ESSENTIALS OF CO-OPERATIVE SOCIETIES BY OSOBA ENAKALI. C. O (CHAPTER TWO)
CHAPTER TWO
ESSENTIALS OF
CO-OPERATIVE SOCIETIES
Chapter Objective
On
completion of the reading of this chapter, the student would be able to:
(i)
Identify
the various types of co-operative society
(ii)
Understand
the functions of agricultural marketing co-operative.
(iii)
Appreciate
the impact of co-operatives on rural development.
Developing Rural Areas through Co-operatives
Rural development gained prominence in Nigeria during the
third National Development plan (1975 – 1980) during Babaginda Administration.
Rural development is a sustained attempt geared towards
minimizing the problems that make life difficult in a rural setting. It cuts across socioeconomic, educational
and political development that would make life worth living for rural dwellers.
In the opinion of the World Bank, rural development is a
strategy designed to improve the economic and social life of a specific group
of people – the rural poor. It involves
extending the benefits of development to the poorest among those who seek
livelihood in the rural areas. The group
includes small – scale farmers, tenants and the landless.
The World Bank appreciates the fact that the only way by
which the quality of life of the rural dwellers could be enhanced is by
mobilizing its land, labor and capital.
This calls for the construction of roads, irrigation schemes,
introduction of new production technology and the creation of new institutions
and organizations.
In the opinion of Ijere, co-operatives constitute veritable
instrument for rural mobilization and organization. He went further to say that agricultural
co-operatives are the most suitable channels for delivering inputs and other
services to a multitude of rural dwellers scattered over wide geographical
expanse of land.
Co-operatives have been recognized all over the world as the
best agencies for handling land reforms,
improved storage, processing and marketing, transfer of agricultural technology
and greater participation of the rural people in these areas. This made co-operatives to be among the new
institutions and organizations required to assist in increasing productivity and
income
In the nation’s agricultural policy, the government has as
its primary objectives, the evolution of a virile system that will facilitate
the use and practice of agriculture as an effective vehicle for socioeconomic
development at the grass root level throughout the federation. In addition, to use agricultural
co-operatives as machinery for rural transformation and development, this
affects the various aspects of rural life.
Types of Co-operative
Though the
co-operative society has the potentials of serving numerous and diverse
purposes, it is most predominant with unlimited prospects for development in
agriculture and the handling of agricultural products; the production and
distribution of consumers goods; fishing; Banking and insurance business.
Fisheries Co-operative
Fisheries Co-operative is formed when
both fishermen and women come together and jointly undertake the buying and
ownership of fishing equipment. The
equipment includes fishing boats, nets and other related accessories. They also jointly insure their fishing
vessels as well as marketing and processing of fish. This form of co-operative is best operated at
individual or family group levels.
Like their counterpart farmers,
fishermen appreciate the need to protect marine and fresh water natural
resources. Over ninety seven percent
(97%) of fishery products in Japan are from fishery co-operatives. They adopted policies to establish environmental
conservation, assessment and monitoring systems. The International Co-operative Alliance
Fisheries Committee under the Chairmanship of Zengyoren, the National
Federation of fishery Co-operative Associations of Japan, was able to mobilize
funds for the training of fishermen.
Seminars on how to make fishing more environmentally sustainable through
the use of selective fishing gear and reduction of waste of fishery products
through cold storage, better transport etc, have also been organized for
fishermen.
Housing Co-operative
Housing Co-operatives have also made
its impact in reducing stress on the environment by providing affordable, high
quality housing with the provision of waste disposal systems and portable water
to alleviate poverty which has been identified as one of the major causes of
environmental degradation.
Housing Co-operative in the urban
areas also focus attention on rationalization of energy and water consumption,
improved waste disposal and making their communities greener. Co-operatives in all sectors of activity
contribute to environmentally sustainable development through their economic and
social activities.
Members of co-operatives also appreciate
the democratic decision making process, which necessitates negotiation and
lobbying skills that are beneficial when individuals and their co-operatives
try to influence local and national policies.
Co-operatives have also contributed immensely too changing attitudes on
environmental issues through their extensive public awareness campaign,
training and the provision of information.
