
1 2wivedi, 1.,. 71;;68 =1ole of ,o#operatives in 1ural Fconomy, Indian Journal of Agricul ural Economics3 $17!8, pp. %1 #
% %.
since provided massive financial, technical and administrative support to co#operatives both directly and indirectly through 9tate governments 72wivedi 1;;6A1.#1!81. +o prospers, cooperatives must be well organi*ed, well financed, well managed, and governed well by a committed membership. +hey must be progressive, adopting to changing climates and responsive to their members changing needs. Eembers the board of directors, and management each have responsibilities within the cooperative. 9trong, viable cooperatives require all three groups to their shares. "lthough capital, employees, business volume and good management practices are all very important for successful operations0 a co#ops members are its most important asset. ,ooperative success also hinges on effective member education and communication. Indeed, providing education, training, and information to members is one of the seven cooperative principles adopted by the I,". +he unique education needs of cooperatives and the essential elements for a successful education and communication program. ,ooperative financing is also critical and in todays complex cooperative organi*ations it can be quite complicated. "dequate capital is one of the fundamental principles of sound business operation and at the same time one of the biggest challenges facing cooperatives today. (inancing options must be consistent with principles of cooperation as well as with federal and state laws. "s with other business forms, cooperatives should be established only to meet a well#defined need in the mar&et. /efore cooperatives are created, advance research should be done by a steering committee to ensure sufficient support by other potential members in the community. +he procedure for organi*ing co# operatives. " good feasibility study, strong membership drives, and a comprehensive business plan are essential ingredients. +he historical development of cooperative business cannot be disconnected from the social and economic forces that shaped them. ,ooperation then, as now, were created in times and places of economic stress and social upheaval. "ncient records and archaeological discoveries point to the existence of cooperative organi*ations created by early civili*ations in diverse part of the world 7,hina, 5reece, Fgypt, etc.8. /ut it is the founders of the 1ochdale 9ociety in 1; th century Fngland who are celebrated for launching the modern cooperative movement. +he 1ochdale pioneers, and the early Furopean cooperative thin&ers and organi*ers who laid the foundation for their success, are responsible for codifying a guiding set of principles that helped guide the development of cooperatives across the world.
1 2wivedi, 1.,. 71;;68 =1ole of ,o#operatives in 1ural Fconomy, Indian Journal of Agricul ural Economics3 $17!8, pp. %1 #
% %. +his point is made by both >enry >./a&&en and Earvin ". 9chaars, in +he Fconomic of ,ooperative Ear&eting 7-ew Kor& A Ec 5raw L>ill /oo& ,ompany, 1;;%8, and /reet (airbairn, 3>istory <f ,ooperatives 3, in ,ooperatives and Jocal 2evelopment, ,hristopher Eerrer and -orman :al*er ,Jeds7JedonA E.F. 9harpe, ''!8.
Revolutionary root in En!lan" +he first cooperative businesses created in Furope arose during periods of great social upheaval and distress caused by dramatic shifts in agricultural and industrial production practices. Grior to the Industrial 1evolution 7about 1%$'#1I$'8, most families in Fngland and other parts of Furope were largely self#sufficient, creating enough food and goods for their subsistence and small amounts for trading. +he Industrial 1evolution introduced the factory system of production and was mar&ed by a rapid succession of remar&able inventions that accelerated the industriali*ation of business. Fxamples of inventions during this period include smelting iron with coal instead of charcoal, the cotton gin and power loom, and the steam engine. +he writing of "dam 9mith at the time, especially his advocacy of the laisse* faire principle 7no government intervention revolution. +he industrial system gradually replaced cottage industries and home#based production. :or&ers were required to move into cities to find wor&. "way from land, their families were increasingly integrated into a mar&et economy0 instead of producing most of their household requirements, especially food, they had no other choice but to purchase them. "dvances in production were not, unfortunately, accompanied by fair labor standards. :or&ers were typically paid very low wages and were in the economy8, further spurred the
Geople remaining in rural areas were e not much better off. "n agricultural v revolution was already well underway I the o 1Ith century. +he introduction of new l cultivation methods and crop varieties u supported a dramatic change in land tenure t patterns. 9cattered, small plots of farmland i were aggregated into large, enclosed o estates, primarily for the purpose of gra*ing n sheep and other livestoc&. /etween 1%6' s and 1I!., nearly seven million acres of agricultural land in Fngland were enclosed w in estates. "s a result, large numbers of e small farmers were driven from their land r into neighboring towns and villages with e few remaining )obs. " freedom movement of towards was greater m another e expression
hallmar& of this revolutionary period. +he t citi*ens of Fngland began to publicly w dissent with government policies, ta&ing i issue with the status quo and demanding t more personal rights. +herefore, the h widespread poverty, unemployment, and general social deterioration that were left in a the wa&e of the industrial and agricultural 1 For a review of the living and working p conditions in England during this period, u
see Johnston Birchall, Co-op: The Peoples Business (Manchester: Manchester University press,1 !"#
b l
ic outcry to the government for improved wor&ing and businesses were in operation in Fngland byF living conditions. Early #oo$erative o#ietie In the absence of public assistance, the people of Furope established various types of self#help organi*ations. Eutual fire insurance companies existed in Jondon and Garis as early as 1$.', although the first highly successful and well# &nown example was organi*ed in Fngland in 16;6, the "micable ,ontribution ship.1 +he people of Fngland also created Eutual "id 9ocieties 7they eventually became &nown as (riendly 9ocieties8 that offered financial payments and assistance to members in times of sic&ness, unemployment, or death. /y the mid#1Ith century many well established societies were already in operation. +hey were legali*ed with the passing of the first (riendly 9ociety "ct 7also called the 1ose "ct8 in 1%;.." number of bills were introduced in the 1;th century to encourage (riendly 9ocieties since they lessened the public burden.. :or&ers organi*ed labor unions to bargain with employers for more favorable wor&ing conditions and to lobby the government for improved labor legislation. ,ooperative or quasi#cooperative industrial 1%6'.Eost consumer#controlled + organi*ations focused on flour milling and1 + ba&ing industries. ,ooperative corn mills< < for grinding flour appeared in a number of r cities shortly after the turn of the 1;th b century to cut the cost of flour and prevent i tampering by greedy millers. Gurchasing s cooperatives already existed in most t :estern Furopean countries by the 1Ith o century. +he :eavers 9ociety in (enwic&, n 9cotland 7often referred to as 3penny , capitalists48 began to purchase supplies as a group in 1%6;.! +he precursors to mutual and unions were guilds, the associations of merchants, artisans, and crafts# men that date bac& to Eedieval times. 5uilds had binding rules for production and business practices. "lthough guilds were created partially in an attempt to establish local trade monopolies, practicesA they incorporated control, socialist member 9 c o t l a n d , 1 a l h ! >enry >./a&&en and Earvin ". 9chaars. 5%e i
Economics of &oo$era ive 2ar#e ing 7-ew Kor&A Ec5raw#>ill /oo& ,ompany,1;.%.p. !8. n
were
1 Cohn /ainbridge. /iography of an IdeaM+he 9tory of 2u ual -ire equitable treatment of all members, and
and &asual y Insurance 75arden ,ity, -KA 2oubleday and ,ompany,1;$ 8. (riendly 9ocieties are still prevalent in the 6nited Dingdom today. (or more information, visit the "ssociation of (riendly 9ocieties siteA www.afs.org.u&.
