FNE102A: Cooperative Management Lecture Notes PDF

REVIEWER: COOPERATIVE MANAGEMENT LECTURE NOTES FNE102A 1 History of Cooperative...

REVIEWER: COOPERATIVE MANAGEMENT LECTURE NOTES FNE102A 1 History of Cooperatives and State Policies What is Cooperative? ​ A cooperative is an association of persons (organization) that is owned and controlled by the people to meet their common economic, social, and/or cultural needs and aspirations through a jointly-owned and democratically controlled business (enterprise). ​ The people of the cooperative are those who use its products, supplies, and/or services. ​ Profits are also often returned back to the members of the cooperative; however, cooperatives are often more focused on services for members than for investments. ​ Cooperatives can be created for a number of different reasons or to fulfill a number of different needs: jointly process goods, split costs, split control over work, purchasing power (bulk buys), shared employees, shared wages, etc. Brief History of Cooperatives Beginnings: The cooperative movement began in Europe in the 18th century.Primarily in Britain and France, although The Shore Porters Society claims to be one of the world's first cooperatives, being established in Aberdeen in 1498 (although it has since demutualized to become a private partnership).The industrial revolution and the increasing mechanism of the economy transformed society and threatened the livelihoods of many workers.The concurrent labour and social movements and the issues they attempted to address describe the climate at the time. ​ The first documented consumer cooperative was founded in 1769, in a barely furnished cottage in Fenwick, East Ayrshire , when local weavers manhandled a sack of oatmeal into John Walker's whitewashed front room and began selling the contents at a discount, forming the Fenwick Weavers' Society. In the decades that followed, several cooperatives or cooperative societies formed including Lennoxtown Friendly Victualling Society, founded in 1812 By 1830, there were several hundred co-operatives. Some were initially successful, but most cooperatives founded in the early 19th century had failed by 1840. However, Lockhurst Lane Industrial Co-operative Society (founded in 1832 and now Heart of England Co-operative Society), and Galashiels and Hawick Co-operative Societies (1839 or earlier, merged with The Co-operative Group) still trade today. It was not until 1844 when the Rochdale Society of Equitable Pioneers established the "Rochdale Principles" on which they ran their cooperative, that the basis for development and growth of the modern cooperative movement was established Important Persons in the History of Cooperatives ROBERT OWEN: An Englishman, was called the “Father of Cooperation”His philosophy, known as Owenism, advocated the use of socialism and education to address social issues. He promoted workplace reform, aided in the unionization of the British working class, and oversaw a factory. He received formal education up until the age of ten, at which point he began working as an apprentice. He had access to a lot of reading material through his employer's extensive library, and what he studied ultimately convinced him that all religions had intrinsic flaws. At age 19, he was promoted to factory superintendent. ​ Brighton Society- Rich people tended to imitate the behaviour of the royal family, and holidays by the sea became very fashionable. Brighton soon became the most popular seaside resort in Britain, with over 2,000 people a week visiting the town. The cost of transport meant that it was extremely rare for most people living in towns to visit the coast. DR WILLIAM KING: He was a Brighton-born British doctor and philanthropist. His most notable contribution to the Cooperative Movement is as an early supporter. Robert Owen had already introduced his concepts for a cooperative movement to America by 1827. But Dr. King took them up and made them louder. In Brighton, King established a cooperative store. The Cooperator was a paper he created in 1828 to further these ideals. The Co-operator was widely read and had a significant impact on the new movement. Although it was only published for a little more than two years, the paper helped to inform and bring together disparate organizations. The movement now had a philosophical and practical foundation thanks to King's essays in the newspaper. ROCHDALE SOCIETY OF EQUITABLE PIONEERS: Founded in 1843. Was the first successful consumers cooperativeComposed of 28 Rochdale Weavers; looked into the deplorable working conditions in the mechanized weaving factory ​ In 1844 opened a small shop to sell groceries to members After 16 years, membership grew to 3,450 with Share Capital of 188,550 pounds (P61 per 1 Pound), Peso Value – P 11,501,550.00 FREDERICK WILHELM RAIFFEISEN: Raiffeisen developed the concept of cooperative self-help. He was motivated by seeing how farmers, who were frequently victims of loan sharks, suffered. In essence, he established the first rural credit union when he launched the first cooperative lending bank in 1864. He established the "Verein für Selbstbeschaffung von Brod und Früchten" in 1846/47 in response to the suffering of the underprivileged during the winter famine (Association for Self-procurement of Bread and Fruits). With the aid of private donations, he purchased flour. The poorest members of the