Meaning and Concept of Cooperative Society

Cooperative society is not a new concept. It prevails in all the countries, this is almost a universal concept. The
cooperative society is active in all countries worldwide and is represented in all the sectors including
agriculture, food, finance, healthcare etc. Co-operative organization is the form of organization where in
persons voluntarily associate together as business being a basis of equality for promotion of economic
interest of themselves. Benefits are generated by, for example, a share of surplus or profits, improved
working conditions and benefits, lower prices, higher quality of product, product type and variety
that better serve members’ preferences, and better access to credit.
It is a voluntary association of persons with same interest. It is guided by service motive. It is
established for economic and social development of weaker section of the society. It tries to solve
similar problems. In all form of business organizations, the objective of owner is to make profit.
But its objective is to provide services. Its motto is all for one and one for all that means mutual
help between membership. It helps through mental support too. it can be defined as voluntary
association of person usually of limited means forming together in equal basis for promotion of
certain economic or business interest. A minimum of 3o members are required to establish a
cooperative society but for the credit cooperative society minimum number of people required are
100 members. The registration of cooperative society is compulsory, and the capital of cooperative
organization is contributed by the members only in the form of share capital.

H.C. Calvent define “Cooperative is a form of organization wherein persons voluntarily associate
together as human beings on the basis of equality for the promotion of the economic interest of
themselves.”

International Labour Organization define” A Cooperative organization is an association of persons

usually of limited means, who have voluntarily jointed together to achieve a common economic
end, through the formation of democratically controlled business organization, making equitable
contribution to the capital required and accepting a fair share of risks and benefits of the
undertakings.”

Features of Cooperative Society

1. Voluntary Association
The cooperative society is a voluntary association of persons. Any person can join the cooperative
society if he/ she has common interest. For example, any farmer can join the agricultural society, or
any consumer can join the consumer society. The members can leave the society whenever they desire
so by giving a notice. There is no restriction on entry or exit of members. They can join or leave the
cooperative organization of their own will and wish. The membership is open to all the members
irrespective of their caste and religion. As per the Cooperative Act 2074 there must be at least 30
members needed to establish cooperative but in the case of Credit Cooperative there must be at least
100 members needed to establish cooperative.

2. Equal Voting Rights

The cooperative societies work with democratic principle of “one man- one vote”. All the members
get only one voting right irrespective of capital contributed by them. The rich members by taking
more shares cannot dictate their terms. A person who have 1000 shares and a person who has 10
shares will get one voting right only.

3. Service Motive
The activities of a society are carried on jointly by the members for service motive instead of profit
motive. A cooperative society purchase and sales goods or performs other economic activities to earn
profit. But the main motive of the society is to provide goods and services to the members in minimum
prices, in the case of consumer cooperative society and in marketing cooperative society the motive
of the organization to provide fair price to small farmers.

4. Separate Legal Entity

It is compulsory for a cooperative society to get itself registered under the Cooperative Societies Act.
After registration, the cooperative organization gets a separate legal entity, which means the
cooperative society is considered separate from its members. It can buy and sell property in its own
name and can enter into contract in its own name. the death, insolvency and incapacity of any member
does not affect the existence of cooperative society.

5. Cash transaction
Cooperative society gives emphasis on cash transaction. It supplies goods and services primarily to
the members in minimum price. Credit transaction is avoided because it creates the problem of bad
debt, doubtful debts and credit collection expenses. Cash transaction helps to maintain enough
working capital and current solvency position of the society.

6. Fulfillment of Community motive

A cooperative society is established by a group of persons having common interest. Its main motive
is to fulfill the interest of the community who involves in it. Agriculture cooperative has to supply all
kinds of requirement to farmers like better seeds, fertilizer, equipment, technical assistance to improve
productivity and financial assistance to sales their product to the market. Hence, main motive of the
cooperative is to fulfill the interest of community to develop their productivity and living standard.

7. Disposal of Surplus
Although cooperative organization is not formed for earning profit, but profit earned from the
business is distributed among its members. A certain percent from the net profit is collected in surplus
fund. Then the rest of it is distributed as interest, bonus and profit among the members on the basis of
the capital contributed by them. The cooperative act prescribed the rules and regulations that the
cooperative organization cannot distributed the profit, bonus or dividend more than 15% to its
members.

8. Capital
The capital of cooperative organization is raised from members through issue of shares. A cooperative
can also receive loan from Banks, Financial Institutions and Cooperative Banks.
Principles of a Cooperative Society

The Principles of Cooperation are guidelines by which cooperatives put their values into
practice.

1 First Principle: Voluntary and Open Membership: Cooperatives are voluntary

organizations, open to all persons able to use their services and willing to accept the
responsibilities of membership, without gender, social, racial, political or religious
discrimination.

