POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

SAN PEDRO CAMPUS, LAGUNA

COOPERATIVES AND SOCIAL DEVELOPMENT

INSTRUCTIONAL MATERIALS

PREPARED BY:
JUNIPER V. ZULUETA
Course Description
This course is a study of cooperatives as a practical vehicle for promoting self-reliance
and harnessing people towards the attainment of economic development and social justices. It
aims to provide students basic knowledge of operating cooperative promotion, organizations
and development.

Course Objectives
At the end of the course the students shall have been able to:
1. Acquire knowledge in cooperatives.
2. Familiarize in RA 9520 or the Philippine Cooperative Code of 2008.
3. Discuss in what way that cooperative contributes in social development.
4. Discuss the birth and/or history of cooperative abroad and in the country.
5. Identify and analyze the present community issues/problems/trend and development
perspective.
6. Explain the different economic systems and its contributions to social and political stability.
7. Differentiate cooperative with other forms of business enterprises.
8. Identify the different sources of funds of cooperatives.
9. Explain the principles and practices, nature and characteristics of cooperatives.
10. Draw and explain the cooperative organizational and management structure.
11. Discuss how to register cooperatives.
12. Enumerate and explain the different types of cooperatives.
13. Know the funding sources and distribution of net surplus.
14. Learn other matters about cooperatives.

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Course Contents
1. Principles and Concepts of Cooperatives
a. Definition of Cooperatives
b. Seven Cooperative Principles
c. Importance of Cooperatives
d. History of Cooperatives
2. Objectives and Goals of a Cooperative
3. Privileges Enjoyed by Cooperatives
4. Types of Cooperatives
5. Organizing a cooperative
6. Where to register a cooperative
7. Other forms of Business Organization
8. Economic Systems
9. The Net Surplus
10. The Cooperative Code of the Philippines

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 Principles and Concepts of Cooperatives

A. Definition of Cooperatives
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 risks and benefits of the
undertaking in accordance with the universally accepted cooperative principles.

The Cooperative Development Authority (CDA) is the lead government agency mandated
by virtue of Republic Act No. 9520 (Philippine Cooperative Code of 2008) to promote the
viability and growth of Philippine cooperatives. It is the only government agency that registers
cooperatives.

B. Seven Cooperative Principles

Cooperatives around the world generally operate according to the same core principles
and values, adopted by the International Co-operative Alliance in 1995. Cooperatives trace the
roots of these principles to the first modern cooperative founded in Rochdale, England in 1844.

1. Voluntary and Open Membership

Cooperatives are voluntary organizations, open to all people able to use its services and
willing to accept the responsibilities of membership, without gender, social, racial, political or
religious discrimination.

2. Democratic Member Control

Cooperatives are democratic organizations controlled by their members - those who buy
the goods or use the services of the cooperative - who actively participate in setting policies and
making decisions.

3. Members’ Economic Participation

Members contribute equally to, and democratically control, the capital of the cooperative.
This benefits members in proportion to the business they conduct with the cooperative rather
than on the capital invested.
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4. Autonomy and Independence
Cooperatives are autonomous, self-help organizations controlled by their members. If the
co-op enters into agreements with other organizations or raises capital from external sources, it
is done so based on terms that ensure democratic control by the members and maintains the
cooperative’s autonomy.

5. Education, Training and Information

Cooperatives provide education and training for members, elected representatives,
managers and employees so they can contribute effectively to the development of their
cooperative. Members also inform the general public about the nature and benefits of
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

While focusing on member needs, cooperatives work for the sustainable development
of communities through policies and programs accepted by the members.

C. Importance of Cooperatives
Cooperatives are the SHOs or Self Help Organizations presently utilized by the
government as the more effective tools for economic development. The Cooperative
Development Authority (CDA), the government agency in charge of development and
monitoring cooperatives ion the country gives this definition – a voluntary organization of people
who have agreed to pool their resources together in order to undertake an economic enterprise
for the purpose of meeting their common needs, and which they themselves democratically
manage and control, and share the economic benefits on the basis of participation and
patronage.

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In this definition, cooperatives are SHOs which are also business enterprises which the
members themselves own, manage and control in accordance with accepted democratic
principles. They are not organized primarily for profit nor to serve other people but to serve the
needs of their own members. Memberships in cooperatives is voluntary and open to all those
who need their services. Finally, the economic benefits from cooperatives are shared by the
members in proportion to the individual member’s patronage of the business or enterprise.

