How to Organize a Primary Cooperative


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Cooperative Development Authority
Dagupan Extension Office
Region I

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How to Organize a Primary Cooperative

  1. 1. Republic of the Philippines OFFICE OF THE PRESIDENT COOPERATIVE DEVELOPMENT AUTHORITY Dagupan Extension Office 3rd Floor, Siapno Bldg., Perez Blvd., Dagupan City Tel/Fax (075) 522-8285 Email : HOW TO ORGANIZE A PRIMARY COOPERATIVE Organizing a cooperative can be complex and simple. It requires an understanding of the basic needs of the prospective cooperative members. It demands patience from the organizer who must make the cooperative’s long-term goals and objectives and its visions a real part of the members’ lives. But it can be too easy because the Cooperative Development Authority has devised very clear-cut steps for the cooperative organizer and members. This questions-and-answer format should make organizing cooperatives a lot more understandable to the cooperative organizer.WHAT IS A COOPERATIVE? A cooperative is a duly registered association of persons with a common bond of interest, who have voluntarily joined together to achieve a lawful common social or economic end, making equitable contributions to the capital required and accepting a fair share of the risks and benefits of the undertaking in accordance with universally accepted cooperative principles. By forming a cooperative, you pool money, human resources and talent to build capital, and work together to produce more goods and raise incomes. Through cooperatives, you can look for other sources of loans at low interest rates instead of borrowing from informal leaders or usurers. The cooperative can also be a mechanism for making your produce.
  2. 2. GENERAL STEPS IN FORMING A COOPERATIVE There are six steps suggested in setting up acooperative.FIRST. Get organized. You must have at least 15 membersto do that. At once determine the common problems you would want solved and the basic needs you would want provided for through a cooperative. You may want to include increasing your production, marketing your produce, credit assistance, power generation, banking or insurance and other similar needs. Determining your problems and needs will also help you classify the kind of cooperative you will be organizing. Even before a cooperative is set up, a dedicated core group of people who will do all the organizational and paper works is a must. From this core group, working committees may be formed to set things moving. These committees may include membership, finance, executive, secretariat to name a few.SECOND. Prepare a general statement called an economic survey. This statement will help you measure your cooperative’s chances of success.THIRD. Draft the cooperative’s by-law. The by-laws contain the rules and regulations governing the operation of the cooperative.FOURTH. Draft the articles of cooperation. Here you indicate the name of the cooperative, its members, term of existence and other pertinent description about your cooperative.FIFTH. Secure bond from your accountable officer(s), normally the treasurer, or the treasurer and the manager. The amount of the bond is to be decided upon by the Board of Directors, based on the initial net worth of the cooperative which includes the paid-up capital, membership fees and other assets of the cooperative at the time registration.SIXITH. Register your cooperative with the Cooperative Development Authority (CDA). You must submit four copies each of the Economic Survey., By-laws and Articles of Cooperation, and Bond of Accountable Officers(s). In every step, you may consult CDA. CDA emphasizes education as a key to the success of cooperatives.
  3. 3. HOW MAY BECOME MEMBERS OF A COOPERATIVE If you are a Filipino, of legal age, you can be a cooperative member if you meet the qualifications prescribed by the cooperative’s by- laws The board of directors act on application for membership. A member may exercise his/her rights only after having paid the fees for membership and acquired shares in the cooperative.WHAT ARE THE TYPES OF MEMBERSHIP IN S COOPERATIVE? A cooperative has two kinds of members; regular members and associate members. A regular member is entitled to all the rights and privileges of membership as stated in the cooperative code and the cooperative’s by-laws. An associate member has no right to vote or be voted upon and is entitled only to such rights and privileges provided by the cooperative’s by-laws.WHAT IS THE MINIMUM NUMBER OF MEMBERS IN A COOPERATIVE? Fifteen (15) natural person of legal age who are citizen of the Philippines.CAN GOVERNMENT OFFICERS AND EMPLOYEES JION A COOPERATIVE? Yes provided that: Any officer or employee of CDA shall be disqualified to be elected or appointed to any position in a cooperative;
  4. 4. Elected officials of the government, except barangay officials, shall be eligible to become officers, directors of the cooperatives; Any government employee may in the discharges of his/her duties as a member in the cooperative, use official time provided that the operations of the office where he/she works are not adversely affected.WHAT IS AN ECONOMIC SURVEY? An economic survey is a general statement describing the structure, purpose economic feasibility of the proposed cooperative, area of operation, size of membership and other pertinent data. It is in fact, a project feasibility study. The structure describes the kind of cooperative being set up, whether it is primary, secondary or tertiary and whether it is a credit, consumer, transport or any other type of cooperative. The purpose defines the primary, secondary and other objectives of the cooperative. The area of operation merely indicates the geographical or sectoral scope of the cooperative. For example, a cooperative may operate in, say, Caloocan City, or it may operate in a certain social sector like farmers. Size of membership is important so as to set limits to the cooperative’s scope of operation. This is closely related to cooperative structure. The most important part of the survey is the economic feasibility. Here the prospective coop members estimate its incomes and expenses. It makes a projection of the possible growth pattern of the cooperative over a certain period, preferably three years, and how this growth generates income and incurs expenses; it tries to anticipate possible obstacles and constraints and makes allowances for them.GUIDELINES IN PREPARING AN ECONOMIC SURVEY 1. GENERAL STATEMENT Type of Cooperative Area of Operation Field of membership Indicate the membership qualifications, size Structure of the Organization Membership Potential Indicate initial number of members and the projected increase 2. RATIONALE State the justification for the establishment of the cooperative. Discuss the necessity for the formation of the cooperative.
