Cooperative Societies – Compiled by J.

Langat

05 Cooperative Societies
Introduction

So far you have learnt about sole proprietorship, partnership and joint stock company as different
forms of business organisation. You must have noticed that besides many differences among them
in respect of their formation, operation, capital contribution as well as liabilities, one common
similarity is that they all engage in business activities to earn profit. Without profit it is impossible
for them to survive and grow. But there are certain organizations which undertake business
activities with the prime objective of providing service to the members. Although some amount of
profit is essential to survive in the market, their main intention is not to generate profit and grow.
They pool available resources from the members, utilise the same in the best possible manner and
the benefits are shared by the members.

Let us take one example. Suppose a poor villager has two cows and gets ten litres of milk. After
consumption by his family everyday he finds a surplus of five litres of milk. What can he do with
the surplus? He may want to sell the milk but may not find a customer in the village. Somebody
may tell him to sell the milk in the nearby town or city. Again he finds it difficult, as he does not
have money to go to the town to sell milk. What should he do? He is faced with a problem. Do you
have any solution for him?

One day that poor villager met a graduate of a local university who had earlier done this course.
The learner told him, you see, you are not the only person facing this problem. There are many
others in your village and also in the nearby village who face a similar problem. Why don’t you all
sit together and find a solution to your common problem? In the morning you can collect the
surplus milk at a common place and send somebody to the nearby town to sell it. Again in the
evening, you can sit together and distribute the money according to your contribution of milk. Of
course first you have to deduct all the expenses from the sale proceeds.

That villager agreed to what the graduate said. He told everybody about this new idea and formed a
group of milk producers in his village. By selling the milk in the nearby town they were all able to
earn money. After that they did not face any problem of finding a market for the surplus milk.

This process continued for a long time. One day somebody suggested that instead of selling only
milk why not produce other milk products like ghee, butter, cheese, milk powder etc. and sell them
in the market at a better price? All of them agreed and did the same. They produced quality milk
products and found a very good market for their products not only in the nearby town but in the
entire country.

Just think it over. A poor villager, who was not able to sell five litres of milk in his village, is now
selling milk and milk products throughout the nation. He is now enjoying a good life. How did it
happen? Who made it possible? This is the reward of a joint effort or co-operation.

The term co-operation is derived from the Latin word co-operari, where the word co means ‘with’
and operari means ‘to work’. Thus, co-operation means working together. So those who want to
work together with some common economic objective can form a society which is termed as “co-
operative society”. It is a voluntary association of persons who work together to promote their
economic interest. It works on the principle of self-help as well as mutual help. The main objective
is to provide support to the members. Nobody joins a cooperative society to earn profit. People
come forward as a group, pool their individual resources, utilise them in the best possible manner,
and derive some common benefit out of it.

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 Cooperative Societies – Compiled by J. Langat

In the above example, all producers of milk in a village joined hands, collected the surplus milk at a
common place and sold milk and milk products in the market. This was possible because of their
joint effort. Individually it would not have been possible either to sell or produce any milk product
in that village. They had formed a co-operative society for this purpose.

In a similar way, the consumers of a particular locality can join hands to provide goods for their
daily need and thus, form a co-operative society. Now they can buy goods directly from the
producers and sell those to members at a cheaper price. Why is the price cheaper? Because they
buy goods directly from the producer and thereby the middlemen’s profit is eliminated. Do you
think it would have been possible on the part of a single consumer to buy goods directly from the
producers? Of course, not. In the same way people can form other types of co-operative societies as
well. Let us know about them.

Definition

A co-operative is an autonomous association of persons united voluntarily to meet their common

economic, social, and cultural needs and aspirations through a jointly-owned and democratically-
controlled enterprise.1 A cooperative society is a form of organization where people associate
voluntarily and on the basis of equality for the furtherance of their common economic interest.
Consumers’ cooperative societies, cooperative credit societies, cooperative farming societies and
cooperative housing societies are some examples of this type of organizations.

The primary motive of a cooperative society is to provide maximum service to its members and not
to make profits. This does not, however, mean that a co-operative does not work for profit at all.
There are several societies engaged in business activities, which earn reasonably good profits while
providing service to their members as well as to non-members. Whatever is the profit, it will be
partly distributed as bonus to its members.

