Economics

What Is A Cooperative Or Co-Op?

Dating back to the 19th century, cooperatives are self-help organizations established by people.

What is a Cooperative (or Co-op)?

A cooperative is an organization established by people who voluntarily work together to meet objectives. These objectives can be economic, cultural, or social. Cooperatives, also known as co-ops, are run democratically where the members are active participants in the affairs of the organization. Cooperatives are self-help organizations that are autonomous with members who are free to control them in any way they deem fit. The aim of cooperatives is not only to gain profits but to uplift and empower the community.

History and Evolution

The origin of cooperatives dates back to 19th century Europe, particularly in Britain and France. The need to establish cooperatives was felt during the Industrial Revolution when the livelihood of laborers was threatened by increasing mechanization. During this period, several social and labor movements were created to cater to the needs of workers. The Fenwick Weaver’s Society made history as the first consumer cooperative in 1769 in Fenwick, East Ayrshire where local weavers gathered in a cottage to sell oatmeal at a discount. Cooperatives subsequently sprang up, and by 1830 there were several hundred in operation. The basis for the modern cooperative movement was laid down with the drafting of the Rochdale Principles. The Rochdale Society of Equitable Pioneers consisted of 10 weavers in addition to 20 people who opened a store to sell food resources they could not otherwise afford. By implementing the Rochdale principles, the society began selling high-quality, affordable goods after an initial struggle. Germany was the cradle of credit unions which were invented in the mid-19th century. After Rochdale, cooperatives began operating successfully, and in 1895, an international association was created. The organizations now have a global appeal.

Types of Cooperatives

Cooperatives are established for different purposes which include:

  • Consumer Cooperatives: this organization is formed by consumers who purchase items from the cooperative. Items include groceries, housing, or financial services.
  • Producer Cooperatives: this kind of organization is operated by producers of commodities who come together to market their products and acquire other resources. This cooperative is popular in the agricultural sector. Farmers, for example, may join together to purchase farm inputs, obtain insurance, and run storage or processing facilities.
  • Worker Cooperatives: this kind of organization enables workers to associate and use their skills for the improvement of all members. The workers get a chance to own a company with a small financial investment making it ideal for people with low incomes.
  • Credit Unions: credit unions mobilize members to contribute money which is then made available to them as loans with low rates of interests.
  • Hybrid Cooperatives: this type of cooperative integrates different cooperative types for the common interest of members.

Significance of Cooperatives

Cooperatives operate in all sectors of the economy from housing, finance, agriculture, energy, to healthcare. The cooperative organizations operate on democratic values and norms and promote individual and collective freedom. Cooperatives provide immense economic benefits to their members from making financial assistance accessible, cultivating saving habits, and fulfilling the economic needs of members. Members also get employment opportunities and access to education and training. Cooperatives contribute to the development of a country through empowering their members. In developing countries, the organizations help to uplift the economic and social lives of disadvantaged members of society. The organizations also promote the concept of self-employment by educating and training their members. It is estimated that there are 1 billion cooperative members in over 100 nations in the world.

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