10 Principles of Co-Operatives – Explained!

(i) Voluntary Membership:

Everyone is at liberty to enter or leave .he co-operative society as and when he likes. Nobody is compelled to join a co-operative society. The members are also free to use or not to use the services of the society. Though there is no limit on the membership of the societies sometimes certain limits are imposed to keep the society as a workable group.

Consumer co-operatives do not restrict the membership but marketing co-operatives, producers co-operatives, insurance societies etc. may limit membership to a number which is properly manageable. Voluntary membership is the main ingredient of co­operation. Everybody willing to join a society is allowed to do so. Voluntary membership has been responsible for the success of co-operative movement.

(ii) Political and Religious Neutrality:

The membership of a co-operative society is opened to all irrespective of religion, caste, creed, colour or political affiliation. The co-operative movement can attract a large membership only by staying out of politics where people have divided opinions.

Co-operatives represent universal brotherhood and it should not lose its path in political contradictions. There is no place for caste or discrimination in co-operatives. The primary aim of co-operatives is to serve its members. So, co-operative societies are neutral as far as political and religious affiliations are concerned.

(iii) Democratic Management:

The management of a co-operative society is always on democratic lines. All the members of a society elect a body of persons to conduct and control the day-to-day working of the society’. The members frequently meet and give guidelines to its executive.

The management is elected through one man one-vote system. The day-to-day work is conducted by expert persons but the ultimate control lies with the members. In a cc-operative, democracy is more than a system; it is a condition of its business success. Co-operative business stands or falls with democracy.

(iv) One Man, One Vote:

In co-operative societies every member is given one vote irrespective of his contribution towards their basis of number of shares held by a person. So persons having large number of shares control the organisation. In a co-operative, nobody can control the society on the strength of his wealth. All members have equal voice in the management of the society.

(v) Service Motive:

The primary objective of co-operative societies is to provide service to their members. The aim is not to earn profits as is the case in all other forms of organisations. The service of members is the fundamental object of co-operative societies. The societies earn a small amount of profit to cover up administrative expenses. The profit is generally earned when goods are sold to non-members.

(vi) Distribution of Surplus:

The societies earn surplus from their services. This surplus is not divided according to capital contributed. It is distributed according to purchases made by the members in case of consumer co-operatives, and according to goods delivered to society for sale in case of producer’ co-operatives. The Indian Co-operative Societies Act has given guidelines for the distribution of the surplus.

A certain percentage is paid in the form of dividend on capital contributions. At present this rate should not exceed 9%. One-fourth of the surplus should be kept as reserve in the society and upto 10% of surplus should be spent for the general welfare of the members. So any surplus arising from the working of the society is either distributed to the members or is spent on their welfare.

(vii) Cash Trading:

Another principle of co-operative societies is trading on ‘Cash basis’. Co-operatives flourish only when cash trading principle is strictly followed. Cash trading ensures economy for the co-operatives. It eliminates bad debts and collection expenses. Credit system reduces working capital of the societies. In granting credit there is a likelihood of some discrimination which may lead to misunderstanding among members. The societies may make some exception to this rule for helping needy members but generally cash trading principle is followed.

(viii) Limited Interest on Investment:

The pioneers of co-operative movement want to give certain percentage on capital contribution in the form of dividend. This is an incentive to members for keeping money with the society as deposits. In India, a maximum of 9 per cent per annum can be paid as interest on contributions to the society. This is a first charge on the surpluses of the society.

(ix) State Control:

The co-operative societies are to follow certain rules and regulations framed by the government. In India, all co-operative societies are registered under Indian Co-operative Societies Act or respective state co-operative laws. The government gives a number of incentives for the promotion of co-operatives. There is a control of central and state governments on the working of co-operative societies in India.

(x) Co-operative Education and Training:

The success of a co-operative will depend upon the awareness of its members towards the principles of co-operation. The members should be properly educated about the aims and objectives of the societies, so that they may work unitedly. The members should be trained to perform various activities of the society. So proper education and training of members will add to the success of co­operative movement.

Submitted by : Dr. Deepti, Category : Business