POLYTECHNIC UNIVERSITY OF THE PHILIPPINES I - OBJECTIVE

SABLAYAN, OCC. MINDORO CAMPUS

SABLAYAN, OCC. MINDORO This lesson is intended to teach the students about the milestone
of cooperative and its background in the creation of cooperative
laws in the Philippines. After this lesson the students would be
able to:

1. Know the birth of Cooperativism.

2. Cooperatives in the Philippines
3. Understand the need to change and create social
legislation.
4. Know the General Concept of Cooperatives
LEARNING MODULE 5. The purpose of cooperative

COOP 20093 – COOPERATIVE LAW AND SOCIAL

LEGISLATIONS
LESSON 1 – Cooperative Movement in the Philippines

Definition of Cooperative

A cooperative is an autonomous and duly registered association

of persons, with a common bond of interest, who have
voluntarily joined together to achieve their social, economic, and
cultural needs and aspirations by making equitable
contributions to the capital required, patronizing their products
and services and accepting a fair share of the risks and benefits
of the undertaking in accordance with universally accepted
cooperative principles. (General Concept, RA 9520)

PREPARED BY: Cooperative - An association or corporation established for

PROF. ALGENE EDWARD M. FRANCISCO the purpose of providing services on a non-profit basis to its
shareholders or members who own and control it. The nature

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and functions of cooperatives differ considerably—such as
purchasing cooperatives, consumer cooperatives, and marketing
cooperatives.
Seven Principles of Cooperatives
1. Voluntary and Open Membership
2. Democratic Member Control
3. Members’ Economic Participation
4. Autonomy and Independence
5. Education, Training, and Information
6. Cooperation Among Cooperatives
7. Concern for Community
Purpose of Cooperative
The purpose of a cooperative is to realize the economic, cultural
and social needs of the organization’s members and its
surrounding community. Cooperatives often have a strong
commitment to their community and a focus on strengthening
the community they exist in or serve.
Brief History of Cooperative
Cooperative societies were created long before the advent of the
fair trade movement to help workers improve their livelihoods and
protect their interests.
Cooperatives are organizations of people who have the same
needs. Most scholars recognize the business of the Rochdale
pioneers of England as the first coop. In 1844, this group of 28
men (weavers and skilled workers in other trades) formed a
cooperative society. They created business principles to guide
their work and established a shop in which to sell their goods.
Increased pressure from the changing market system was a
driving force in their decision to move toward cooperation.
With the emergence of mass production during this time,
entrepreneurs who had previously been capable of the
sustainable production of high quality goods found themselves
competing with large industries that sold less-expensive, poorly
made products. In the tea industry, for example, large-scale
producers added grass clippings to bulk up tea, sacrificing
quality for quantity. Production was changing in order to
accommodate consumers’ desire for cheaper, plentiful goods.
Those who rapidly produced high volumes could meet the
demands of the shifting market.
Another significant change in the market system was that the
new large industries relied on unfair labor practices in order to
meet production quotas. Employees lost control over working
conditions; low pay, long hours, unsanitary workplaces, and no
mechanisms for claiming worker rights added to the growing
frustration among laborers. In Co-operatives and Community
Development: Economics in Social Perspective, Brett Fairbairn and
his coauthors describe the situation:
The monotony and cruelty are hardest on the children; they
work fourteen-, even sixteen-hour days, standing, fetching,
holding, with hardly a break. It is a long time. The speed of the
machinery is calculated and they [the masters] know how much
work it will do; and unless [the children] are driven and flogged
up, they cannot get the quantity of work from them. The average
life expectancy of an urban labourer is seventeen years.
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Small companies that did not want to adjust their business
practices in such a manner began to lose out in the new market.
The local producers had typically used the finest materials and
relied on traditional techniques for production. These smaller
producers were not willing to resort to labor practices that did
not respect the rights of individual workers. Thus, they did not
meet the demands for quantity and speed that the changing
market dictated.
The situation demanded new forms of organization that retained
old modes of production while providing economic security for
individual producers. Since the time of the Rochdale pioneers,
the formation of cooperatives has continued and the notion of
cooperative organization has reached many regions of the world.
The global rise of cooperatives is partially due to the work of the
International Co-operative Alliance (ICA). The ICA was formed in
1895 by E. V. Neale of Rochdale and Edward Owen Greening, a
supporter of worker cooperation, in order to “end the present
deplorable warfare between capital and labour and to organize
industrial peace, based on co-partnership of the worker … [and
to] promote the formation of central institutions for helping
people to establish and maintain self-governing workshops,”
writes Johnston Birchall in The International Co-operative
Movement.
Neale and Greening recognized that coops had the power to
combat the emergent market trends by empowering workers to
own a share of the business and to govern themselves. They also
realized that a worldwide organization that could support the
mission of employee-owned business would help promote
solidarity and their continued existence. Neale and Greening
founded the ICA on the principles under which the Rochdale
coops had been successfully operating for 50 years prior to the
ICA’s inception.
Over the last century, the ICA has flourished, particularly in
Europe, Canada, and in some parts of Africa. In the United States,
several of the major centers for cooperative business and study
(which are primarily focused on agriculture) also adhere to the
ICA’s values. Whether or not cooperatives have an official
connection with the ICA, they ascribe to essentially the same
core set of principles. The ICA thus is recognized as a leader for
cooperatives all over the world in terms of promoting the values
of cooperative organization.
Principal Concepts
The seven ICA principles of coops are variously interpreted but
generally followed in some manner in most cooperative
organizations. The attempt to solve common problems by
combined action is at the root of cooperatives, but
empowerment, shared ownership, and democratic control are
also key concepts of cooperative ideology. Members become
bound to each other through values and principles as well as
through their shared experiences in the cooperative.
Cooperatives attempt to balance individuals’ needs with those of
the community as a whole by encouraging individual
empowerment within the structure of membership and
responsibility to the group. In a 1997 article in the ICA Review, J.
Langmore says that cooperatives promote “the material
conditions and well-being of members through their acting in
concert; members [have] a greater say over their lives through
their voluntary association in organizations controlled freely and
democratically by their members.”
Each member of the cooperative typically has a voice and a role
in the daily operations of the cooperative. Cooperative principles
place a strong emphasis on democratic processes such as
majority voting systems, participation by all members in
decision-making, and sharing work and benefits equally.
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Cooperatives do not operate in isolation from their community,
but are integrated into society. Some offer various types of
educational opportunities to non-members; others support local
projects benefiting their communities. As individuals, members
are involved with groups outside the cooperatives and,
according to anthropologist Christine Eber, are viewed as
“people of action in their communities and beyond.” Cooperative
values and principles are intended to support the structure of
the cooperative, which in turn supports the structure of society.
came across with the Raiffeisen movement. He was very much
impressed by this type of cooperative that he looked forward for
an opportunity to introduce it in the Philippines. Finally, Sandiko
had his chance when he was appointed one of the early
governors when Civil Government, under the Americans, was
established.
Cooperative Law in the Philippines