community received the bread on credit after it was prepared at a bakery that was built by the community A CENTURY OF THE PHILIPPINE COOPERATIVE MOVEMENT The Philippines, despite its positive prospects in economic development, is seriously confronted with the continuing problems of poverty and income inequality. Income inequality comes in two dimensions: Inequality among classes (or the poor becoming poorer and the rich becoming richer) Inequality among regions (or the poor regions are being left behind by the fast paced development of the richer urbanized regions). People empowerment is indeed the correct approach in solving these twin problems of poverty and income inequity. (people) empowerment enables the REVIEWER: COOPERATIVE MANAGEMENT LECTURE NOTES FNE102A 2 transfer of "social, economic as well as political power from one class to another or from one region to another which could result in reconfiguration of people and geography. ​ Early Initiatives (Early 1900s): The formal establishment of cooperatives in the Philippines traces back to the early 20th century during the American colonial period. The Cooperative Act of 1902 provided the legal framework for organizing cooperatives, and the Cabatuan Farmers' Cooperative Credit Association in Iloilo is recorded as one of the earliest cooperatives established in 1902. ​ Japanese Occupation and Post-War Reconstruction (1940s-1950s): During World War II, the Japanese occupation government promoted cooperatives as part of its economic policies. After the war, cooperatives played a vital role in post-war reconstruction efforts, empowering rural communities and stimulating economic development. ​ Agrarian Reform and Rural Development (1970s-1980s): The martial law period under President Ferdinand Marcos saw the implementation of agrarian reform programs that encouraged the formation of agricultural cooperatives. The Kilusang Kabuhayan at Kaunlaran ng Kababaihan (4K) program in the 1970s aimed to organize women into cooperatives to enhance their socio-economic status. ​ Creation of Cooperative Development Authority (1990): In 1990, the Cooperative Development Authority (CDA) was established to promote the growth and development of cooperatives in the Philippines. The CDA provided regulatory oversight, technical assistance, and capacity-building programs to support the cooperative sector ​ Expansion and Diversification (2000s-present): In the 21st century, the Philippine cooperative movement witnessed significant expansion and diversification across various sectors, including agriculture, finance, consumer goods, housing, and utilities. Cooperatives have become key players in poverty reduction, rural development, and inclusive growth by providing employment, income generation opportunities, and essential services to communities nationwide. ​ Recognition and Support (2010s-present): The Philippine government has recognized the vital role of cooperatives in socio-economic development and has provided support through policies, programs, and incentives. Cooperatives have been integrated into various national development agendas, including poverty alleviation, entrepreneurship promotion, and sustainable development goals. CHALLENGES AND RESILIENCE Despite facing challenges such as limited access to capital, governance issues, and regulatory constraints, the Philippine cooperative movement has demonstrated resilience and adaptability. Cooperatives continue to innovate, collaborate, and empower their members to address emerging socio-economic issues and contribute to nation-building. THE HISTORY AND ASSESSMENT OF THE PHILIPPINE COOPERATIVE MOVEMENT Cooperatives are compatible with Filipino culture whose concepts and practices of "bayanihan" (cooperation) preceded the coming of the Spaniards. ​ Early Development (1900s-1940s): The Philippine cooperative movement traces its roots to the early 20th century during the American colonial period. The Cooperative Act of 1902 laid the foundation for formal cooperative organization, with the establishment of agricultural credit cooperatives, consumer cooperatives, and savings and loan associations. The movement gained momentum during the Japanese occupation and post-war reconstruction period, promoting self-help, mutual aid, and community development. ​ Golden Age (1950s-1970s): The cooperative movement experienced significant growth and expansion in the 1950s and 1960s, supported by government initiatives and international development agencies. Agricultural cooperatives played a vital role in land reform programs and rural development efforts, empowering farmers, fisherfolk, and indigenous communities. The Kilusang Kabuhayan at Kaunlaran ng Kababaihan (4K) program in the 1970s promoted women's participation in cooperatives, fostering gender equality and socio-economic empowerment. ​ Challenges and Setbacks (1980s-1990s): The 1980s and 1990s were marked by challenges and setbacks for the Philippine cooperative movement. Economic downturns, political instability, and governance issues led to the decline of some cooperatives, particularly in the agricultural sector. Issues such as mismanagement, corruption, and lack of regulatory oversight undermined public trust and confidence in cooperatives. ​ Reforms and Revitalization (2000s-present): In the 21st century, the Philippine cooperative movement underwent reforms and revitalization efforts to address