D. History Background of Cooperative

The Rochdale Society of Equitable Pioneers, founded in 1844, is usually considered the
first successful co-operative enterprise, used as a model for modern co-ops, following the
‘Rochdale Principles. A group of 28 weavers and other artisans in Rochdale, England set up the
society to open their own store selling food items they could not otherwise afford. Within ten
years there were over 1,000 co-operative societies in the United Kingdom. Other events such as
the founding of a friendly society by the Tolpuddle Martyrs in 1832 were key occasions in the
creation of organized labor and consumer movements.

The history of the cooperative movement concerns the origins and history of
cooperatives. Although cooperative arrangements, such as mutual insurance, and principles of
cooperation existed long before, the cooperative movement began with the application of
cooperative principles to business organization. Robert Owen (1771-1858) is considered the
father of the cooperative movement. A Welshman who made his fortune in the cotton trade,
Owen believed in putting his workers in a good environment with access to education for
themselves and their children. These ideas were put into effect successfully in the cotton mills of
New Lanark, Scotland. It was here that the first co-operative store was opened. Spurred on by
the success of this, he had the idea of forming “villages of co-operation”

Where workers would drag themselves out of poverty by growing their own food,
making their own clothes and ultimately becoming self-governing. He tried to form such
communities in Orbiston in Scotland and in New Harmony, Indiana in the United States of
America, but both communities failed.

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 History of Cooperative Laws 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 sponsor 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 from Zambales.

The bill was ably presented in both Houses and it was finally passes into law on
February 11, 1914 and became Act 2508. When this Act was finally made into law, Gov.
Sandiko earned a title of 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 the
different provinces were organized. At the end of 1926 there were 544 rural credit cooperatives
organized in the 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.

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 Objectives and Goals of a Cooperative

The primary objective of every cooperative is to help improve the quality of life of its members.
Towards this end, the cooperative shall aim to:

1. Provide goods and services to its members to enable them to attain increased income,
savings, investments, productivity, and purchasing power, and promote among themselves
equitable distribution of net surplus through maximum utilization of economies of scale, cost-
sharing and risk-sharing;

2. Provide optimum social and economic benefits to its members;

3. Teach them efficient ways doing things in a cooperative manner;

4. Propagate cooperative practices and new ideas in business and management;

5. Allow the lower income and less privileged groups to increase their ownership in the wealth of
the nation; and

6. Cooperate with the government, other cooperatives and people-oriented organization to

further the attainment of any of the foregoing objectives.

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 Privileges Enjoyed by Cooperatives

• Cooperatives shall enjoy the privilege of depositing their sealed cash boxes or containers,
documents or any valuable papers in the safes of the municipal or city treasurers and other
government offices free of charge, and the custodian of such articles shall issue a receipt
acknowledging the articles received duly witnessed by another person;

• Cooperatives organized among governments employees, notwithstanding any law or

regulation to the contrary, shall enjoy the free use of any available space in their agency,
whether owned or rented by the Government.

• Cooperatives rendering special types of services and facilities such as cold storage, ice plant,
electricity, transportation, and similar services and facilities shall secure a franchise therefore,
and such cooperatives shall open their membership to all persons qualified in their areas of
operation.

• In areas where appropriate cooperatives exist the preferential right to supply government
institutions and agencies rice, corn and other grains, fish and other marine products meat, eggs,
milk, vegetables, tobacco, and other agricultural commodities produced by their members shall
be granted to the cooperatives concerned;

• Preferential treatment in the allocation of fertilizers and in rice distribution shall be granted to
cooperatives by the appropriate government agencies:

• Preferential and equitable treatment in the allocation or control of bottomries of commercial

shipping vessels in connection with the shipment of goods and products of cooperatives;

• Cooperatives and their federations, such as market vendor cooperatives, shall have
preferential rights in management of public markets and/or public market facilities, stall or
spaces;

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• Credit cooperatives and/or federations shall be entitled to loans, credit lines, rediscounting of
their loan notes, and other eligible papers with the Development Bank of the Philippines, the
Philippine National Bank, the Land bank of the Philippines and other financial institutions except
the Central Bank of the Philippines;

• Cooperatives transacting business with the Government of the Philippines or any of its political
subdivisions or any of its agencies or instrumentalities, including government-owned and
controlled corporations shall be exempt from pre-qualification bidding requirements; and

• Cooperatives shall enjoy the privilege of being represented by the provincial or city fiscal or the
Office of the Solicitor General, free of charge, except when the adverse party is the Republic of
the Philippines.