2 Second Principle: Democratic Member Control: Cooperatives are democratic organizations

controlled by their members, who actively participate in setting their policies and making
decisions. Men and women, serving as elected representatives, are accountable to the
membership. In primary cooperatives, members have equal voting rights [one member one vote],
and cooperatives at other levels are also organized in a democratic manner.

3 Third Principle: Member Economic Participation: Members contribute equitably to, and
democratically control, the capital of their cooperative. At least part of that capital is usually the
common property of the cooperative. Members usually receive limited compensation, if any, on
capital subscribed as a condition of membership. Members allocate surpluses for any or all of
the following purposes: developing their cooperative, possibly by setting up reserves, part of
which at least would be indivisible; benefiting members in proportion to their transactions with
the cooperative; and supporting other activities approved by the membership.

4 Fourth Principle: Autonomy and Independence: Cooperatives are autonomous, self-help

organizations controlled by their members. If they enter into agreements with other
organizations, including governments, or raise capital from external sources, they do so on terms
that ensure democratic control by their members and maintain their cooperative autonomy.

5 Fifth Principle: Education, Training and Information: Cooperative provide education and
training for their members, elected representatives, managers, and employees, so that they can
contribute effectively to the development of their cooperatives. They inform the general public
particularly young people and opinion leaders – about the nature and benefits of cooperation.

6 Sixth Principle: Cooperation among Cooperatives: Cooperatives serve their members most
effectively and strengthen the Cooperative Movement by working together through local,
national, regional and international structures.

7 Seventh Principle: Concern for the Community: Cooperatives work for the sustainable
development of their communities through policies approved by their members. It undertakes
need based community-related services e.g., drinking water, health care, sanitation, education,
women empowerment, and other community related programmes. A cooperative is a central
rallying point in the village and therefore it performs a lot towards the social responsibility and
such activities bring the general community closer to the cooperative.
Types of Cooperative Society

The main types of cooperative societies are given below:

1. Consumers cooperative societies:

Consumers' cooperatives are formed by the consumers to obtain their daily requirements at
reasonable prices. Such a society buys goods directly from manufacturers and wholesalers to
eliminate the profits of middlemen. These societies protect lower- and middle-class people from
the exploitation of profit hungry businessmen. The profits of the society are distributed among
members in the ratio of purchases made by them during the year. Consumer’s cooperatives or
cooperative stores are working mainly in urban areas and countryside.

2. Producers cooperatives:

Producers or industrial cooperatives are voluntary associations of small producers and artisans
who join hands to face competition and increase production. These societies are of two types.

(a) Industrial service cooperatives:

In this type, the producers work independently and sell their industrial output to the cooperative
society. The society undertakes to supply raw materials, tools and machinery to the members. The
output of members is marketed by the society.

(b) Manufacturing cooperatives:

In this type, producer members are treated as employees of the society and are paid wages for their
work. The society provides raw material and equipment to every member. The members produce
goods at a common place or in their houses. The society sells the output in the market and its
profits are distributed among the members.

3. Marketing Cooperatives:

With an aim of helping small producers in selling their products, these societies are established. The
producers who wish to obtain reasonable prices for their output are the members of this society. For
securing a favorable market for the products they eliminate the middlemen and improve the
competitive position of its members. The output of different members is pooled and sold through a
centralized agency to eliminate middlemen. The sale proceeds are distributed among the members
in the ratio of their outputs. As a central sales agency, the society may also perform important
marketing functions such as processing, grading and packaging the output, advertising and
exporting products, warehousing and transportation, etc.

4. Cooperative Farming Societies:

These are voluntary associations of small farmers who join together to obtain the economies of
large-scale farming. In our country farmers are economically weak and their land-holdings are
 small. In their individual capacity, they are unable to use modern tools, seeds, fertilizers, etc. They
pool their lands and do farming collectively with the help of modern technology to maximum
agricultural output.

5. Housing Cooperatives:
To help people with limited income to construct houses at reasonable costs, these societies are
established. Their aim is to solve the housing problems of the members. A member of this society
aims to procure the residential house at lower cost. They construct the houses and give the option to
members to pay in installments to purchase the house. They construct flats or provide plots to
members on which the members themselves can construct the houses as per their choice.

6. Credit Cooperatives:

These societies are formed by poor people to provide financial help and to develop the habit of
savings among members. They help to protect members from exploitation of money lenders who
charge high interest from borrowers. Credit cooperatives are found in both urban and rural areas.
In rural areas, agricultural credit societies provide loans to members mainly for agricultural
activities. In urban areas, non-agricultural societies or urban banks offer credit facilities to the
members for household needs.

