Cooperative Institutions | Meaning, Salient Features, Types

The ultimate objective of all major forms of business organizations is to earn profit. The cooperative institution is another form of organization whose principal objective is not to earn profit but to render service to its members.

Cooperative enterprises are generally set up by the individuals of the weaker sections to safeguard their own interest by eliminating middlemen and exploitation.

Meaning and Definition of Co-operatives

What are Cooperatives
What are Cooperatives

A co-operative society is a  voluntary association of individuals who join together on voluntary basis for the furtherance of their common economic interests.

Definition of the Maclagan Committee on Co-operation

The theory of co-operation implies that an isolated and powerless man can by association with others and by moral development and mutual support, obtain in his own degree the material advantage available to the wealthy and powerful persons.

Definition of the International Labour Organisation

A cooperative organization is an association of persons usually of limited means who voluntarily joined together to achieve a common economic end through the formation of a democratically controlled organization making equitable contributions to the capital required and accepting fair share of risk and benefits of the undertaking

Salient Features of Co-operative Institutions

Features of Cooperative Societies
Features of Cooperative Societies

The above definitions bring out clearly the following main features of co-operative institutions.

1. Voluntary Association

A co-operative society is a voluntary association of persons and not of capital. The membership is open to all having a common interest. Persons can become members at their free will and also free to leave it at anytime by giving a due notice to the society.

2. Open Membership

Any person, irrespective of his caste, sex, creed, beliefs and religion can become a member of a co-operative society. New members are always allowed to the society. As there is no restriction on the number of members, the membership list is not closed at any time.

3. Equality in Voting

Each member irrespective of his capital contribution, has one vote and hence an equal right to take part in its management. “One man one vote” is the principle of the co-operative form of organization.

4. Democratic Management

Co-operative societies are managed on democratic lines. It is the rule of the co-operatives. The members from among themselves at the annual general meetings elect the Board of Directors, and the management is entrusted to them. The Board is responsible and answerable to the general body of shareholders as regards the management of the society.

5. Fixed Return on Capital

Under the co-operative system, capital is not given undue preference. It is rewarded in the form of a limited rate of interest, which is normally restricted to the rate, which ranges from 5% to 6% under the Co-operative Societies Act.

6. Disposal of Surplus

The word “Surplus” denotes the excess of income over all the expenses including the provisions made for reserves. This surplus is distributed to the members in the form of bonus in proportion to the business transacted by the individual members with the society. But in the other forms of organization, the surplus is distributed on the basis of their capital contribution.

7. Body Corporate

A co-operative society is formed and registered under the Co-operative Societies Act, which renders it a body corporate. It has perpetual succession. Being a legal person, it enjoys certain privileges like a company on its incorporation.

8. Service Motto

The primary objective of co-operative society is to render service to its members.

9. Trading on Cash Basis

Most of the co-operatives prefer only cash transactions and avoid credit system. Hence, they follow cash and carry system in its operation, which is the universal feature of the cooperative organization. However, a few societies give credit to its members under certain circumstances.

Types of Co-operative Societies

Types of Cooperative Societies
Types of Cooperative Societies

Various types of co-operative societies are operating in our country. They are:

  1. Consumers Co-operative Societies.
  2. Producers or Industrial Co-operative Societies.
  3. Marketing Co-operative Societies.
  4. Co-operative Credit Societies.
  5. Co-operative Farming Societies.
  6. Co-operative Housing Societies.

1. Consumers Co-operative Societies

This type of society aims at ensuring steady supply of consumer goods and services of standard quality at reasonable prices to their members. It purchases goods on wholesale basis and resells them to its members at fair price. Thereby it eliminates middlemen in the channel of distribution. These societies are the business units established by the consumers with an object of supplying consumer goods primarily to the members.

2. Producers or Industrial Co-operative Societies

These societies are organized to carry on certain industrial activities. The main object of industrial co-operatives is to assist the small producers who are suffering from lack of capital and equipment. They aim at eliminating the capitalist who controls production.

This type of societies is suitable for cottage and small-scale industries. These societies supply raw materials, equipment, tools and finance to the small-scale industrialists who are all their members in order to enable them to produce specified goods.

The goods produced by the members are purchased by the societies at fixed rates. Then the society sells them to the consumers. That means it provides necessary marketing facilities also to the members.

In India, producers’ societies are popular in the field of hand-loom weaving, pottery, manufacture of coir goods, matches etc.

3. Marketing Co-operative Societies

These societies are formed to enable their members to secure fair price for their products by removing the difficulties in marketing their products. The marketing societies provide services such as assembling, grading, packing and storing.

They collect the products from their members and grade them and store them till they are required in the markets. Whenever the demand arises, they sell them at remunerative prices.

4. Co-operative Credit Societies

Co-operative credit societies are formed to provide financial assistance in the form of direct loans to their members. This type of societies is popular in India. They raise funds by way of accepting deposits from the members as well as from the public but they give loans only to their needy members. Credit societies can be classified into two i.e.

  • Urban banks, and
  • Rural credit societies or primary societies.

The-urban banks are established in urban areas by salary earners of industrial workers. Agriculturalists or artisans in rural areas establish the rural credit societies or primary societies.

5. Co-operative Farming Societies

In this type of societies, the farmers pool their land and cultivate them jointly. The main object of forming such type of societies is to overcome the defects of small-scale operation and to enjoy the economies of large-scale farming. These societies provide for the introduction of scientific organization of agriculture in order to increase the production and improve the economic position of the agriculturists.

6. Co-operative Housing Societies

Co-operative housing societies are formed to provide houses to their members either on ownership basis or on rental basis. These societies enable the middle class and even the poor people to own houses. They grant loans to the members for construction of houses. Sometimes, the society itself constructs houses for its members. These societies are popular in India.