(ourier never found philanthropists willing to fund 7where handicrafts were traded based ona the creation of a phalanx. "gter his death, several were the amount of labor involved in theirg attempted in (rance and more than thirty organi*ed in the mar&eting8, and trade unions. "lthougha 6nited 9tates.1 the notable in the 6nited 9tates were /roo& most of the organi*ations he started lasted* (arm, near ,ambridge, Eassachusetts71I! #1I!68, and only short time, they provided thei of groundwor& for another generation ofn 1ipon8,:isconsin 71I!$#1I$'8. +he phalanxes suffered cooperative development in Furope ande from a conflict between treating everyone equally and -orth "merica. one in (ond du Jac ,ountry7now the city rewarding those who provided more capital and labor. +he
a phalanx model, however, influenced the successful "evelo$er an" Pra!1ati t l &ibbut*im in Israel 7disused later8. 2r :illiam Ding 71%I6#1I6$8, l <wen was a visionary idealist, not realistic another social reformer in Fngland, was in e cooperatives in Fngland 3Coint stoc& retailing is not the many respects more responsible than d 9ocial 9ystem which we contemplate and will not form any 1obert <wen for spreading the cooperative part of the arrangements in the -ew Eoral :orld.4 In 1I.; idea and for the actual organi*ation of 3 he did not even bother to respond to an urgent request by cooperatives. "lthough he accepted much + ,harles >owarth to visit 1ochdale, Fngland to discuss of <wens social philosophy, he disagreed h organi*ational plans for new retail cooperative. on how to reach those goals. Ding was e <wens attac& upon individualism, the family, competition, more realistic about cooperatives, private property, the mar&et economy, and organi*ed advocating and inspiring the development , religion, alienated many people from cooperation and of consumer cooperatives across Fngland. o provo&ed condemnation of cooperatives from various "s a physician, Ding became# religious groups. Fven so, <wen is often called the 3(ather interested in improving the welfare of theo of ,ooperation.4 wor&ing people of /righton, Fngland. >ep 2espite his failures, <wen continues preaching that was involved in organi*ing numerous sociale cooperative production and living were the best medicines and educational institutions, including anr for the ills of society. >is advocacy stimulated the creations infants school, a mechanics institute, and aa
1 /a&&en and 9chaars. /irchall,p.
library. /etween 1I I to 1I.', Dingt published 7at his own expense8 a smallo
r4 that was widely distributed throughout Fngland. Its I also advocated and promoted cooperation0
issues were a source of inspiration, information, and the first too& place in 1I.' in Eanchester,n instruction on cooperation in theory as well as in practice. the second in 1I.1 in /irmingham, and the +he maga*ine advocated a more realistic type of third in 1I. in Jondon. <wens influenceh cooperation within reach of the wor&ing class. and rhetoric were exhibited in these and
e t
Ding believed that cooperatives should start small later congresses. (or instance, the +hirdf i with the original capital supplied by members, a significant ,ongress stated that 3the grand ultimater
s deviation from <wen and (ouriers large#scale operations ob)ect of all cooperative societies ist funded by wealthy investors. Ding did not necessarily community on land.4
as long as they were funded with the members own capital societies in 1I 6 quic&ly grew to about v and were restricted ,hristians. Ding was a religious .'' consumer cooperatives by 1I.', many fundamentalist who believed that biblical scripture should patterned after Dings guide the ethics and operations of cooperatives. >e also ,ooperative +rading "ssociation. Dings /righton f
e o
taught that cooperatives should not pay patronage refunds, ideas may have also influenced early o but instead reinvest all net profits to increase the scope of "merican cooperatives. " treasurer of a n their activities and to employ as many members as cooperative in /righton, Fngland, :illiam u possible. Ding also proposed the following guidelines for /ryan consumer cooperatives. 718 Eembers should pay cash for all merchandise purchased at the cooperative0 principles of governance0 and 7.8 It should publici*e the cooperative movement. In addition to the advocacy of <wen and Ding, the cooperative movement in Fngland was supported by a helped organi*e a consumer e
r % s
his active role in the cooperative movemento medical practice was suffering and poorr management and internal discontent
e
7 8 +he co#op should adopt democratic in the late 1I.'s for two reasonsA hisp
a t plagued individual co#op stores. /y 1I!',i v the cooperative movement in Fngland wase basically at a standstill and Dings ideass , were forgotten, ignored in the cooperativea s h o
number of short#lived cooperative )ournals, which were literature for several decades. circulated between 1I $ and 1I.'. ,ooperative congresses T/e Ro#/"ale Pioneer