A cooperative society raises its capital from its members in the form of share capital and proceeds
arising from operation are shared among members in an equitable manner based upon a set of
established cooperative principles. The management of a cooperative is run by a managing
committee elected by members on the basis of one member one vote irrespective of the number of
shares held by members. The general body of members decides the broad policy framework and
guidelines, which the managing committee is required to follow.

History2

Early Co-op Origins

In early human societies, people learned to cooperate and work together to increase their success in
hunting, fishing, gathering foods, building shelter, and meeting other individual and group needs.
Historians have found evidence of cooperation among peoples in early Greece, Egypt, Rome and
Babylon, among Native American and African tribes, and between many other groups. Ancient
records show that Babylonians practiced cooperative farming and that the Chinese developed
savings and loan associations similar to those in use today. In North America, clearing land in
preparation for the planting of crops, threshing bees, and barn raisings all required cooperative
efforts.

Early agriculture would have been impossible without mutual aid among farmers. They relied on
one another to defend land, harvest crops, build barns and storage buildings, and to share

1
Source: ICA Statement on the Cooperative Identity
2
Principal source (adapted): http://www.cooplife.com/coophist.htm (24/10/2005)
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 Cooperative Societies – Compiled by J. Langat

equipment. These examples of informal cooperation – of working together – were the precursors to
the cooperative form of business.

The First Cooperatives

The earliest cooperatives appeared in Europe in the late 18th and 19th centuries, during the
Industrial Revolution. As people moved from farms into the growing cities, they had to rely on
stores to feed their families because they could no longer grow their own food. Working people had
very little control over the quality of their food or living conditions. Those with money gained more
and more power over those without. Early co-ops were set up as a way to protect the interests of the
less powerful members of society – workers, consumers, farmers, and producers.

In England, consumers were frustrated by the abuses of storeowners, many of whom adulterated
products to increase their profits. In many cases, workers’ wages were paid in company “chits” –
credit that could only be used at the company’s stores. The average consumer had very few choices
and little control.

Groups of these people began experimenting with various methods of providing for their needs
themselves. They decided to pool their money and purchase groceries together. When they
purchased goods from a wholesale dealer and then divided them equally among themselves, they
were surprised at the savings and higher quality of products they were able to obtain.

The Rochdale Equitable Pioneers Society3

Co-operatives started out as small grassroots organisations in Western Europe, North America and
Japan in the middle of the 19th century, however, it is the Rochdale Pioneers that is regarded as the
prototype of the modern co-operative society and the founders of the Co-operative Movement.

In 1844 a group of 28 artisans working in the cotton mills in the town of Rochdale, in the north of
England established the first modern co-operative business, the Rochdale Equitable Pioneers
Society. The weavers faced miserable working conditions and low wages, and they could not afford
the high prices of food and household goods. They decided that by pooling their scarce resources
and working together they could access basic goods at a lower price. Initially, there were only four
items for sale: flour, oatmeal, sugar and butter.

The Pioneers decided it was time shoppers were treated with honesty, openness and respect, that
they should be able to share in the profits that their customer contributed to and that they should
have a democratic right to have a say in the business. Every customer of the shop became a member
and so had a true stake in the business. At first the co-op was open for only two nights a week, but
within three months, business had grown so much that it was open five days a week.

The principles that underpinned their way of doing business are still accepted today as the
foundations upon which all co-operatives operate. These principles have been revised and updated,
but remain essentially the same as those practiced in 1844.

Cooperative Movement in Kenya

In Kenya, the movement started in the early 20th century, mainly for European farmers. In the
1940s, many small-scale farmers in rural areas started establishing cooperative societies. At
present, there are cooperative societies all over the country, including large, country-wide
cooperatives such the Kenya Planters Cooperative Union (KPCU), the Kenya Farmers Association
(KFA), and the Kenya Cooperative Creameries (KCC).

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Source: http://www.ica.coop/coop/history.html (10/10/2007)
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 Cooperative Societies – Compiled by J. Langat

The cooperative movement is an important instrument supported and encouraged by the

government, aimed at achieving mass participation in the national development and to provide a
means of raising the standards of living of Kenyans, both in rural and urban areas.

