COOPERATIVE IDENTITY

In accordance with the International Cooperative Alliance (ICA), and later adopted by the International Labor
Organization (ILO) under the Promotion of Cooperatives Recommendation “a cooperative is an autonomous association
of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-
owned and democratically-controlled enterprise.”
UNIQUE CHARACTERISTICS
• Autonomous – independence and organization base of the enterprise;
• Volunteerism – open membership;
• Common needs – people come together to fulfill a mutual need;
• Ownership – members are owners (not merely customers or workers) of the enterprise and should invest wisely in its
growth;
• Democratic control – each member is given a single vote regardless of contribution/wealth;
• Enterprise – a cooperative is not only an association of people, but also a business enterprise.
GLOBAL RECOGNITION
• Cooperatives operate in all sectors of the nation’s economy;
• Cooperatives in their various forms promote the fullest participation in the economic and social development of all
people;
• Cooperatives perform an important role in job creation, mobilizing resources and generating investment, thereby
making significant contributions to the economy; and
• Globalization has created new and different pressures, problems, challenges and opportunities for cooperatives, and
that stronger forms of human solidarity at national and international level are required to facilitate a more equitable
distribution of the benefits of globalization
COOPERATIVE PRINCIPLES
1. Voluntary and Open Membership
• Cooperatives are voluntary organizations, open to all persons able to use their services and willing to accept the
responsibilities of membership, without gender, social, racial, political, religious or other forms of discrimination.
2. Democratic Member Control
• Cooperatives are democratic organizations controlled by their members, who actively participate in setting their policies
and making decisions.
• Men and women serving as elected representatives are accountable to the membership
3. Member Economic Participation
• Members are both users and owners who contribute equitably to, and democratically control the capital of their
cooperative.
• Each member is required to purchase a share, which provides access to goods and services
4. Autonomy and Independence
• Cooperatives are autonomous, self-help organizations controlled by their members.
5. Education, Training and Information
• Cooperatives provide education and training for their members, elected representatives, managers, and employees so
they can contribute effectively to the development of their cooperatives.
6. Cooperation among Cooperatives
• Cooperatives serve their members most effectively and strengthen the cooperative movement by working together
through local, national, regional, and international structures.
7. Concern for Community
• Cooperatives work for the sustainable development of their communities through policies approved by their members.
• Cooperatives are founded on strong human values; they do not just selfishly pursue their own interests at all costs.
COOPERATIVE ADVANTAGES
1. Economies of Scale
• Cooperative can be effective system for developing the skills and resources of relatively unskilled or disadvantaged
people. The members can learn how to pool their resources and how to help one another set up a commonly-owned
business.
2. Contributing to Poverty Reduction
• Cooperative can be effective in reducing poverty because:
• They provide common services which would have been costly if carried out by individual members;
• If they operate efficiently, they provide goods and services at competitive prices, thus saving the member some
money;
• Some cooperatives provide credit to members which enable them to improve production and increase their incomes,
and
• The returns accruing from the cooperative business revert to members either in cash or in kind.
3. Employment Creation
•
Cooperatives help create employment with employing millions of people around the world. Producer, Consumer or
Worker cooperatives have demonstrated capacity for creating jobs.
4. Gender Equality
•
Cooperatives provide a voice and a vehicle for economic opportunities for women otherwise disenfranchised and
provided with few opportunities to break the cycle of poverty.
5. Youth Empowerment
• Cooperatives provide essential life skills by teaching and engaging young people on topics such as money
management, the importance of savings, and the power of compound interest.
6. Business Development
• Cooperatives provide opportunities for very ordinary people to engage in the business activities – people who, as
individuals, would never have been able to do so due to real economic costs.
• Participation in cooperative pool enables them to reap economic benefits like knowledge and skills in marketing,
production, understanding financial statements, organization and leadership.

HOW CAN COOPERATIVE DIFFER FROM OTHER FORMS OF BUSINESS?

• In determining whether the cooperative is the right structure, it is important to have an understanding of the advantages
and disadvantages of the various forms of business structures. It is recommended that a review of the local business
and taxation laws and regulations be done when comparing cooperatives with other forms of business structures.
ADVANTAGES AND DISADVANTAGES OF THE THREE FORMS OF BUSINESS STRUCTURES WITH
COOPERATIVES
1. Sole proprietorship
 • Sole owner and fully responsible for all debts and obligations related to that person’s business.
• The owner is personally liable, a creditor can make a claim against the owner’s personal as well as business assets in
order to satisfy any debts.
• All profits are the owners to keep

Advantages
• Easy and inexpensive to register Regularly burden is generally light
• Owner has direct control of decision making Minimal working capital required for start-up
• Subject to local tax laws, there may be tax advantages if the business is not doing well
• All profits go to the owner directly
Disadvantages
• Income is taxable at the owner’s personal rate and, if the business is profitable, this could put the owner in a higher
tax bracket Unlimited liability
• Lack of continuity for the business if the owner is unavailable
• Can be difficult to raise capital as an individual owner
2. Partnership
• A non-incorporated business that is created between two or more people.
• The financial resources of the business partners are combined and put into the business. The partners would then
share in the profits of the business according to any legal agreement that has been drawn up.

Advantages
• Fairly easy and inexpensive Equal share in the management, profits and assets
• Start-up costs are shared equally between partners
• Tax advantage – if income from the partnership is low or losses money
Disadvantages
• There is no legal difference between the owner and their business Unlimited liability
• Can be difficult to find a suitable partner(s) Possible development of conflict between partners
• Each partner is held financially responsible for business decisions made by the other partner(s)
3. Corporation
• Can be done at the national or territorial level
• When a business is incorporated, it is considered to be a legal entity that is separate from its shareholders.

a. As a shareholder of a corporation, the owner will not be personally liable for the debts, obligations or acts of
the corporation
Advantages
• Limited liability Continuous existence Ownership is transferable
• Easier to raise capital than with other form of business Separate legal entity
• Possible tax advantage as taxes may be lower for an incorporated business
Disadvantages
• A corporation is closely regulated
• More expensive to set up than other form
 • Extensive corporate records required, including documentation filed annually with the government
• Possible conflict between shareholders and directors
• Proof of residency or citizenship of directors may be required

4. Cooperative
• Owned and controlled by an association of members.
• It can be set up as a for-profit or as a not-for-profit organization
• The least common form of business, but can be appropriate in situations where a group of individuals or businesses
decide to pool their resources and provide access to common needs, such as the delivery of products or services, the
sale of products or services, employment and more.

Advantages

• Owned and controlled by its members Limited liability

• Democratic control (one member, one vote) Profit distribution

Disadvantages

• Longer decision making process Extensive record keeping

• Participation of all members is required in order to succeed Less incentive to invest additional capital

• Possible conflict between members