Co-operative Society: Definition, Types, Features, Pros & Cons

Meaning of Co-operative Society

A co-operative society is an organization or body of people of common interest who come together to protect their interest and utilize this to better the lot of its members by engaging in various economically viable ventures.

Cooperative Societies are Commercial company made up of a group of people who satisfy individual and collective needs.

What is Cooperative Society?

Cooperative Societies are Entities formed by people who are associated, with freedom of membership and the possibility of voluntary withdrawal, in order to carry out business-type activities, which are aimed at satisfying their economic and social needs and aspirations, through a democratic structure and functioning.

Types of Co-operative Societies

• Consumers Co-operative Society: is an organization that buys in bulk either direct from the manufacturers or big time wholesalers. Such goods are sold to members at reasonable and affordable prices. Profits realized are usually shared on the basis of patronage.
• The Producers’ Co-operative Society: is common among the producers of similar commodities. They pool their products together in order to have a favourable bargaining power with the consumers. The profits made are shared according to each member’s share of the total output.
• Thrift and Credit Co-operative Society: is a loan giving society. Members save or contribute to a common purse and can take about 2 or 3 times the amount saved as a loan at low interest. The profits realized are shared among members by way of dividends according to their contributions.
• Multi-purpose Co-operative Society: as the name suggests may be a combination of (i) and (ii) or (i) and (iii) or (ii) and (iii).

Features of a Co-operative Society

The main characteristics of Cooperative Societies are the following:

• It is a form of business unit owned by people of a common interest.
• There is a minimum shareholding for every member.
• Every member enjoys a voting right.
• Each member has one vote irrespective of the size of his shareholding.
• Profits or dividends are shared according to members patronage.

Advantages of Co-operative Society

The advantages of a cooperative society are the following:

• They are democratically managed by their partners.
• The costs incurred by the company are shared by the partners, according to their capital contribution.
• All members are responsible for the society and must collaborate in its administration.
• The partners are involved in the production of goods and services, along with their sale and distribution, so communication tends to be effective and generate rapid adjustments in production and commercial processes, when necessary.
• Loyalty of members ensures stability in the operation of the business.
• It is an organization that is democratically run as every member has just one vote that is freely used at the annual general meeting.
• Middlemen’s costs are saved for members who operate the business by themselves.
• It strives to provide educational facilities for its members.
• Easy provision of loan facilities to members is encouraging.
• Thrift is encouraged among members to save for the rainy day.

Disadvantages of Co-operative Society

The disadvantages of a cooperative society are as follows:

• They tend to have difficulties when it comes to accessing sources of financing, since the general organization of the company is shared between several partners.
• Decisions are shared by all partners instead of being centralized by one person. Although, a priori, this is a positive and democratic characteristic, when time is short, it tends to hinder the normal functioning of society.
• The partners usually have other paid jobs where they have to fulfill a fixed schedule, which sometimes makes it difficult to carry out the management of the company.
• If the company is not generating profits, the members of the cooperative will not be able to obtain income from the work carried out in it.
• Large scale illiteracy among members often results in wrong use of their voting rights to the advantage of their business.
• Exemption of its profits from taxation makes it less competitive with other forms of business enterprises in the private sector.
• Diversion of business funds into a political cause is usually counter productive.
• The experience of leaders is usually a hindrance tothe survival of this form of business organization.

Examples of Cooperative Societies

Some examples of this type of organization are:

1. Cooperative Electricity Society.
2. Agricultural cooperative society.
3. Cooperative insurance society.
4. Cooperative Society for Emergency Services and Nursing.
5. Cooperative labor society (in activities such as fishing, metallurgy, transportation, food).
6. Cooperative banking society.