Cooperative Theory SD 302

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  • 1. Edwin Badu Rawlings Gbargaye Discussant SD302
  • 2. “Cooperatives are great organizations and they have better chances of survival and thus have the potential to help the world to come out of economic crisis Ivano Barberini (2009) President of ICA
  • 3. UN Declares 2012 International Year of Cooperatives highlighting the contribution of cooperatives to economic development, in particular recognizing their impact on poverty reduction, employment generation and social integration.
  • 4. • The UN declaration also emphasizes a few key areas of cooperative strength, one of which is the credit union and banking sector. • Under the umbrella of the World Council of Credit Union some 53,000-plus credit unions serve over 185 million members in 97 countries. According to World Council statistics, total assets of credit unions worldwide in 2008 climbed to close to $1.2 trillion.
  • 5. In Europe, the European Association of Cooperative Banks has 4,200 member banks which collectively hold a 20 percent market share of the banking market and serve 160 million customers.
  • 6. The UN designation also takes note of the role of co-ops in agriculture and rural electric production. In the United States, the UN points out, agricultural cooperatives account for more than 80 percent of total milk production, while 900 rural electric cooperatives serve 37 million people and own almost half of the electric distribution lines in the country.
  • 7. UN notes that co-ops also are responsible for over 80 percent of total milk production in Norway and New Zealand; 71 per cent of fishery production in South Korea; and 40 per cent of overall agriculture production in Brazil. In Bangladesh, rural electric cooperatives serve 28 million people.
  • 8. • The International Co-operative Alliance (ICA) is the independent, nongovernmental association that unites, represents and serves co-ops worldwide. Founded in 1895, the ICA has 230 member organizations from 92 countries active in all sectors of the economy. Together, these co-ops represent more than 800 million people worldwide • ICA has also created a Global 300 list that ranks the 300 largest co-ops worldwide, as well as a second Developing 300 list that ranks the 300 largest co-ops in developing countries.
  • 9. Key Theorists • Robert Owen • Dr. William King • François-Marie- Charles Fourier • Friedrich Wilhelm Raiffeisen
  • 10. Key Theorists Robert Owen is considered the father of the cooperative movement. His idea is to form "villages of cooperation" where workers would drag themselves out of poverty by growing their own food, making their own clothes and ultimately becoming self- governing. He tried to form such communities in Oriston in Scotland. 1771-1858
  • 11. Although Owen inspired the cooperative movement, others – such as– Dr William King took his ideas and made them more workable and practical. King believed in starting small, and realized that the working classes would need to set up co-operatives for themselves . Dr William King (1786–1865)
  • 12. French social theorist. He advocated a reconstruction of society based on communal associations of producers known as phalanges (phalanxes). His system became known as Fourierism. He felt that phalanges would distribute wealth more equitably than would capitalism and that they would contribute both to a cooperative lifestyle and to individual self-fulfillment 1772 - 1837 François-Marie- Charles Fourier
  • 13. founder of the German system of agricultural co- operative banks Friedrich Wilhelm Raiffeisen 1818-1888),
  • 14. A few poor weavers joined together to form the Rochdale Equitable Pioneers Society at the end of 1843. The Rochdale Pioneers, as they became known, set out the Rochdale Principles in 1844, which have been highly influential throughout the cooperative movement. The successful example of cooperative business provided by the Rochdale Society, which also established between 1850 and 1855 a flour mill, a shoe factory, and a textile plant, was quickly emulated throughout the country The Rochdale Pioneers
  • 15.  By 1863 more than 400 British cooperative associations, modelled after the Rochdale Society, were in operation. Thereafter the English movement grew steadily, becoming the model for similar movements worldwide.
  • 16. • The number of coops have increased dramatically by 2004. • ICA research has identified 286,560 coops in Europe alone out of which 37% are in agricultural; 26% are in housing; 15.5% in labor; 6.6% in consumer sector; 6.5% in the financial sector; and 7.8% in other sectors.
  • 17. By the mid-20th century, it comprised almost 2400 associations of all types. The Cooperative Wholesale Society is the largest distributive agency in England.
  • 18. Listed among the Global 300 are some of the world's largest businesses. The Global 300 co-ops had total revenue of nearly $1 trillion in 2004. If they were a nation, these 300 co-ops would have the 10th largest gross domestic product in the world, ranking just behind Canada.
  • 19. The United States is home to more of the Global 300 than any other nation, with 62 (or nearly 20 percent of the total list). It is followed by France, with 45, then Germany with 33 and Italy with 28 co-ops on the list. Cooperatives in these four countries represent more than 50 percent of the Global 300.
  • 20. ZEN-NOH-the National Federation of Agricultural Cooperative Associations is Japan's federation of agricultural co-ops and is the largest co-op organization in the world. Of the 3 million farm households in Japan, most belong to one of ZEN- NOH's 1,010 primary-level co- ops. The co-op had total sales of $56.3 billion in 2003 and employs about 12,500 people. Japan : World’s Largest Co-op Organization
  • 21. • In Norway: 99% of milk production is through coops and consumer coops cater to 25% of the market share. • In Finland: 97% of dairy production and meat products 50% of egg output, 34% of forestry products and 34% of total deposits in banks are through coops.
