Cooperatives by their very nature contribute to the improvement of the living conditions of their members especially the low income earning segments of the population. Cooperatives through a voluntarily agreed association are able to tap the energies of a group effort and economies of scale for the benefit of their members. The benefits that can accrue from an autonomous mutually agree self-help and self-controlled systems of carrying out income earning activities through a cooperative are many and varied.
Due to this ability to harness group energy that enables them to collect surpluses at grass root level for the benefit of members, they have been recognised as essential vehicles for economical growth and development of a national economy.
A cooperative is defined as an autonomous association of persons united voluntarily to meet their common economic, social, cultural needs and aspirations through a jointly owned and democratically controlled enterprise.
Like companies, cooperatives are economic organisations whose income generating activities are devoted to the economic and social welfare of their members by providing services which enable individuals to improve their personal skills and economic means for self advancement. They are based on the values of self help, self-responsibility, democracy, equality and equity.
In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for others. So the cooperative principles are guidelines by which coperatives put their values into practice.
1. Voluntary and open membership - the principle of open membership establishes that there should be no limitation to membership in a cooperative society. In accordance with this principle there should be no artificial limitations based on discrimination, placed in the way of a member to bar membership. It does not however mean that everyone who wants to join a particular society can become a member. Limitations may be necessary for example where the societies activities require that members must have a certain common skill. Persons without the skill are accordingly excluded from joining the society because they lack the common skill required for membership in the society. Thus one can say that cooperatives are voluntary organisations open to all persons able to use their services and willing to accept the responsibilities of membership without gender, social, political or religious discrimination.
2. Democratic member control the principle of democratic control has several aspects to it.
(i) It establishes that members must have the final authority in making decisions concerning their society since they will have created it to serve their needs. This aspect of democratic control finds expression in provisions ensuring voting at general meetings
(ii) The principle requires that every member has one vote notwithstanding his or her share contributions. This springs from the idea of equality of all members in a cooperative society. Thus the economic superiority of the member is not permitted to adversely affect the equality of members in the decision making process;
(iii) Since all members cannot participate in the day to day affairs of the society, there must be a small group of members normally the committee which manages and administers the society. The committee must be elected by members and be accountable to them. The right of members to appoint the committee entails the rights to remove it if it does not perform its work well.
3. Member Economic Participation; This principle has two links
(i) Limited rate of interest on capital – cooperatives differ from other types of business organisations like companies and partnerships which are formed with a profit motive. A cooperative is formed to provide services and not as a means of facilitating the accumulation of wealth. Accordingly, the share capital of a cooperative gets a limited rate of interest. The members contribute to and democratically control the capital of their society. At least part of that capital is usually the common property of that cooperative. Members usually receive limited compensation if any on the capital subscribed as a condition of membership. They allocate surpluses for any of 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 approved by the membership
(ii) Disposal of surplus – the principle relating to the disposal of surplus is intended to ensure that in a cooperative society there is a fair and just distribution of the surplus and no member gains at the expense of the others. Here surplus refers to the funds which remain after operational expenses and all the expenses of the society including statutory requirements are met. An efficiently ran cooperative society ought to produce a surplus. Fair and just distribution is achieved if the surplus is distributed in proportion to a member’s business transaction with the society.
4. Autonomy and Independence: cooperatives are autonomous self-help organisations controlled by the members. If they enter into arrangements with other organisations 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.
5. Promotion of Education, Training and Information the principle on the promotion of education of cooperaters establishes that a member of a cooperative society must be informed of all about cooperative organisation. The education cooperatives must be promoting. A member of a society must know his/her rights obligations and must therefore exercise the rights and meet the obligations with respect to his/her membership from a position of knowledge. The member must know the principles that guide the functions of a society and other matters related to its activities, its management and administration. The educational effort should cover society officials and employees as well as others who work with cooperatives and members of the public ought to be involved in the education process as well.
6. Cooperation among Cooperatives the principal of cooperation of a society with other societies was adopted as one of the cooperative principles in order to strengthen the cooperative movement through mutual assistance at the local national as well as international level. The potential of a strong movement to bring about social and economic development of people regardless of their background was thus recognised. The last of the cooperative principles recently enshrined
7. Concern for the Community cooperatives work for the sustainable development of their communities through policies approved by their members.