rt& lived society was created in 'ochdale,England in 1())#Ja%es *%ithies,one of the original organi+& ers,was inspired ,y -ing.s cooperative %aga+ine and shared it with his co&founders#/heir ulti%ate cooperative goals,however,echoed 0wen.s teach& ings#1lthough their first co&op effort failed after only two years,a core group of 2( continued to work actively for social refor% and eventually created the prototype cooperative %odel for a %odest shop on /oad 3ane in 1(!!# /he so&called 'ochdale 4ioneers were a%,itious and had lofty goals for their co&op:(1" to sell provi& sions at the store5(2" to purchase ho%es for their %e%,ers5()" to %anufacture goods their %e%,ers needed5and (!" to provide e%ploy%ent for their %e%,ers who were either out of work or poorly paid#$n su%,they wanted to 6esta,lish a self&supporting ho%e colony of united interests7 and to 6arrange the powers of production,distri,u& tion,education,and govern%ent7in the interests of its %e%,ers#$n addition,they hoped to open a 6te%perance hotel7in one of the cooperative houses to pro%ote so,riety# /he foundation for the 'ochdale cooperative was ,uilt upon the intelligent co%,ination of various ideas that had ,een tried ,y previous coopera& tives#/he 4ioneers learned fro% the co&op failures of the past#For e8a%ple,the ,usiness practices they adopted for their s%all store,later called the 'ochdale 4rinciples (side,ar",were novel pri%arily in their co%,ination5%any had ,een ,orrowed fro% other cooperatives#
GRO0TH OF COOPERATIVE SECTOR IN INDIA India has basically an agrarian economy with % % of its total population residing in rural areas. +he rural people need lot of services in daily life which are met by village co# operative societies. +he seeds of cooperation in India were sown in 1;'! when the first ,ooperative 9ocieties "ct was passed.1 9ince then, the cooperative movement has made significant progress. ,ooperatives have extended across the entire country and there are currently an estimated .' million members nationwide. +he cooperative credit system of India has the largest networ& in the world and cooperatives have advanced more credit in the Indian agricultural sector than commercial ban&s. +he village cooperative societies provide strategic inputs for the agricultural sector, consumer societies meet their consumption requirements at concessional rates0 mar&eting societies help the farmer to get remunerative prices and co#operative processing units help in value additions to the raw products etc. In addition, co#operative societies are helping in building up of storage go#downs including cold storages, rural roads and in providing facilities li&e irrigation, electricity, transport and health. Barious development activities in agriculture, small industry mar&eting and processing, distribution and supplies are now carried on through co#operatives. In fertiliser production and distribution the Indian (armers (ertiliser ,ooperative 7I((,<8 commands over .$ %of the mar&et. In the production of sugar the cooperative share of the mar&et is over 1 2as, Dumar71;;.8 1ural 2evelopment +hrough 2ecentral*ation, 2iscovery Gub. >ouse, 2elhi. 1I'p
2eb, "lo& Dumar 7 ''68,:orld ,ooperative Eovement , :::. ,ooperative Eovement India. com
$I %and in the mar&eting and distribution of cotton they have a share of around 6' %. +he cooperative sector accounts for $$ %of the looms in the hand#weaving sector. ,ooperatives process, mar&et and distribute $' %of edible oils. 2airy cooperatives operating under the leadership of the -ational 2airy 2evelopment /oard and through 1$ state cooperative mil& mar&eting federations has now become the largest producer of mil& in the world. +he groundwor& for this was laid in the early 1;%'Os when the largest dairy development programme in the world # <peration (lood # was launched. <peration (lood was a national mar&eting strategy lin&ed to a dairy infrastructure development programme that created a chain of dairy processing plants, collection stations and a national mil& transportation grid. :ith the passage of the Insurance "ct, cooperatives have been allowed to entry into the insurance business. Insurance is a field where the immense potential of cooperatives still remains untapped. +he Indian (armers (ertiliser ,ooperative has recently teamed up with a Capanese company and formed a )oint venture for underta&ing general insurance business in India. +his signifies that Indian cooperatives have come of age in formulating strategic alliances. +hus the co#operative societies in India in fact are playing multi#functional roles both in rural and urban areas. "n Fxpert 5roup constituted by the 5ovt of India in 1;;' ,recommended i8 to facilitate building up of integrated co#operative structure0 ii8 to ma&e the co#operative federation organi*ations responsive towards their members0 iii8 to minimi*e government interference and control in the functioning of co#operatives and iv8 to eliminate politici*ation from the cooperative sector. /ased on the recommendations, the central govt enacted the Eulti 9tate ,ooperative 9ocieties "ct, '' which provided for democratic and autonomous wor&ing of the ,ooperatives, which came into force with effect from "ugust 1;, '' . Barious development activities in agriculture, small industry mar&eting and processing, distribution and supplies are now carried on through co#operatives. +he co#operatives in India have made an all#round progress and their role in, and contribution to agricultural progress has particularly been significant.
CAUSES OF SLO0 PROGRESS 2espite rapid growth the overall progress of cooperative movement during 1'' years
of its existence is not very impressive. It is therefore necessary to &now the causes of poor performance of the movement and on that basis ta&e such steps as would promote a faster growth of cooperative movement in India. a. Govern1ent Inter3eren#e.