They have been able to reach out to their members, communities and
future generations.
It is worthy of note that
co-operatives can only contribute to the move towards becoming more
environmentally rational. They do not
have answers to the complex issues of balancing development with environmental
consideration.
Agricultural co-operative
Through co-operation the small farmer
is able to gain access to selected seeds, fertilizers, animal feeding stuffs,
fencing and building materials, control of pests, veterinary medicines and all
other agricultural requirements which differentiate profitable modern farming techniques
from the primitive scratching of the soil.
Co-operation makes it possible for
the farmers to employ the services of highly qualified and experienced manpower
to handle the technical and complex aspects of marketing and purchasing.
By forming an organized body as the
co-operative farmers are encouraged to produce high quality produce, which are
in turn marketed in the best interest of the farmers.
Furthermore, through co-operation
farmers are able to avoid the exploitative tendencies of middlemen who pay low
prices on farm produce to the farmers and later sell the same produce at
exorbitant prices to its final consumers.
The agricultural Co-operative society
fosters the spirit of Co-operation among members. They are also able to enjoy the benefit of
joint marketing efforts which as individual’s members would not have been able
to realize.
As an organized body, the
agricultural co-operative society is able to secure loans from banks, which are
consequently paid back from the proceeds of their farm produce. This protects the farmers from the clutches
of greedy money lenders who charge high interest on loan to farmers. Apart from selling its farm produce
profitably, the agricultural co-operative is also able to collect, weigh, grade
store and process its commodities in more acceptable forms.
In the agricultural co-operatives farmers are
conscious of the fact that unsustainable farming practices would lead to loss
of their livelihood. Hence to them,
environmental issues are economic issues.
This necessitates farmers and their
co-operatives to reconcile environmental and health consideration with price
and quality of produce. Many have
rationalized their use of pesticides and chemical input; some have taken to
organic farming; still others are rationalizing their marketing or processing
methods by looking at packaging storage and transport issues.
Many agricultural co-operatives have
adopted environmental policies which endorse reducing inputs, providing
increased training and information undertaking research and promoting organic
farming Countries like Nigeria, Japan Canada India, Srilanka and the United
States have been very active in this regard.
For many countries training and information constitute their major
focus.
Agricultural co-operatives have also
looked at innovative ways of reconciling environmental and business concerns by
developing alternative sources of energy.
For example the Kenyan planter’s co-operative union commenced a research
on ways of converting coffee husks into briquettes (Kahawa coal) to replace
charcoal and firewood for domestic heating.
This is in contribution to reducing desertification caused by people’s increasing
demand for firewood which had led to deforestation.
Consumer Co-operative
The Consumer Co-operative plays a formidable
role in the distribution of goods. It is
set up to enable members to buy goods of desired quality at fair prices. The consumer co-operative could have a chain
of shops dealing on various types of goods such as foodstuffs, clothes, foot
wears and general articles of domestic use.
The consumer co-operative could undertake the distribution of goods it
manufactures it could also provide service like operating a restaurant
laundries and hair dressing saloon. The co-operative
on cash and carry basis only. Stores selling larger and more expensive items,
however, provide a delivery and credit service.
However, where members are made up of
workers with regular source of income, credit sales is allowed for a proportion
of such member’s monthly income. This is
however based on the condition that the concerned member allows his employer to
be deducting his debts from the monthly emoluments. By the coming together of individuals to form
a consumer co-operative, they are able to buy goods cheaply in bulk than on
individual basis.
The Consumer Co-operative have worked
relentlessly to ensure safe and healthy goods for their members. For example, the union pioneered the campaign
against food additives in the 1970s.
Twenty five percent (25%) of milk sold by food retail co-operative
enterprises in Denmark, originated from
farms which did not use industrial fertilizers or chemical pesticides. Consumer co-operatives have also promoted the
reduction of chlorofluorocarbons and minimization or outright removal of
products that are harmful to the environment such as phosphates in detergents
and chlorine bleached paper products.
As a mark of recognition of the
contributions of consumer co-operatives, the co-operative Retail services
Limited (UK) won the European Conservation Award for industry in its efforts to
remove environmentally harmful products from the range of goods retailed
through its stores and to introduce environmentally friendly products.