FORMATION AND OPERATION

In Kenya, cooperatives are registered by the Commissioner of Cooperative Development (CCD)

under the Cooperative Societies Act, 2004. Cooperative organizations are normally registered with
limited liability. Cooperatives have a perpetual succession, which is not affected by entry or exit of
members. All cooperatives are required to operate in accordance with the Act and the Cooperative
Societies Rules, 2004, prepared by the Minister (CS) in charge of Cooperative Development.

A cooperative should have a minimum of ten members but no maximum is set. The ten members
must sign the application form for registration.

All major decisions of cooperatives must be made at the general meeting by a majority vote. Each
member has one vote irrespective of the share capital the member has in the cooperative and also
irrespective of the activities carried out between the member and the cooperative. This is because a
cooperative is an association of people, but not capital, as is the case in joint stock limited
companies.

THE COOPERATIVE PRINCIPLES4

Co-ops worldwide share a common creed – known as the “co-op principles”. All co-ops operate
under these seven principles. The co-op principles serve as an important framework to define the
unique ways co-op businesses are structured. They help all co-ops maintain both the spirit and
structure of cooperation.

The co-op principles were originally developed in the mid-1800s by groups struggling to provide
unadulterated, quality food when the market offered them very few options. They were eventually
endorsed by the International Cooperative Alliance, most recently in 1995, as the standards by
which all co-ops should operate and by which members maintain democratic control. Co-ops are
among very few types of business organizations that adhere to a set of principles.

These principles are significant not just from a historical perspective but also because they outline a
democratic structure that can be adapted to businesses providing any of a large variety of services
and products.

The International Cooperative Alliance Statement of Cooperative Diversity

Adopted September 1995

VALUES
Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity,
and solidarity. In the tradition of their founders, cooperative members believe in the ethical values
of honesty, openness, social responsibility, and caring for others.

PRINCIPLES
The cooperative principles are guidelines by which cooperatives put their values into practice.

First Principle: VOLUNTARY AND OPEN MEMBERSHIP

Cooperatives are voluntary organizations, open to all persons able to use their services and willing

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Source: http://www.ica.coop/coop/principles.html (10/10/2007)
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to accept the responsibility of membership, without gender, social, racial, political, or religious
discrimination.

Second Principle: DEMOCRATIC MEMBER CONTROL

Cooperatives are democratic organizations controlled by their members, who actively participate in
setting their policies and making decisions. Men and women serving as elected representatives are
accountable to the membership. In primary cooperatives, members have equal voting rights (one
member, one vote) and cooperatives at other levels are organized in a democratic manner.

Third Principle: MEMBER ECONOMIC PARTICIPATION

Members contribute equitably to, and democratically control, the capital of the cooperative. At least
part of that capital is usually the common property of the cooperative. They usually receive limited
compensation, if any, on capital subscribed as a condition of membership. Members allocate
surpluses for any or all of the following purposes: developing the 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 approved by the membership.

Fourth Principle: 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 their members and maintain their
cooperative autonomy.

Fifth Principle: 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.

Sixth Principle: COOPERATION AMONG COOPERATIVES

Cooperatives serve their members most effectively and strengthen the cooperative movement by
working together through local, national, regional, and international structures.

Seventh Principle: CONCERN FOR THE COMMUNITY

While focusing on member needs, cooperatives work for the sustainable development of their
communities through policies accepted by their members.

THE STRUCTURE OF COOPERATIVES IN KENYA

The co-operative movement in Kenya is organized into four-tier system consisting of: Apex,
Tertiary (NACOs), Secondary (County/District Unions) and Primary.

Apex Co-operative Organization

The apex co-operative organization today in Kenya is the Co-operative Alliance of Kenya
(CAK).

The Co-operative Alliance of Kenya Limited (CAK) was registered on the 22nd December, 2009 as
the National Apex Organization for the Co-operative Movement of Kenya under the Co-operative
Societies Act, CAP 490 Laws of Kenya. The newly registered Co-operative Alliance of Kenya
Limited is to be the driving force of the Co-operative Movement in Kenya. CAK is a successor to
Kenya National Federation of Cooperatives (KNFC). KNFC was formed in 1964 by co-operative
societies unions and NACOs to be the spokesman of the co-operative movement and to promote co-
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operative interest. However, KNFC faced some challenges in late 90’s and early 2000 which led to
its liquidation.