+he cooperative movement in India was initiated in 1;'! under the auspices of /ritish government. 1ight from the beginning the govt has adopted an attitude of patroni*ing the movement. ,ooperative institutions were treated as if these were part and parcel of the administrative set up of the government. +he govt interference thus became an essential element in the wor&ing of these institutions. "s a result peoples enthusiasm for the movement did not grow. +he movements independence and self#reliance existed only on paper and files. "fter attainment of independence in particular after beginning of the planning, some healthy changes in the attitude of the govt did ta&e place. It was not given proper importance that it deserves in any plan. /ut even the cooperative movement has not become full#fledged people movement. Fven today quite often cooperative societies are imposed upon the people. +his does bring about an increase in the membership of the societies. /ut the spirit of cooperation cannot flower fully in these circumstances. -either it growth too& place according to any plan nor did it become a peoples movement. It )ust grew very slowly and that too hapha*ardly. It was a state driven institution. %. 4i 1ana!e1ent an" 1ani$ulation. +he essence of the cooperative movement is that it gives the farmers the status of shareholders and assures them agricultural, educational and medical facilities. 6nder the Eaharashtra 9tate ,ooperatives "ct, a minimum of 11 farmers is required to form a cooperative. +oday the shareholder membership averages between 1$,''' and $,''' farmers. +he relationship between the shareholder farmer and the cooperative is simple # the farmer is committed to contributing a certain amount of cane per season and the mill is bound to ta&e this cane. +he strength of the movement was the involvement of the who were shareholders in the sugar mill regardless of the si*e of their holdings. <ver the years, this truly democratic idea got corrupted and farmers with larger holdings more powerful. In practice, this altered the power structure of the cooperatives. In the elections to the governing bodies of the sugar factories, money became such a powerful tool that the top posts of chairman and vice#chairman usually went to the richest even though the ma)ority of members were farmers with small# or medium#si*ed holdings.1 #. La#5 o3 A&arene . Geople are not well informed about the ob)ectives of the movement, the contributions it can ma&e in rebuilding the society and the rules and regulations of cooperative institutions. 6nfortunately, no special efforts have been made in this direction. Geople loo& upon these 1 5upta ,9 G 7 ''68 5lobalisation, Fconomic 1eforms and Fmployment 9trategy in India, %6 G
institutions as means for obtaining facilities and concessions from the govt. 9o long as people expect to get something from the govt, they see to it that societies somehow continue to function. Jac& of education, dirty politics of the village, casteridden elections to the offices of cooperative societies, bureaucratic attitudes of the govt officers at the lower ran& are some of the hurdles in spreading the correct information about the cooperative movement and in educating the people about its true character and vital role in the society. d. Re tri#te" Covera!e. +he cooperative movement has also suffered on account of two important limitations on its wor&ing. <ne is that the si*e of these societies has been very small. Eost of these societies are confined to a few members and their operations extended to only one or two. "s a result their resources remain limited, which I ma&e it impossible for them to expand their means and extend their are of operations .+wo, the most of the societies have been single purpose societies. (or this reason these societies are not unable to ta&e a total view of the persons see&ing help, nor can they analy*e and solve problems from different angles. the help these societies render thus can not be adequate. /y assessing the persons and the problems only from one angle, these societies neither help properly the person nor ma&e a optimal use of their resources. 6nder these circumstances it has not been possible for these societies to ma&e much progress. e. Fun#tional 0ea5ne A +he cooperative movement has suffered from inadequacy of trained personnel right from its inception. Jac& of trained personnel has been caused by two ma)or factors. In the first place, there has been a lac& of institutions fort this purpose of training personnel. 9econdly because of it unsatisfactory wor&ing of cooperative institutions, efficient personnel did not feel attracted or motivated towards them. +he functioning of the cooperative societies, too suffer from several wea&ness.1 9ome of these are, ta&ing no care of the need of credit see&ers or their repaying capacity at the time of granting loans, ma&ing no adequate provision for the return of loans, unsatisfactory &eeping of accounts, factional politics in it management, lac& of coordination among various divisions of the cooperative structure, too much dependence on outside sources of finance, lac& of adequate auditing. 9uch wea&ness have prevented theme from progressing on healthy lines. +hus there are several pitfalls. Goor infrastructure, lac& of quality management, overdependence on government, dormant membership, non#conduct of elections, lac& of 1 >anumantha ,1ao c h ,/ / /hattacharya , - 9 9iddharthan 7 ''$8, Indian Fconomy and 9ociety in the Fra of
5lobalisation and Jiberalisation , "cademic (oundation, 2elhi !.;p
strong human resources policy, neglect of professionalism, etc. are the limiting factors. Indian cooperatives are also unable to evolve strong communication and public relations strategies which can promote the concept of cooperation among the masses. En ure u$$ortive le!al 3ra1e&or5 3or #o-o$erative !ro&t/ If an argument can be convincingly made for why co#operatives are better for the long#term interests of the world, and if the public better understands what a co#operative is, it would stand to reason that momentum would gather for growth. /ut this is more li&ely to occur, and in some cases can only occur if existing barriers to growth are removed. <ne aspect of this is the process by which co#operative enterprises are started up within different )urisdictions, and this process is generally part of national law. /ut there is more to it than that. +he view that co#operatives are a marginal form of enterprise is not uncommon. +here is often a failure to understand precisely how they wor& or the benefits they deliver 7exacerbated by the general lac& of coverage of co#operative in the education and training of those going into the business world8. +hese factors contribute to financial, legal and regulatory infrastructures that are essentially designed for the greater ma)ority of businesses which are