Co-operative societies are groups formed by individuals to meet their various financial needs. It is either formed by a person or a group of people who pull resources together in the form of savings to invest or for on lending to members of the cooperative.
It is a voluntary association formed for the mutual benefit of all the members, working towards their common cause. The Co-operative Societies are formed with an idea of supporting each other to achieve a common economic objective.
For example, the farmers may come together and form a co-operative society to work jointly and take advantage of economies of scale. When they work together they will have a better bargaining power for buying raw materials. They will also enjoy a better bargaining power while selling their agricultural output.
Basically, co-operatives work towards directly answering community needs, promote collaborative entrepreneurship and economic growth, provide small loans to their members amongst others. Asides from contributing to societal growth, one other purpose a co-operative society has is to make a profit.
Co-operative societies go through a lot of planning, financing, and preparation to start-up. Therefore, they expect to get good and encouraging returns. Traditionally, co-operatives make the investment rather easy for members. When members join an existing co-operative, they may be required to invest a nominal amount and then agree to invest over time by allowing the co-operative to keep or retain a portion of each year’s co-operative earnings as equity capital.
Members must thus invest in their co-operative and not merely use or patronize it. In other words, members who do business with other firms can just do buying or selling, but in order to do business with their co-operative, they must invest as well.
Some co-operatives allow their members to take out loan, while some others allow members to make purchases of items at cheaper rates as they make bulk purchases from the savings of the members.
Being a member of a co-operative allows an individual to not only save up funds but also be eligible for small loans that come at little or no interest to be able to finance projects. Co-operatives can be formed either with members of a religious organisation, professional associations or even within workers in corporate organisations or government establishments.
