Cooperative societies are groups formed by individuals to meet their various financial needs. It is either formed by a person or a group of people who collect resources in the form of savings to invest or to lend to the members of the cooperative.
It is a voluntary association formed for the mutual benefit of all members, working for their common cause. Cooperative Societies are formed with the idea of supporting each other to achieve a common economic goal.
For example, farmers can band together and form a cooperative society to work together and take advantage of economies of scale. When they work together, they will have better bargaining power in purchasing raw materials. They will also benefit from better bargaining power when selling their agricultural production.
Basically, cooperatives aim to respond directly to community needs, promote collaborative entrepreneurship and economic growth, provide small loans to their members, among others. In addition to contributing to the growth of society, another objective of a cooperative society is to make profits.
Co-operative societies go through a lot of planning, financing and start-up preparation. Hence, they expect to get good and encouraging returns. Traditionally, cooperatives make investment rather easy for members. When members join an existing co-op, they may be required to invest a nominal amount and then agree to invest over time allowing the co-op to keep or keep a portion of the co-op profits each year in the form of social capital.
Members must therefore invest in their cooperative and not simply use it or visit it. In other words, members who do business with other companies can simply buy or sell, but to do business with their cooperative, they must also invest.
Some cooperatives allow their members to take out loans, while others allow members to purchase items at cheaper rates when making bulk purchases from members’ savings.
Being a member of a cooperative allows an individual not only to save funds, but also to be eligible for small loans at little or no interest to be able to finance projects. Cooperatives can be formed either with members of a religious organization, or with professional associations, or even with workers from corporate organizations or government establishments.