The features of cooperative society make it a peculiar business organization focused on the collective welfare and not just the generation of profits. A cooperative society is formed by people with common interests voluntarily coming together to attain social, economic, and cultural benefits. The article defines a Cooperative Society, the key features of a cooperative society, and the various types of cooperative societies existing. With the characteristics and categories of cooperatives known, it’s easy to understand how they bring about the growth of an individual and communities.
What is a Cooperative Society?
A cooperative society is a member-owned organisation formed by those who unite to meet their daily needs. They are different from traditional companies, mainly based on maximising shareholder profits. They are focused more on the members’ benefits because of shared resources, profits, and decision-making. The basic principle of a cooperative is one member, one vote, where every member has an equal say, irrespective of his investment or contribution. The most famous example of a Cooperative Society is Amul.
Features of Cooperative Society
The features of a cooperative society are entirely different from those of other business organizations. Its features depict how the values of equal rights, democracy, and mutual aid remain the central tenets of cooperative societies.
Voluntary Membership
Anyone can become a member of a cooperative society if they agree to the duties and responsibilities that accompany membership. No discrimination based on caste, religion, gender, or social status exists. Members are free to join or leave at their discretion. For instance, any dairy farmer involved in milk production can be a member of Amul.
Democratic Management
In cooperative societies, one member one vote rules no matter how much a person has invested. Major decisions usually occur in general meetings, where every member has equal voting rights. For instance, in a housing cooperative, all members vote equally regarding maintenance fees regardless of their apartment size.
Service Motive
The main goal of a cooperative society is to serve its members instead of gaining maximum profits. Although cooperatives make some profits, they consume them to benefit the members or invest them for expansion. For example, a consumer cooperative mainly aims to sell commodities at fair prices instead of maximizing profits.
Limited Liability
The financial risk of each member in a cooperative is limited only to the sum they invest in the cooperative. If the business suffers losses, members do not have to contribute more than their investment. Take, for example, a credit cooperative. Members lose only what they invested and not their savings if the business fails.
Distribution of Surplus
Cooperative societies share profits based on members’ participation rather than investment. Apart from this, they keep some earnings for growth and development. For instance, in the case of a worker’s cooperative, the profit-sharing is based on the number of hours put in by each member.
Legal Status
A cooperative society has its legal identity separate from its members. It can hold property, enter into contracts, and sue or be sued. In India, cooperatives must register under the Cooperative Societies Act, of 1912. For instance, a registered cooperative bank carries out its financial activities independently.
Mutual Cooperation and Self-Help
Cooperative societies are based on the principles of teamwork and self-reliance, and in it members work together for common goals. Success is measured only by their active participation. An example would be farmers who purchase seeds, fertilizers, and other equipment in an agricultural cooperative at reduced prices.
Continuity of Existence
A cooperative society lives long, even after members leave or pass away. Its operation is not affected by membership changes. For instance, a housing cooperative keeps operating even when original members sell apartments and new members take their places.
Types of Cooperative Society
Cooperative societies can be classified into various types based on their purpose, structure, and members’ needs. Here are the major types of cooperative enterprises:
Consumer Cooperatives
Consumer cooperatives provide their members with goods and services at a relatively cheap price. Individuals order products in bulk and then sell them at agreed reasonable prices, bypassing the middleman. For example, in India, there is a consumer cooperative known as Apna Bazaar, and its members are owners and customers. Such an arrangement gives the consumers lower prices, reasonable quality control, and profit-sharing between the members. However, it will still be affected by problems like low product variation and management because of the lack of professionalism.
Producer Cooperatives
Producer cooperatives allow producers, whether farmers, artisans, or manufacturers, to sell their produce with the proper means. The pooled resources enable a member to source raw materials for production, produce goods, and then sell those goods in an aggregated form. Some well-known examples are Amul, which supports dairy farmers, and Lijjat Papad, which empowers women in the food industry. They guarantee better prices, scales of economies, and wider market access. A drawback to cooperatives is their dependence on management and problems regarding quality control.
Worker Cooperatives
Worker cooperatives provide employment where workers are owners, managers, and business controllers. They invest in the cooperative and make decisions; hence, the profit is equally divided. The Uralungal Labour Contract Cooperative Society (ULCCS) of Kerala is managed by its workers. The cooperatives give job security, equal wages, and ownership; however, the cooperatives are often marred with inadequate funds and fight over management control.
Housing Cooperatives
The main objective of housing cooperatives is to offer affordable housing to its members. Members pool money to acquire land, build homes, and run the property together. Quite a few housing societies in large cities such as Mumbai and Delhi function as cooperatives. The benefits include affordability, better maintenance, and good community bonding. Still, they face issues with property management disputes and high maintenance costs in the big societies.
Credit Cooperatives (Cooperative Banks)
Credit cooperatives are also known as cooperative banks. Credit cooperatives offer loans and other credit facilities, deposits in savings accounts, etc., to the members. Here, the capital is contributed by the members and utilized to issue loans at low interest rates. Such models include Urban Cooperative Banks in India, offering low-interest loans, easy credit access to small businesses, and profit-sharing among members. However, there are risks of loan defaults and limited capital compared to commercial banks.
Features of Cooperative Society FAQs
What are the characteristics of cooperative society?
The essential characteristics of a cooperative society are voluntary membership, democratic management, limited liability, profit sharing, and legal existence as an independent organization.
What is Cooperative Society?
Cooperative Society refers to an organization owned and controlled by its members, who engage in their venture for the benefit of each other and divide the profits according to participation.
What are the types of Cooperative Societies?
The cooperative organizations can be mainly classified as consumer cooperatives, producer cooperatives, worker cooperatives, housing cooperatives, and credit cooperatives.
Why is democratic management required in cooperative society?
In a cooperative society, the concept of democratic management can provide every member equal significance to the making of a decision. It enhances the equity and transparency issues of the cooperative organization.
What are the Importance of Cooperative Societies?
Co-operative societies in India aim to enhance economic empowerment, creating employment opportunities, social equity, and available commodities, services, and resources for finance.
