1. Socio-condition of Nepal before cooperative was introduced in Nepal.

Cooperatives are people centric enterprise owned, controlled and run by and for their
members to realize their common economic, social, and cultural needs and aspirations.

Cooperatives bring people together in a democratic and equal way. Whether the members are
the customers, employees, users or residents, cooperatives are democratically managed by
the one member one vote rule. Members share equal voting rights regardless of the amount of
capital they put into the enterprise. 

Cooperative in Nepal was introduced in 1956 but it didn’t take off instantly rather it needed
time for people to understand and be part of it. Before the introduction of cooperative in
Nepal people living in rural areas were unaware of the banking system as they used to bury
money in their home. People with weak financial background used to work in the field for the
landlords and get few things to eat. There were bad practices from the money lenders to
collect the hefty interest rate from borrowers. People with skills were forced to work for
others due to lack of capital to setup their own enterprises. The condition of the woman were
even worst because they used to be busy in the house works and were little aware about the
work knowledge. There huge income disparity among poor and rich because rich people were
lending money to the poor population and investing in the different sectors while it was
difficult for the poor population to feed their family. People didn’t have basic financial
knowledge to save unless cooperative reached them.

Majority of the Nepalese people were not introduced to have the proper knowledge of health,
education, agriculture, savings and financial programs. Till today most of the rural parts does
not have access to the banking sector and cooperative have successfully help to fill that gap.
Most of the people were living in the poverty line and people had no idea about the local
entrepreneurship and they were also unable to recognize their skill and their potential.

2. Establishment of Cooperative

Like the rest of the world Nepal also adapted the model of cooperative but it was not a hit at
an initial stage but with the time everything changes. Modern co-operatives began in Nepal in
1954 when a Department of Co-operatives (DOC) was established within the Ministry of
Agriculture to promote and assist development of co-operatives. The first co-operatives
formed in Nepal were co-operative credit societies with unlimited liability created in the
Chitwan district as part of a flood relief and resettlement program. They had to be
provisionally registered under an Executive Order of HMG and were legally recognized after
the first Co-operative Societies Act of 1959 was enacted. The history of co-operatives in
Nepal is closely related to Government’s initiatives to use co-operatives as part of its
development 2programs. Therefore, the development of co-operatives will be described in
eight phases corresponding to eight plan periods.

Co-operatives have direct and indirect impacts on socio-economic development by promoting

and supporting entrepreneurial development, creating productive employment, raising
incomes and helping to reduce poverty while enhancing social inclusion, social protection
and community-building. Whilst cooperatives directly benefit their members, they also offer
positive externalities for the rest of society, and have a transformational impact on the
economy. Prior to the establishment of cooperative there was a  concept in the form of Guthi,
Parma, Dhikuri, Dharmabhakari etc. has been used from a very beginning in Nepalese
societies. Characteristics of these historical social institutions are almost resembled with
primary form of co-operatives. For the institutional development of such societies, the then
government aimed to adopt co-operative system as a means for economic social and cultural
development of the people as well as an appropriate and effective tool for rural development.

The establishment of the cooperative has been great for the Nepalese society because people
are able to have their own business, woman no longer only gets involved in household matter
rather they are adding the financial benefit to the family. The income source of the people
have increased as a result people are able to afford the good housing, better education and
health facilities to the family members.

3. Starting the growth of the cooperative movement in Nepal

It appears that until 1990 most cooperative ventures were limited to credit and finance and
were controlled by the government. The Cooperative Act of 1992 provided freedom for the
farmers themselves to organize and establish cooperative societies. As of 2004, it is reported
that a total of 7,598 cooperatives exist in Nepal, and of the total 2,979 were multipurpose
cooperatives, 2,345 credit unions, 1,410 milk producer cooperatives, 154 consumer
cooperatives, and 710 other types of cooperatives It is reported that consumer cooperatives
are failing mainly due to the opening of department stores nationwide. Cooperatives are also
found in the areas of transportation, vegetable production, coffee and tea production, wood
carving, furniture, the cottage industry, carpet industry, and  ginger  production.

Beginning in the 1980s a new generation of community based savings and credit groups
began to emerge in Nepal. The Cooperative Act was amended for the third time to give the
Government more control. By this time the Savings and Credit movement had spread
throughout the country and the need for an apex coordinating body was evident. In August
16, 1988, the Nepal Federation of Savings and Credit Cooperative Unions (NEFSCUN) was
formed. After people’s movement the new democratic government enacted the Co-operative
Act and the Co-operative Regulations in 1992 and 1993 which permitted the establishment of
a three tiered co-operative system, and provides a legal base both for the establishment of co-
operative societies/unions/federations and application of co-operative values, norms and
principles into practice. According to the Department of Cooperative the major types of co-
operative societies operating in Nepal are Saving and Credit, Multipurpose, Dairy,
Agriculture, Fruits and Vegetables, Bee Keeping, Tea, Coffee, Consumers, Science and
Technology, and Energy. It is believed that around 6 million people are the members of
34,512 cooperatives and more than 60,517 people are employed directly in Cooperative
business.

There are various types of cooperative that are currently working in Nepal under the Ministry
of Agriculture and Co-operatives to enhance the local entrepreneurship as well as to develop
local leadership through the promotion, regulation and development of Co-operatives for
economic, social and cultural development of their members. Some types of cooperative that
are in Nepal are:

1. Coffee cooperative
2. Strawberry cooperative
3. Agriculture cooperative
4. Herbal cooperative
5. Multipurpose cooperative
6. Saving and credit cooperative
7. Others