  • 22. • Nestle • Dean Food • Dairy Farmers of America - Coop • Danone • Fonferra - Coop • Kraft • Land o’Lakes - Coop • Lactalis • Aria Foods - Coop • Meilli Dairies • Friesland Foods - Coop • Uniliver • Morinaga Milk Industries • Parmalat • Campina - Coop • Bongrain • Human Milchunion - Coop • Saputo • Nordmilch - Coop • Sodiaal - Coop World’s dairy top 20 includes 8 co-operatives
  • 23. • In Holland: 95% of Dutch flour sales are by coops; Sweden : 66% of daycare centers are run by coops • Germany: 50% of German farm sector is controlled by coops • Switzerland: coops are the second largest employer
  • 24. • France: the fifth and the sixth largest banks owners are coops. • Colombia: Saludcoop health coop is the 2nd largest employer caring for 25% of the population • Israel: World’s 5 largest producers of drip irrigation equipment are coops.
  • 25. Italy: Social Cooperative • This gives totals of 7,100 social co- operatives, with 267,000 members, 223,000 paid employees, 31,000 volunteers and 24,000 disadvantaged people undergoing integration. Combined turnover is around 5 billion euro. The co-operatives break into three types: 59% type A (social and health services), 33% type B (work integration) and 8% mixed. The average size is 30 workers.
  • 26. Euros 11B housing health Credit union doctor Football club buying Whole foods careleisure consumers workers Euros 1.3 B Source: Mr. Bob Burlton Midcounties Co-operative, United Kingdom Aug. 2006 agriculture
  • 27. Seven principles that define the identity of cooperatives: 1. open and voluntary membership 2. democratic control 3. limited interest on shares 4. return of surplus to members 5. cooperative education 6. cooperation among cooperatives 7. concern for the community
  • 28. Today, civil society performs inevitable roles in eradicating poverty, promoting democracy and good governance, promoting sustainable development, resolving social conflict-among myriad of other areas related in enhancing total human development.
  • 29. It is common now to see civil society represented at local, regional ,national and international conferences and meetings together with their governments in discussing social, political, environment issues and problems of the day. One of these kinds is the Cooperative Movement
  • 30. Cooperative Defined An autonomous and duly registered association of persons, with a common bond of interest, who have voluntarily joined together to achieve their social, economic and cultural needs and aspirations by making equitable contributions to the capital required, patronizing their products and services, and accepting a fair share of the risks and benefits of the undertaking in accordance with universally accepted cooperative principles (RA 9520)
  • 31. Cooperatives in the Philippines According to the CDA (2008) the number of cooperatives registered since 1990 are: Savings and Credit coops 4,812 a.Consumer coops: 1,369 b.Producer coops: 911 c.Marketing coops: 1, 806 d.Agricultural and 60,000 Non-Agricultural
  • 32. Financial Strength of the Coop Sector in the Philippines Assets Size (in Million of Pesos) Total Assets in Billion Pesos % Share No Of Coop s % No. of Coops Large (100M) 61.57 54.09 161 0.88 Medium (15 to 100M) 30.15 26.49 859 4.71 Small (3M to 15M 14.76 12.97 2.197 12.04 Micro (below 3M) 7.35 6.46 45.037 82.38 Total 113.83 100 18.254 100 Source: CDA(2008)
  • 33. Why Cooperatives Survived? • Cooperatives are borne out of the need of the members & their members take responsibility of their decisions. Cooperatives are the top survivors of Global Economic Crisis.
  • 34. Why Cooperatives Survived? Self-help Self- Responsibility Equity Equality Democracy Solidarity Cooperative Principles and Values that we practice, and our ethical practices
  • 35. Parameters of Cooperative Governance. Good governance in a cooperative society will largely depend upon the following factors: Why Cooperatives Survived? • Autonomy & Democratic Leadership • Awareness to Elected Representatives • Cooperative Law • Role of Government • Federal Structure • Value-based Professional Management; • Social Audit
  • 36. • Social capital through coops is about the ability of people to be architects of their own personal and social histories on the basis of their shared norms, value and collective empowerment. • The habit of citizenship is formed among the members, and they acquire ability to identify local needs and ways of meeting these needs in a unified action. Why Cooperatives Survived?
  • 37. Cooperative model is a better model of business. • It is not linked to Stock Markets. • Relies on Member funds for its operation. • Controlled by Local people for Local people • Know individual need & repayment capacity hence loans are not unfettered. • Hardly any exposure on mortgage- securities. • Not motivated by profiting and capitalistic gains. Why Cooperatives Survived?
  • 38. • Cooperatives work within a long-term time frame. They do benefit from long-term perspective in their investment strategies. • They are modest and realistic in planning the Growth of the Business with manageable control on costs and aspirations giving them a greater power of flexibility. Why Cooperatives Survived?