profit#oriented, shareholder#owned businesses, but are inappropriate for co#operatives in certain important respects. (ew countries have good legislation for co#operatives. It is important for co#operatives themselves to resist any tendency to mimic investor# owned enterprises in operational, management and governance practices which do not reflect the distinctiveness of co#operatives. +his can often be the easier option when operating within infra#structure designed for investor#owned businesses, but unless co#operatives resist and fight for appropriate recognition and treatment they ris& losing their distinctiveness and commercial advantages through isomorphic behaviour. Eanagers need to be supported and encouraged in this. +he (inal 2eclaration of the recent conference in Benice 1 called for a 3regulatory framewor& and support policies that are coherent with the co#operative form and favour its development4. +his important demand has some pedigree, including 6nited -ations 1esolution $6P11! urging governments 7amongst other things8 to encourage and facilitate the
1 promoting the 6nderstanding of ,o#operatives for a /etter :orld 7Earch '1 8 1esolution adopted by the 5eneral "ssembly on 1;th 2ecember ''1, ,o#operatives in social development, "P1F9 P$6P11! following the 9ecretary#5enerals report on ,o#operatives in social development distributed in Eay ''1
establishment of co#operatives, and to ta&e appropriate measures to create a supportive and enabling environment for the development of co#operatives0 and IJ< 1ecommendation 1;... "n important aspect of supportive legal framewor&s involves ensuring that co# operative legislation underpins and protects the co#operative identity. Fach )urisdiction needs to frame its legislation in a way that incorporates co#operative principles into the local context, in a way which appropriately reflects the distinctive identity of co#operatives. Coo$erative in "evelo$e" #ountrie In the now#developed countries, cooperatives have had the chance to develop in their own ways over the last two centuries, without much government interference. +he first type to develop was a @friendly or mutual health society that insured people against sic&ness and provided basic health care. In countries with a mixed system of state and private funding, such as (rance, 5ermany or the -etherlands, becoming a member of one of the health mutuals is still the main way in which people gain access to health care. In the 69", some of the largest health providers are consumer cooperatives0 in the Gacific -orthwest one cooperative provides health care for $%',''' members0 in the Eid#:est another has as many as 6.',''' members. In Capan, 1 ' consumer cooperatives provide health care for around three million members, who meet in small @han groups to discuss preventive health issues. +he most successful type of cooperative, measured by mar&et share, is the agricultural cooperative. Fver since the industrial revolution turned them into producers of food for distant mar&ets rather than )ust for local consumption, farmers have needed to ta&e control over three processesA farm inputs 7such as fertiliser, seeds and livestoc&80 mar&eting of the produce0 and food processing to add value to the product. +hey have also needed a supply of credit, to smooth out the seasonal variability in farm incomes. :ithout a strong membership organisation to meet their needs, farmers are reliant on intermediaries, merchants who often find it easy to exploit them 7particularly when they supply credit in exchange for produce or have control over transport systems8. It was farmers in the 69" who first invented the modern mar&eting and processing cooperatives in the 1I 's, while the first supply cooperatives were set up in 9wit*erland in the 1I6's and credit cooperatives began in 5ermany at around the same time. >owever, it was in 2enmar& that the full potential of this type was realised0 there, by the beginning of the 'th century virtually all the needs of rural communities were met by cooperatives. .+he IJ< subsequently published revised 5uidelines for the ,o#operative Jegislation by >agen >enrQ nd
revised edition ''$ 7httpAPPwww.ilo.orgPempentPGublicationsP:,E9R';!'!$Plang##enPindex.htm8
+he agricultural cooperative sector has grown to be a ma)or economic force. +he 69" has the largest sector0 in 1;;! there were !1%! farmer#owned businesses with a membership of nearly four million and a turnover of SI; billions. "s one commentator recently put it @cooperatively owned businesses are considered a ma)or player in rural "merica 1. Its mar&eting cooperatives have well &nown brand names such as Jand <Ja&es, /irds Fye, 9un&ist, and <cean 9pray. +hese very large cooperatives dominate the sector0 )ust 1.6 percent of the cooperatives have sales of more than S $'bmillions, and do $% percent of the business . 9imilarly, in ,anada cooperatives are big businesses, handling !' percent of farm cash receipts. +hey are export#led and heavily involved in adding value through food processing0 1I agri#food cooperatives have been ran&ed in the top $'' corporations, and four L including the two wheat pools L in the largest 1'' in ,anada. In the "mericas /ra*il comes next, with an output almost the same as that of ,anada, at S1 billions. In "sia, the Capanese agricultural cooperatives rival those of the 69" with an output of S;' billions. ;1 percent of farmers are in membership, and they provide an integrated system of mar&eting, supply, credit and insurance for the whole rural economy. +he -ational (ederation, Ten -oh, is the seventh largest trading firm in Capan, its ,entral /an& is one of the largest ban&s, and Ten&yoren, the insurance arm, is the largest insurance company in Capan. +hese are among the biggest businesses in the world. 9outh Dorea comes next, with a membership of nearly two millions 7;' percent of all farmers8, and an output of around S11 billions. Its ban& is the largest in Dorea. ,hina comes next, with a turnover of over S; billions. India has almost the same turnover, but with a membership of over 1!' millions it can claim in this respect to be the largest cooperative sector on earth. -ew Tealand has only !; cooperatives, but they have an output of S% billions a year, and generate %' percent of agricultural exports. "ll farmers belong to at least one cooperative. In "ustralia cooperatives produce only ' percent of total output. >owever, as this is the worlds largest producer of wool and beef, second largest of sugar, the total cooperative output is huge. ,ooperatives dominate the mar&et in dairying, rice production and fishing. In Furope, there were in the mid#1;;'s around $I,''' societies, with 1..I million members and a turnover of S69 6$ billion .. 9ome of the mar&et shares are impressive. In (rance, cooperatives handle 6' percent of the mar&et for table wine, and in 5ermany the
1 +orgerson, 1 71;;$8 p. 1!.
