CHAPTER 2
BUSINESS ORGANISATIONS
2. COOPERATIVE SOCITIES
A cooperative society is a non-profit making business unit which is owned and managed by a group
of people with a common goal and working as a team. There must be at least ten members and
registered under the cooperative Act to make it a limited liability entity.
Reasons why Cooperative Societies are not successful in Malawi
Lack of enough capital.
Lack of competent personnel.
Examples of Cooperative Societies
(i). SACCOs (iii). Welfare groups (iv). AIDS clubs
PRINCIPLES OF COOPERATIVE SOCIETIES
a. Democratic control: Cooperative societies may have several members so long as the
minimum is ten. Every member has only one vote, i.e. a member has one particular chance to
manage affairs of the cooperative society and on member is voted twice before others.
b. Membership: Entry and exit of members is voluntary so long as are 18 years and over. A
written consent is required when one is leaving the society.
c. Capital contribution: Capital to start the business comes from the members of the society
depending on how much one can afford to contribute more especially shares.
d. Distribution of profits: Profits are distributed to members according to number of shares held.
This distributed profit is called dividend of which its rate is discussed and agreed on the
society’s annual general meeting.
e. Limited liability: Once the society is duly registered by the registrar general of cooperative
society, all members have limited liability, i.e. their personal assets cannot be snatched away
by creditors on liquidation unless otherwise.
FOUR MAIN DIFFERENT FORMS OF COOPERATIVE SOCIETIES IN MALAWI
a. CONSUMER COOPERATIVES
Consumer cooperatives are enterprises owned by consumers and managed democratically
which aim at fulfilling the needs and aspirations of their members. They operate within the
market system, independently of the state, as a form of mutual aid, oriented towards service
rather than on profit.
Importance of Consumer Cooperatives:
Consumer cooperatives are important for businesses because they buy the
products/services that the business makes
Savings are mobilised locally and returned to members in form of loans.
Interest rates given by SACCOs and other related parties are generally better than the
rates given by banks.
SACCOs encourage members to save, especially rural and women groups.
Consumer cooperatives provide quality goods and services at competitive prices.
b. PRODUCER COOPERATIVES
A producer cooperative is a business organisation made up and run by a group of persons and
is intended for their mutual gain. They are voluntary associations where members aim to
collectively meet their economic, social and other needs through democratic joint management
of their resources.
Importance of Producer Cooperatives
Producer cooperatives are important for businesses because they sell the products/ services
that businesses and other consumers want.
Revenues are mobilized locally and returned to members in the form of dividends.
Interest rates given by SACCOs and other parties are generally better than the rates given
by banks.
They provide quality goods and services at the lowest prices to consumers following low
interests rate given.
c. COMMUNAL ENTERPRISES
A communal enterprise is typically an equal partnership venture/society. It is traditionally
defined as a living project with equal partnership, requirement, and legal framework for
sharing of liabilities regardless of nay hierarchy or individual profit incentives, but with a
substantial internal share of profits.
Communal enterprises/cooperatives traditionally involve individual resalable ownership rights
to definable portions of an asset, together with a democratic share of ownership and liabilities
in the whole. The communal tightness of each sub-project is flexible.
d. SERVICE PROVIDERS
These are cooperatives which are purely established to provide services to the general public.
In this case, they are not commercially oriented, but provision of services such as health,
education, entertainment and communication.
IMPORTANCE OF COOPERATIVE SOCIETIES
a. Cooperative societies such as the producers’ cooperatives societies and consumers’
cooperative societies help to eliminate the middlemen.
b. Cooperative societies promote local control and reinvestment thus, they promote stability.
c. They contribute to the economic growth in the community.
d. They improve the living conditions and standards of their members
e. Cooperative societies such as SACCOs encourage members to save. Saving is essential for
economic empowerment.
f. Credit cooperative societies offer loans to their members at reasonable interests, thus facilitate
economic empowerment of members.
g. They act as self-help organisations, thus, contribute to poverty alleviation through economic
and social empowerment of their members and employees.
ADVANTAGES OF COOPERATIVE SOCIETIES
Goods and services are provided at very cheap price as their motive is not for profit making.
They may offer short loans to members or non-members at a cost.
Members enjoy a sense of loyalty where business is stable.
Characterized by democratic control.
Members share and gain skills and experience from each other.
DISADVANTAGES OF COOPERATIVE SOCITIES
Capital shortage: lending institutions are reluctant to offer loans to cooperatives.
Corruption in the business may distort normal business activities hence liquidation.
Losses incurred in the society are met by members.
Though members enjoy limited liability, they may be snatched of their personal assets if
assets of the society are not enough to cater for debts on liquidation.
There is always loss of trust among members.
