BENEFITS OF COOPERATIVES

The Benefits of Cooperatives:

The ILO-Cooperative Network (ILO-Coopnet) identifies five broad benefits of
cooperatives as follows:
(a). Co-operatives keep economic benefits within a community: Profit is not
siphoned off by outside interests, because the co-operative members own and
keep it within the community. Co-operatives exist to fill a need in a community
that is not being met by other businesses, for example:
Agricultural co-operatives satisfy the need for supply, processing and
marketing of goods
Consumer co-operatives provide the members with the goods and services
required of the preferred quality at competitive prices.
Housing co-operatives give low-income people the opportunity to own their
own homes
Co-operative insurance protects individuals and small businesses from
risks
Savings and Credit Cooperatives serve people of limited incomes and not
reached by commercial banks. They extend credit to micro-entrepreneurs who
otherwise might not be able to secure financing.
Tourism co-operatives facilitate the opportunity of holiday stay and travel
and offer fair prices and good quality service to their members.
Energy and communication co-operatives meet rural peoples needs for
electricity and telephone not satisfied by private businesses.
Community development co-operatives are formed for the overall
development of local communities and are specifically concerned with social,
economic and cultural development. They build schools, clinics and other
utilities.
(b) Co-operatives Promote Democracy:
Co-operative members own their business. They provide share capital,
elect a board of directors, and receive the benefits of ownership through better
services and patronage refunds based on use. In this way co-operatives
reduce poverty.
Co-operatives bring men and women outside the mainstream into a
nations economic and political life.
Co-operatives teach people how to resolve problems democratically. Many
decisions are made through the voting process and the majority wins. Some
individuals who receive education in democracy from co-operatives
become good political leaders.
In emerging democracies, co-operatives help throw off the shackles of a
non-market economy. Their members develop the skills of entrepreneurship
and learn market values. By so doing co-operative members who are also
entrepreneurs use these skills to improve services provided at individual and
co-operative society levels.
(c). Co-operatives Build Open Markets:
As more and more governments privatize state-owned enterprises, there is a
danger that these monopolies may be moved intact into private hands.
Co-operatives help avoid this pitfall by ensuring wider participation by the
users of the former state services.
Co-operatives spread economic power and encourage competition

 They provide market leverage to small producers victimized by powerful

cartels or sole-source companies.
They undercut middlemen and money lenders, whose charges are often
exorbitant.
By re-investing profits back into the business, co-operatives can operate on
narrower margins. Thus they help drive down unfair prices, and set a
competitive range for goods and services.
(d). Co-operatives raise human dignity:
Poor people always feel worthless and socially rejected. They are traumatized and
emotionally detached, feeling no one cares or loves them. They need company,
love and encouragement.
Co-operatives help people escape poverty and achieve dreams, such as
owning a house or giving their children education.
Since educated decision-making is essential to a co-operative societys
success, co-operatives also teach new skills, from adult literacy to business
operations.
Co-operatives empower individuals by giving the chance to participate in
decisions, which have an impact on them.
Sensitisation on cross-cutting issues affecting cooperative development.
Promotion of cooperative participation in socio-economic events.
(e). Co-operatives are Systems for Development:
Co-operatives draw community businesses into regional and national networks
through apex organizations such as unions and federations. The following are
associated benefits:
Lower co-operatives benefit from larger business volume, operating
efficiencies and professional management of apex organizations.
The economies of scale enjoyed by co-operatives enable farmers to
purchase supplies at volume discounts, and receive profits from value-added
processing.
Savings and Credit Cooperatives pool their resources together and are able
to transfer surplus savings to credit unions in lower income areas.
Co-operative insurance companies are tied into a worldwide reinsurance
network to guard against catastrophic losses. They pool groups of individuals
not served by commercial companies to guard against personal and business
risks.
Difference between cooperatives and other businesses
Cooperatives are economic organisations just like other businesses or
organisations. However, most business organisation are investor-oriented firms
owned by shareholders who have invested capital in an economic initiative. But
cooperatives are owned by the members, who are also users of the organisation
services.
Therefore, a cooperative a user-oriented enterprise, designed to maximise the
long term qualitative and quantitative benefits of the members.
For example, a producers cooperative involved in the marketing of agricultural
products will pay members a fair price for their products according to market
realities.
An investor-oriented enterprise is profit-driven and will try to minimise the cost of
farm produce, which they consider to be an input for their activities. They will
pay the farmers the lowest negotiated price for their agricultural produce. By

purchasing at low price and selling at high price, the investor-oriented firm will
try to maximise profit.