How do Cooperatives work?

Are you paying attention? Do you really know what we do at Volition Capital? Have you read our article about Private Equity? Well, it provides insight into what we do. This is another in the series. It’s about cooperatives, which we manage. But what are cooperatives and how do they work? This brief article will shed some light.

What are cooperatives?

Likely, you are familiar with a cooperative credit society or a multipurpose cooperative society. These lend money to members at a very low-interest rate. But cooperatives do more than that. Simply, a cooperative society is a group of people who have specific common interests and financial goals. The general objective is to improve the economic status and social welfare of members.

A consequence of capitalism is inequality of wealth and cooperative societies help to reduce this by aggregating and distributing resources. Cooperatives are as predominant as they are useful. The Worldwatch Institute found that in 2012, approximately one billion people in 96 countries had become members of at least one cooperative. The turnover of the largest three hundred cooperatives in the world reached $2.2 trillion.

Meanwhile, here’s a little about the history of cooperatives. The Rochdale Society of Equitable Pioneers, (RCEP) founded in 1844, is considered the first successful cooperative enterprise. A group of 28 weavers and other artisans in Rochdale, England set up the society to open their own store selling food items they could not otherwise afford. Within ten years there were over a thousand cooperative societies in the United Kingdom.

Rochdale created a model for modern cooperatives, embodied in the “Rochdale Principles”. Many cooperatives follow these seven principles:

• Voluntary and open membership
• Democratic member control, with each member having one vote
• Economic participation by members
• Autonomy and independence
• Education, training and information
• Cooperation among cooperatives
• Concern for community

What are the features of a cooperative?

A cooperative enjoys a separate legal personality after it is registered. This means that it acquires an identity, distinct and independent of its members. It can purchase and dispose of its assets in its own name. It can also sue and be sued. It has a continuous existence because it is not affected by the death of any member of society. Members enjoy liability that is limited, to the extent of the amount contributed by members as capital.

Membership is voluntary. Also, the capital of a cooperative society is raised from its members. Members have the right to vote. They use this to elect the managing committee. This committee has the power to take decisions.

Cooperative societies are self-governing institutions. Yet, once they are registered, they are subject to the rules and regulations of the government. In Nigeria, they are governed by the Nigerian Cooperative Societies Act which provides for compulsory registration. Registration is effected at the Office of National Civil Registration.

Now to types of cooperatives.

There are various types of cooperatives. Cooperatives in agriculture gather, process and store the produce of their members. They are useful to small scale farmers who may be unable to market their products individually. Consumer cooperatives supply household essentials to their members at prices lower than those in the market.

You must have heard about savings and credit cooperatives. They are the most common. Members save money with the cooperative and the funds are made available to them as low-interest loans for individual projects.

Transport cooperatives are involved in purchasing vehicles and using them for public transport or for hiring or leasing. Likewise, insurance cooperatives provide insurance. Housing cooperatives buy and develop houses for the members or sell houses to members at lower prices.

A utility cooperative is tasked with the delivery of a public utility like electricity, water or telecommunications services to its members. Ah, then there are multi-purpose cooperatives that do some or all of these many things.

Oh well, now you know about cooperatives.

Our cooperative at Volition Capital is exclusively by referral. You have to be recommended by an existing member.

To those who are already part of our community, high five!

To everyone else, do well to join our mailing list for information on how we help businesses and private individuals.

Bye for now!