  5. 5. 3. GOALS AND OBJECTIVES State the purpose of the cooperative, general and specific.4. ECONOMIC ASPECT State the background information on the economic situation of the proposed area of operation in relation with the contemplated business activity/activities of the cooperative. State the economic prospects: survival chances, competitiveness and the probability of success of the proposed cooperative. Basic assumption on the services of the proposed cooperative. Projected volume of business/or capacity of its facilities to serve the members. Market behavior of the proposed business activity/activities. Demand and supply of the product to be marketed.5. TECHNICAL ASPECT State the human power requirement of the proposed business activity/activities if the cooperative and the organization’s capability to meet those requirements. Expertise in the field that requires specialized trainings/experiences. Machine capacity and its capability to cope with production requirements of the business, taking into consideration the demand for the product.6. FINANCIAL ASPECT Source of capital and uses thereof as well the mobilization of such funds. Illustrate in financial (Peso value) form the assumption under economic aspect. Financial projections such as: a. Projected balance sheet; b. Projected income statement (profit and loss statement); c. Projected cash flow; and d. Return on investment (ROI).
  6. 6. 7. MANAGEMENT ASPECT Discuss the organizational structure of the cooperative and the number of personnel/staff required and compensation of hired employees. Note to the Trainer: Remember this is only a guideline: you may add, revise or omit items that are not applicable to your proposed cooperative.8. WHAT DOES THE ARTICLES OF COOPERATION CONTAIN? The Articles of Cooperation is a duly notarized document that legally binds all the signatories in the formation of a cooperative. It should contain: a. the name of the Cooperative b. the type and purpose(s) c. the goals of this cooperative is to help improve the quality of life of its members and in furtherance thereto shall aim: 1. To attain increased income, savings, investments, productivity, and purchasing power, and promote among themselves equitable distribution of net surplus through maximum utilization of economies of scale, cost-sharing and risk- sharing; 2. To provide optimum social and economic benefits to its members; 3. To teach members efficient ways of doing things in a cooperative manner; 4. To propagate cooperative practices and new ideas in business and management; 5. To allow the lower income and less privileged groups to increase their ownership in the wealth of the nation; 6. To actively support the government, other cooperatives and people oriented organizations, both local and foreign, in promoting cooperatives as a practical means towards sustainable socio-economic development under a truly just and democratic society; 7. To institutionalize a dynamic savings mobilization and capital build-up schemes to sustain its developmental activities and long-term investments, thereby ensuring optimum economic benefits to the members, their families and the general public; 8. To implement policy guidelines that will ensure transparency, equitable access to its resources and services, and promote the interests of the members; and
  7. 7. 9. To adopt such other plans as may help foster the welfare of the members, their families and the community.d. the powers, rights and capacities of this cooperative are those prescribed under Article 9 of Republic Act 9520. 1. To the exclusive use of its registered name; 2. To sue and be sued; 3. Of succession; 4. To amend its articles of cooperation in accordance with the provisions of RA 9520; 5. To adopt by-laws not contrary to law, morals or public policy, and to amend and repeal the same in accordance with RA 9520; 6. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage, and otherwise deal with such real and personal property as the transaction of the lawful affairs of the cooperative may reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution; 7. To enter into division, merger, or consolidation, as provided under RA 9520; 8. To form subsidiary cooperatives and join federations or unions, as provided in this Code; 9. To avail of loans, be entitled to credit and to accept and receive grants, donations and assistance from foreign and domestic sources subject to the conditions of said loans, credits, grants, donations or assistance that will not undermine the autonomy of the cooperative. The Authority, upon written request, shall provide necessary assistance in the documentary requirements for the loans, credit, grants, donations and other financial support; 10. To avail preferential rights granted to cooperatives under RA 7160, otherwise known as the Local Government Code, and other laws, particularly those in the grant of franchises to establish, construct, operate and maintain ferries, wharves, markets or slaughters houses and to lease public utilities, including access to extension and on-site research services and facilities related to agriculture and fishery activities; and 11. To exercise such other powers granted under RA 9520 or necessary to carry out its purposes as stated in this articles of cooperation.e. the term of existencef. the area of operationg. the common bond of membership of this Cooperativeh. The name and postal address of cooperatorsi. the number of Directors of this Cooperativej. the Authorized Share Capital of this Cooperativek. Subscribed and Paid-up Share Capitall. Arbitral Clause
  8. 8. 9. WHAT ARE COOPERATIVE BY-LAWS? By-laws are the set of rules that defines and determines how a cooperative is to be run without confusion. In general, by-laws should be consistent with the provisions of the Philippine Cooperative Code of 2008 (RA 9520). The by-laws include: a. The purpose(s) and goals of this Cooperative are those set forth in its Articles of Cooperation; b. Membership; c. Administration; d. Board of Directors; e. Committees; f. Officers and Management Staff of the Cooperative; g. Capital Structure; h. Operations; i. Allocation and Distribution of Net Surplus; j. Settlement of Disputes; and k. Amendments