 “Laws are a form of social rule emanating from political

agencies”. Laws become legislations when they are made and put
Cooperative History in the Philippines
into force by law-making body or authority. Legislations,
particularly social legislations have played an important role in
Filipinos who have travelled Europe in the later part of the 19th
bringing about social change.
century must have been impressed with the success of a new
economic movement, bringing about a gradual transformation in
There are two opinions about the functions of law. The function
the economic and social life of the people. At the turn of the
of law, according to one view, is to establish and maintain social
century, Filipinos, in increasing number, travelled and studied
control. Hence the major problem of law is to design legal sanc-
abroad and brought home with them new ideas. Two names
tions to minimise deviance and to maintain social solidarity and
worthy of note were Dr. Jose P. Rizal and Teodoro Sandiko.
social order.
Rizal, after his side trip to Sandakan, Borneo in 1892, requested
Another view stresses the dynamic role of law. It states that the
Governor Despudol permission to move to that place and found a
function of law is not just to maintain social order through social
colony under the cooperative plan of Robert Owen. Instead, he
control. It insists that law must bring about social change by
was arrested for treason and banished to Dapitan, Zamboanga
influencing people’s behaviour, beliefs and values. We shall now
del Norte. In Dapitan, Rizal had his ideas in cooperation partially
analyse the role of law or legislation in bringing about social
fulfilled. He put up a school for the poor community and a store
change.
with the help of his pupils on a purely cooperative basis. One
noteworthy group organized by Rizal was the La Sociedad de los
A careful analysis of the role of legislation in social change would
Abacaleros (Society of Abaca Producers). This functioned for
reveal two things. (i) Through legislations the state and society
only one year. Rizal returned the members’ share capital without
try to bring the legal norms in line with the existing social norms,
any loss.
(ii) Legislations are also used to improve social norms on the
basis of new legal norms.
Teodoro Sandiko, in his travels to Europe, must have had a close
contact with the cooperative movement in Germany where he
COOP 20093 4
Social legislation can be an effective means of social change only
when the existing social norm is given a legal sanction. No
legislation by itself can substitute one norm with another.
It can hardly change norms. Unaided social legislation can hardly
bring about social change. But with the support of the public
opinion it can initiate a change in social norm arid thus a change
in social behaviour.
Some accounts in Cooperative Law in the Philippines
The Rural Credit Law
As soon as Civil Government was established, Filipino
participation in government was encouraged. Teodoro Sandiko,
then governor of Bulacan, prepared a bill patterned after the
Raiffeisen type of credit union and had Rep. Albert Barreto of
Zambales sponsored the bill in the lower House of Congress. The
principal aim of this bill was to protect and develop the
agricultural interest of the country. When the Barreto sponsored
bill was presented it readily obtained unanimous approval on
January 20, 1908. The Philippine Commission however, turned it
down.
Undaunted by this defeat, the sponsors of the bill again put it
through in the Second Philippine Legislature. This time it was
sponsored in the Lower House by Rep. Rafael Corpuz who
succeeded Rep. Barreto. The bill was ably presented in both
Houses and it was finally passed into law on February 11, 1914
and became Act 2508. When this Act was finally made into law,
Gov. Sandiko earned the title, Father of Cooperation in this
country.
The administration of the Rural Credit Law was entrusted to the
Bureau of Agriculture. The first rural credit association that was
organized under this Law was the Agricultural Credit
Cooperative Association of Cabanatuan, Nueva Ecija. It was
formed on October 18, 1916. With this initial organization
farmers in different provinces were organized. At the end of
1926 there were 544 rural credit cooperatives organized in 42
provinces and by 1930 there were 571 associations formed all
over the country. In 1935, however, about 90% of these
cooperatives were inactive with no funds left in their treasury.
The experiment on rural financing, through cooperatives was a
failure.
Marketing Cooperatives
