Frequently Asked Questions

What is a Cooperative?

A cooperative is a duly registered association of persons, with a common bond of interest who have voluntarily joined together to achieve a lawful common social or economic end, and making equitable contributions to the capital required and accepting a fair share of the risks and benefits of the undertaking in accordance with universally accepted cooperative principles.

By forming a cooperative, you pool money, human resources and talent to build capital, and work together to produce more goods and raise incomes. Through cooperatives, you can look for other sources of loans at low interest rates instead of borrowing from informal lenders or usurers. The cooperative can also be a mechanism for marketing your produce.
Objectives of Cooperatives

The primary objective of every Cooperative is to provide goods and services to its members and thus enable them to attain increased income and savings, investments, productivity and purchasing power and promote among them equitable distribution of net surplus through maximum utilization of economies of scale, cost-sharing and risk-sharing without however, conducting the affairs of the cooperative for eleemosynary or charitable purposes.

What are the purposes in Organizing a Cooperative?

1. To encourage thrift and savings mobilization among the members;
2. To generate funds and extend credit to the members for productive and provident purposes;
3. To encourage among members systematic production and marketing;
4. To provide goods and services and other requirements to the members;
5. To develop expertise and skills among its members;
6. To acquire lands and provide housing benefits for the members;
7. To insure against losses of the members;
8. To promote and advance the economic, social and educational state of the members;
9.To establish, own, lease or operate cooperative banks, cooperative wholesale and retail complexes, insurance and agricultural/industrial processing enterprises, and public markets;
10.To coordinate and facilitate the activities of cooperatives; and
11.To undertake any and all other activities for the effective and efficient implementation of the provision of R.A.6939.


Cooperative Principles

Every Cooperative shall conduct its affairs in accordance with Filipino culture and experience and the universally accepted principles of cooperation such as:

Open and Voluntary membership- membership in a cooperative shall be voluntary and available to all individuals regardless of their political, racial or religious background or beliefs.

Democratic Control- cooperatives are democratic organizations. Its affairs shall be administered by persons elected or appointed in a manner agreed upon by members. Members of primary cooperatives shall have equal voting rights on an one-member-one vote principle, while a secondary or tertiary cooperative shall have voting rights as delegate of members-cooperatives, but such cooperatives shall have only five (5) votes. The votes cast by the delegates shall be deemed as votes cast the members thereof.

Member Economic Participation- members contribute equitably to and control the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all the following purposes: developing their cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities as a approved by the membership.

Autonomy and Independence- cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations (including governments) or raise capital from external sources, they do so on terms that ensure democratic control by the members and maintain their cooperative independence.

Education, Training and Information- cooperatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperatives. They inform the general public-particularly young people and opinion leaders about the nature and benefits of cooperation.

Cooperation among Cooperative - cooperatives serve their members more effectively and strengthen the cooperative movement by working together through local, national, regional, and international structures.

Concern for the Community- cooperatives work for the sustainable development of their communities through policies approved by their members.


Cooperative Practices

Cooperatives follow certain operational guidelines. These are practical response to local needs. Some are adopted from standard international practices, others are local innovations. But all these are aimed at perfecting cooperative operations. They are:

Capital Formation - Starting a new cooperative can create a need for substantial capital. A problem develops when trying to operate with limited membership equity capital. The task of financing a new cooperative with member equity alone is usually impossible. Therefore, the best source of additional funds needed is from members in the form of: a) membership fee or purchase of stock; b) agreement to withhold portion of net earnings profits); c) by assessment based on units of products sold or purchased.

Cash Trading - This is business done on a cash and carry basis. The customer enjoys at least the use of the goods and services for the cash payment he/she gives. Cash trading promotes equality since anybody with cash can enjoy the service patronage. This practice can train members to observe the habit of balanced spending. Furthermore, the cooperative would be able to avoid bad debts and stabilize business operations. Finally, it is a way of increasing growth.

Selling at market price - Cooperatives offer goods and services at prevailing market prices. This promotes stability. It can cope with operational expenses and cover up the negative effects of shrinkage, depreciation and losses. It helps maintain the prices of goods;

Cooperatives can avoid destructive competition - Fostering constructive competition among cooperatives will safeguard the interests of consumers. Cooperatives are encouraged to cooperate in unison and bring their joint power in the market up to the level achieved by enterprises that are operated for the benefit of other stakeholders. They cooperate in order to get a fair deal from the large scale buyers of their products. Consumers cooperate to get a better deal from manufacturers and suppliers. Credit unions are formed to counter the power of large scale financial institutions. