Cooperative Societies: Features, Types, Advantages and Disadvantages

Cooperative Societies

A cooperative society functions as a collaborative business entity where individuals, united by shared interests, join forces to establish and advance economic activities such as producing, distributing, or marketing goods and services. These societies also focus on providing welfare benefits to their members.

Features of Cooperative Societies

1. Ownership: Cooperative societies are owned collectively by a minimum of two individuals, with membership extending to any number of interested parties.
2. Membership Criteria: Access to membership is contingent upon meeting specific, predefined conditions.
3. Non-Profit Focus: While profitability isn’t the primary goal, cooperative societies aim to serve the collective interests of their members rather than maximizing profits.
4. Democratic Principles: These societies operate based on democratic principles, ensuring that decisions are made collectively and inclusively.
5. Profit Distribution: If profits are generated, they are distributed among members based on the level of their engagement or patronage within the society.
6. Regular Meetings: Cooperative societies conduct regular meetings to discuss and decide on various operational aspects, fostering a participatory environment among members.

Types of Cooperative Societies

The following are types of cooperative societies:

1. Consumer Co-operative Society: In a consumer cooperative society, individuals unite to pool their resources for collective bulk purchases directly from manufacturers. This allows members to access goods at more affordable prices by leveraging the power of group buying.
2. Producers Cooperative Society: This type involves producers of similar goods banding together to enhance the production and sale of their products. By collaborating, these producers aim to optimize production efficiency, market their goods collectively, and strengthen their position in the market.
3. Credit and Thrift Cooperative Society: Members of this society are encouraged to save collectively. Portions of these pooled savings are then available as loans to members in need. This fosters a culture of savings while providing financial support to members when required. This ensures financial stability within the community.

Advantages of Cooperative Societies

1. Encouragement of Savings: Co-operative societies promote a culture of savings among members.
2. Prevention of Price Fluctuation: By enabling bulk purchasing or collective selling, these societies mitigate price fluctuations, ensuring more stable prices for goods.
3. Democratic Nature: Operating on democratic principles, cooperative societies empower members to actively participate in decision-making processes.
4. Low Prices of Goods: Through collective buying power and efficient management, cooperatives often secure goods at lower prices, passing on the benefits to their members.
5. Prevention of Hoarding: Cooperative societies discourage hoarding by promoting collective ownership and fair distribution of resources, reducing the likelihood of scarcity.
6. Avoidance of Cheating: With transparency and mutual trust as core values, cooperatives minimize fraudulent activities or deceitful practices among members.
7. Increase in Standard of Living: By providing access to affordable goods and services, cooperative societies contribute to an improved standard of living for their members.
8. Fighting Inflation and Deflation: Through collective purchasing power and stable pricing, cooperatives help combat the adverse effects of inflation and deflation, ensuring economic stability.
9. Savings in Advertisement Costs: By leveraging word-of-mouth and member engagement, cooperatives often save on advertising expenses, allocating resources more efficiently.
10. Education of Members: Co-operatives emphasize educating their members, imparting knowledge on financial management, cooperative principles, and various skills, and contributing to personal and professional growth.
11. Encouragement of Hard Work: These societies foster a culture of diligence and industriousness among members, encouraging hard work for collective progress and success.
12. Encouragement of Economic Development: By pooling resources and supporting local economies, cooperative societies play a significant role in fostering economic development within their communities.
13. Encouragement of Interpersonal Relationships: Through shared goals and mutual interests, cooperative societies nurture strong interpersonal relationships among members.

Disadvantages of Cooperative Societies

1. High Embezzlement Rate: Cooperative societies may be susceptible to a higher risk of misappropriation or misuse of funds. This can cause financial discrepancies and trust issues among members.
2. Insufficient Capital: Limited financial resources can impede the cooperative society’s growth prospects, restrict investment opportunities, and hinder operational efficiency.
3. Weak Management: Inadequate or inexperienced management teams might struggle to navigate complexities within society, leading to inefficiencies and decision-making challenges.
4. Problem of Politics: Internal conflicts or power struggles among members can disrupt harmony, causing divisions and hampering the smooth functioning of the cooperative.
5. Illiteracy: A lack of education among members could pose hurdles to comprehending complex cooperative principles, hindering effective participation and decision-making.
6. Limited Expansion: Due to resource constraints or market conditions, cooperative societies may find it challenging to expand their operations beyond a certain scale, limiting their growth potential.
7. Denial of Individual Initiatives: Overemphasis on collective decision-making might stifle individual creativity or innovative initiatives among members, impacting the society’s adaptability and progress.
8. Lack of Discipline: Without clear guidelines or adherence to rules, cooperative societies may struggle with member discipline, which in turn affects productivity and cohesion within the organization.
9. Evasion of Tax: In some instances, there might be cases of tax evasion within cooperative societies, leading to legal complications and undermining the societal integrity.
10. Indiscriminate Enrollment of Members: Admitting members without aligning with the society’s goals or values could result in conflicting interests, divergent contributions, or internal discord.