All you need to know about cooperative societies

Cooperative society is a voluntary organization in which individuals, traders and businessmen with common interest pool their resources together to promote the welfare interest of their members. It is controlled by the members.

Formation of a Cooperative Society

A cooperative society is recognized in law as a legal person. It can own property, enter into contract, as well as sue and can be sued. Therefore a cooperative society must be registered before it begins operation.

A cooperative society is formed by a group of persons not less than ten (10).

The cooperative society must have a by-law which must contain the rules and regulations of the society.

The society must show evidence of being able to sustain itself.

The cooperative society must keep certain books and records necessary for the running of the society.

Application form stating the particulars of the society must be obtained and submitted. Then the Registrar of cooperatives issues a certificate which gives birth to the cooperative society.

Characteristics of Cooperative Societies

Cooperative Societies have the following characteristics:

  1. It is formed by individuals
  2. The individuals in the society are united with common interest and goals
  3. Cooperative societies are formed and maintained by the members
  4. All members in a cooperative society are equal
  5. Members give themselves mutual support
  6. Cooperative societies promote the welfare of their members
  7. Election in cooperative societies is through democratic process
  8. Cooperative societies give loans to members
  9. Saving of money is compulsory for members of a cooperative society.
  10. They hold the end of the year meeting called Annual General Meeting (AGM) which is mandatory to all cooperative societies.


  1. What is a cooperative society?
  2. List the characteristics of a cooperative society.
  3. Discuss the formation of cooperative societies.

History of Cooperative Movements

The formation of cooperative society started in a town of Rochdale in the industrial section of Lancashire in Great Britain.

The first cooperative society in the world was formed on October 28, 1844, in Rockdale. It was formed by a group of 28 men who were weavers.

The reason for the formation was to assist one another from the poor condition of living they found themselves as a result of the industrial Revolution in Europe. The leader of the group was Charles Haworth. The name of the first cooperative society was the Rochdale Equitable Pioneer society. The society made the first cooperative law which they called the Rochdale’s principles.

Early contributors to the cooperative movement include Robert Owen and William King.

The first attempt to form cooperative society in Nigeria was in 1922 when a group of cocoa producers came together to form  a producer cooperative society with the aim of getting reasonable prices for their products.

Presently, cooperative societies can be found in virtually all commercial activities which has contributed to the development of Nigerian economy by increasing the standard of living of the members.


  1. Discuss briefly the history of cooperative movement.
  2. What is cooperative society?
  3. Discuss the formation of cooperative societies.
  4. What are the features and characteristics of cooperative societies?
  5. Explain the reasons why people join cooperative societies.
  6. What are the differences between cooperative societies and business organization?



  1. Types of Cooperative Societies
  2. Advantages and Disadvantages of Cooperative Societies
  3. Problems of Cooperative Societies

Types of Cooperative Societies

The following are types of cooperative societies formed in Nigeria:

  1. Consumers’ cooperative societies.
  2. Producers’ cooperative societies
  3. Wholesalers’ cooperative societies
  4. Retailers’ cooperative societies
  5. Thrift and credit societies
  6. Multi-purpose cooperative societies

Consumer’s Cooperative Societies

This is owned and operated by a group of ultimate consumers who pull their resources together to purchase goods and services in large quantities and distribute primarily to its members

Features/Characteristics/Functions of Consumers’ Cooperative Societies

(i) They are made up of consumers

(ii) They protect themselves against exorbitant price of sellers

(iii) They buy in large quantity and distribute to members in small quantity

(iv) The surplus is distributed to members in proportion to patronage

(v) They settle dispute among members

(vi) There is open membership

(vii) Limited interest is paid on capital invested.

(viii) portionate dividend is based on their level or purchase or patronage.