7. Multipurpose Cooperative Society

A Multipurpose Cooperative Society performs several functions like production, marketing,

farming, housing, credit service so on. Thus, it fulfills various needs of its members. It is most
common and popular type of cooperative. Members can obtain all kinds of services from one
society.

Incorporation of cooperative organization in Nepal

In Nepal, the Co-operative organization is guided and regulated by Co-operative Act 2048. Before
starting the co-operative, the prospective members are required to discuss all the matters relating
to the formation of co-operative. A co-operative organization cannot start its legal business activity
without registering in the co-operative department. Following steps are required to start co-
operative in Nepal:

1. Preliminary Meeting
2. Application for registration
3. Investigation of application
4. Certificate of registration

Preliminary Meeting:
 According to Cooperative Act 2048, for the registration of a cooperative organization,
Preliminary meeting must be conducted in order to discuss and decide on the different matters
in the presence of at least 25 persons under one chairman among them. It is the first stage
 before starting a co-operative activity. In this meeting, all the members will discuss in the
different matter such as: -
 Problems and benefit of the co-operative,
 The total number of members in cooperation
 Concerning the name, address and objective of the society,
 Capital required and rules and regulation,
 Work plan and working area,
 Opening a bank account and depositing amount and conducting the bank account after the
registration,
 Delegation of right for the registration of the proposed cooperative.
Once they agree about the formation of co-operative, they will form a different committee and
sub-committee. At this meeting, different people will be given different responsibilities such as
the collection of capital, development of laws and by-laws, preparing for registration etc.
Application for registration:
After holding preliminary meeting and passing above mentioned matters or proposal, an
application for registration should be submitted to the office of the Registrar, Department of
Cooperative, Government of Nepal. It must be signed by the chairman of the temporary committee.
The following particulars of the proposed society should be mentioned in the application form:
 Proposed name and Address of the society,
 Objective of the society,
 Working area of the society,
 Liabilities of the society,
 Capital Structure of Cooperative.
The following document should be attached along with the application

 Two copies of the by-law of the proposed society,

 One copy of original working scheme of the proposed society,
 Attested photocopies of the decisions of the preliminary meeting,
 Personal particulars and signature specimen of at least 25 promoters, and
 Original copy o the bank deposit voucher of registration fee.

Investigation of application:
The concerned authority of department or co-operative will investigate information provided in
application form. It identifies the correctness of information. The department will verify either the
law or by-law of co-operatives are against or in support of current law of a country. If the
department finds certain things to be amended, it will issue notice for amendment. If the team of
co-operative is not able to provide such amendment, then the department will refuse for application
registration.
Certificate of registration:
The registrar of the department of co-operative will issue a certificate of registration after making
an entry in the registration book. The co-operative can start its legal business after getting a
 certificate of registration. The co-operative relating to saving and credit is required to follow rules
and regulation provided by NRB. It must complete all basic requirement of NRB before starting
its economic activities.

Role of Cooperatives in Developing Countries

Developing countries are those countries which are in the process of development and
industrialization. The level of income availability and the resources are less in developing
countries. They are slowly developing their resources for industrialization. The co-operative
organization plays a vital role in the development of the country. The importance of Co-operative
in developing countries like; China, Nepal, India, Sri Lanka are explained as follows:

1. Encourage Saving
2. Provide Institutional Credit
3. Help for Economic Diversification
4. Terminate Middlemen
5. Generate Employment
6. Improve Living Standard
7. Proper Utilization of Resources
8. Democratic Management
9. Capital formation
10. Empowers poor people