Consumer co-operatives throughout the
world have been most active as educators, promoting patterns of consumption and
production that reduce environmental stress. Information brochures videos and innovative
educational programs for children and adults have been successful in raising
environmental awareness and a hanging attitude.
Advantages of Consumer Co-operative
The retail co-operative societies
could buy from the co-operative wholesale society which in turn could buy in
vast quantities. With this, the retail co-operative is able to benefit from the
special services provided by the co-operative wholesale society such as good
credit terms and product advertising.
They also share in Co-operative Wholesale Society (CWS) profits
(surplus).
Because the consumer (retail)
co-operatives are classed as friendly societies no tax is paid on profits
issued as dividends as is the case with other businesses.
Many societies are very large hence
able to obtain many of the benefits of multiple organizations such as bulk
buying and specialist management.
The dividend tends to encourage
customers to be regular while others may, be loyal because of their belief in
co-operation.
Most societies are very large hence
able to obtain many of the benefits of multiple organizations such as bulk
buying and specialist management.
The dividend tends to encourage customers
to be regular while others may be loyal because of their belief in co-operation.
Most of the customers are also shareholders
and therefore, part owner of the business.
As such, they expect better service and value for money.
Disadvantages of Consumer Co-operative
In the consumer co-operative,
majority of shareholders take no interest in running the business. This makes
the co-operative to be controlled most often by a minority group with few
changes over the years. This denies the
co-operative of new and progressive ideas.
The members of the management
committee are ordinary people with little or no business experience.
The salaried manager, who should have
more business knowledge than the committee, may feel himself unable to put into
practice his ideas because they clash with those of the committee and the idea
of co-operation in general.
The manager may not possess enough
ability as his counterpart in other retailing businesses because co-operatives
often fail to attract the best men as a result of their reluctance to pay attractive
salaries. This conflicts with the basic idea of equality implied in
co-operation.
Employees of co-operatives are
sometimes promoted on the basis of length of service rather than ability,
efficiency and qualification. This again, discourages the more able individuals
from entering or staying in co-operative employment.
Many Co-operative Societies are
extremely small and may as a result be insufficient due to their inability to
take advantage of the benefits of being large such as bulk buying and the
ability to pay high salaries for good managerial staff.
Credit Societies
Before delving into the activities of credit societies, let
us first of all understand the meaning of the word credit. Credit could be
referred to as money given to an individual in advance on trust: that he would
pay back though he may not have contributed anything to the fund by way of
personal savings.
Credit societies provide loans on terms for productive
purposes. It is mainly open to farmers and traders in rural areas or villages.
Its sources of funds include bought shares in the societies. It also gets funds
from savings deposit as a way of promoting thrift in the locality. Through the
provision of credit facilities to the farmers, he is able to improve on his
productive efforts. This in turn, enhances his standard of living.
Through co-operative movement, the Nigeria Agricultural
co-operative Bank (N.A.C.B) serves as a source of supply of funds to both the
small and medium scale farmers.
The supply of credit constitutes one of the most important
contributions of co-operator to agricultural growth and development. Credit
facilities are extended to members of the co-operative on individual basis.
The advantages of
managing agricultural credit through co-operative include:
1.
Ensuring
the repayment of loans by co-operative members through the use of sanctions
2.
It
guarantees loans for its members as well as assisting in negotiating better
terms for them
3.
Scrutinizing
of individual members credit worthiness
4.
Undertake
the mobilization of member’s small savings.
5.
Links
members of co-operatives to credit institutions. This makes it possible for
people to be reached compared to if the credit institutions were to direct seek
agricultural loan-customers.
Co-operative Banking
In order to ensure a strong and
virile financial structure for co-operative movement necessitated the setting
up of an Apex Bank. Most co-operative because of their low income and status in
the society are usually not able to provide material securities to secure loans
from commercial banks. All they have at stake are their characters and integrity.
This is where the co-operative bank comes in as a central financing agency for
affiliated primary credit societies. It also provides normal Banking Services
to co-operative movement that have no access to primary credit societies. The
co-operative banking system directs surplus funds to societies where they are
needed. It is important to note here that government’s aids to farmers are
channeled through the co-operative banks. Other terms of service of co-operative
apart from that of the co-operative banks, include, transport, health, and
medical services.