Producers’ Cooperative Societies

This is formed by manufacturers who produce similar products.  They organise cooperative production and also undertake joint marketing of the products on both wholesale and retail basis

Features/Functions of Producers’ Cooperative Societies

(i) They are formed by producers of similar commodities

(ii) They undertake joint marketing of products on wholesale or retail basis

(iii) They organize cooperative production

(iv) They share any useful knowledge among members.

(v) They jointly buy or lease equipment

(vi) They settle dispute among members.

Wholesalers’ Cooperative Societies

Features/Functions of Wholesalers’ Cooperative Societies

(i) They are formed by wholesalers

(ii) They buy in bulk from producers

(iii) They sell in small unit to cooperative retailers

(iv) They are able to raise large amount to finance wholesale purchases

(v) They settle dispute among members.

Retailers’ Cooperative Societies

Features/Functions of Retailers’ Cooperative Societies

(i) They are formed by retailers pooling their funds together to enable bulk purchase.

(ii) The goods are retailed to members at a relatively lower price

(iii) The profits are shared in proportion to the amount of purchase made by each member.

(iv) They buy in bulk from producers/wholesalers

(v) They settle dispute among members

Thrift and Credit Societies

Features/Functions of Thrift and Credit Societies

(i) They are formed by low income earners

(ii) They enable low income earners to pool their fund by monthly or weekly contributions.

(iii) They grant loans to members at low interest rates

(iv) They encourage saving habit among members

(v) They settle dispute among members.

Multipurpose/Miscellaneous/Apex Societies

Features/Functions of Multipurpose/Miscellaneous/Apex Societies

(i) They make facilities available for sharing among member societies

(ii) They mediate in case of rift among members

(iii) They serve as protective body for members.


  1. Mention four (4) types of cooperative societies.
  2. Mention two distinguishing features and two functions of each type mentioned.

Advantages and Disadvantages of Cooperative Societies

Advantages of Cooperative Societies

The following are the advantages of cooperative societies:

  1. They link their members with government and with research and financial institutions
  2. Cooperatives often educate their members on production techniques especially in agriculture
  3. By operating collectively they often reap economies of scale
  4. Cooperative help in developing the rural areas if they are located there.
  5. Cooperative societies are easy to form
  6. Their members learn how democracy work since cooperatives are democratic
  7. Members buy goods at reasonable prices
  8. Members are encouraged to save
  9. It enables individuals to pool their resources together and undertake viable business ventures
  10. Members can borrow at preferential interest rate

Disadvantages of Cooperative Societies

The following are the disadvantages of cooperative societies:

  1. Each member has only one vote irrespective of the amount of shares held.
  2. Members receive lower interest on their investment than they would have received in other investments
  3. Since the profits of cooperative movements are not distributed on the basis of the capital contributed, the incentive to contribute much capital is lacking.
  4. The practice of one-man one vote adopted in electing the leaders can result in election of a popular but corrupt and inefficient leadership.


  1. State 3 advantages and 2 disadvantages of being a member of a cooperative society.

Problems of Cooperative Societies

The following are problems that often confront cooperative societies in Nigeria:

(i) The cooperative habit is yet to be imbibed by the people. Also the role of cooperatives is yet to be widely appreciated, resulting to low membership and low dividend.

(ii) The high level of illiteracy with the membership often results in weak leadership

(iii) Cooperative societies are poorly funded from within and outside

(iv) Misappropriation of funds and poor financial management are sometimes suffered by some societies.

(v) Government has not given enough support to cooperative societies.

(v) Lack of adequate capital to run the society

(vi) Problem of loan recovery: the society may not be able to recover the given to members which may destabilize the society.


  1. Discuss the various problems faced by cooperative societies in Nigeria
  2. What are thrift societies? Describe five services rendered by thrift societies to their members.
  3. Discuss the history, management and financing of cooperative societies.
  4. Explain briefly the reasons why people join cooperative societies.
  5. What are the difference between cooperative societies and business organisation?
  6. Compare and contrast importance features of cooperative societies with those of limited liability companies.

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