Co-operatives

A cooperative is a business organization started by people who want to use services or buy goods as a group, have an equal say in how the business is run and share in any profits the business makes. Their business structure ensures that: all members have an equal say (one vote per member, regardless of the number of Shares held) open and voluntary membership• limited interest on share capital

surplus is returned to members according to amount of patronage Co-operatives are placed in five separate categories when they are classified by function: Producer cooperatives combine members’ skills and resources for mutual benefit. An example is an employment co-operative, which pools and markets the skills of the employee-members and provides them with an income. Consumer co-operatives buy commodities in bulk and sell them to the member-owners. Examples are retail co-operatives and direct-charge co-operatives.

Marketing co-operatives sell their members’ products. Typical products are dairy products, poultry, fish and handicrafts. Financial co-operatives provide a variety of financial services for their members including savings, investment and loans. Examples are credit unions, co-operative trust and insurance companies. Service co-operatives enable members to improve the quality, price and availability of needed services, such as health care, child care and transportation. Advantages Disadvantages

Owned and controlled by members Democratic control by one member, one vote Limited liability Profit distribution (surplus earnings) to members in proportion to use of service; surplus may be allocated in shares/cash Possibility of development of conflict between member Longer decision making process Requires members to participate for success Extensive record keeping necessary Less incentive to invest additional capital