CAK endeavours to promote co-operative development, to unite the Co-operative Movement and to
represent the Co-operative interests on all matters of policy and legal framework and to be the
spokesperson of the Co-operative Movement in Kenya.

Tertiary National-Co-operative Organizations (NACOs)

These are countrywide co-operative organizations whose membership is drawn from secondary and
primary co-operatives. NACOs offer specialized services to their affiliates, which
include insurance, banking, housing, commodity marketing, and promotion of active relationship
with social and economic partners in order to create favourable climate for co-
operative development. They provide commercial and financial services, human
resource development, advocacy and representation of co-operative unions and societies at the
international level.

Currently there are ten NACOs which are: Co-operative Bank of Kenya Ltd, Kenya Co-operative
Coffee Exporters (KCCE) Ltd, Co-operative Development and Information Centre (CODIC) Ltd,
Co-operative Insurance Company of Kenya (CIC) Ltd, New Kenya Co-operative Creameries
(KCC) Ltd, Kenya Planters Co-operative Union (KPCU), Kenya Union of Savings and Credit Co-
operative (KUSCCO) Ltd, Kenya Rural SACCO Societies Union (KERUSSU) Ltd, National Co-
operative Housing Union (NACHU) Ltd, and Cooperative Communication Holdings Ltd (CCHL).

Co-operative Bank of Kenya Ltd

The Co-operative Bank of Kenya Limited was registered as a co-operative society on the 19th June
1965. The Bank applied for a banking licence to operate under the Banking Act, which was granted
later on and it opened for business on 10th January 1968. The Bank is now incorporated in Kenya
under the Company’s Act and is also licensed to do the business of banking under the Banking Act.
It was initially registered under the Co-operative Societies Act at the point of founding in 1965.
This status was retained up to and until June 27th 2008 when the Bank’s Special General Meeting
resolved to incorporate under the Companies Act with a view to complying with the requirements
for listing on the Nairobi Stock Exchange (NSE).

The Bank went public and was listed on December 22 2008. Shares previously held by the 3,805
co-operatives societies and unions were ring-fenced under CoopHoldings Co-operative Society
Limited which became the strategic investor in the Bank with a 64.56% stake. Co-operative bank
has a distinct advantage in co-operative societies spread across all the 47 counties and can
therefore provide a reliable alternative for establishing branches countrywide.

The Bank is already in a franchising partnership through Sacco Link which provides wholesale
banking services to individual SACCO’s which then provide retail banking services to members
through FOSAs.

Kenya Co-operative Coffee Exporters (KCCE) Ltd

This was formed in 2008 by small scale coffee farmers to enable them access export markets
through enhanced economies of scale and professional expertise in coffee marketing. KCCE
is licensed as a commercial coffee marketing agent that provides small holder coffee farmers with
an opportunity to directly sell their produce to the international market. Since its
registration producer prices have improved significantly.

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Co-operative Development and Information Centre (CODIC) Ltd

This was developed as a one stop shop for co-operative societies on issues of information
technology and co-operative development. The primary function is computerization of
cooperative society operations in order to improve efficiency. Among its major achievements is
development of software which is used to install ATMs in a number of societies.

Co-operative Insurance Company of Kenya (CIC) Ltd

The Co-operative Insurance Company of Kenya Limited (CIC) was established in 1978 and was
formerly known as Co-operative Insurance Services Limited (CIS). In 1999, the company name
was changed to the Co-operative Insurance Company of Kenya Limited (CIC). The name change
was part of the company’s market repositioning strategy of completely changing the then
small company to a respected insurer in the country. It is currently among the largest insurance
companies in terms of capitalization and insurance premium

Kenya Planters Co-operative Union (KPCU)

Kenya Planters Co-operative Union (KPCU) was registered 1937 as a national co-operative union
for primary coffee co-operatives societies. The union, however, currently faces some serious
challenges necessitated by poor governance structure and dual certificate of registration.

Kenya Union of Savings and Credit Co-operative (KUSCCO) Ltd

KUSCCO is the union for SACCOs in Kenya. It is charged with responsibility of championing
issues affecting SACCOs in Kenya through advocacy and representation. The main objectives of
KUSCCO are to:
• Promote the organisation and development of viable co-operative savings and credit societies
• Disseminate information concerning savings and credit societies and co-ordinate their operating
methods and practice to maintain basic uniformity
• Foster education, training of members, officials and employees of savings and credit societies
• Act as the sole local and international representative and mouthpiece of savings and credit
societies
• Help improve the internal management of savings and credit societies by providing a standardized
management system.