-adeau, F and +hompson, 2 71;;68.
1aiffeisen cooperatives handle more than half of all farmers sales and purchases. In "ustria, the share of mar&eting and processing is 6' percent. Fverywhere the mar&et share in mil& distribution is very highA in (rance $ percent, 9lovenia % percent, /elgium I' percent, the -etherlands %$ percent, the 6D ;' percent, and -orway ;; percent. In 9candinavia, cooperatives are dominant in the mar&et0 in 2enmar& they process ;. percent of dairy products and ;6 percent of por&, while in 9weden they are the countrys third largest corporate group, controlling .% percent of the agri#food industry. 1ecently, this sector has begun to face pressures from a rapidly changing and globalising agri food industry. In response, cooperatives have formed subsidiaries co#owned by external investors, or have opened up their own societies to investment by non#farmer interests1. 9ome have demutualised and become investor#owned. >owever, in most cases farmers are determined to &eep control of their core business, and the future of the sector seems assured. "gricultural cooperatives are really the best &nown example of a broader type, the primary producer cooperative. <thers include fishing and forestry cooperatives. 9tatistics are hard to find, but we &now that the mar&et share of the Dorean (ederation of (ishing ,ooperatives is %1 percent and this is not untypical of the picture in many other countries. In -orway, cooperatives produce %6 percent of forestry products, in ,anada %. percent. ,onsumer cooperatives, which emerged in /ritain in the 1I!'s along the 1ochdale system , are today the mar&et leaders in Italy, 9wit*erland, 9ingapore and Capan. +hey are also very active in the 9candinavian countries and "tlantic ,anada. In the 6D, which has seen the fiercest competition among consumer chains, consumer cooperatives are fifth in mar&et share and are pre#eminent in the small supermar&et sector. ,onsumer cooperatives have a strong record of creating decent wor& for their employees, engaging in fair trade with producer cooperatives in developing countries, setting industry standards for honest labeling, and promoting healthy diet. >ousing cooperatives have played an important role in developed economies. Euch of the housing built in -orway and 9weden in the second half of the last century has been cooperative. >ousing cooperatives in the 69" have been popular among higher income dwellers and retired people. +hey have proved effective wherever private or public renting has failed0 in -ew Kor& %,''' homes abandoned by private landlords have been ta&en over
1 9ee -ilsson, C 7 ''18 +he @1ochdale system is characteri*ed by adherence to the principles of one member one vote, granting dividend on purchases, and is based on the vertical integration of retail and wholesale cooperatives.
and renovated by housing cooperatives designed for low income people 1. In /ritain, management cooperatives have ta&en over unpopular @council estates, and tenant#owned cooperatives are challenging conventional social housing landlords to involve more tenants in the governance over social housing . "nother important area of cooperative involvement is in utilities. In the 69", over 1''' electricity cooperatives supply power to around 1 per cent of households, mainly in rural areas. In :ales, the privati*ation of water to investor#owned businesses proved unpopular, and has now been bought bac& by a semi#cooperative which has sta&eholder members. 9ome of the worlds biggest insurers are cooperatives. +he International ,ooperative and Eutual Insurance (ederation 7I,EI(8 has 1I! insurance companies in membership from %' countries, with seven percent of the worlds premiums. /ehind the success of these insurance companies is the underpinning principle of pooling ris&s among large numbers of people without having to pay outside investors thereby providing insurance at cost. +his is a particular business advantage in with#profits pensions.. >owever, recently there have been some serious governance failures in mutual insurers in the 6D which had to demutualise because of poor decision#ma&ing by boards that had insulated themselves from member influence. "s a result, the 6D government advocated for a new code of conduct for life insurance mutuals.! <ther forms of cooperatives are also active in developed economies. 1etailer cooperatives provide small store&eepers with grocery, hardware and pharmacy supplies and compete directly against the large multiple chains. :or&er cooperatives, particularly in the Fmilia#1omagna region of Italy and the /asque region of 9pain provide shared services such as ban&ing, technical education and product development to their members. +here are also emerging cooperatives in personal services such as social care for older people and people with disabilities. :or&er cooperatives have also proven successful in preserving )obs by ta&ing over failed businesses0 as happened in :estern Furope in the 1;%'s and 1;I's. 1 9ee /irchall 7 ''.8 ,ediscovering %e &o-o$era ive Advan age( $over y reduc ion %roug% self-%el$ ,
International Jabour <rganisation, ,h..+enant ta&eovers of abandoned housing in -ew Kor&. 9ee 1odgers, 2 on @,o#operative >ousing in /irchall 7ed, ''18 5%e .e/ 2u ualism in !u6lic !olicy, 1outledge.
. +hey do not need to be regulated li&e investor#owned pensions providers, so as to determine which part of the
profit goes to members and which to investors. ! 9ee >E +reasury 7 ''!8 2yners ,evie/ of %e *overnance of 0ife 2u uals.
