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Principles Or Features Of Cooperative Society

International Co-operative Alliance (ICA) Congress of 1931 resolved to appoint a Committee to examine the applica-tion of Rochdale principles. The Committee made its final report in 1934 in Paris. As a result of this report the ICA recognised seven Rochdale principles but concluded that only four of those could be applied universally at the international level for purpose of ICA membership. They were:

1. Voluntary or open membership.

2. Democratic control.

3. Distribution of surplus to members in proportion of their participation in the transaction of the society.

4. Limited interest on capital.

The other three were:

5. Cash trading.

6. Religious and political neutrality.

7. Education.

1. Membership (a) Those who can make use of the servics of a particular co—operative society should be able to become its members without any artificial restrictions. It is important to note that only those whose needs and services are supplied should become and allowed to become members.

(b) Co-operative Movement is at once a social movement seeknig to increase its adherence. Naturally it should welcome and encourage the eligible persons to become members.

(c) The member should realize and fulfil his obligation to the society and the society in turn should reciprocate.

(d) The individual should be free to join or withdraw from a society. These should not be any direct or indirect compulsions. However, his entry or exit should not affect the society adversely. Therefore this freedom can rarely be absolute. It can be modified or restricted by other considerations of greater validity.

(e) A society is not obliged to retain a member if his conduct is detrimental to its interest. The condition of explusion however should be clearly laid down in advance and known to both parties.

(f) The open membership (with the unavoidable restrictions) make a co—operative society distinctly different from a joint stock company. Because of open membership shares remain at the nominal value fixed in the society’s rule.

2. Democratic Administiration

(a) The primary purpose of a co-operative society is to promote the interest of its members. To achieve this end the members must have the final say in the society. Therefore, there should be an effective method of consulting the members as a body and their support and loyalty keep the society alive and active. To ensure that the members interest get the highest priority in the administration of the societies:, affairs, those who administer the affairs must be chosen directly or indirectly by the members.

(b) “One man, one vote” is the most condensed expression of the democratic administration of co-operative societies.

(c) In the case of organizations of higher tiers, where members are societies, indirect systems of elections are adopted.

(d) In developing countries where government contribute capital of the societies, government representation on Boards of Management become necessary. Without generous amou-nts of government finance, co-operative development in these countries will be slow. However, representation should not continue a day longer than it is necessary.

3. Interest on Capital

(a) The co-operative movement since its beginning has followed the system of paying a fixed and limited interest on capital of members.

(b) The three main forms of capital in a co-operative:– (i) Share capital. (ii) Capital owned by society in the form of reserves etc. : (iii) External borrowning etc. The limitation applies really to the first.

(c) Situation where principle of limited interest can be tested.
(i) The co-operators are not unanimous on the question whether any interest should be paid on capital or not. There is no principle which obliges that interest should be paid. If no interest is paid there is no clash with the principle.

(ii) If interest is paid below the rate which may be regarded as fair elsewhere then also this can be regarded as payment of limited interest.

(iii) A third situation is where limited interest is paid for a certain period but raised or lowered not in response to short term fluctuation on the money market but the long range movement of interest rates. This too does not contravene the principle.

(d) A fourth situation would be where a premium is merged into the rate of interest. From a co-operative point of view, this is dubious.

(4) Disposal of Surplus (Savings):

(a) There are two main points that should be kept in mind.

(i) How to find the proper balance between the interest of the society and those of the individual members.

(ii) To do Justice as between one individual member and another. It is important to remember that economic benefits conferred on the members are of varions kinds—money, goods or service.

(b) With regard to the distribution of surplus there are certain operational aspects that must he considered:

(i) Provision of goods to members at low prices which hardly leads to accumulation of surplus for distribution.

(ii) The business prudence sometime may require that all or large part of the society’s earnings to be placed to reserve.

(iii) A major part of the surplus may have to be devoted to provision of common enjoyment to the members. The distribution of surplus among members is an important characteristic that distinguishes a co-operative from a joint stock company.

(5) Education:

(a) The Commission elevated “principle of education” to that of a regular principle.

(b) The definition of education for the purpose of co-operation,. : “For the purposes of co-operation, however, education needs to be defined in a very broad sense which includes academic education of more than one kind but much besides. It includes both what people learn and how they learn it. Every phase of experience, which adds to people’s knowledge, develops their faculties and skill, widens their outlook, trains them to work harmoniously and effectively with their fellows and inspires them to fulfil their responsibilities as man or women and citizens can have educational significance for co-operation. Less and less in the contemporary world can education be limited to what is learnt in schools and colleges at special periods of people’s lives. According to the co-operative concept, education is a life long process.

(c) Co-operative education process can be divided into three groups: (i) Member education ; (ii) Staff training ; (iii) Education of the public in co-operative methods.

(6) Cash Trading : The main reasons the pioneers were:

(a) High cost involved in credit buying.

(b) Credit buying may hold the temptation to spend more than one can afford. The conditions at least in some parts of the world have changed where it is reasonable to think that the rule of cash trading may not be adhered to strictly.

(7) Political and Religious Neutrality: Internal: The internal aspect concerns the relations of a co-operative with its members. There should be no discrimination on the basis of religion or politics in admitting members or in the treatment to members.

External: “The external aspect deals with the society’s or the Co-operative Movements’ relation with the external social and political system. The Commission thought that co-operation as an economic movement with an economic doctrine of its own and represen-ting well defined economic interest, can not avoid involvement in affairs of government, which whether they are or are not the subject of party conflict are in nature political.”

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