As soon as the organization of rural credit cooperatives was in
full swing, The Cooperative Marketing Law (Act 2425) was
enacted and approved on December 9, 1927. The rural credit
associations were designed to help finance the efforts of the
farmers for more production. Wherever rural credit associations
were, cooperative marketing societies were also designed to be
present. The apparent weakness of the rural credit cooperatives,
however, failed the enthusiasm of farmers to organize
themselves into cooperative marketing associations. By 1939
only 164 societies were actually organized with a total
membership of around 5,000 farmers. With this number only 35
reported their sale of products to the Bureau of Commerce. The
number of associations reporting indicated that only 20% of the
organized associations were active.
The ACCFA Financing Program
In recognition of the strategic position occupied by our farmers
in the social structure and economic development of the country,
the Philippine Congress enacted Republic Act 821 in 1952. This
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law established a system of liberal credit which is specially
designed to meet the needs of the small farmers. It also created
an administrative agency known as the Agricultural Credit and
Cooperative Financing Administration (ACCFA). To implement
the great task of rural financing, four general and interrelated
objectives of the law were set forth as follows:
1. To assist small farmers in securing liberal credit.
2. To promote the effective groupings of farmers into
cooperative associations.
3. To establish an orderly and systematic marketing
machinery for, and controlled by, the small farmers.
4. To place agriculture on a basis of economic equality with
other industries.
Republic Act 6938 - This Act shall be known as the
“Cooperative Code of the Philippines.” – It is the declared
policy of the State to foster the creation and growth of
cooperatives as a practical vehicle for prompting self-reliance
and harnessing people power towards the attainment of
economic development and social justice.
Approved: March 10, 1990, Published in Malaya on March 15,
1990. Published in the Official Gazette, Vol. 86 No. 14, 1 Supp., on
April 2, 1990.
Source: CDAsia
Republic Act 9520 – the Philippine Cooperative Code of
2008, it is the declared policy of the State to foster the creation
and growth of cooperatives as a practical vehicle for promoting
self-reliance and harnessing people power towards the
attainment of economic development and social justice. The
State shall encourage the private sector to undertake the actual
formation and organization of cooperatives and shall create an
atmosphere that is conducive to the growth and development of
these cooperatives.
READINGS:
>RA 9520
>RA 6938
>Cooperative Marketing Law (Act 2425)
SELF ASSESSMENT:
1. What are the universally accepted cooperative principles
and their meaning. Provide 3-5 examples each principles
of real-life situation and explain briefly.
2. Explain “ by making equitable contributions to the capital
required”
3. Expound the following statements:
a. “The purpose of a cooperative is to realize the
economic, cultural and social needs of the
organization’s members and its surrounding
community.”
b. “Cooperatives often have a strong commitment to
their community and a focus on strengthening the
community they exist in or serve.”
4. What do you think would happen RA 6839 had not been
amended? What would be its effect nowadays?
5. What are the early stages of societies and their features.
Relate them in our modern time.
6. Is there a need to form a marketing association under the
act 2425? Why or why not?
7. What is Social Justice?
8. How do Cooperatives helps the Philippine Economic
Development?
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 9. What are the laws or Policies exercised during Owen
regime that inspired International Universal Cooperative
Policy?
10. What are Rochdale Pioneers? Discuss briefly.

REFERENCES:

https://www.shareyouressays.com /86953

https://www.phcci.coop/about-us/cooperative-
movement/history-of-cooperative-in-the-philippines/

https://www.officialgazette.gov.ph/1990/03/10/republic-act-
no-6938/

https://www.cda.gov.ph/resources/issuances/philippine-
cooperative-code-of-2008/republic-act-9520
https://www.lawphil.net/statutes/repacts/ra2009/ra_9520_20
09.html

legal-dictionary.thefreedictionary.com/cooperative
https://www.culturalsurvival.org/publications/cultural-
survival-quarterly/cooperatives-short-history

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