What is Cooperative Society, its characteristics and types?

The Buyt Desk

Cooperative society is a business organization which is formed for the welfare of its members.A business organization can be of various types. A cooperative society is one such form of business unit. It has features of both democratic leadership and joint ownership. A cooperative society has existed for a very long time in all the countries. A cooperative society is present in all the sectors and most commonly in finance, agriculture, healthcare, food etc. It is formed by voluntary union of people to protect their interest  and for the  upliftment of the members of the society. These societies are usually formed by weaker sections of the society who want to fight against any kind of exploitation of its members by stronger sections of the society. Under the Cooperative Societies Act, 1912, to function as a legal entity cooperative societies have to be registered. The capital for cooperative societies is raised by the members of the society.

What are the characteristics of Cooperative society?

• Voluntary Association – The membership of a cooperative society is up to the choice of people. An individual as per his/her desire can take membership or exit one. Membership is voluntary in nature. A notice period needs to be served when exiting the society. There are no restrictions like gender, religion or caste for membership and is open for all.

• Service motive – The cooperative society is formed with the intention of the welfare of the weaker sections of the community. The profits earned by the cooperative society are shared among the members as a dividend as per the bye-laws of the society. The principle on which the cooperative society operates is mutual help & welfare.

• Registration – A cooperative society becomes a legal entity only after it is registered. After registration under the Cooperative Societies Act, 1912, society can sign contracts and also is eligible to acquire property in cooperative society’s name.

• Under state control – The state government controls and supervisions the cooperative society. It is the state government’s responsibility to safeguard the interests of society members. An independent auditor is appointed to audit the accounts of the cooperative society.

• Democratic character – Cooperative society is run by the managing committee which is formed by the elected members. All members of the cooperative society elect the members who in turn have the power to vote and choose the managing committee. All the important decisions to run and operate the society are taken by the managing committee.

• Limited liability – Each membership of a cooperative society has a limited liability equivalent to the sum of capital that member contributed.

What are the types of cooperative societies in India?

• Consumer Cooperative Society – Consumer cooperative societies are set up with the intention of safeguarding the consumer interests and supply daily necessary commodities at lesser price. Members of such society are the ones who wish to purchase products at reasonable rates. The product is directly purchased from the producer and no middleman is involved and sold to consumers in these societies. These are as per geographical areas and for the mutual benefit of the members who own and govern the businesses in that area.

• Producer Cooperative Society – Producer cooperative societies are set up with the intention of safeguarding the interests of small producers. The objective is to help producers to increase their profits and support producers in procuring raw material and tools for manufacturing. The co-operative society members come together to improve the production efficiency and marketing possibilities.

• Credit Cooperative Society – Credit cooperative societies are set up with the intention of safeguarding people and helping them by providing credit facilities. Here the loans are provided at a minimal rate of interest with the facility of flexible repayment tenure. These loans have interest rates lesser than private money lenders but a little higher than banks. These credit unions are member-owned financial cooperatives.

• Housing Cooperative Society – Housing cooperative societies are set up with the intention of helping its members by providing them housing facilities. It is more beneficial for the lower income groups because housing benefits can be availed at a very affordable price. The sole purpose of the society is to resolve the member’s housing problems.

• Marketing Cooperative Society – Marketing Cooperative societies are set up with the intention of establishing a platform for small producers to sell their products. The platforms are provided at affordable prices and middlemen are eliminated from the supply chain which gives them good profits. These cooperative societies provide different marketing utilities like transportation, warehousing, packaging, etc so that the producer can sell the products at the best price.

What are pros and cons of Cooperative Society?

Pros

1. Consumers can buy products at the cooperative societies as they are cheaper than the market.

2. Both the producers and consumers are at profit as there is direct procurement of products from the producers removing all the middlemen.

3. Loans are easily available in the cooperative society for its members.

4. Cooperative society completely eliminates black marketing.

Cons

1. The scope of raising capital can be limited as cooperative society is the association of low income group members.

2. As it is run by members there might be inefficiencies in management.