Cooperative Management Key Concepts

Republic Act No. 9520 (Philippine Cooperative Code of 2008) defines a cooperative
as a voluntary, autonomous association of persons with a common bond of interest
who collectively meet their needs through a jointly owned, democratically controlled
enterprise.
Legal definition of cooperatives
• A cooperative is an autonomous and duly registered association of persons
with a common bond of interest.
• Members voluntarily join to achieve their social, economic and cultural needs
and aspirations through equitable capital contributions, patronizing the
cooperative’s products and services, and sharing fairly in risks and benefits.
General concepts and nature
• The cooperative is a people-owned, people-managed, and people-controlled
enterprise that exists to improve members’ quality of life rather than to
maximize profit for external owners.
• It operates in accordance with universally accepted cooperative principles,
Filipino culture, good values, and the experience of the cooperative
movement.
State policy on cooperatives
• The State recognizes cooperatives as a practical vehicle for promoting self-
reliance, harnessing people power, and attaining economic development and
social justice.
• Government is mandated to provide an enabling environment for the
organization, growth and development of cooperatives, while the private
sector undertakes their actual formation and operation.
Cooperative principles in RA 9520
RA 9520 incorporates the universally accepted cooperative principles, including:
• Voluntary and open membership: Open to all who can use the services and
accept membership responsibilities, without discrimination.
• Democratic member control: Members actively participate in setting policies
and making decisions on a one-member, one-vote basis.
• Member economic participation: Members contribute equitably to, and
democratically control, the capital; a portion is usually common property and
surplus is allocated for development, reserves, and member benefits.
• Autonomy and independence: Cooperatives are self-help organizations
controlled by their members, even when entering agreements with
government or other entities.
• Education, training and information: Cooperatives provide education and
training for members, officers and employees, and inform the public about
the nature and benefits of cooperation.
 • Cooperation among cooperatives: Cooperatives work together through local,
national, regional and international structures to better serve their members.
• Concern for community: Cooperatives work for sustainable community
development through policies approved by the members.
Objectives and goals of a cooperative
• The primary objective of every cooperative is to help improve the quality of
life of its members.
• Specific goals include: providing goods and services that raise members’
income, savings, investments, productivity and purchasing power; promoting
equitable distribution of net surplus; and advancing the economic, social and
educational status of members.
Terms and Definitions
Cooperative management uses a mix of general management terms and
cooperative-specific concepts, all framed by democratic control and member
ownership. Below are core terms and definitions commonly used in cooperative
management practice.
Core cooperative concepts
• Cooperative – An association of persons, owned and democratically controlled
by its members, formed to meet common economic, social, and cultural
needs through a jointly owned enterprise.
• Cooperative management – The process of planning, organizing, directing,
and controlling cooperative activities to achieve objectives in a democratic
and participatory manner.
Governance and structure
• Democratic member control – Principle that each member has voting power
(often one-member, one-vote) in major policy and governance decisions,
regardless of capital contribution.
• Board of directors – Members elected to represent the membership, set
policies, approve major decisions, and oversee the cooperative’s
management and financial condition.
• Bylaws – Internal governing rules that define membership, capital structure,
voting, officers’ roles, meetings, and procedures for decision-making and
amendments.
• Cooperative governance – The framework of rules, practices, and processes
by which the cooperative is directed and controlled, emphasizing
accountability and participation.
Membership and participation
• Member – An individual or entity that meets membership requirements,
contributes share capital or membership fee, and uses the cooperative’s
services.
 • Open membership – Policy where any qualified person may join the
cooperative upon meeting bylaw requirements and equity subscription.
• Closed membership – Structure where new members can join only under
specified conditions (for example, buying equity from existing members),
often used to match capacity and investment.
• Patronage – The extent of a member’s use of the cooperative’s services (for
example, volume of purchases or sales through the co-op).
Capital, surplus, and refunds
• Member economic participation – Principle that members contribute equitably
to, and democratically control, the cooperative’s capital and share in
economic results.
• Equity capital – Member-provided funds (shares, retained patronage,
membership fees) that finance the cooperative and represent ownership
claims.
• Net surplus (net savings) – Excess of revenues over expenses in a
cooperative, typically after allocations to reserves and statutory funds.
• Patronage refund – Distribution of a portion of net surplus to members in
proportion to their patronage, not to the amount of shares owned.
Types of cooperatives and associations
• Marketing cooperative – Cooperative that markets members’ products, often
pooling volumes, negotiating prices, and providing market access.
• Supply or service cooperative – Cooperative that provides inputs (for
example, seeds, fertilizer) or services (for example, credit, utilities,