KUSCCO operations are managed by a board of 15 directors selected by member SACCOs on

regional basis. The organisation has its Headquarters in Nairobi and five branch offices in Kisumu,
Nakuru, Nairobi, Embu and Mombasa. Each upcountry office serves KUSCCO members within its
region. There are sub branches in wider regions to cover all the 47 counties

Kenya Rural SACCO Societies Union (KERUSSU) Ltd

The Kenya Rural Savings & Credit Cooperatives Societies Union (KERUSSU) was registered in
1998 and is the umbrella national cooperative organization for rural SACCOs. KERUSSU
brings together rural SACCO societies and other forms of savings & credit associations in Kenya.

The membership of KERUSSU is made up of cooperative societies whose operations are largely
based in rural areas of Kenya where:
• The members’ major source of income is from rural based activities such as farming
• The greater percentage of the members live in rural areas
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• And where members are largely derived from institutions and establishments such as factories
based in rural areas and/or process inputs that are mostly from the rural areas.

The overall goal of KERUSSU is to contribute to improved standard of living in the rural areas of
Kenya through appropriate, efficient and effective rural cooperative movement with the capacity to
offer accessible and affordable financial services.

The aim of KERUSSU is to work towards empowered and dynamic rural SACCOs offering
effective and efficient services to their members.

National Co-operative Housing Union (NACHU) Ltd

NACHU was established in 1979 under the Co-operative Societies Act (Cap 490) to coordinate
shelter issues through the co-operative model by providing financial and technical service. Its
formation was in response to the great demand for decent and affordable housing among the low-
income group. NACHU therefore is an organization whose membership is made of registered
primary housing cooperatives. The co-operative movement has an obligation under Kenya Vision
2030 to provide 25% of annual housing demand in Kenya.

NACHU’s strength is its holistic approach to shelter development: housing microfinance combined
with advocacy and technical services that allow cooperatives to gain access to land and
infrastructure, and ensure quality construction. NACHU also supports member cooperatives with
training in financial management, governance, and other important topics including HIV/AIDS
prevention.

Cooperative Communication Holdings Ltd (CCHL)

Co-operative Communication Holdings Limited (CCHL) is a National Co-operative Organization

(NACO) which was registered on 8th March 2010 to enter into partnership with the private sector
in the provision of Information Communication Technology (ICT) services to the co-operative
movement as a vehicle for investment in this fast-growing sector.

The core activity of the CCHL is to partner with the private sector on areas of ICT in order to
maximize returns to the members and ensure access to information through the provision of
affordable products and services thereby promoting their social economic welfare. ICT is critical to
the country’s development and CCHL is strategically placed to provide the best ICT products.

Secondary Co-operatives (County/District Cooperative Unions)

These co-operatives restrict their membership to primary co-operative societies. They include the
County/District Co-operative Unions which serve the primary co-operatives as service agencies.
They are managed by an executive committee whose members are elected from the primary co-
operatives. They are formed with the aim of enhancing economies of scale through shared goods
and services such as bulk procurement of farm inputs and education and training of its affiliates.

Primary Co-operatives

These co-operatives restrict their membership to individual persons and are mainly formed by
individuals within a given locality or common bond. Most of them are single-purpose or single
product enterprises. They group individual members for their economic thrift and cut across all
sectors of the Kenyan economy such as: Marketing Co-ops, Savings and Credit, Housing,
Horticulture, Livestock, coffee, pyrethrum, sugar cane, cotton, Fisheries and Dairy. They include:

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Manufacturing/processing, Construction, Transport, Irrigation, Farm purchase (e.g. Konza), Mining

[Turkana] alluvial gold and Investment Co-operatives.

TYPES OF COOPERATIVES COMMON IN EAST AFRICA

1. Producers’ Cooperatives – these are associations of producers who have joined together in
order to improve the production and marketing of their products collectively. They are
formed to protect the interest of small producers by making available items they need for
protection like raw materials tools and equipment, machinery, etc. and to, among others:
a. Negotiate better prices
b. Provide better storage facilities
c. Get better transportation means
d. Obtain loans as a group

These are the principle types of cooperatives in East Africa and are mainly based in rural
areas.