governance issues, strengthen regulatory oversight, and promote sustainability. The creation of the Cooperative Development Authority (CDA) in 1990 provided regulatory supervision and technical assistance to cooperatives, enhancing their capacity and resilience. Cooperatives diversified into new sectors such as finance, consumer goods, housing, and utilities, expanding their reach and impact. ​ Assessment and Impact: The Philippine cooperative movement has made significant contributions to poverty reduction, rural development, and inclusive growth. Cooperatives provide employment, income generation opportunities, and essential services to millions of Filipinos, particularly in underserved and marginalized communities. Cooperatives promote social solidarity, mutual cooperation, and people-centered development, embodying the principles of self-help, self-reliance, and collective action. ​ Challenges and Opportunities: Despite its achievements, the Philippine cooperative movement faces various challenges, including limited access to capital, governance issues, regulatory constraints, and competition from other financial institutions. Addressing these challenges requires concerted efforts from government, cooperatives, civil society, and other stakeholders to promote transparency, accountability, and sustainability. The digital transformation, innovation, and collaboration are essential for the future resilience and relevance of the Philippine cooperative movement in the evolving socio-economic landscape. REVIEWER: COOPERATIVE MANAGEMENT LECTURE NOTES FNE102A 3 THE HISTORY OF THE COOPERATIVE MOVEMENT IN THE PHILIPPINES CAN BE DIVIDED INTO 3 STAGES The first stage, from 1895 to 1941, is characterized by the aborted germination of coops by some revolutionary illustrados (or the pre-formation period) ​ The introduction and indigenization of the Raiffeisen-type agri-based coops by American missionaries and teachers and western-educated Filipinos which featured the principles of self-help and self-reliance (or the formation period) ​ The introduction of state-initiated farmers coops by the American colonial administrators Cooperatives are compatible to the Filipino culture whose concepts and practices of "bayanihan" (cooperation) preceded the coming of the Spaniards The second stage was from 1941 to 1986. This stage can be subdivided into 4 phases. ​ The first phase is the period of Japanese occupation which featured a rapid increase in cooperatives as a result of food shortages. ​ The second phase is the period of rehabilitation period after the 2nd World War ​ The third phase is the resurgence of the state-initiated coops while, ​ The fourth phase is the introduction and rise of the non-agricultural coops ​ The fifth and final phase is the martial law period and the politicization of the coop movement The third stage of the evolution of the Philippine coop movement is from 1986 to the present. ​ This stage shows the emergence of the co-op movement as a potent political force as it allies with the NGO and trade union movements in pursuing the goals of people empowerment and strengthening the country's civil society sector. ​ During the 1998 party list elections, the cooperative movement was able elect 3 sectoral representatives which led all other sectors, groups and non-dominant political parties in representing the marginalized and underrepresented masses of the Filipino people. COOP INSURANCE SYSTEM OF THE PHILIPPINES Was established in same year (1973) to provide protection benefits to samahang nayos member. AQUINO ADMINISTRATION ​ RA NO. 6657 ​ Signed on March 10, 1990 by Pres Corazon C. Aquino ​ Created the Coop Dev’t Authority to promote viability and growth of cooperatives ○​ This Act shall be known as the Comprehensive Agrarian Reform Law of 1988. The law paved the way for the redistribution of agricultural lands to tenant-farmers from landowners, who were paid in exchange by the government through just compensation but were also allowed to retain not more than five hectares of land. However, corporate landowners were also allowed under the law to "voluntarily divest a proportion of their capital stock, equity or participation in favor of their workers or other qualified beneficiaries", in lieu of turning over their land to the government for redistribution. Despite the flaws in the law, the Supreme Court upheld its constitutionality in 1989, declaring that the implementation of the comprehensive agrarian reform program (CARP) provided by the said law, was "a revolutionary kind of expropriation. ​ RA NO. 6938 Known as the cooperative code of the Philippines; signed into law on the same year ○​ That RA 6938, otherwise known as the "Cooperative Code of the Philippines," makes membership in cooperatives " [a]vailable to all individuals regardless of their social, political, racial or religious background or beliefs," does not accord petitioner, by virtue of the functions of her office, complete freedom in any of her personal transactions with any cooperative despite her membership therein. ARROYO ADMINISTRATION ​ RA NO. 9520 Known as the Philippine Cooperative Code of 2008; ​ Passed by the senate and the house of representatives on December 16, 2008, amending the Coop code of the Philippines (6938) CANTEENS AS COOPERATIVES ​ Ownership and Governance: The canteen cooperative would be collectively owned and democratically governed by