insurance) to members.
• Worker cooperative – Cooperative owned and governed by worker-members
who both work in and control the enterprise.
• Federation / federated cooperative – An association of primary cooperatives
that join to pursue common objectives at a higher (often regional or national)
level.
Management roles and processes
• Manager / general manager – Professional hired by the board to run day-to-
day operations, implement policies, and manage staff and resources.
• Professional management – Use of qualified and trained personnel applying
modern management techniques to manage cooperative operations
efficiently.
• Planning, organizing, directing, controlling – Key management functions
applied in cooperatives to set goals, structure resources, guide activities, and
monitor performance.
Formation and Purposes of the Cooperative
Under the Philippine Cooperative Code of 2008 (Republic Act No. 9520),
cooperatives are formed by at least 15 Filipino natural persons of legal age who
share a common bond of interest, reside or work in the same area, and complete a
mandatory Pre-Membership Education Seminar (PMES). They must prepare Articles
of Cooperation and Bylaws detailing the name, purpose, area of operation, capital,
directors, and membership rules, then file these with the Cooperative Development
Authority (CDA) along with proof of at least 25% subscription and payment of
authorized share capital (minimum paid-up capital of P2,000, though adjustable).
Upon CDA approval within 30 days, the cooperative gains juridical personality,
enabling powers like suing, owning property, merging, or consolidating with
member approvals (e.g., 2/3 vote for major changes).
Formation Process
Primary cooperatives start with the minimum 15 organizers electing officers and
drafting documents, including bonds for accountable officers. Registration requires
no competition with existing cooperatives in the area, and names must end in
“Cooperative” without misleading terms. Higher-level cooperatives (secondary,
tertiary, or federations) build on primaries, focusing on coordination, education, and
services for members; mergers or divisions follow similar voting and CDA
procedures.
Core Purposes
Cooperatives aim to improve members’ quality of life through increased income,
savings, productivity, and equitable surplus sharing via economies of scale, cost-
sharing, and risk-sharing. Specific goals include promoting thrift and credit for
provident needs; systematic production and marketing; providing goods, services,
housing, and insurance; skill development; and economic/social advancement. They
may own banks, wholesale/retail complexes, processing enterprises, or markets,
while advocating self-reliance, poverty alleviation, and technology use.
Cooperatives are guided by core values and seven principles outlined in the
Statement of Cooperative Identity by the International Cooperative Alliance (ICA),
which align with the Philippine Cooperative Code of 2008 (Republic Act No. 9520).
These values and principles emphasize democratic, equitable, and community-
focused operations, ensuring cooperatives serve members while promoting ethical
practices.
Core Values
Cooperatives are based on six primary values: self-help, self-responsibility,
democracy, equality, equity, and solidarity. Members take initiative to meet needs
collectively (self-help), accept accountability for actions (self-responsibility), ensure
equal say (democracy and equality), provide fair treatment (equity), and support
one another (solidarity). Additionally, ethical values—honesty, openness, social
responsibility, and caring for others—uphold integrity in dealings, transparent
operations, community welfare, and compassion.
Seven Principles
These principles operationalize the values, providing practical guidelines for
cooperatives worldwide, including in the Philippines.
 • Voluntary and Open Membership: Cooperatives welcome all able to use
services and accept responsibilities, without discrimination based on gender,
race, politics, or religion.
• Democratic Member Control: Members control policies democratically; in
primaries, it’s one member, one vote, with elected leaders accountable to
them.
• Member Economic Participation: Members contribute equitably to capital,
democratically control it, and share surpluses based on transactions,
reserving some for future needs.
• Autonomy and Independence: Cooperatives self-govern democratically;
external agreements preserve member control.
• Education, Training, and Information: They educate members, leaders, staff,
and the public, especially youth, to enhance participation and cooperation
awareness.
• Cooperation Among Cooperatives: Cooperatives strengthen the movement by
collaborating locally, nationally, and globally.
• Concern for Community: Cooperatives work for sustainable community
development through responsible policies.
TYPES OF COOPERATIVES
RA 9520, the Philippine Cooperative Code of 2008, outlines 16 specific types
of cooperatives under Article 23, rather than 21. The mention of "21 types" often
refers to common subtypes or expanded classifications used by the Cooperative
Development Authority (CDA) in practice, such as detailed variants of financial
service, service, and advocacy cooperatives.
Primary Types (Article 23)
These are the core 16 types explicitly listed in RA 9520:
 Credit Cooperative: Promotes savings and lending among members.
 Consumers Cooperative: Supplies goods and services to members.
 Producers Cooperative: Provides business services to members for production
and processing.
 Workers/Productivity Cooperative: Owned and controlled by workers for
service contracts.
 Multipurpose Cooperative: Combines two or more business activities of other
types.
 Advocates Cooperative: Advances causes for member benefit.
 Microfinance Cooperative: Accumulates capital for small loans to needy
members.
 Microinsurance Cooperative: Provides insurance for misfortune or death.
  Agriculture Cooperative: Handles agriculture-related production and

