Various authors have defined cooperatives differently based on their backgrounds. Some view cooperatives as businesses voluntarily owned and controlled by member patrons, operated on a non-profit basis.
These businesses often emerge from the felt needs of members who aim to solve common problems by pooling their limited resources. For example, they may collaborate to market farm produce or secure farm supplies.
Other authors, such as H.E. Babcock, a prominent eastern cooperative leader, describe cooperatives as legal entities through which a group of self-selected individuals seek to improve their economic positions within society.
Regardless of the perspective, two common elements emerge from these definitions: (i) A cooperative is an institutionalized device that enables group action to compete within the framework of a business organization; (ii) Cooperatives are voluntarily organized to serve and benefit their members.
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Origin of Cooperative Business
The concept of cooperatives originated from human suffering, degradation, and exploitation. The cooperative movement began in England in 1844 during the Industrial Revolution, a time when factory workers endured immense misery and poverty.
Twenty-eight impoverished weavers in Rochdale convened to devise ways to improve their conditions. Their efforts led to the formation of the “Equitable Society of the Rochdale Pioneers,” the first cooperative society. Inspired by this model, other industrial workers organized similar bodies to amplify their voices. The cooperative idea soon spread to other industries.
Characteristics of Cooperative Movement
Cooperatives are guided by seven unique principles:
- Open Membership
- Democratic Control
- Limited Interest on Capital
- Patronage Dividend
- Cash Transactions Only
- Religious or Political Neutrality
- Constant Education of Members
These principles unite cooperators worldwide and distinguish cooperatives from other business organizations.
1. Open Membership: This principle ensures cooperative businesses are open to all interested individuals. Typically, there is no upper limit to the number of members a cooperative society can have.
2. Democratic Control: This principle emphasizes the concept of “one person, one vote,” ensuring that control remains in the hands of patrons rather than capital owners, unlike private businesses where voting power is tied to share ownership.
3. Limited Returns or Interest on Capital: In most cooperatives, returns on capital are limited to a fixed percentage, usually between 5% and 8%. Capital is seen as a tool to meet members’ needs, discouraging profit-driven motives.
4. Patronage Dividends: Surplus is allocated based on members’ patronage, unlike in private companies, where profit is tied to shareholding. In a credit society, for example, patronage is determined by the amount borrowed.
5. Cash Transactions Only: Based on Article 21 of the Rochdale Pioneers’ statutes, all transactions are conducted on a cash basis. Though modern cooperatives may allow credit for durable goods, the cash principle remains key.
6. Religious and Political Neutrality: Cooperatives remain open to all individuals, regardless of their religious, political, or ethnic backgrounds, fostering unity in society.
7. Constant Education of Members: Members must be educated in economics, business management, and cooperative operations. Even when professionals are hired, education helps members appreciate and actively participate in their cooperative.
Types of Cooperatives in Agriculture
Several types of cooperatives exist, but the most common in Nigeria include:
1. Marketing Cooperatives: These cooperatives manage the physical operations of marketing for their members, striving to offer services at the lowest cost while securing the highest possible prices for products.
2. Producer Cooperatives: Made up of producers like farmers, these cooperatives focus on sourcing inputs such as fertilizers and agro-chemicals at affordable costs and in a timely manner.
3. Service Cooperatives: These cooperatives provide services like credit, thrift, irrigation, and transportation to members at cost.
4. Processing Cooperatives: Formed for processing farm products like butter, cheese, and rice, these cooperatives help members process and package their goods for sale.
5. Consumer Cooperatives: These societies work to provide consumer goods to members at reasonable prices. They played a significant role in Nigeria during the early 1980s when consumer goods were scarce and prices were high.
6. Multipurpose Cooperatives: These cooperatives combine various functions, such as supplying inputs, offering credit, and selling consumer goods.
Potential Benefits of Cooperatives to Farmers
1. Increased Profit: Farmers can increase profits by purchasing inputs in bulk at lower prices and securing higher net returns through marketing cooperatives, which eliminate middlemen.
2. Marketing Services at Cost: Cooperatives allow farmers to divert profits from middlemen to themselves, ensuring that services are provided at cost.
3. Reduced Cost: Cooperatives operate at lower costs due to economies of scale, reduced advertising expenses, and the unique patronage dividend system.
4. Increased Political Strength: Cooperatives empower farmers to advocate for timely supply of inputs and government subsidies.
5. Organizational Structure of Cooperative Societies: In Nigeria, cooperative societies follow a three-tier structure. Primary societies form at the local level, secondary societies unite primary groups, and apex associations provide ancillary services at the state or federal level.
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Problems of Cooperatives in Nigeria
1. Illiteracy and Ignorance of Members: Many members lack education, which leads to a poor understanding of cooperative principles.
2. Disloyalty Among Officials: Corruption among officials, particularly in rural areas, undermines trust and affects the efficiency of cooperatives.
3. Low Membership: A small membership base restricts cooperatives’ ability to pool resources effectively.
4. Poor Capital Base: Limited capital weakens the competitiveness of cooperatives.
5. High Rate of Loan Default: Frequent loan defaults pose a serious threat to the viability of cooperative societies.
This article highlights the role of cooperatives in agriculture, their principles, types, benefits, and challenges, providing a comprehensive overview of their significance in the agricultural sector.
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