1.Encourage Saving:
Co-operative organizations encourage saving habit of people by providing a high rate of interest
on saving. They provide facilities for saving by collecting a small amount of saving daily or on the
monthly basis. They visit door to door to collect savings.
2.Provide Institutional Credit:
In developing countries like Nepal, bank and financial institutions are limited to an urban area
only. Urban people have to take a loan from a money lender at the high rate of interest but the co-
operatives in the regular area provides institutional credit to their members via the easy process.
They avoid the exploitation of money lenders.
3.Help for Economic Diversification:
The co-operative organization provides economic activities in rural backward areas. In rural areas
banks, financial Institutions are not there but the co-operatives facilitate lending and saving service
to the rural public to start and develop the economic activities there.
4.Terminating Middlemen:
The co-operative like consumer and marketing society helps to terminate middlemen consumer.
Co-operatives directly purchase the product from manufacturers, provide to their member
consumer. Marketing society helps to sell and promote the manufacture of product directly to the
consumers. This helps to terminate the role of middleman and benefit both consumers as well as
manufacturers.
5. Generating Employment Opportunities:
The co-operative organization needs different kinds of human resources to work at various level.
Cooperative generate employment opportunities by direct and indirect way. They need various
skilled and unskilled employees, they need different employees like accountant, salespersons,
managers, accountant, technician’s etc. It provides additional employment opportunities in society.
On the other hand, co-operatives promote business by providing loan and other facilities. When
the business organization is established and developed, they will create new employment
opportunities in society.
6.Improve the living standard:
Different co-operatives are established to help and promote the economic life of their members.
They develop saving habit of members. The saving of members is later utilized for different
purposes such as production, distribution, education, health, game and sports, cultural and
traditional activities. These facilities promote the living standard of people.
7.Proper Utilization of Resources:
Co-operatives help to develop managerial skills in their member. They provide different training
to their member regarding management of organization and resources. It helps in effective
utilization of resources so that people will know the importance of scare resources.
8.Democratic Management:
Co-operative organization practices a democratic system of management. They provide freedom
to express ideas, knowledge, and views, among their members. It develops a democratic culture in
society. They encourage the member to accept norms, values, rules, and regulation of the
organization.
9.Capital formation:
Formation of capital is another role of cooperative. It collects surplus from the society and invests
in productive sectors. It plays a vital role in the economic development of the nation.
10.Empowers poor People
Empowering is generally relating with providing power and confidence to the needy person.
Cooperative organization empowers their members enhancing their economic condition. They
provide different kind of opportunities to enhance their economic condition such as employment,
self- employment, education, training, technical assistant so on. It reduces gap between the poor
and the rich people.
eaning, Definition and
Characteristics of Public
Enterprises.
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Meaning, Definition and Characteristics of Public
Enterprises.
Public enterprises as a form of business organisation has attained a
great deal of significance in recent times. During 20th century various
governments have taken active part in the industrial and commercial
activities. The term public enterprise denotes a form of business
organisation owned and managed by the state government or any other
public authority. So it is an undertaking owned and controlled by the
local or state or central government. The whole or most of the
investment is made by the government.
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According to A. H. Hansen, a public enterprise denotes “state

ownership and operation of industrial, agricultural, financial and
commercial undertakings”.
ADVERTISEMENTS:

According to N. N. Malaya, “Public enterprises are autonomous or

semi-autonomous corporations and companies established, owned and
controlled by the state and engaged in industrial and commercial
undertakings”.

Characteristics
The chief characteristics of public enterprises are:

Autonomous or semi-autonomous organisation: Public

enterprise is an autonomous or semi-autonomous organisation because
some enterprises work under the direct control of the government and
some organisations are established under statutes and companies act.
ADVERTISEMENTS:

State control: The public enterprises are financed, owned and

managed by the government may be a central or state government.
Rendering service: The primary objective of the establishment of
public enterprises is to serve the public at large by supplying the
essential goods at a reasonable price and creating employment
opportunities.
Useful to various sectors: The state enterprises serve all sectors of
the people of the company. They do not serve a particular section of the
people in the community.
Monopoly Enterprises: In some specific cases private sectors are
not allowed and as such the public enterprises enjoy monopoly in
operation. The state enterprises enjoy monopoly in Railways, Post and
Telegraph and Energy production.
ADVERTISEMENTS:

A direct channel for use of Foreign money: Sometimes the

government receive foreign assistance from industrially advanced
countries for the development of industries. These advances received
are spent through public enterprises.
Public accountability: The state enterprises are liable to the general
public for their performances because they are responsible for the
nation.
Agent for implementing government plans: The public
enterprises run as per the whims of the government and as such the
economic policies and plans of the government are implemented
through public enterprises.
Financial Independence: Though investment in government
undertaking are done by the government, they become financially
independent by arranging finance for day-to-day operation.
tate Ownership:

A public enterprise is wholly owned by the Central Government or State Government(s) or local
authority or jointly owned by two or more of them, in case the enterprise is owned both by the
Government and private sector, the State must have at least 51 percent share in ownership.

2. State Control:

The ultimate control of a public enterprise lies with the Government which appoints its Board of
Directors and the Chief Executive.

3. Government financing:

The whole or a major portion of the capital of a public enterprise is provided by the Government.

4. Service Motive:

The primary aim of a public enterprise is to render service to the society at large. It may have even to
incur losses for this purpose. However, public enterprises are expected to generate surplus in course
of time.

5. Public Accountability:

Public enterprises are financed out of public money. Therefore, they are accountable for their results
to the elected representatives of the public, i.e., the Parliament and the State Legislature. That is
why; the working of public enterprises is scrutinized by the Committees of the Parliament or the
State Legislature.

6. Autonomous Bodies:

Public enterprises are autonomous or semi- autonomous bodies. In some cases they work under the
control of Government departments. In other cases these enterprises function as companies and
statutory corporations.