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

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.

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