+here are primary producer cooperatives, which supply inputs and do mar&eting and processing of products for farmers, fishermen and forestry wor&ers. +hey include some of the worlds biggest businesses, including conglomeration of farmers, ranchers and primary cooperatives whose success made to the (ortune $'' listing. 9ome are cooperatives of small farmers struggling to survive in a tough mar&et where prices paid by supermar&et chains are falling and farm subsidies are being cut. In the 6D, there is a cooperative that operates !'' mar&ets on behalf of 6$ cooperative mar&et societies, through which 1 ,''' producers can sell direct to consumers1. " recent development is the new generation cooperative in the 6.9. where members contribute capital in proportion to the amount of product they intend to supply to a processing coop. +he resulting share confers a right to supply, and can be traded among farmers at mar&et value. In return, they get a guarantee from the co#op to return all the value from processing bac& to the farmers, again in proportion to the amount they have supplied. +his new form of co#op, of which there are around neighbouring states . T/reat an" #/allen!e 3a#e" %y #oo$erative in "evelo$e" #ountrie <ne of the biggest challenges to cooperatives is the lac& of awareness of their business potential among governments and the general public. It also often leads to mischaracteri*ation of their interests. In Furope, for example, the International "ccounting 9tandards /oard is see&ing to have members shares in cooperatives treated as liabilities rather than equity or capital. +his means members will be considered creditors of the cooperative rather than equity owners. International cooperative organi*ations are opposing the proposed treatment as the proposal is contrary to the nature of cooperatives. "nother concern is the treatment of cooperatives with large mar&et shares as a monopoly. (or example, the 9wiss ,ompetition ,ommission is concerned about the large mar&et share of the two consumer cooperatives in 9wit*erland that have between them over $' per cent of the mar&et, despite the fact that the consumers actually own the cooperatives. +hese cooperatives are see&ing a compromise on the monopoly law. In addition, there have been de#mutuali*ations in insurance coops, engendered by minimal relationship between members and management and self#perpetuating attitude of
1 ,o#operatives 6D 7 ''I8 &o-o$era ive ,evie/ 2007, Eanchester. Eerrett, , and :al*er, - 7eds, ''18 A &oo$era ive A$$roac% o 0ocal Economic 'evelo$men , Nuorum /oo&s.
dramatically, and revitalising the local economies of -orth 2a&ota, Einnesota and
board members who are insulated from criticisms. In the 6D, the recent financial crisis has caused problems for demutuali*ed building societies, while those that have remained as mutual building societies have largely avoided the problem. Coo$erative in tran itional an" "evelo$in! #ountrie +he growth of cooperatives in transitional and developing countries at first faced many challenges. In the transitional countries, cooperatives have been viewed as state enterprises0 with the collapse of communism, these cooperatives collapsed as well. In the developing countries, cooperatives in the 1;$'s and 1;6's operated under the sponsorship of nationalist governments. +hese governments saw cooperatives as instruments, ta&ing them over and using them as parastatals within a controlled economy and as mass organisations through which the ruling party could reach the rural population. +here were success stories in sugar and cotton cooperatives in India, dairy cooperatives in India and /angladesh, coffee cooperatives in +an*ania and Denya and in several countries a more independent credit sector. -evertheless, with mar&et liberali*ation in the 1;;'s and the withdrawal of government support, many state sponsored cooperatives could not compete with the private sector and had to shut down. "fter these experiences, independent cooperatives have since formed. In the transition economies, new laws were passed and old cooperatives were returned to their members and new ones have formed. In /osnia and in 9erbia 1, for example, agricultural and mar&eting coops were formed in response to the demand for produce by a growing supermar&et sector . :hile the whole cooperative movement in these transitional economies remains wea&, they are expected to continue to grow in such areas as credit, agricultural supply and mar&eting, and even a renascent consumer cooperative sector. +he 69"I2 has been active in the /al&an region in promoting cooperative formation0 governments in Fastern and ,entral Furope and the ,I9 countries can go a long way in promoting the formation of autonomous cooperatives. In the developing countries, the international efforts by I,", IJ< and the 6-, have been instrumental in the formation of new cooperatives that are independent of their governments. +he I," Identity 9tatement and cooperative principles, the 6nited -ations 5uidelines of ''1 and the IJ< 1ecommendation -o. 1;. on the promotion of cooperatives have served to guide cooperative formation, as well as limit the role of governments to one of providing an enabling environment and level#playing field so cooperatives can operate on a
1 >elped by a 69"I2 programme.
<,2, 7 ''%8.
sustainable basis alongside other types of business. +hese mechanisms recommend that there should be an @early and complete disengagement of governments from the internal affairs of cooperatives1. +he IJ< 1ecommendation -o. 1;. emphasises the need to promote the business potential of cooperatives so they can contribute to sustainable development and decent employment. It does not advocate the complete withdrawal of government but recommends an institutional framewor& in which government registers cooperatives as simply and efficiently as possible, regulates them in the same way as other forms of enterprise, and provides a wide range of support such as human resource development, access to credit, and support services for mar&eting, all without infringing cooperative autonomy. +he cooperative sector is experiencing a renaissance despite many difficulties. " study of 11 countries in "frica estimates that around seven percent of "fricans are co#op members and that even in countries where apex cooperatives have collapsed, such as 6ganda and 1wanda, the numbers have continued to grow there were only $$! cooperatives registered in 6ganda in 1;;$, but nearly %$'' now. 9avings and credit cooperatives are growing, including non#traditional sectors such as housing, consumer, cottage industries and distilleries. +hey are demand driven, mar&et oriented, and bypassing the old cooperative unions in favour of new networ&s. (armer cooperatives are meeting a growing demand from supermar&ets for fresh fruit and vegetables. ,offee mar&eting cooperatives are gaining high prices through fair trade. Flectricity cooperatives show that the cooperative model can wor& in rural areas where the private sector does not want to go. 9mall dairy cooperatives are growing rapidly in Fastern Furope, Jatin "merica, and "frica to provide raw mil& to private dairies. +here has been a ma)or resurgence of mar&eting cooperatives in Fthiopia, Tambia and >onduras. +elecommunications cooperatives are strong in Goland, "lbania, "rgentina, /olivia, and electricity cooperatives in the Ghilippines and /angladesh. ,redit unions are growing in many countries and extending access to credit, savings and remittance services by poor people and migrant wor&ers. In /olivia cooperatives are a serious alternative to privatisation of water services to urban consumers.. >ealth professionals also sometimes find it useful to 1 6nited -ations 7 ''18 ,e$or of %e Secre ary-*eneral on coo$era ives in social develo$men , "P$6P%.#
FP ''1P6I annex, p1%, and International Jabour <rganisation 7 ''18 ,ecommenda ion 198 &oncerning %e !romo ion of &o-o$era ives3 5eneva. 2eveltere, G, Gollet, I and :anyama, ( 7 ''I8 &oo$era ing ou of !over y( %e renaissance of %e African coo$era ive movemen , 5enevaA IJ< forthcoming. . 9ee /irchall 7
''!8 ,h.!, case study on water co#op in /olivia.
