Cooperative Society - Characteristics and Types

There are different types of business organisations, one such form is of cooperative society. Cooperative societies are formed with the aim of helping their members. This type of business organisation is formed mainly by weaker sections of the society in order to prevent any type of exploitation from the economically stronger sections of the society.

Cooperative societies need to be registered under the Cooperative Societies Act, 1912 in order to function as a legal entity. Members of the society raise the capital within themselves.

Characteristics of Cooperative Society

Cooperative societies are defined by the following characteristics.

1. Voluntary Association: The membership of a cooperative society is voluntary in nature, i.e it is as per the choice of people. Any individual can join the cooperative society and can also exit the membership as per his/her desire. The member needs to serve a notice before deciding to end the association with the society.

2. Open Membership: The membership of a cooperative society is open to all i.e, membership is open to all, irrespective of their caste, creed and religion.

3. Registration: A cooperative society needs to get registered in order to be considered a legal entity. After registration it can enter into contracts and acquire property in its name.

4. Limited liability: The members of a cooperative society will have limited liability. The liability is limited to the amount of capital contributed by the member.

5. Democratic Character: Cooperative society forms a managing committee and elected members have the power to vote and choose among themselves. The managing committee is formed so as to take important decisions regarding the operations of the society.

6. Service Motive: The formation of a cooperative society is for the welfare of the weaker sections of the community. If the cooperative society earns profit it will be shared among the members as dividend.

7. Under state control: In order to safeguard the interests of society members, the cooperative society is under the control and supervision of the state government. The society has to maintain accounts, which will be audited by an independent auditor.

Types of Cooperative Societies

Following are some of the types of cooperative societies:

1. Consumer Cooperative Society: Consumer cooperative societies are formed with the objective of protecting the consumer interests. Individuals who wish to purchase products at reasonable rates most likely join consumer cooperative societies. In such type of societies, there are no middlemen involved, the product is purchased directly from the producer and sold to consumers.

2. Producer Cooperative Society: Producer cooperative societies are formed with the objective of protecting the interests of small producers. These cooperatives help producers in maintaining their profit and also to assist producers in procuring items that will be helpful in production of goods and services.

3. Credit Cooperative Society: These cooperative societies are set up with the objective of helping people by providing credit facilities. They provide loans at a minimal rate of interest and flexible repayment tenure to its members and protect them against high rates of interest that are charged by private money lenders.

4. Housing Cooperative Society: Housing cooperative societies are formed with the objective of providing housing facilities to the members of the society. This proves to be beneficial for the lower income groups as it allows them to avail housing benefits at a very affordable price.

5. Marketing Cooperative Society: These societies are formed with the objective of providing small producers a platform to sell their products at affordable prices and also eliminate middlemen from the chain, thus ensuring adequate profits.

Advantages of Cooperative Society

Following are some of the advantages of cooperative societies:

1. The products that are sold in the cooperative societies are cheaper than the market.

2. Procurement of products is done directly from the producers, which removes the middlemen, thereby generating more profit for the producers and consumers.

3. Members of the cooperative society can get quick loans.

4. There is no black marketing involved.

Disadvantages of Cooperative Society

Some of the disadvantages of cooperative societies are:

1. Due to the association of members of low income groups, the scope of raising capital is limited.

2. It suffers from inefficiencies in management.

This was all about the topic of Steps in Cooperative Society – Characteristics and Types, which is an important concept for the students of Commerce. For more information, stay tuned to BYJU’S.

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