Small-Scale Industrial Co-operatives
Small scale industrial co-operatives
are established to meet the need of trained weavers, shoemakers and artisans
who are unable to secure adequate capital to set up their own industries.
Through co-operatives these people are able to pool their resources together to
set up a meaningful business.
Examples could be found in the Benin
Co-operative Wood – Workers Society supported by loans from the Nigerian local
Development Board; and the Awka co-operative carvers union. Other examples
include the Awete Weavers co-operatives and Agege Farmers Co-operative,
Agricultural Product Processing and marketing Society Limited.
Agricultural Marketing Co-operative
The agricultural marketing co-operative
is made up of a collection of producers of single products or a collection of
closely related products. This society makes arrangements for the collection,
banking, grading and selling of the agricultural produce. Through this process,
the marketing Co-operative is able to provide attractive and efficient
marketing facilities for the agricultural producers. Through combined
bargaining, lower trade margin, price stabilization and the opportunity of
discovering better markets, the income of the Farmers is substantially
enhanced. Beside, the co-operative also grants its farmers short-term credit.
It is important to note that the
formation of marketing co-operative brings farmers, who were hitherto producing
for themselves individually, under one fold. This enabled them to pool their
resources and expertise together and embark on improved methods for better
production output. It also protects them from the exploitative tendencies of
middlemen who pay low prices, give false weight and advance loans at high interest
rates.
The Functions of
Agricultural Marketing Co-operative
The agricultural marketing co-operative provides up to date
information about trends in demand of agricultural produce in terms of quality
and varieties. In order to be able to do this satisfactorily, demand the
service of a person who has good knowledge of the community to be handled. He
should know how to judge quality, grade deliveries as they come in, know the
usual grades that are likely to be in the district, the quantities of the
produce that are likely to be available and at what times of the year. He
should also be able to determine whether the product is perishable and under
what condition it could be stored. He should also know about the existing
system of marketing such as whether producers are paid in advance or after
sales, before or after grading. He should also have knowledge of what happens
to the produce when it leaves the district such as, processing it undergoes, as
well as where and when. He should also know who the final consumers are and
their tastes.
In addition to the above, the produce
farmers are also told about, the price at wholesale and retail levels.
The above information makes it possible to plan a
co-operative enterprise capable of handling one or more stages in the marketing
process. This however depends on the
financial state of the co-operative.
Collection and Delivery
of Farm Produce
The agricultural marketing co-operative assists the farmers
physically in the delivery of their produce.
In spite of this, members of the co-operative bring in their farm
produce on their own especially where the crops are seasonal in nature.
A common collection point is created to allow for the
delivery of perishable produce like soft fruits and milk which are delivered on
daily basis, as well as eggs that are brought on weekly basis. The produce is eventually evacuated with a
van. Through the use of motor vans, the
co-operative is able to collect the produce in small quantities from a large
number of members. By this process a steady
supply of the produce is assured.
Weighing and Grading of
Produce
When the produce eventually arrives the premises of the
Co-operative, its quality is determined by grading them into varieties, size,
colour, ripeness and those infested by germs.
Standard weighing machines are used in this exercise are able to use
their eyes, fingers and sometimes, nose in the grading operation samples are
used where the quantity delivered is large.
In the case of livestock, evidence of good health, age, body
formation is used in grading them.
Due to its delicate nature, soft fruits and similar crops are
packed before they are moved from the premises of the grower. This is effectively done through the training
given to the farmers on how to carry out the grading themselves.
In ensuring this, standard containers are made available to
the farmers before the season. This is
to ensure uniform and proper packing to avoid losses resulting from further handling
and transportation. Where the packed
produce is for retail sale, it is made attractive and presentable to the
consumers.
Storing of Farm Produce
Before farm produce are moved for storage, adequate
containers are made available. This is
important because some crops are sensitive to high temperature while some are
not. In some cases, some crops need to
be frozen.
Most farm produce are transported in such containers as
sacks, baskets and boxes. This enables
the movement of the produce, from the co-operative to the market or mill for
processing as the case may be.