2. Marketing Cooperatives – These societies are formed by producers and manufacturers

who find it difficult to sell their products individually. The society collects the products
from the individual members and takes the responsibility of selling those products in the
market. Example: those formed to market fresh vegetable products which are perishable,
hence hard to be marketed by individuals.

3. Savings and Credit Cooperatives (SACCOs) – These societies are formed to provide
financial support to the members. The society accepts deposits from members and grants
them loans at reasonable rates of interest in times of need.

4. Consumer Cooperatives – These societies are formed to protect the interests of general
consumers by making consumer goods available at a reasonable price. They buy goods
directly from the producers or manufacturers and thereby eliminate the middlemen in the
process of distribution. The consumers join together to buy goods they require collectively,
thereby reducing the price per unit, hence making it cheaper for the members.

5. Handicraft Cooperatives – These societies are formed to manage the production and
marketing of various kinds of handicrafts, especially wood and (soap)stone that has in the
recent past been boosted by the growth in tourism and ready market abroad.

6. Fisheries Cooperatives – Fisheries cooperatives consist of members who are involved in

fishing activities, both fresh and seawater. The main purpose is to deal with production and
marketing problems through joint purchasing, access to loan funds, increased knowledge of
the fishing industry, and promotion of natural resources conservation.

7. Housing Cooperatives – These societies are formed to provide residential houses to

members. They purchase land, develop it, and construct houses or flats and allot the same to
members. Some societies also provide loans at low interest rate to members to construct
their own houses.

Advantages of Co-operative Society

A Co-operative form of business organisation has the following advantages:
i. Easy Formation: Formation of a co-operative society is very easy compared to a joint
stock company. Any ten adults can voluntarily form an association and get it registered
with the Commissioner for Co-operative Development.

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ii. Open Membership: Persons having common interest can form a co-operative society.
Any competent person can become a member at any time he/she likes and can leave the
society at will.
iii. Democratic Control: A co-operative society is controlled in a democratic manner. The
members cast their vote to elect their representatives to form a committee that looks after
the day-to-day administration. This committee is accountable to all the members of the
society.
iv. Limited Liability: The liability of members of a co-operative society is limited to the
extent of capital contributed by them. Unlike sole proprietors and partners, the personal
properties of members of the co-operative societies are free from any kind of risk because
of business liabilities.
v. Elimination of Middlemen’s Profit: Through co-operatives the members or consumers
control their own supplies and thus, middlemen’s profit is eliminated.
vi. Government Assistance: Both Central and Local governments provide all kinds of help
to the societies. Such help may be provided in the form of capital contribution, loans at
low rates of interest, exemption in tax, subsidies in repayment of loans, etc.
vii. Stable Life: A co-operative society has a fairly stable life and it continues to exist for a
long period of time. Its existence is not affected by the death, insolvency, lunacy or
resignation of any of its members.
viii. Tax Advantage: Cooperatives, unlike companies, are not taxed as separate entities.
Members however are taxed on dividends received.

Limitations of Co–operative Society

Besides the above advantages, the co-operative form of business organisation also suffers from
various limitations.
i. Limited Capital: The amount of capital that a cooperative society can raise from its
members is very limited because the membership is generally confined to a particular
section of the society. Again due to low rate of return, the members do not invest more
capital. Government’s assistance is often inadequate for most of the co-operative
societies.
ii. Problems in Management: Generally it is seen that co-operative societies do not
function efficiently due to lack of managerial talent. The members or their elected
representatives are not experienced enough to manage the society. Again, because of
limited capital they are not able to get the benefits of professional management.
iii. Lack of Motivation: Every co-operative society is formed to render service to its
members rather than to earn profit. This does not provide enough motivation to the
members to put in their best effort and manage the society efficiently.
iv. Lack of Co-operation: The co-operative societies are formed with the idea of mutual co-
operation. But it is often seen that there is a lot of friction between the members because
of personality differences, ego clash, etc. The selfish attitude of members may sometimes
bring an end to the society.
v. Dependence on Government: The inadequacy of capital and various other limitations
make cooperative societies dependant on the government for support and patronage in
terms of grants, loans subsidies, etc. Due to this, the government sometimes directly
interferes in the management of the society and also audit their annual accounts.

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