LECTURE 8

COOPERATIVE SOCIETY
Cooperative Society its advantages and disadvantages

COOPERATIVE SOCIETY

A cooperative society is formed by the people of limited means for self help through
mutual help. It is set up to protect economically the poor sections of the society. It is set
up for cooperation, not for competition. The motto of a society is self help, without
dependence on other business units.

DEFINITION

1. According to Herrik

Cooperation is an action of persons voluntarily united for utilizing reciprocally

their own forces, resources or both under mutual management for their common
profit or loss.

2. According to Mr. Plunket

The cooperation is self help made effective by organization.

Diagram

Cooperative Society

Welfare
Number of persons

Business Pool Resources

ADVANTAGES OF COOPERATIVE SOCIETY

Following are the important advantages or merits of cooperative society:

1. Advantage for Farmers

Farmers can get fertilizers and seeds at low prices from such cooperative societies.
Farmers can also self their production at high rate or prices through cooperative societies.

2. Easy Formation

the formation of cooperative society is very easy. the formalities for registration are
simple and formation expenses are also normal. The registration of a society is not
compulsory but it is desirable to have its registration.

3. Equal Rights

All members of cooperative society enjoy equal right of vote and ownership. Each
shareholder has only one vote in the management of cooperative societies.

4. Equal Distribution of Wealth

The profit of middlemen is also distributed among the workers. These societies remove
the unequal distribution of wealth.
5. Economic Democracy

Cooperative society is a domestic form of organization. Every member is allowed to

participate in the management of the business. Each member has the right to cast vote.
The decision of majority is honoured.

6. Elimination of Middlemen

Cooperative society eliminates the profit of middlemen. These societies purchases goods
directly from the producers for members and provide them on wholesale rate to society
members.

7. Financial Assistance

These societies also provide financial assistance to its members. In case of house
building cooperatives housing society provides loan for the purchase of inputs.

8. Friendly Relations

A cooperative society is a mean of developing friendly relations among the members. A

society provides a platform for the introduction of members with each other.

9. Improve the Standard of Living

Such societies provide the goods and services to the members of the society at low prices.
Due to this, the purchasing power of the people increases and their standard of living
improves.
10. Increase in Employment

The cooperative societies also increase the employment opportunities for people.
Thousands of people are engaged in different types of cooperative societies.

11. Limited Liability

The liability of each member in cooperative society is limited to the share capital, which
he invested. His remain safe.

12. Mutual Cooperation

It is worthwhile to mention here that cooperative society is very useful for creating the
spirit of friendship and brotherhood among the members. Cooperative society is the
basic need of human being in modern era.
13. No Monopoly

A start of the society is the end of monopoly. The monopoly eliminates the competition
and controls the market and prices. The society tries to restore competition and to
eliminate control over market and prices.

14. Open Membership

the membership of a cooperative society is open for all people living in the same area. It
is a voluntary association of persons of any caste, colour and creed.

15. Protection of Mutual Interest

In cooperative societies its members take an advantage of mutual interest and cooperate
with each other achieve the common interest.

16. Responsibility

A society is a training centre for the members to feel their responsibility. A cooperative
society is an ideal place for building up the moral character and development of personal
qualities of the members.

17. Supply according to Demand

Such societies purchase the goods according to the demand of members. The question of
surplus does not arise.

18. Stable Life

The cooperative societies, as compared to other business organization like sole-
proprietorship or partnership, exists for a longer period. It has a fairly stable life.

19. Saving in Expenditure

In cooperative societies, most of offices bearers work voluntarily. So, there are no heavy
expenditures on management. It also reduces the cost of production.

20. Tax Concession

Government provides certain concessions to cooperative societies, i.e. exemption from

stamp duty, super tax, income tax and registration fee etc.
DISADVANTAGES OF COOPERATIVE SOCIETY
Following are the disadvantages of cooperative societies:
1. Lack of Capital
Generally the members of cooperative societies are related to poor group and they cannot
provide the capital on large scale. External financial resources are also limited. So,
cooperative society faces the shortage of capital, which is a handicap to their
development.

2. Untrained Supervision

The government has sufficient control over the movement of these societies. These
societies cannot prosper because the staff appointed for supervision is mostly untrained.

3. Defective Organization

The organizations of cooperative societies are defective and these cannot operate
efficiently to fulfill their objectives.

4. Illiterate and Ignorant

In our country, the villagers are generally illiterate and ignorant. So, they are not familiar
with the basic concept of the cooperative societies.

5. Lack of Experience

The members of societies have less experience of business. Due to lack of capital, they
cannot hire the services of experts.

6. Lack of Discipline

Every member of the cooperative society considers himself as the owner of the business.
Due to lack of discipline, business suffers a loss.
7. Lack of Sincere Management

It is our common observation that the management of society remains in the hands of
selfish and dishonest persons or members who obtains undue advantage form their
powers. So, business suffers a loss.

8. Lack of Profit Incentive

It is not a profit earning institution. Due to absence of profit incentive, the progress of
cooperative society is very poor.
9. Lack of Secrecy

There is no secrecy in the business of cooperative societies.

10. Lack of Knowledge

The members of cooperative society do not know the principles and rules of society. So,
they create great problem for society.

11. Lack of Unity

In the absence of proper education and training, it is useless to think about unity. The
lack of unity leads towards the destruction of the business.

12. No use of New Technology

The cooperative societies cannot use the latest technology in production. As a result of
this, demand and profit remains low.

13. No Public Confidence

A cooperative society is not bound to publish annual financial statements for the
information of general public. Due to this public shows less confidence in them.

14. Delay in Decision

The main cause of failure of cooperative societies is delayed in decisions.

15. Government Control

The cooperative department of the provincial government supervises the work of all
cooperative societies. The business of a society is not free like other forms of business,
so it cannot earn maximum profit.