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Business Studies

Functions of a Cooperative Society

Cooperative societies play an important role in any country. They can be organised to bring people of a specific occupation such as farmers, miners or tradesmen together. As a result, there different types of cooperatives but with similar functions. Some of these functions include eliminating middlemen, protecting the rights of their members and empowering the vulnerable members of society, to name a few.

What is a Cooperative Society

A cooperative society is an association of people united voluntarily in order to meet a common social, cultural or economic need. These associations are jointly owned and democratically controlled. The main objectives of cooperative societies are established by the members. Normally, the objectives have to do with specific deficiencies in the marketplace. Hence, the function of any society is to intervene in the marketplace in order to fulfil the needs of its members. The various functions of cooperative societies are described below.

To provide goods and services at affordable prices

The primary function of cooperative societies is providing goods and services to their members at affordable prices. Be it affordable loans at reasonable interest rates from credit societies, cheap goods at discounted prices from consumer and producer societies or affordable housing from housing societies.

They aim to eliminate middlemen

The second function of cooperative societies is to eliminate middlemen. Societies such as marketing societies do this through the coming together of members to sell their products. Members can even purchase these products at discounted prices. A marketing society aims to sell directly to customers thus eliminating middlemen.  Also, consumer societies seek to solve the problems created by middlemen or eliminate them completely. Middlemen are known to increase the prices of products and to create artificial shortages in the market. To solve these problems, cooperative societies bring together various producers and suppliers of different products to sell directly to the consumer. Some other societies perform the role of processing, marketing and distribution of the members’ produce on their behalf. That way, the society can improve the competitive position of its members whilst protective producers from being exploited by middlemen.

Prevent the exploitation of the weaker members of society

Preventing the exploitation of weaker member of societies is another function of cooperative societies. Good examples of such cooperative societies are producer cooperatives and worker cooperatives where workers from all walks of life including artisans and self-employed workers are active members. Farming cooperative societies are also important in preventing the exploitation of farmers. Such societies are set up to protect the interests of producers and artisans. These societies aim to fight against big capitalists and enhance the bargaining power of self-employed workers and small to medium producers.

To protect the rights of people as both producers and consumers

By keeping tracking of prices of goods and services, cooperative societies look out for both consumers and producers. They focus on the needs of their members and the community where the people are both consumers and producers.  Cooperative societies also provide financial and technical support to their members.

Contribute to a more sustainable food system

An important function of cooperative societies is their contribution to a sustainable food system. Food and agricultural cooperatives are the most common cooperatives especially in developing countries. Agricultural cooperatives participate along the supply chain and help small scale farmers access markets, inputs, credit and technical support.

Empowering the elderly and the vulnerable

Housing cooperatives provide affordable ways for people to own houses or secure rental property. Purchasing a home is expensive for many and without the help of cooperative societies many low-income workers would not be able to obtain accommodation. In developed countries such as Canada for example some housing cooperatives are specifically targeted at the elderly. The housing cooperation, for example, provides housing for their members who only pay a reasonable membership fee.

Provision of Products and Services not provided for by Businesses

The primary function of cooperative societies is to invest in sustainable development. If the government or businesses do not invest in certain community projects or provide for the needs of the community a cooperative will do it. Be it a healthcare, basic commodities, or housing, a cooperative society will provide the need or service at affordable prices. This way cooperatives create a balanced system by making a community self-sufficient.

Protecting the Environment

Protecting the environment is another function of cooperative societies. Most of these societies are concerned with the community and its environment. Thus, the businesses run by cooperative societies are run with the environment in mind. Cooperatives take measures to respond to environmental degradation as well as protecting and sustainably managing the available natural resources. Most cooperative societies are important partners in achieving environmental sustainability since they are at the forefront in supporting practices that retain the value of the natural environment.

Reduction in Inequality through Inclusion

The cooperative principle of open membership means that anyone from any income group can join and enjoy the benefits of cooperative societies. Thus, a crucial function of cooperative societies is the inclusion of those with little to no income or those discriminated. This means that people with limited resources or who face discrimination can pool resources together in order for them to enhance their bargaining power as well as compete with wealthy or powerful organisations.

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