Co-Operative Societies

CONTENT

1. Definition
2. Principles of Co-operative Societies
3. Types of Co-operative Societies
4. Features of Co-operative societies
5. Advantages and disadvantages of Co-operative societies
6. Sources of Finance for a Co-operative society
   A co-operative society is a voluntary association of persons, businessmen, traders or organization with common needs and interests. The resources of members of are pooled together to promote the economic and welfare interest of the members.

PRINCIPLES OF CO-OPERATIVE SOCIETIES

Co-operative societies are based on the following principles.

1. Open and Voluntary membership
2. Democratic management and control:
   Decisions are taken by voting and each member of a co-operative society has one vote in all decisions taken by the society. In other words, voting does not depend on members shareholding
3. Distribution of surplus (i.e. profits) based on participation or patronage
4. Neutrality in race, politics and religion
5. Encouragement of the habit of saving and thrift
6. Promotion of education of members
7. Protection of members from exploitation of normal market forces
8. Sale of only pure goods: All goods offered for sale must be good quality (not inferior or imitations)

TYPES OF CO-OPERATIVES SOCIETIES

1. Consumers’ Co-operatives Society: This is formed by consumers who pool their resources together to buy essential commodities in bulk direct from manufacturers. Such commodities are then distributed or sold at reasonable prices to members.
2. Retails Co-operative Society: This is an association formed by many small independent retailers pooling their resources together and buying in bulk either from the manufacturers or wholesalers
3. Wholesale Co-operative Societies: Association of wholesalers buying in large quantities from the Manufacturer
4. Producers Co-operative Society: This is an association of producers of similar commodity who have come together for the promotion of the market for their products. They could also purchase tools and raw materials in bulk and share or sell them to members at reduced prices.

FUNCTIONS OF PRODUCERS CO-OPERATIVE SOCIETIES

a. Negotiation for better prices from buyers
b. Provision of Joint transport facilities
c. Provision of specialist advice
d. Provision of Information
e. Provision of short –term loans/Facilitation of loans from specialized institution e.g. World Bank Assisted FADAMA Project
f. Provision of Joint Storage Facilities
g. Education of Members

5. Credit and Thrift Co-operative Society: This is an association of low income earners who jointly pool their resources or fund together by contributing on a weekly or monthly basis. This type of society encourages saving habits among their members and grant loans to the members out of the accumulated fund. The Loan attract a low rate of interest. At times however, non-members too can borrow from such a society but at a higher rate of interest. At the end of the year, surplus will be distributed to members as dividends. The members can also be afforded the opportunity of purchasing household need like television, fridge etc.
6. Multipurpose Co-operative Society: This is formed by existing co-operative societies. They undertake a variety of co-operative activities that is profitable and serving the interest of members

EVALUATION

1. List six types of co-operation societies
2. State four distinguishing features and functions of each of the co-operative societies

FEATURES OR CHARACTERISTICS OF CO-OPERATIVE SOCIETIES

i. Perpetual existence
ii. Minimum of two members and no maximum limit to the number of members
iii. Liability to the members is limited to the shares held
iv. Members buy shares to contribute the initial capital; extra capital may be raised in from members in the form of loans
v. Shares are not transferable but can be withdrawal or added to at any time
vi. Democratic in nature
vii. Profit (surplus) is shared based on patronage
viii. It is separate legal entity
ix. Control is in the hands of management committee elected by members
x. The objective of co-operative society is to promote members interest.

ADVANTAGE OF CO-OPERATIVE SOCIETIES

1. It encourages thrift and saving habits among members
2. There is democracy inherent in its control and management
3. Loans are more easily obtained by members
4. Perpetual existence: i.e. death of members cannot bring the society to an end
5. It facilitates improvements in member’s standard of living
6. They prevent loading of goods
7. Helps in marketing members products
8. They encourage investments
9. They encourage production of high standard products
10. They could easily obtain loan facilitates from banks or government agencies
11. They are very prominent in consumer protection activities

DISADVANTAGES OR PROBLEMS OF CO-OPERATIVES SOCIETIES

1. Problems of loan recovery – Loan recovery is difficult and in some instances even impossible.
2. Inefficient Management – Member elected to manage the business may lack experiences.
3. Inadequate Capital – This occurs as a result of the prevalence of low income earners in their membership
4. Misappropriation and embezzlement of funds
5. High level of illiteracy among members
6. Indiscriminate enrolment of members

SIMILARITIES BETWEEN CO-OPERATIVES SOCIETIES AND LIMITED LIABILITY COMPANIES

1. Both are legal entities
2. Members buy shares
   3 They hold Annual General Meetings (AGM)
3. Both are registered
4. The shareholders (members) receive dividends
5. Both have perpetual existence

DIFFERENCE BETWEEN CO-OPERATIVE SOCIETIES AND LIMITED LIABILITY COMPANIES

Points Co-operatives Societies Limited Liability Companies

1. Formation Registered under Co-operative law of the ministry of commerce Incorporated under CAMA 1990
2. Management By elected Management committee By elected Board of Directors
3. Distribution of Profits On Patronage basis In proportion to number of shares held
4. Members voting rights Equal On the basis of their shareholding
5. Aim To promote members welfare To maximize profits

SOURCES OF CAPITAL/FINANCE FOR A CO-OPERATIVE SOCIETY

a. Voluntary contribution of members
b. Retained profits (ploughed – back profits)
c. Fines and other special levies
d. Loans from banks
e. Loans from government agencies and independent agencies (e.g. N. G. O’S)
f. Loans from umbrella bodies such as credit unions etc

EVALUATION

1. State and explain five services rendered by co-operative societies to their members
2. Give five main similarities and differences each between a retail co-operatives society and a public limited company

GENERAL EVALUATION QUESTIONS
1 Explain five benefits that would be derived when a sole trader admits other partners
2 State five features common to both public and private limited companies
3 State five provisions of a memorandum of association
4 State five disadvantages of international trade
5 Explain five measures a country can take to solve its balance of payments problems

WEEKEND ASSIGNMENT

1. The main aim of credit and thrift societies is to (a) Settle disputes among members (b) Educate their members (c) Secure loans for members (d) Encourage savings among members
2. In which of the following business units are profits shared on the basis of membership patronage (a) Public enterprise (b) Partnership (c) Co-operative society (d) Public Limited Company
3. Which of the following interest holders are settled first in case of a company’s liquidation (a) Board of Directors (b) Debentures holders (c) Ordinary Shareholders (d) Preference Shareholder
4. The affairs of the co-operative society are in the hands of the (a) Board of directors (b) Executive members (c) Board of trustee shareholders
5. When a company is issued with the certificate of incorporation it is allowed to (a) Acquire premises (b) Come into existence (c) Commence trading (d) Raise Capital

THEORY

1. Name the five major types of business units
2. State four problems of retail co-operative in Nigeria

READING ASSIGNMENT
Essential Commerce for SSS by O. A. Longe Page 166 – 172