Co-operative Organization

Co-operative Organization
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Unit 6: Co-operative Organization

6.1 Concept of co-operative Organization:

A co-operative society of voluntary association of people having low income and common interest. They join together for business with the principle of equality and mutual help. It is a democratic organization establish with equal contribution from members. It is set up to serve the weaker section of the society. The main objective of cooperative is to provide essential goods and services at a fair price to its members. The philosophy behind the co-operative movement is “each for all and all for each” and “self-help through mutual help”.

The profit motive of business and their exploitations to the consumers for a long period of time led to the establishment of co-operative societies. They are also named as co-operative organizations, co-operative business or simply co-operatives. Robert Owen is the pioneer of co-operative name Rochdale equitable pioneers society was established by him on 21st December 1844 in England with just 28 members. This business organization becomes very successful and the idea of Europe, America and other parts of the world.

The definition of co-operative organizations are as follows:-

According to H.H Kunzru,co-operative is such help as well as mutual help.

According to Seligman, “a co-operative society in its technical sense means the abandonment of completion in distribution and production and elimination of middle man of all kinds.”

From the above meaning and definition, it is clear that co-operative is a form of organization where persons joint together on the basis of equality for the promotion of the economic interest of themselves.

6.2 Characteristic of Co-operative.

a) Voluntary organization:

Co-operative is a voluntary organization of persons from weaker sections who want to improve their individual economic status. The members have to agree to contribute equal capital. They can freely join and leave the organization at any time by giving simple notice. The membership of co-operative is open for all but not freely transferable.

b) Service motive:

Co-operative is established with the main objective of providing service to its members at a reasonable price. It may earn profit by extending its services to non-members.

C)  Mutual Help:

Co-operative is established with a feeling of mutual help and co-operation among the members. Each for all and all for each is the philosophy of Co-operative.

d) Disposal of surplus:

Co-operative earns a profit by extending its service to the non-members. It distributes (disposes of) surplus to its members after maintaining reserve funds and employee bonuses. However, Nepal co-operative Act, 2048 B.S. restricts to provide the dividend of more than 15% of share capital to its members.

e) Democratic management:

A co-operative society is a democratic organization. Its day to day operation is managed by the management committee or board of directors who are democratically elected in the AGM by voting according to principles of 1 member 1 vote.

f) Equality:

In a Co-operative organization, every member has one vote only. This creates an equal voice for every member of the organization. No one dictates on the basis of holding more shares. All the important decisions are taken by a majority of votes.

g) Cash transaction:

A Co-operative organization sells goods and services to its members and outsiders only on cash. Such cash transaction eliminates the chances of bad debts and provides a better liquidity position to the Co-operative. As a result, it can perform its business successfully even with limited capital.

h) Separate Legal existence:

A co-operative society is an artificial person created by law. It is incorporated under the Co-operative Act, 2048 B.B. it has separate legal existence apart from its members. It has a common seal which is affixed a most of the important documents. The death, lunacy, insolvency or disabilities of members do not affect the existence of the society. It enjoys perpetual succession.

6.3 Types of Co-operatives.

a) Consumers Co-operatives:

The Co-operative organization established by a group of consumers for the supply of daily consumable Products at a reasonable price is called consumers cooperative. The main objective of such a cooperative is to provide qualitative goods or services to its members at a cheaper price. It directly purchases goods from producers or distributors in larger quantities and supplies to its members. It tries to eliminate the role of middleman in the distribution of goods and thus reduces the cost. Such co-operatives aim to protect the weaker section of the community to increase their purchasing power, raise the economic standard and ensure the regular supply of goods and services at a convenient place at a reasonable price.

b) Saving and Credit Co-operative:  

The Co-operative society formed by poor people with a view to encouraging regular saving and grant loans to the members at a lower rate of interest is called credit Co-operative. The main objective of such a cooperative is to protect the poor people of rural areas from the economic exploitation of money lenders. It encourages them for regular savings and grants a loan to fulfill their basic needs. Nowadays, a number of such organizations have been established in our country in the name of saving and credit Co-operatives.