its members, who could include the canteen staff, workers from the organization or community it serves, and other stakeholders. Members would have equal voting rights regardless of their investment in the cooperative. ​ Financial Investment: Members would contribute financially to the cooperative by purchasing shares or making capital investments. These investments would provide the initial funding needed to establish and operate the canteen, including purchasing equipment, ingredients, and supplies. ​ Profit-Sharing: As a cooperative, the canteen would operate on a not-for-profit basis, meaning that any surplus revenue generated would be reinvested back into the cooperative or distributed among members in the form of patronage dividends based on their participation or purchases. ​ Employee Participation: Canteen staff would have the opportunity to become members of the cooperative, giving them a stake in the business and a say in its operations. They could also participate in decision-making processes, such as menu planning, pricing, and hours of operation. REVIEWER: COOPERATIVE MANAGEMENT LECTURE NOTES FNE102A ​ 4 Community Engagement: The canteen cooperative would serve as a community hub, providing affordable meals, snacks, and beverages to workers, students, or residents in the area. It could also host events, workshops, or social gatherings to foster community engagement and promote local food culture. ​ Sustainable Practices: The cooperative could prioritize sustainability in its operations by sourcing ingredients locally, reducing food waste through composting or recycling, and implementing eco-friendly practices such as using biodegradable packaging or energy-efficient appliances. ​ Social Impact: By operating as a cooperative, the canteen would promote social justice, economic empowerment, and solidarity among its members and the broader community. It could provide job opportunities, skills training, and support services for marginalized individuals or communities, contributing to poverty reduction and inclusive growth. ​ Educational Opportunities: The canteen cooperative could also serve as a learning center for cooperative principles and practices, offering training programs, internships, or educational resources for members, staff, and the public interested in cooperative entrepreneurship and sustainable food systems. COOPERATIVE WORK AS A PROFESSION ​ Specialized Knowledge and Skills: Professionals in the cooperative sector possess specialized knowledge and skills related to cooperative principles, governance, management, and development. They understand the unique dynamics of cooperative enterprises and are trained to effectively manage and support cooperative businesses. ​ Professional Associations and Networks: Cooperative professionals often belong to professional associations and networks dedicated to advancing cooperative education, research, and practice. These organizations provide opportunities for networking, professional development, and knowledge exchange among practitioners in the field. ​ Education and Training: Many educational institutions offer programs and courses specifically focused on cooperative management, development, and entrepreneurship. Cooperative professionals may pursue formal education and training to acquire the necessary expertise and credentials for their profession. ​ Ethical Standards and Codes of Conduct: Cooperative work is guided by ethical standards and codes of conduct that emphasize principles such as cooperation, mutual benefit, democratic governance, and social responsibility. Professionals in the cooperative sector adhere to these principles in their work and interactions with cooperative members and stakeholders. ​ Career Paths and Opportunities: Cooperative work offers diverse career paths and opportunities for professionals to contribute to the growth and sustainability of cooperative enterprises. Professionals may pursue roles such as cooperative manager, development officer, consultant, educator, researcher, or advocate, depending on their interests and expertise. ​ Advocacy and Policy Engagement: Cooperative professionals often engage in advocacy and policy initiatives to promote cooperative development, strengthen supportive legal and regulatory frameworks, and advance the interests of cooperative enterprises and their members. They may collaborate with government agencies, civil society organizations, and international bodies to advocate for policies that enable a conducive environment for cooperatives to thrive. ​ Impact and Social Change: Cooperative work is driven by a commitment to social change and economic empowerment, particularly in underserved and marginalized communities. Professionals in the cooperative sector strive to create positive impact by fostering inclusive growth, poverty reduction, sustainable development, and community resilience through cooperative enterprises. CAPTIVE MARKET ​ Cooperatives are prepared to meet the challenges of competition. They have a captive market that is loyal to the business of the cooperative and cannot weaned away by competition unless price differences make the co-op uncompetitive. ​ "Captive market" in the context of cooperative management refers to a situation where a cooperative has a secure and exclusive customer base, typically due to specific circumstances or characteristics of its members or stakeholders. DIVERSE