Advantages of Cooperative Enterprises

Advantages of Cooperative Enterprises

The following are some of the important advantages of co-operative enterprises.

1. Voluntary organization: The membership of a cooperative society is open to all. Any person with common interest can become a member. The membership fee is kept low so that everyone would be able to join and benefit from cooperative enterprises. At the same time, any member who wants to leave the society is free to do so. There are no entry or exit barriers.

2. Ease of formation: Cooperatives can be formed much easily when compared to a company. Any 10 members who have attained majority can join together for forming a cooperative society by observing simple legal formalities.

3. Democracy: A co-operative-enterprise is run on the principle of ‘one man one vote‘. It implies that all members have equal rights in managing the affairs of the enterprise. Members with money power cannot dominate the management by buying majority shares. Equitable distribution of surplus: The surplus generated by the cooperative enterprises is distributed in an equitable manner among members. Therefore all the members are benefited. Further the society is also benefited because a sum not exceeding 10 per cent of the surplus can be utilized for promoting the welfare of the locality in which the cooperative is located.

4. Limited liability: The liability of the members is limited to the extent of their capital contribution. They cannot be personally held liable for the debts of the society.

5. Stable existence: A cooperative enterprise enjoys separate legal entity which is distinct from its members. Therefore its continuance is in no way affected by the death, insanity or insolvency of its members. It enjoys perpetual existence.

6. Each for all and all for each: Co-operatives are formed on the basis of self help and mutual help. Therefore members contribute their efforts to promote their common welfare.

7. Greater identity of interests: It operates in a limited geographical area and there is greater identity of interest among members. Members would be interacting with each other. They can co-operate and manage the activities of the enterprise in a more effective manner.

8. Government support: The government with a view to promote the growth of co-operatives extends all support to them. It provides loans at cheap interest rates, provides subsidies etc.

9. Elimination of middlemen: Co-operatives can deal directly with the producers and with the ultimate consumers. Therefore they are not dependent on middlemen and can save the profits enjoyed by the middlemen.

10. Low taxes: To promote the co-operative movement and also because of the fact that it is a non-profit enterprise, government provides various exemptions and tax concessions.

11. Rural credit: Co-operative societies have contributed significantly in freeing villagers from money lenders. Earlier, money lenders used to charge high rates of interest and the earnings of the villagers were spent on payment on interest alone. Co-operatives provide loans at cheaper interest rates and have benefited the rural community. After the establishment of co-operatives, the rural people were able to come out of the grip of money lenders.

12. Role in agricultural progress: Co-operative enterprises have aided the government’s efforts to increase agricultural production. They have improved the life of the people in rural areas. They serve as a link between the government and agriculturists. High yielding seeds, fertilizers, etc. are distributed by the government through the cooperatives.

13. Own sources of finance: A cooperative society has to transfer at-least one-fourth of its profits to general reserve. Therefore it need not depend on outsider’s funds to meet its future financial requirements. It can utilize the funds available in the general reserve.

15. Encourages thrift: Cooperative societies encourage the habit of savings and thrift among their members. They provide loans only for productive purposes and not for wasteful expenditure.

16. Fair price and good quality: Co-operative enterprises buy and sell in bulk quantities directly from the producers or to the consumers. Products are processed and graded before they are sold. Bulk purchases and sales ensure fair prices and good quality.

17. Social benefit: Co-operatives have played an important role in changing social customs and curbing unnecessary expenditure. The profits earned by the co-operatives have been used for providing basic amenities to the society.

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