  • 39. • Cooperatives are organizations with human face and soul. They are in position to retain their workforce and continue to provide services to members at reasonable cost & affordable prices. Why Cooperatives Survived?
  • 40. • The Principles that from the heart of cooperation are not independent of each other. They are subtly linked; When one is ignored all are diminished. • Coops should not be judged exclusively on the basis of any one principle; rather, they should be evaluated on how well they adhere to the principles as an entirety. Why Cooperatives Survived?
  • 41. Economic and Social Returns • Coops have a special responsibility to ensure that the development of their communities- economically, socially and culturally-is sustained. • They have a responsibility to work steadily for the environmental protection of their communities.
  • 42. Cooperative as Poverty Reduction Strategy In light of the numerous squabbles and controversies created by the ever mutating dimensions of poverty and poverty alleviation, emerged coop as one of the solutions to the problem.
  • 43. Coop is a tool used and a goal for poverty reduction and human development. Human development is therefore, ‘the development of people investing in their education and health for the people, generating adequate income, satisfying their basic needs and offering sufficient employment opportunities and allowing them fully participate in every process of their lives.
  • 44. Strategies • Capital endowment • Credit system • Resource allocation • Livelihood • Educational Assistance • Mutual Aid Fund • Health and Members Benefit • Employment • Community Involvement • Linkaging/networking
  • 45. Best Practices and Awards • San Joaquin MPC, Ilocos Norte Ist Place Gawad Pitak Awardee 2010
  • 46. Landan Multipurpose Coop –Coop in Polomolok, South Cotabato , composed of indigenous people referred to as B’laans, the coop heavily depended on dole-outs from charitable groups but now it has turn the wheels and boast of 773 members and Php 60.1 Million assets-corn production, pineapple contract and others.
  • 47. BEST Practices and Awards • Novaliches Development Coop (NOVADECI) –After 26 years of existence, in 2002, the coop has total membership of 6,727 regular and 3169 associate members with Php 318 Million assets. Its services include health and medical services, loans, consumer retail among others.
  • 48. • Lamac Multipurpose Coop –Started with 70 farmer-tenants contributing initial capital of Ph50 each in the 70’s. At the end of 2002, it had an asset of Php 63.8 Million. It is engaged into day care center, reforestration projects, postal service, clean and green program, among others.
  • 49. Best Practices and Awards Experience in Region I a. Galimuyod Savings and Development Coop: organized in April 1972 by a group of 32 parishioners of the Sacred Heart of Jesus Parish in Galimuyod, Ilocos Sur. As of 2007 it has total membership of around 3000 with a capitalization of over Php 9 Million. It had been awarded by Land Bank of the Phil.
  • 50. b. Government of Laoag Employees Development Coop: Organized by employees o local government of Laoag in 1992. As of Dec 2008, it has 848 members and Php 10 Million.
  • 51. Criticisms and Limitations Given the reduction in global poverty has been rather sluggish, even the promoters of cooperative do not disagree that cooperative alone is enough to reduce poverty.
  • 52. • Coops are faced with striking the balance between the two: a.Fulfillment of their mission of alleviating poverty, they also charge high interest rates to survive. b.While they are not charitable groups they charge interests to cover operational costs and avoid risks.
  • 53. • Concerns have been raised that the reliance on coop programs to help the poor escape poverty results in cuts in government expenditure in public safety net programs (Neff 1996). • Cooperative programs often claim to empower their clients who are mostly women. • Many coops have predominantly female clients and members.
  • 54. Challenges of Cooperative • Cooperatives today are confronted with massive issues and problems as a result of globalization. Coops are operating in an environment that has the following characteristics: .
  • 55. Challenges of Cooperative • Deregulation of markets; intensive competitive pressure; withdrawal of government sponsorship; declined in traditional community base for coops; rapid technology led transformation of process and markets; and lack of management development opportunities within the cooperative movement.
  • 56. Challenges of Cooperative Mismanagement, financial scandals, poor management control, growing distance between members and their cooperative society, failure of democracy and an unbalanced relationship between management and elected directors.
  • 57. Problems of Cooperatives 1. There is duplication of series and functions within the coop movement because coop organizations are not merging and consolidating fast enough to match their competitive environment. 2. Coops have been slow to develop in the fastest growing technology based leisure, information, manufacturing and pharmaceuticals.
  • 58. 3. Only a small proportion of primary coops operate at national level and even fewer can trade internationally. 4. Most primary coops operate as the low value added link in their industries’ supply chain..
  • 59. 5. Coops are characterized by the absence of a substantial degree of entrepreneurial spirit or culture leading to missed opportunities and lack of innovation. 6. Coops lack a commitment or awareness of the need to develop coop executive management and generally do not recognize management’s crucial leadership role in defending coop purpose and values.
  • 60. 7. There has been no real attempt by the movement to incorporate coop management within the statement of cooperative identity.
  • 61. Personal Views Cooperatives have contributed significantly to poverty reduction through their provision of services, and direct investments on community projects and programs.
  • 62. Personal Views Co-operatives are the better socio-business model