Principles of Co-operatives

The principles of co-operatives are aimed at the realization of certain moral values of life. There are four basic principles of co-operation viz.
  •  Open and voluntary membership.
  •  Democratic Governance.
  •  Limited return on equity.
  •  Equitable distribution of surplus.
Based on these principles, the organization developed the following principles:
  •  Co-operation between Co-operatives.
  •  Co-operative Education.
These principles are of universal significance and can be applied to different type of co-operatives in different situations with a considerable degree of understanding and skill. To apply these principles in the various forms and situations, it is of utmost importance to understand these principles.

i. Open and Voluntary Membership

The membership of the society should be open to any body residing in the area according to his willingness only. For it, the criteria could be that he is willing to accept the responsibility bestowed upon him. The right of membership should not be based on religion, cast, political affiliation or other artificial distinctions. The person full-filling the conditions should neither be denied nor compelled to take the membership under pressure either social or legal rather it implies freedom to join,continue or withdraw from the society.

ii. Democratic Governance

All the members of the cooperatives are the owners of the business and have the right and responsibility to govern its affairs either in their individual capacity or through the leader they choose. In case, the business of the cooperatives expands and diversifies, all the members may not get time to meet each other every day to discuss the minor details of the business and take decision. In such cases, it becomes practically difficult to involve all the members all the time. Hence the members have to choose/elect certain members from amongst them selves. The members have to delegate their powers to these elected members, known as Board of Directors, who take the decision at every moment concerning the business. If the member of the board of directors does not have the adequate time to look after the affairs of the society, the powers are delegated to the General Manager, subject matter specialists in the field or to the sub committees formed for the purpose.

iii. Limited Return on Equity

The co-operatives formed is a human association directed towards earning profits and therefore it is an economic enterprise. For starting any economic enterprise capital is required. To raise the capital for running the enterprise, every member of the society contributes his share. This shared capital of the members of the society is known as the equity. Since the money invested as equity by the members has not been paid for direct returns, a limited interest/bonus as determined by the board of directors after calculation of profits is paid to the members from time to time.

iv. Equitable Distribution of Surplus

Since the co-operative society formed is an economic enterprise running with a motto of earning profits, surplus is originated. This surplus can be used in several ways viz. capital formation and expanding the business in the same direction or starting some other business related or unrelated with this business, for common benefits or enjoyment and dividend to the members. The dividend is generally distributed on the basis of the contribution of the members or the number of shares which a member possesses in the society. Non-members who may be directly or indirectly connected with the business are not entitled to any dividend. The surplus after paying the dividend and taxes, etc. remain with the society and is at the disposable of board of directors. They can take the decision to use this surplus capital for the benefit of members, the way they like. One of the way generally used is to give the loan to the members of the society for a specific period at a certain specified rate of interest (generally the rate of interest is the same as offered by the cooperative/public sector banks).

v. Co-operation among Co-operatives

Both in the business and in protecting the interest of one another, the cooperatives work together extending the benefit of cooperation even in wider circles.

vi. Co-operative Education

Cooperative Education means providing knowledge in the principles and techniquesof cooperation to its members, officers and employees at the same time. This will facilitate the Co-operatives to run effectively and efficiently.

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