Understanding Co-operatives
Yvonne Harvey, Contributor

Students perform at the 'No Violence in Schools' tour at the Norman Manley High School in November last year. - Ricardo Makyn/Staff Photographer

Hello Readers. It's so good that we have lived to see another day and another week.

Today, we will look at the final form of business in the private sector of a mixed economy - Co-operatives.

A co-operative is a business organisation that is owned and operated by its members who have similar interests and objectives and who pool their resources together to establish the co-operative for their mutual benefit.

The first co-operatives were agricultural co-operatives, e.g., farm co-operatives, where tools, seedlings and other materials were bought in bulk at low costs for farming purposes. The agricultural products were sold at reasonable prices and the profits shared among the members of the co-operative.

Shares

Membership in a co-operative is gained by buying shares. These shares are usually of low value.

Irrespective of the number of shares owned, however, each shareholder only has one vote at the society's general meeting.

A board of management is elected to operate the business on behalf of its members. Profits are distributed among members.

Apart from selling shares, the co-operative may raise funds by borrowing from commercial banks, development banks and co-operative banks. The co-operative is based on five co-operative principles listed as follows:

• Open membership
  Open to all, 16 years and over, on the payment of a small fee. However, for certain types of co-operatives, there is a restriction where certain skills are required.
  
  
• Democratic control
  All members are equal, and the business is run for the benefit of all.
  
  
• Limited interest on share capital
  This is so since there are usually many persons contributing relatively small amounts of share capital.
  
  
• Distribution of profits to benefit all equity
  Profits should be shared in such a way as to prevent one member gaining at the expense of others. Therefore profits are distributed in accordance with the amount of share capital invested.
  
  
• Promotion of education
  Members of co-operative should be educated on the principles of the co-operative so that the business can be run efficiently.

Types

There are five main types of co-operatives:

1. Consumer

These buy goods and services at wholesale prices and sell to their members at lower-than regular prices.

2. Producer

These purchase raw materials at low costs, produce and then sell to make reasonable profits.

3. Financial Members

Persons who pool their personal savings so that they are able to qualify for credit at low interest rates from financial institutions.

4. Services

Provide their members with services which under normal circumstances they would not be able to access because of the high costs involved, e.g., housing and health care.

5. Workers

Members are allowed to determine and control their choice of employment and the co-operative will find employment for them.

Any group of persons wishing to form a co-operative must register with the Registrar of Co-operative Societies. They must pay a registration fee.

Your task for this week is to find out the advantages and the disadvantages of co-operatives. You can compare them with the ones that I will give you next week. The major part of the lesson will be on the major functional areas of a business. Bye for now.

Yvonne Harvey teaches at Glenmuir High School.