Cooperatives can play an important role in the development process of communities and nations. Cooperatives are businesses owned and run by their members, who share in the profits and benefits of the enterprise. As of March 2021, there were over 8.48 lakh (848,000) registered cooperatives in India, and the total membership of cooperatives in India was over 31 crores according to the latest data from the National Cooperative Development Corporation (NCDC). These cooperatives are spread across different sectors including agriculture, dairy, banking, housing, handloom, fisheries, and more.
Role of Cooperatives:
The following are some of the roles that cooperatives can play in development:
1. Economic Development: Cooperatives can help stimulate economic development in communities by providing employment, generating income, and promoting local production and consumption. Cooperatives can also provide access to markets for small-scale producers who may not be able to compete with larger, more established businesses.
2. Poverty Reduction: Cooperatives can be an effective tool for poverty reduction by providing members with access to credit, training, and other resources. By pooling resources and sharing the risks and rewards of business ventures, members can improve their economic well-being.
3. Social Development: Cooperatives can contribute to social development by promoting democratic decision-making, fostering community cohesion and social inclusion, and providing opportunities for education and training.
4. Environmental Sustainability: Cooperatives can play a role in promoting environmental sustainability by adopting sustainable production practices, promoting eco-friendly products and services, and investing in renewable energy and other environmentally friendly technologies.
5. Women’s Empowerment: Cooperatives can be a powerful tool for women’s empowerment by providing access to resources and opportunities that may be otherwise unavailable. Cooperatives can also provide a supportive environment for women to network and share experiences.
Limitations of Cooperatives:
While cooperatives have many advantages, they also have some potential drawbacks or demerits, including:
1. Limited resources: As cooperatives are often small organizations run by volunteers, they may have limited resources to invest in professional management, marketing, or innovation. This can make it difficult for them to compete with larger businesses in the marketplace.
2. Decision-making challenges: Cooperative decision-making can be time-consuming and difficult, especially if members have different opinions or priorities. This can lead to delays and disagreements, which can ultimately hurt the cooperative’s success.
3. Lack of accountability: Since cooperatives are member-owned and controlled, there may be a lack of external oversight or accountability. This can lead to issues with transparency and governance, which can be problematic if members or customers lose trust in the cooperative.
4. Free-rider problem: In some cooperatives, members may be tempted to take advantage of the benefits without contributing their fair share of effort or resources. This can create a free-rider problem, where the burden of the work falls disproportionately on a small number of dedicated members.
5. Limited scope: Cooperatives may be limited in the scope of their operations, which can make it difficult for them to grow or expand beyond their initial focus. This can limit their ability to generate more revenue and profits, which can ultimately impact their long-term sustainability.
Challenges of Cooperative Societies in India:
Cooperative societies in India face several challenges, including:
1. Lack of Education and Awareness: A significant challenge facing cooperative societies in India is the lack of education and awareness among members about cooperative principles, values, and objectives. This can lead to poor decision-making, limited participation, and poor management.
2. Political Interference: Cooperative societies in India often face political interference from local politicians and government officials. This interference can create conflicts and disputes that impact the cooperative’s operations and sustainability.
3. Lack of Funding: Many cooperative societies in India struggle with funding, as they do not have access to adequate financial resources to invest in their operations or expand their services. This lack of funding can limit their ability to grow and compete in the market.
4. Weak Governance: The governance structure of cooperative societies in India is often weak, leading to poor accountability, transparency, and corruption. This can lead to mismanagement and poor decision-making, which can hurt the cooperative’s operations and sustainability.
5. Limited Professional Management: Most cooperative societies in India are run by volunteers who lack professional management skills and expertise. This can lead to poor management practices, limited innovation, and a lack of competitiveness in the market.
6. Legal and Regulatory Challenges: Cooperative societies in India also face legal and regulatory challenges, including complex laws, regulations, and procedures that make it difficult for them to operate effectively. This can lead to delays, disputes, and legal challenges, which can impact the cooperative’s sustainability.
Way Forward:
To overcome the challenges facing cooperative societies in India, some possible solutions and strategies include:
1. Education and Awareness: There is a need for education and awareness campaigns to inform members about the cooperative principles, values, and objectives. This can help to build a strong foundation for effective decision-making, participation, and management.
2. Professional Management: Cooperative societies need to invest in professional management, training, and development to build capacity and expertise in the cooperative sector. This can help to improve management practices, innovation, and competitiveness.
3. Funding: Cooperative societies need access to funding to support their operations and expansion plans. Governments and financial institutions can provide funding support and investment incentives to encourage growth and development.
4. Strong Governance: Cooperative societies need to develop strong governance structures, including clear rules, policies, and procedures. This can improve transparency, and accountability, and reduce the risk of corruption and mismanagement.
5. Legal and Regulatory Framework: Governments can simplify and streamline the legal and regulatory framework for cooperative societies, making it easier for them to operate effectively. This can reduce the burden of compliance and enable cooperatives to focus on their core activities.
6. Networking and Collaboration: Cooperative societies can form networks and collaborations to share knowledge, resources, and best practices. This can help to build a supportive community of cooperatives that can learn from each other and work together to achieve common goals.
Overall, cooperatives can be a valuable tool for promoting sustainable and inclusive development. By harnessing the power of collective action, cooperatives can help to build more resilient and equitable communities and economies.
Dr. Jayavantha Nayak
Professor,
Department of Economics
University College, Mangalore.