Type Description

Financial Service Cooperative Broadens credit and savings services.

Health Services Cooperative Medical and dental care.

Labor Service Cooperative Worker-related services.

Housing Cooperative Member housing development.

Insurance Cooperative Risk protection services.

processing.
 Fishery Cooperative: Focuses on fishery production and related activities.
 Potters and Pavers Cooperative: Specific to those crafts.
 Weavers Cooperative: For weaving and related crafts.
 Electric Cooperative: Generates and distributes electricity.
 Water District Cooperative: Manages water supply and irrigation.
 Memorial (Burial) Cooperative: Handles burial and interment services.
 Transport Cooperative: Operates land and sea transportation.
Categories
Cooperatives are further categorized by membership (primary, secondary,
tertiary) and area of operation (regular, provincial, national).
Expanded 21 Types in Practice
CDA guidelines and primers often expand to 21 by splitting broader types
(e.g., Financial Service, Health Services, Labor Service under Service Cooperatives),
as seen in official flyers and circulars. Examples include:

ROLES OF BODs, OFFICERS, MEMBERS OF COOPERATIVE

RA 9520 (Philippine Cooperative Code of 2008) defines distinct roles for the
board of directors, officers, and members to ensure democratic governance,
strategic management, and member participation in cooperatives.
Board of Directors
 Composed of 5-15 members elected by the general assembly for a 2-year term,
the board handles high-level oversight without involvement in daily operations.
 Responsible for strategic planning, direction-setting, and policy formulation.
 Elects chairperson and vice-chairperson from among themselves; appoints
other officers per bylaws.
 Liable for willful unlawful acts, gross negligence, or conflicts of interest.
Officers
Elected or appointed by the board, including chairperson, vice-chairperson,
general manager, secretary, treasurer, and others specified in bylaws; serve during
good behavior.
 Execute board policies and manage day-to-day operations (e.g., general
manager oversees business activities).
 Compensation fixed in bylaws or by board; removable only for cause after
due hearing.
 Assist in policy implementation and committee functions.
Committees
Created by general assembly or board for specific duties like audit, election, or
mediation; members elected similarly to directors.
 Handle specialized tasks such as credit, education, or supervision.
 Report to board; subject to same liability rules as directors/officers.
Members
As owners with voting rights (one-member-one-vote), members form the general
assembly—the highest policy-making body.
 Elect/ remove board and committee members; approve amendments to
articles/bylaws.
 Duties include regular savings, patronizing cooperative services, obeying
rules, and promoting cooperative aims.
 Participate in meetings, capital build-up, and welfare activities.
These roles promote cooperative principles like democratic control and member
economic participation, with CDA guidelines emphasizing training for directors and
officers.