As soon as the produce arrive the co-operative they are
conditioned for storage. Some of the
produce would be dried to remove excess moisture; it could be fumigated to
prevent pests from attacking the crops.
At this stage the crops are graded into marketable lots of uniform
quality.
With the exception of perishable farm produce other produce
are stored after harvest, and are gradually released into the market. This is
to allow favorable price in the market.
Where this precaution is not observed the price of the products will
fall drastically.
Apart from providing adequate storage facilities there is the
need to have an idea of how long a commodity could safely be held before it
starts to go bad. This is because on
storage, some commodities lose moisture resulting in loss of weight after some
months. Some produce deteriorates due to
delays on its way to the market. All these contribute to losses which places
the co-operative at a disadvantage.
Produce Processing
At times, there is the need to process agricultural
produce. This is to make it either
marketable or to prevent its deterioration.
Processing could be said to have taken place when a raw product is
turned into something different from its original state. Processing of farm produce could be borne out
of the co-operative desire to make its produce available to consumers in
various forms which in turn will make more money available to it for use.
Sale of Produce
There are many ways through which the cooperative could
dispose of its produce. Raw farm produce
could be sold by operating a retail shop.
It could organize auction sale of the produce at its premises with an
auctioneer appointed by the society. In
this method, the produce of each member is offered for sale and sold to the
highest bidder. The auctioneer is able
to do this effectively by being able to attract large number of buyers both
from within and outside the locality.
Where potential buyers boycott the co-operative auction sale; direct
sales could be made to exporters.
The ability of the produce seller to know the best use a
given sample of produce could be put into and the markets in which it could be
sold, is the hall mark of good marketing.
Selling large quantities of produce of a uniform grade to
retailers or manufacturers is more profitable than selling small lots, each
perhaps including produce of different qualities to wholesalers who
themselves grade, pool and take the gain on the operation.
Approved customers selected by the committee of the
co-operative are allowed credit. This
however depends on their ability to deposit twenty five (25) percent of their
proposed bid before they are allowed to take part in the auction exercise.
Traders who buy at auctions are allowed credit for a week or
two. The co-operative however, retains
custody of the produce until the debt is paid.
For better marketing the co-operative strives to know all its
different customers and establish good relations with them as well as knowing
and understanding their peculiar requirements.
Fluctuations in Prices
of Produce
Price of produce fluctuates
greatly from one market to the other. The causes of this could be attributed to the
quantity of the produce that is made available in the market. Buyers could resist high prices of scarce
home grown fruit where they are sure of the arrival of similar products from
abroad, which in most cases are cheaper.
In view of this it becomes very important that a marketing co-operative
should be able to know 21ethe impact of supplies of it produce on prices. Coupled with his local experiences, he would
be able to decide what to sell, where, when, to whom and at what price.
Under a new development, the co-operative could adopt the
fixed price system for the sale of its produce.
Under this system, the Co-operative buys the produce from its
members. This encourages the management
of the co-operative to assume a higher level of responsibility. Besides, the
co-operative is able to adjust sales in response to market conditions. By this, it is able to determine when it is
most appropriate to sell and the market partner it would like to do business
with.
Limitations of
Co-operative Societies
Financial mismanagement is one of the major problems of the
co-operative societies. It kills the
enthusiasm in members to put in their best to ensure its survival. The Inability of co-operatives to secure
loans both internally and externally has stifled them of their well desired
funds for growth and development.
The smallness in size of co-operative has adversely affected
their capital accumulation. This problem
is further aggravated by the fraudulent attitude of some members who after
taking loans refuse to pay back.
Poor record keeping and auditing of account is yet another
inhibiting factor to the success of co-operative as an organized body.
As a panacea to the problems of co-operatives government
should be more responsive to the yearnings of co-operative societies instead of
using them as mere tools for implementing its policies.
SELF
EVALUATION QUESTIONS
1.
Carefully
compare and contrast the activities of credit societies with that of the
co-operative banking
2.
Of
what significance is the agricultural marketing co-operative to its members?
3.
Explain
how the Agricultural co-operative disposes its farm produce
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