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 Types of Cooperatives

1. Credit Cooperative
- is one that promotes and undertakes savings and lending services among its members. It
generates a common pool of funds in order to provide financial assistance and other related
financial services to its members for productive and provident purposes;

2. Consumer Cooperative
- is one the primary purpose of which is to procure and distribute commodities to members and
non-members;

3. Producers Cooperative
- is one that undertakes joint production whether agricultural or industrial. It is formed and
operated by its members to undertake the production and processing of raw materials or goods
produced by its members into finished processed products for sale by the cooperative to its
members and non-members. Any end product or its derivative arising from the raw materials
produced by its members, sold in the name of and for the account of the cooperative, shall be
deemed a product of the cooperative and it’s members;

4. Marketing Cooperative
- is one which engages in the supply of production inputs to members and markets their
products;

5. Service Cooperative
- is one which engages in medical and dental care, hospitalization, transportation, insurance,
housing, labor, electric light and power, communication, professional and other services;

6. Multi-Purpose Cooperative
- combines two (2) or more of the business activities of these different types of cooperatives;

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7. Advocacy Cooperative
- is a primary cooperative which promotes and advocates cooperativism among its members
and the public through socially-oriented projects, education and training, research and
communication, and other similar activities to reach out to its intended beneficiaries;

8. Agrarian Reform Cooperative

- is one organized by marginal farmers majority of which are agrarian reform beneficiaries for
the purpose of developing an appropriate system of land tenure, land development, land
consolidation or land management in areas covered by agrarian reform;

9. Cooperative Bank
- is one organized for the primary purpose of providing a wide range of financial services to
cooperatives and their members;

10. Dairy Cooperative

- is one whose members are engaged in the production of fresh milk which may be processed
and/or marketed as dairy products;

11. Education Cooperative

- is one organized for the primary purpose of owning and operating licensed educational
institutions, notwithstanding the provisions of Republic Act No. 9155, otherwise known as the
Governance of Basic Education Act of 2001.

12. Electric Cooperative

- is one organized for the primary purpose of undertaking power generation, utilizing renewable
sources, including hybrid systems, acquisition and operation of sub transmission or distribution
to its household members;

13. Financial Service Cooperative

- is one organized for the primary purpose of engaging in savings and credit services and other
financial services;

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14. Fishermen Cooperative
- is one organized by marginalized fishermen in localities whose products are marketed either
as fresh or processed products;

15. Health Services Cooperative

- is one organized for the primary purpose of providing medical, dental, and other health
services.

16. Housing Cooperative

- is one organized to assist or provide access to housing for the benefit of its regular members
who actively participate in the savings program for housing. It is co-owned and controlled by its
members;

17. Insurance Cooperative

- is one engaged in the business of insuring life and property of cooperatives and their
members;

18. Transport Cooperative

- is one which includes land and sea transportation, limited to small vessels, as defined or
classified under the Philippine maritime laws, organized under the provisions of RA 9520;

19. Water Service Cooperative

- is one organized to own, operate and manage water systems for the provision and distribution
of potable water for its members and their households;

20. Workers Cooperative

- is one organized by workers, including the self-employed, who are at the same time the
members and owners of the enterprise. Its principal purpose is to provide employment and
business opportunities to its members and manage it in accordance with cooperative principles;
and

21. Other types of Cooperatives

- as may be determined by the Authority.
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 Organizing a Cooperative

The following are the basic information that the prospective members should understand before
organizing a cooperative.
There are six steps suggested in setting up a cooperative.

1. Get organized
- You must have at least 15 members to do that. At once determine the common problems you
would want solved and the basic needs you would want provided for through a cooperative. You
may want to include increasing your productions, marketing your produce, credit assistance,
power generation, banking or insurance and other similar needs. Determining your problems
and needs will also help you classify the kind of cooperative you will be organizing. Even before
a cooperative is set up, a dedicated core group people who will do all the organizational and
paper works is a must. From this core group, working communities may be formed to set things
moving. These committees may include membership, finance, executive, secretariat to name a
few.

2. Prepare a general statement called an economic survey

- This statement will help you measure your cooperative’s chances of success.

3. Draft the cooperative’s by-laws

- The by-laws contain the rules and regulations governing the operation of the cooperative.

4. Draft the articles of cooperation

- Mandatory contents of the articles of cooperation are the following: (a) the name of the
cooperative, which must include the work “cooperative”; (b) the purpose or purposes and scope
of business of the cooperative; (c) the term of existence of cooperative; (d) the area of operation
and the postal addresses of the registrant-cooperators; (e) the common bond of membership; (f)
the names of the directors who shall manage the cooperative; (g) the amount of share capital;
(h) the names and residences of its contributors; and (i) the type of cooperative, whether it is
primary, secondary or tertiary.

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5. Secure bond for accountable officer(s)
- The accountable officers normally are the Treasurer and the Manager. The amount of the
bond is to be decided upon by the Board of Directors, based on the initial net worth of the
cooperative which includes the paid-up capital, membership fees and other assets of the
cooperative at the time of registration.

