Tuesday, January 18, 2011

Cooperative Principles and Practices

Cooperative Principles

Every Cooperative shall conduct its affairs in accordance with Filipino culture and experience and the universally accepted principles of cooperation such as:

Open and Voluntary membership - membership in a cooperative shall be voluntary and available to all individuals regardless of their political, racial or religious background or beliefs.

Democratic Control - cooperatives are democratic organizations. Its affairs shall be administered by persons elected or appointed in a manner agreed upon by members. Members of primary cooperatives shall have equal voting rights on an one-member-one vote principle, while a secondary or tertiary cooperative shall have voting rights as delegate of members-cooperatives, but such cooperatives shall have only five (5) votes. The votes cast by the delegates shall be deemed as votes cast the members thereof.

Member Economic Participation - members contribute equitably to and control the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all the following purposes: developing their cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities as a approved by the membership.

Autonomy and Independence - cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations (including governments) or raise capital from external sources, they do so on terms that ensure democratic control by the members and maintain their cooperative independence.

Education, Training and Information - cooperatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperatives. They inform the general public-particularly young people and opinion leaders about the nature and benefits of cooperation.

Cooperation among Cooperative - cooperatives serve their members more effectively and strengthen the cooperative movement by working together through local, national, regional, and international structures.

Concern for the Community - cooperatives work for the sustainable development of their communities through policies approved by their members.

Cooperative Practices

Cooperatives follow certain operational guidelines. These are practical response to local needs. Some are adopted from standard international practices, others are local innovations. But all these are aimed at perfecting cooperative operations. They are:

Capital Formation Starting a new cooperative can create a need for substantial capital. A problem develops when trying to operate with limited membership equity capital. The task of financing a new cooperative with member equity alone is usually impossible. Therefore, the best source of additional funds needed is from members in the form of: a) membership fee or purchase of stock; b) agreement to withhold portion of net earnings profits); c) by assessment based on units of products sold or purchased.

Cash Trading- This is business done on a cash and carry basis. The customer enjoys at least the use of the goods and services for the cash payment he/she gives. Cash trading promotes equality since anybody with cash can enjoy the service patronage. This practice can train members to observe the habit of balanced spending. Furthermore, the cooperative would be able to avoid bad debts and stabilize business operations. Finally, it is a way of increasing growth.

Selling at market price- Cooperatives offer goods and services at prevailing market prices. This promotes stability. It can cope with operational expenses and cover up the negative effects of shrinkage, depreciation and losses. It helps maintain the prices of goods;

Cooperatives can avoid destructive competition- Fostering constructive competition among cooperatives will safeguard the interests of consumers. Cooperatives are encouraged to cooperate in unison and bring their joint power in the market up to the level achieved by enterprises that are operated for the benefit of other stakeholders. They cooperate in order to get a fair deal from the large scale buyers of their products. Consumers cooperate to get a better deal from manufacturers and suppliers. Credit unions are formed to counter the power of large scale financial institutions. Price fixing agreements and cartel methods are prevented.

Constant expansion- As organizations, cooperatives have to grow for community services. Expansion is a must. It is done intensively and extensively. New members should be recruited to accumulate more capital and savings to support operation of the expanded business and services which in the long run will provide more benefits for them. However, members in this regard should undergo continuous education and training to learn various management practices/techniques and effective financial supervision.

Quality standardized goods- Cooperatives are intended to develop communities through the production of high quality goods and provision of better services. Cooperatives could help by patronizing only standardized products and services of high quality. Hence, different types of cooperatives will strive to improve their goods and services to stand competition with business establishments. This in turn will be instrumental in improving life in the country.

Cooperative wholesale business or interlending (cooperative bank). Cooperatives can be organized with enough people and capital. They respond to the needs of the community. Needs arise when there are people. The expansion of membership may result in wholesale business. In fact, to be effective, wholesale business, interlending (cooperative bank), could be done by primary societies. Defects from retail business could be avoided.

The benefits from the wholesale are considerable. Members can market and acquire the goods and services at the right price and quality. They can even lower and raise savings. They can also influence the production of badly needed goods and services;

Minimize expenditures A significant factor favoring the growth of cooperative is its being a community project. Their officers do not receive remuneration. If they get compensation, it is only in the form of allowances, per diems, or honoraria. When audit shows that the cooperative is not capable or can afford the minimum wage, only employees get paid regularly. The government can give exemption. Furthermore, laws may allow exemption from income and sales taxes. Minimizing expenses should not be taken as a remedy to cover up the weaknesses of the system. It is not to be conceived as a form of dole-outs, but rather , it should be considered as motivation to make the movement stand on its own and soon attain its objectives. Once its objectives are achieved, the movement can take its rightful place in the development of the country.

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