c) Marketing Co-operation:

The cooperative institute formed to manage a systematic market for the selling of agricultural products produced by farmers is known as a marketing cooperative. It collets the agricultural products from farmers stores them in its store and sells when the price is favorable. It also provides the loan to the farmers against the deposit of goods. Thus, such a cooperative avoids the difficulty in the marketing of agricultural products. The main aim of this kind of cooperative is to provide the proper value of agricultural products. The farmers create a favorable market for them. Thus it sells the products when the price goes up and returns the surplus after deducting the loan amount. Besides, it also performs other marketing functions like transportation, warehousing, processing grading and packaging of the products.

d) Producers Co-operative:

The Cooperative established by small scale producers for supplying raw materials, tools, equipment, and other accessories required for production is known as producers cooperative. Since, the small producer cannot buy an expensive plant and machinery and raw materials, such cooperative purchase in bulk quantity and sell them at fair prices. The main objective of such cooperatives is to increase the income level of small producers by providing a loan or other required materials for production. The small producer will get a loan to buy raw materials, tools and equipment, and other things at a reasonable rate at interest. Thus, it aims to develop small and cottage industries of the country and improve their economic status.

e) Housing Cooperative:

The cooperative established by people having limited resources to provide housing facilities to its members is known as a housing cooperative. Under this cooperative group of people buy a big plot of land, construct a number of buildings and provide it to the member at the minimum rental charge. It also sells the flat or whole building on an installment basis. Such Cooperative societies also provide a loan to the members for the construction of their own building at a low rate of interest. Thus, the housing cooperative provides accommodation facilities with other requirements like electricity, water supply, communication, garden, road and so on its members.

f) Multipurpose Cooperative:

The Cooperatives established for providing several facilities to its members through a single organization is called multipurpose cooperative. It performs the functions related to the different sectors and provides services to its members. It may perform the functions in different areas such as production, marketing, housing, industry, health, education, etc. such cooperatives are very much helpful to get varieties of services in different sectors.

g) Miscellaneous Cooperatives:

The cooperatives established in different sectors other than mentioned above are called miscellaneous cooperatives. Such cooperatives provide facility and service to the needy people in different areas. Farming cooperatives, poetry farming cooperatives, dairy products cooperatives, fishery cooperatives are some of the examples of miscellaneous cooperatives.

6.4 Role of Co-operative in Developing Countries.

Nepal is an agricultural developing country most of the people are farmers. The majority of farmers have a marginal holding of land. Co-operative help weaker sections of the society for their economic upliftment. They are important to develop countries like Nepal for the following reasons.

Development of rural areas:

The establishment of Co-operatives helps to mobilize human, financial and physical resources of the rural areas. Co-operatives make the people participate in different economic activities. Such participation ultimately contributes to the development of rural areas.

Distribution of goods and services:

Co-operative buy goods in bulk quantities directly from the manufacturer and sell at a cheaper price to its members. In this way, they protect the members from the exploitation of the middle man and helps to distribute essential goods and services to the members.

Encourage in saving:

Co-operative encourages farmers, employees and small scale businessmen for saving a part of their income or regular basis by offering an attractive rate of the interval which encourages them to save their hard-earned money for the future.

Providing credit:

Co-operatives provide loans to the members at a low rate of interest through easy terms and conditions and helps them to protect from the exploitation of local money lenders.

Eliminate the middlemen:

Co-operative purchases products in bulk quantities from producers and sell this product to the consumers and members. They eliminate the middlemen of the business and their margin.

Marketing outputs:

Co-operatives collect the product from small producers and perform the marketing activities like advertising, transportation, warehousing, packaging, grading, etc. they store and sell the products when the price of the product is higher in the market which provides maximum benefit to the members.

Employment opportunities:

Cooperative, directly and indirectly, contribute to the creation of employment opportunities and plays an important role to minimize the unemployment problem of the nation.