6. Register your cooperative with the Cooperative Development Authority (CDA)

- Submit the following required documents:
• Four (4) copies each of the Economic Survey, Articles of Cooperation and By-Laws duly
notarized;
• Bonds of accountable officer(s) (any directors, officers and employees) handling funds,
securities, of properties in behalf of the cooperative;
• Sworn statement of the treasurer duly notarized showing that at least 25% of the authorized
share capital has been subscribed, and at least 25% of the total subscription has been paid.
The paid-up capital must not be less than Php 2,000.00. It must be noted that no members may
own more than 20% of the subscribed share capital and each share must not be less than Php
1.00.

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 Where to Register your Cooperative?
The Cooperative Development Authority (CDA) is the only government agency mandated to
register all types of cooperatives. Its main office is located at 5th Floors, Benlor Building, 1184
Quezon Avenue, Quezon City.

To facilitate the flow of its services, extension offices have been set up. These are located in (a)
Dagupan City; (b) Tuguegarao, Cagayan; (c) Baguio City; (d) San Fernando, Pampanga; (e)
NCR-Quezon City; (f) Calamba, Laguna; (g) Naga City; (h) Iloilo City; (i) Cebu City (k)
Kidapawan; (l) Tacloban City; (m) Davao City; (n) Zambaonga City; and (o) Butuan City.

CDA Memorandum Circular No. 02-03, Series of 2002 thereby amending Memorandum
Circular No. 92-004, Series of 1992 provides the schedule of fees as follows.
Types of Cooperatives Paid-Up Capital Fees
Laboratory Cooperatives NO Registration Fees
Primary Cooperatives P2,000.00 – P500,000.00 P500.00 **1/10 of 1% of the
P500,001.00-up paid-up share capital
Secondary Cooperatives P2,000.00 – P500,000.00 P1,000.00 **1/10 of 1% of the
P500,001.00-up paid-up share capital
Tertiary Cooperatives P3,000.00

Register your cooperative with the Cooperative Development Authority extension office near the
place where the cooperative is located. For those established within Metro Manila, you may
contact:
Registration Division
Cooperative Development Authority
Ground Floor CDA Building,
827 Brgy. Immaculate Conception, Aurora Blvd, Quezon City
or at
6/F Ben-Lor Bldg.
1184 Quezon Ave., Quezon City
Tel. No. (632) 725-5510
Fax No. (632) 371-2077
Website: www.cda.gov.ph

An online cooperative registration is available by logging on to http://www.cda.gov.ph.

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 Other Forms of Business Organizations

A) Single or Sole Proprietorship – is a form of business organization that is owned and usually
managed by one person. It is the oldest and simplest form of business ownership. The
entrepreneurs who wants to start a new business venture favor this kind of organization. (DTI)

B) Partnership – is an association of two or more person who act as co-owners of a business.

Each partner contributes money, property or service to their organization. Most partners have
two partners. (SEC)

C) Corporation – is an artificial being created by operation of law, having the rights of

succession, and the powers, attributes and properties expressed authorized by law or incident
to its existence.
The shares or certificates of ownership of a corporation are called stocks. Divided into common
stocks and preferred stocks. The owners of stocks are called stockholders or share holders.
The corporation has two types: private or close corporation and open corporation. (SEC)
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Types of Economic System

A) Traditional Economic Systems – production decisions are made according to customs and
traditions. A farmer engaged in the production of rice does exactly what his father did when he
planted rice twenty years ago.

B) Command Economies – the answers to the basic economic problems are dictated by the
government through the head of the nation or a group of men designated by the head to make
the decisions. This system is socialistic as the government owns and controls the factors of
production.

C) The Market System – deals with the economic problems by considering consumers’ choices.
The indicators are consumers’ demand in the market as reflected in the prices of goods and
services. This is an economy where individuals exercise free enterprise.

D) Mixed Economy – this is the economic system of the Philippines. The question of what to
produce and how to produce, answered predominantly through the price mechanism, are
modified through government intervention in the form of direct controls, taxes, and subsidies.
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The Net Surplus / Distribution of Surplus

Unlike profit oriented enterprises, the surplus (i.e. profit after limited interest has been paid on
capital) of a cooperative society is not distributed to the members in the ratio of their capital
contribution or in an agreed ratio. Under the provision of the law, at least 25% of the profit must
be transferred to the general reserve. Likewise, a certain percentage (not exceeding 10) may be
also utilized for the general welfare of the local community.
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The Cooperative Code of the Philippines

The Cooperative Code of the Philippines was amended under Republic Act No. 9520 to be
known as the Philippine Cooperative Code of 2008 during the term of President Gloria
Macapagal Arroyo.
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