PROBLEMS OF COOPERATIVES ​ Lack of education and training ○​ This deficiency invariably leads to weak leadership, mismanagement, lack of capital, lack of membership support, graft and corruption, insufficient volume of business. Members will not know how to act, much more on project a vision, in an activity they are ignorant of. ​ Lack of adequate safeguards ○​ Against unscrupulous offers who take advantage of their positions to grant loans to themselves. There should be enough check and balance systems ​ Improper use of credit ○​ The board should be strict in investigating the improper usage of loan proceeds and sanctions should be meted out immediately. ​ Defective or inadequate security ○​ It must be commensurate in amount to the loan sought. Security that is less in value than the loan obtain is an invitation to delinquency in payments. REVIEWER: COOPERATIVE MANAGEMENT LECTURE NOTES FNE102A ​ Political interference 5 ○​ Cooperative becomes politicized, or accepts donations from politicians. Effort should be exerted so that political interference can be avoided. ​ Lack of adequate marketing facilities ○​ To establish a cooperative and make it produce its output might be easy. Learning technology could be also easy. Finding a market to sustain production is hard. ​ Inadequate government support ○​ The private sector should have the primary concern in promoting and developing strong and competent cooperatives. NATIONAL POLICY ON COOPERATIVES ​ Self Reliance ○​ Cooperatives have an equity component in them. For people who have not gone to higher education, the cooperative is the best vehicle to foster ethical business education towards equity. ​ Thrift / habit of saving ○​ Cooperative teach the value of thrift and the habit of savings. Savings lead to capital formation and savings capitalized create microfinance enterprise. ​ Principle of continuous education ○​ Continuous education in a cooperative uplifts the intellect of a member. As his mind is formed, he gains wisdom. Knowledge and technical know-how at the same time that his will is trained to be prudent. ○​ ECONOMIC DEVELOPMENT AND SOCIAL JUSTICE ​ Social justice component of cooperatives. ○​ Successful cooperatives no doubt are economic indicators of development. Cooperatives developed into what they are now as a socio-economic reaction to the ugly consequences of unbridled capitalism. ​ Cooperatives: Criticism of capitalism ○​ Capital per se, will not be able to transform any output of more value than itself. To create value, or wealth, the service of labor is necessary so that capital can be converted into something valuable or profitable. ​ Capital: is mere tool in wealth condition ○​ Social justice is promoted by cooperatives, therefore, lies in the fact that capital is seen merely as a tool in wealth creation and that the human element is considered supreme over capital. ​ Social encyclicals: Laborem Exercens ○​ Laborem Exercens is a sustained reflection on the meaning of human work, which John Paul considers to be a key, probably the essential key, to the whole social question... In this document he is more interested in looking at social teaching in the light of the concept of work, than in formulating new norms for a changed social situation. As we examine the main points of his reflections we will be able to see more clearly his insights into the meaning of the Church's social doctrine. Atmosphere that is Conducive to Co-op Growth and Development ​ IT is the duty of the state to promote an environment that is conducive to the development and growth of cooperatives. ​ Tax exemption for new and budding cooperatives help create an environment favorable to the formation of cooperatives. ​ Government should be sincere in helping cooperatives and all government agencies should put their acts together. ​ Prospective members who have been reading the Cooperative code and have seen the tax exemption provisions feel cheated when the tax is imposed on them. Private Initiative and the Principle of Subsidiary Private Initiative ​ Private initiative refers to the entrepreneurial drive, innovation, and investment made by individuals or groups within the cooperative movement to establish and operate cooperative enterprises. ​ In the Philippines, private initiative is often evident in the founding of cooperatives by community members who identify common needs or opportunities. These individuals or groups pool their resources, skills, and efforts to create cooperatives that address socio-economic challenges, such as access to credit, markets, or essential services. ​ Private initiative within cooperatives fosters entrepreneurship, self-reliance, and empowerment among members, who actively participate in cooperative governance, decision-making, and management. REVIEWER: COOPERATIVE MANAGEMENT LECTURE NOTES FNE102A Principle of Subsidy in Cooperative 6 The principle of subsidy involves providing financial assistance, incentives, or support to cooperative enterprises to promote specific economic or social objectives. Subsidies for cooperatives may come from various sources, including government grants, loans, tax incentives, technical assistance, or preferential treatment in procurement or market access. Subsidies are often used to address market failures, promote equity, or achieve public policy goals, such as poverty alleviation, rural development, or environmental sustainability.