Developing Social and moral culture:

Co-operatives do not discriminate members on the basis of their caste, gender, and religion. They work together by following the principle of each for all and all for each which promotes for the development of social and moral culture.

In conclusion, we can say that co-operatives are absolutely needed in developing countries like Nepal. The establishment of a large number of cooperatives will certainly help in the economic upliftment of the poor section of the society. This ultimately contributes to the economic prosperity of the nation.

6.5 Registration of cooperative in Nepal.

It is essential to fulfilling some informal discussion and formal documentation procedures for the registration of a cooperatives society in Nepal. It should be registered as per the provision of the cooperative Act, 2048. This act has clearly defined and explained the registration and operation procedures of a cooperative society in Nepal.

Legal provisions for registration of cooperative organizations

In Nepal, all types of cooperatives are established by registering under the cooperative Act 2048. The following procedures of cooperatives organizations.

Preliminary meeting:

It is the initial stage for the establishment of a cooperative society. According to the regulation, at least twenty five eligible members as per act must be united together for the establishment of a cooperative. In the presence of at least 25 persons in the chairmanship of one member, a preliminary meeting should be held to discuss and decide on the following proposals:

  • Opening of cooperative organization.
  • Name, address and objectives of the society.
  • The share capital, the value of share and entry fees.
  • Formation and electron of the ad-hoc committee of the proposed cooperative.
  • Regulation of the proposed cooperative.
  • Opening bank account, depositing amount and conduct of bank account.
  • The delegation of authority for the registration of the society.
  • Working area and an annual working plan of society.
  • Miscellaneous.

After getting into consensus on all the above proposals all the attended members must sign at the end of the decisions.

Application for registration:

After endorsement of annual work plan passing proposals by laws of the proposed cooperative society from the preliminary meeting, it requires to apply for registration. The registration of the cooperative act should be submitted to the registrar of the department of cooperation under the government of Nepal.

  • Name and address of the proposed society.
  • Objectives
  • Area of operation
  • Total share capital and division of share.
  • The number of shares issued and their value.

With the application form, the following documents should be submitted to the registrar of the department of cooperatives.

6.6 National cooperative Development Board (NCDB)


National cooperative development board (NCDB) was formed in august 1991 as a basis in accordance with the decision of the council of ministers. The board was initially instructed the responsibility of revising the cooperative legislation and designing a strategy for revitalizing the cooperative movement so as to make it reliant and people managed. It is an autonomous corporate body established to form the national level plans and policies for the development of cooperatives in the country. it is managed by a board of directors formed under the chairmanship of the minister of poverty and cooperation. The main feature of NCDB can be listed below:-

  • It is an autonomous corporate body with perpetual existence.
  • Established under the national cooperative development board Act, 1992
  • Separate legal entity with a common seal.
  • Sue to others and can be sued.
  • Managed by the board of directors under the chairmanship of the minister of poverty and cooperation.
  • Acquire and sell assets in its own name.


“The national cooperative development board(NCDB) has been established at the national level with the objective of assisting in the development of different types of cooperative societies and unions by formulating policies and relevant plan for the economic and social development of the lower strata of people in accordance with cooperative principles.”


  • The NCDB Act 1992, defines the function, duties, and powers of the NCDB as follows:-
  • To help the government of Nepal in formulating plans and polices concerning cooperative development.
  • To facilitates the implementation of cooperative policies.
  • To create and maintain a cooperative development fund with a view to providing cooperative with loans or grand for development purposes.
  • To participate in the share capital of cooperative societies union or banks.
  • To stand surety for cooperatives.
  • To extend technical helps to cooperatives.
  • To bring coordination between cooperatives and other related government as well as non-governmental agencies and encourage cooperation to expand their service.
  • To facilitate the joint investment of the government of Nepal. Cooperative and other nations as well as the international organization for the industrial in the cooperative sector.
  • To conduct the required studies and research work for cooperative development.
  • To carry out all other functions as may seem necessary for the cooperative movement.

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