A cooperative is a business organization that is owned and controlled by its members.

Cooperatives are often formed to provide goods or services to their members at a lower cost than they would be able to obtain from a traditional business.

It is an association of persons who have voluntarily joined together to meet their economic, social and cultural needs and aspirations through a jointly and democratically controlled enterprise.


  • A farmers’ cooperative that sells agricultural products to its members.
  • A consumer cooperative that sells groceries and other household goods to its members.
  • A housing cooperative that provides affordable housing to its members.
Features of Cooperative Organizations:

Features of Cooperative Organizations:

  1. Democratic Management, Election, and Control: Members have equal voting rights and participate in the decision-making process.
  2. Separate Legal Entity: Cooperatives are legally recognized as separate entities from their members.
  3. Voluntary Membership: Individuals are free to join or leave a cooperative voluntarily.
  4. Service Motto or Driven by a Fundamental Objective: Cooperatives are driven by a desire to serve their members and achieve a common goal.
  5. Government/State Control: Cooperatives are subject to government regulation and supervision.
  6. Members’ Economic Participation: Members contribute to the cooperative’s capital and share in its profits and losses.
  7. Disposal of Surplus: Surplus funds are distributed among members based on their patronage or participation.

Types of Cooperatives:

  • Market / Sales Cooperatives: These cooperatives help farmers and producers sell their products collectively to get better prices.
  • Savings and Credit Cooperatives: These cooperatives provide financial services to their members, such as savings accounts, loans, and insurance.
  • Producers / Industrial Cooperatives: These cooperatives are owned and operated by workers who share the profits and losses.
  • Consumers Cooperatives: These cooperatives are owned and operated by consumers who pool their resources to buy goods and services at lower prices.
  • House Cooperatives: These cooperatives provide housing for their members.

Merits of Cooperative Societies

  1. Continuity or Long-Term Survival: Cooperatives are often more resilient than other types of businesses due to their democratic structure and member loyalty.
  2. Democratic Management: Members have a say in the management of the cooperative, which promotes transparency and accountability.
  3. Limited Liability: Members’ liability is limited to the amount of capital they have contributed to the cooperative.
  4. Government Assistance: Cooperatives often receive government support and assistance, such as tax breaks and subsidies.
  5. Reduce Inequalities: Cooperatives can help to reduce income inequality by providing equal opportunities for all members.
  6. Ease of Formation: Cooperatives are relatively easy to form and operate, especially compared to other types of businesses.

Demerits of Cooperatives

  1. Lack of Secrecy: Due to the democratic nature of cooperatives, there may be less secrecy compared to other types of businesses.
  2. Government Interference: Cooperatives are subject to government regulation and supervision, which can sometimes be burdensome.
  3. Limited Capital: Cooperatives may have limited access to capital compared to other types of businesses.
  4. Lack of Harmony and Innovation: Decision-making in cooperatives can be slow and bureaucratic, which may stifle innovation.
  5. Poor Management: Cooperatives may suffer from poor management due to the lack of professional expertise among members.

Reasons for Failure of Cooperative Societies:

  1. Government Interference: Excessive government interference can affect the autonomy and flexibility of cooperatives.
  2. Poor Infrastructure: Lack of adequate infrastructure, such as transportation and communication networks, can hinder the operations of cooperatives.
  3. Price Fluctuations: Cooperatives may be vulnerable to price fluctuations in the market.
  4. Political Instability: Political instability can create an uncertain and risky environment for cooperatives.
  5. Liberalization of the Economy: Liberalization of the economy can increase competition and make it difficult for cooperatives to compete with larger, more established businesses.
  6. Poor Financing: Cooperatives may have difficulty accessing financing, especially in developing countries.
  7. Lack of Harmony of Members: Disagreements and conflicts among members can weaken the cooperative and hinder its progress.
  8. Poor Methods of Production: Cooperatives may use outdated or inefficient methods of production, which can lead to lower productivity and profitability.
  9. Poor Management Systems: Poor management systems and practices can lead to mismanagement and financial problems.
  10. Natural Calamities: Natural disasters, such as floods, droughts, and earthquakes, can disrupt the operations of cooperatives and cause financial losses.
  11. Lack of Diversification: Cooperatives that rely on a single product or service may be vulnerable to changes in market demand.
  12. Substitute Influence: The emergence of substitute products or services can reduce the demand for the products or services offered by cooperatives.

Reasons for Revival of Cooperatives:

  • Improves on the Standards of Living: Cooperatives can help to improve the living standards of their members by providing access to essential goods and services at affordable prices.
  • Strengthen the Private Sector: Cooperatives can strengthen the private sector by providing employment opportunities and stimulating economic growth.
  • Eradicate Poverty: Cooperatives can help to eradicate poverty by providing access to financial services and economic opportunities for marginalized communities.
  • Equip Members with Practical and Theoretical Skills: Cooperatives can provide members with practical and theoretical skills through training and education programs.
  • Mobilize Special Interest Groups: Cooperatives can mobilize special interest groups, such as the youth, farmers, and women, to work together for their common benefit.
  • Provide Employment to Society: Cooperatives can provide employment opportunities for people who may have difficulty finding work in the formal sector.
  • Reduce on Income Inequality: Cooperatives can help to reduce income inequality by providing equal opportunities for all members.
  • Reduce on Regional Imbalance: Cooperatives can help to reduce regional imbalance by promoting economic development in rural and underserved areas.
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