organi*e through a cooperative, as in /ra*il where the biggest cooperative medical system in the world has .6% local member cooperatives operating in over I' per cent of /ra*ilOs counties with ;I,''' doctors in membership, serving 1 million service patients. In "rgentina $I per cent of rural electricity is supplied by cooperatives, and they are also strong in telecommunications. In ''1, wor&ers in "rgentina from some '' failed enterprises were ta&en over by the wor&ers to form wor&ers cooperatives1. +he reform of the basic rules by which cooperatives are registered, regulated and held accountable to their members and the wider public has been critical in the growth of strong cooperatives. In the case of +an*ania, for example, a Gresidential ,ommission met in ''' to analyse the problems faced by the sector. It was followed by a new cooperative law, new by# laws that ensured primary cooperatives were run properly, and a process of re#elections to societies vetted by the 1egistrar to ensure that ineffective and corrupt board members are removed. +his reform has led to strong growth in the savings and credit movement and in coffee cooperatives in particular. In another example, an Fthiopian reform process which began in 1;;% with 69 development support, has led to growth of cooperatives. -ow more than I$ per cent of Fthiopias total inputs in rural areas are distributed through cooperatives, and over %$ per cent of its coffee is exported by cooperatives. T/reat an" #/allen!e 3a#e" %y #oo$erative in "evelo$in! #ountrie +he preceding optimistic view has to be tempered with awareness of the constraints that cooperatives in developing countries face. " recent study of !$' cooperatives in +an*ania and 9ri Jan&a reports that cooperatives lac& access to loan finance to help them expand their business. <ther constraints include lac& of technical &nowledge and access to new technology, and training in business and leadership s&ills0 lac& of access to mar&ets beyond their locality0 and lac& of &nowledge about opportunities for fair trade. +hese cooperatives are still held bac& by issues li&e over#regulation from governments and poor internal governance which can lead to lac& of trust in their own elected officials . (armer cooperatives need assistance to improve the quality of produce for export in a global economy that puts the responsibility on producers to meet quality standards. ,redit cooperatives need strengthened capacity to do ban&ing and manage ris&. +he low level of participation by women is a challenge faced by many cooperatives, a problem that is worse in agricultural cooperatives compared to other types such as credit cooperatives. <ne way to address this problem is 1 >owarth, E 7 ''%8 "or#er co-o$era ives and %e $%enomenon of em$resas recu$eradas in Argen ina,
EanchesterA ,o#operative ,ollege
9immons and /irchall 7 ''I8.
through setting up womens cooperatives li&e the womens cooperative ban&s in the 9outh of 9ri Jan&a. "wareness campaigns, as in the :omens 2airy ,ooperative leadership programme in India, helped double the participation rates of women 1 In addition, the challenge of low level of involvement of young people and the need to provide them with decent wor& could be addressed through setting up specialised youth cooperatives and running awareness campaign in existing cooperatives. In "frica, cooperatives face the specific threat from >IBP"I29 . +he cost in human resources L loss of trained employees and committed members L adds to those imposed by the difficult business environment. In particular, credit cooperatives face increased ris&s from default on loans, and need to provide insurance that may, in the long run, be costly. <ne challenge is to meet the needs of members with >IBP"I29 and their families, and this can only be done by businesses that are sound. -evertheless, cooperatives are an ideal setting for increasing awareness and >IB education. (or instance, in India cooperative networ&s are being used for health education, while in Fthiopia !'' cooperatives with a total family membership of .$ million are developing educational materials with help from ",2IPB<,". In ,alcutta and :est /engal the sex wor&ers of 6sha Eultipurpose ,ooperative 9ociety, with more than %''' members, have started a microcredit scheme, help with supply and mar&eting of handicrafts, and a peer education programme. <ne opportunity provided by the crisis is to develop new types of cooperatives for home care provision, such as the 9oweto >ome#based ,are 5ivers ,ooperative, which is supported by the ,anadian cooperative movement. ,ivil wars and ethnic conflicts have caused ma)or disruptions and destroyed cooperative infrastructure and social capital. Ket there is some evidence that even during conflicts cooperatives can survive. In 9ri Jan&a and -epal, they have been the only independent organisations allowed by both sides in the civil war *one. In post conflict areas, cooperatives also play a crucial role in restoring both the economy and civil society. In Fast +imor, with help from the -ational ,ooperative /usiness "ssociation of the 69", a networ& of ',''' farmers has been formed, processing one third of the coffee for export .. In 1wanda, a credit union system was rebuilt by the :orld ,ouncil of ,redit 6nions without regard to ethnicity, and now there are 1!; unions with nearly !'',''' members. In /osnia cheese cooperatives, and in Eontenegro dairy cooperatives, have encouraged displaced refugees to
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''$8 2a#ing a 'ifference( co-o$era ive solu ions o glo6al $over y, EanchesterA ,o#operative ,ollege.
return, while in Fl 9alvador electricity cooperatives have boosted the local economy so ex# combatants can find wor&. 9imilar stories can be told of 5uatemala, Jebanon, "*erbai)an, 9erbia and Eontenegro. +here is also evidence of cooperatives bridging longstanding ethnic divides0 electricity cooperatives in /angladesh have a common membership among the I million users, and in India dairy cooperatives treat members of different castes as equals.