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What is the Role of Co-operative Society in Rural Development?

Dashmeet Kaur

| Updated: Oct 11, 2019 | Category: RBI Advisory

When individuals having common economic, social, and cultural interests voluntarily come together to form an association, it turns into the establishment of a co-operative society. The central motive of co-operative societies is to serve the needs of underprivileged and rural sections of our community. Co-operative society in rural areas follows the principle of mutual help and self-help to attain the objective of rural development. It is like a non-profit organization where every member joins a co-operative society to provide support instead of earning profits. An essential role of co-operative society’s contribution lies in the advancement of villages.

Characteristics of a Co-operative Society

The following features determine the co-operative societies:

  • A Separate Legal Entity
    A co-operative society is obliged to register itself under the Co-operative Societies Act. After registration, the co-operative society gets identified as a separate legal entity implying its existence is different from its members.
  • Voluntary Association
    The formation of a co-operative society is only possible when all members voluntarily take responsibility to build one. Anybody with a common interest can join or create a co-operative society. Moreover, members have the flexibility to leave the association at any time by giving proper notice.
  • No Personal Motive
    As co-operative society works together to achieve a common objective, it is indispensable for the members not to have any personal motive involved. The fundamental aim of co-operatives is to provide services to the members and not to earn profits. Maximizing the profits is an essential objective of other business organizations; while, it’s not the case with co-operatives.
  • State Authority
    The laws of the government regulate all co-operative societies. In India, a co-operative society must register itself under the State Co-operative Societies Act, or the Cooperative Societies Act, 1912.
  • Democratic Administration
    Co-operative societies conduct an Annual General Meeting (AGM) every year wherein the managing committee gets elected that manages the affairs of the co-operative society.

Role of Co-operative Society in Rural Development

Even though agriculture is the primary source of income and employment in rural areas, the parody of the situation is that a majority of the people living in rural districts are poor and hungry.  Co-operative society plays a vital role in improving the deprived conditions of rural areas.  To understand how co-operative society helps in rural development, let’s have a look at the pointers below:

  • Since 65% of India’s population depends on agriculture, it has become a dominant source of livelihood in rural districts. People earn through the activities of farming, fisheries, forestry, and livestock. The agricultural co-operative society actively supports the men and women agrarian producers to increase employment opportunities for marginalized groups.
  • The co-operative society helps in enhancing the quality of fertilizers and facilitates better facilities for product marketing, including storage, processing, transport, and availing modern cultivation techniques.
  • There are multiple co-operative societies furiously working on different aspects to acquire a sustainable economy in rural areas.
  • The co-operative societies impart several services to poverty-stricken sections, such as access to advanced technologies, proper training in natural resource management, and boost agricultural productivity by increasing the supply of goods.
  • The purpose of co-operative society does not restrain to provide social benefits but also to give financial security to the people performing agrarians’ activities.  So, co-operatives avail finance through agricultural funds and credits to strengthen the economic position of farmers.

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Types of Co-operative Societies

There are different types of co-operative societies, having unique objectives:

  • Consumer Cooperative Society
    To consider the interest of general consumers, the Consumers Co-operative Society gets build. After the establishment of a consumer society, its members focus on providing reasonable goods to consumers by eliminating the middleman and directly buying the products from manufacturers.
  • Producer Cooperative Society
    Producers Co-operative Society is mainly formed to protect the interest of small producers. The society achieves its purpose by availing items producer’s needs like equipment, machinery, raw material, etc.
  • Marketing Co-operative Society
    When small producers and manufacturers find difficulty in selling their products individually; it results in the creation of a co-operative marketing Society. The members of such society collect products from both parties and take responsibility for selling their products in the market.
  • Co-operative Credit Society
    As the name suggests, the co-operative credit society works on the purpose of providing financial support. This society accepts deposits from its members and grants them loans at reasonable RoI.

Challenges faced by Co-operative Society in Rural areas

It’s usually not that easy to operate in the rural market because of several problems. Let’s have a look at some common issues that co-operative deal with frequently:

  • Inadequate Funds
    The co-operative society has a limited working capital that is insufficient to perform any course of action. Having a weak owned fund base, the co-operative society borrowing from the central financing agency gets considerably constrained. Therefore, lack of resources and funds stands as a barrier in the way of meeting the credit requirements of indigents.
  • Availability of Agricultural Loans Only
    Even after aggressively participating in the progression of rural areas, co-operative societies fail to offer financial support to every department.  The credit services of co-operative society are limited to agricultural operations.  Credit societies usually overlook the other financial needs of farmers. The farmers plead to co-operatives to address different credit requirements as well, which leads to a reason for dispute amid them.
  • Political  Intrusion
    The biggest problem of co-operative society is that they become the victim of politicians’ tactics. The politicians misuse co-operatives for their advantage and to inflate their vote bank. They clench onto the co-operative society like a leech, which affects the productivity of co-operatives.  
  • Mixed Intentions
    It happens in several instances that some members of co-operative society join the association for personal gains. It not only violates the original goal of mutual help but also creates a clash between private interests and the interest of the co-operatives that ultimately divert their way to attaining a higher economy in India through rural development.
Conclusion : The rural sector being the major GDP contributor of India has to be developed as a scarcity of resources in rural areas will impact the development of the entire nation. The co-operative societies cover about 95% of villages in India, hence sharing a crucial part in enlarging the overall economy. Despite facing numerous challenges, the co-operative society in rural districts are efficiently working in promoting economic welfare.
Dashmeet Kaur

Dashmeet Kaur is an experienced content writer, having proficiency in writing Legitimate content with comprehensive research. She also has a keen eye to detail and incorporating accurate facts.

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