Define Co-operative Society? Explain its Merits and De-merits?


Define Co-operative Society? Explain its Merits and De-merits?



Meaning: -A Co-operative society is an organization, which is service oriented rather than profit oriented. It is an association of persons who joint to form an organization for mutual benefit. In other words, co-operative organisation is defined as a form of organisation where in person voluntarily associate together as human being on the basis of equality for economic interests for themselves.

Following points are the merits of co-operative society:



1.  Easy Formation: -As per the co-operative society act 1956 it can be easily formed. The minimum number of members required is 10.  The Procedure of registration with the registrar of co-operative societies is also simple and less expensive.


2.  Limited Liability: -In a co-operative society, the liability of each member is limited. The liability of the members is limited to the face value of shares purchased by them.


3.  Low overhead cost: -The overhead costs are comparatively low. The members of the managing committee may provide honorary services. It has government support also.



4.  Stability: -The Co-operative Society enjoys stability and continued existence. A co-operative society has a long life. It is not affected due to death, insolvency or insanity of a member. Hence, there is a stability of business.



5.  Open Membership: -The membership of a co-operative society is open to all members of the public. Irrespective of castes, creed, religion and so on.



6.  Socially Desirable: -Co-operative societies are formed to help the poor and middle-income people. They protect the society from the evils of monopoly and concentration of economic power. Hence, it develops social desirability among the people.



7.  Reasonable Prices: -The members can make their purchases at reasonable prices. This is because the main objective of the cooperative is to provide service to its members. Profits become the secondary motive.






Following points are the de-merits of co-operative society



1.  Limited Capital: -A co-operative society can collect limited capital only from the members. As it is, a local organisation and member are poor and middle income group.



2.  Lacks of Business Secrecy: -In a co-operative society, it is not possible to maintain secrecy. Democratic management also effects business secrecy. Because the business done in this organisation is openly.


3.  Lack of Motivation: -Most of the members in a co-operative organisation are less educated and ignorant about the rights and principles of co-operative. Hence, there is lace of motivation in a co-operative society.



4.  Lack of Economies of Scale: -A Co-operative society lacks economics of scale. This is because the co-operative conducts its business activities in a local area on a limited basis.



5.  Non-Transferability of Shares: -The shares of co-operative society are not freely transferable to any one. Every member can purchase a limited number of shares, as there are restrictions for purchasing more numbers of shares.



6.  Political Interference: - The Co-operative organisation acts as a platform for political interests. At the time of elections to managing committee, some of the political parties get involved.



7.  Limited Scope for Expansion: -A co-operative society is owned managed and controlled by middle class people. The capital of this people is limited. Its area of operation is also restricted to certain extent only. Hence, there is limited scope for expansion.



8.  Lack of Loyalty among Members: -The members are often not loyal to their cooperatives. Some of the members may buy their requirements from private traders rather than buying from co-operative.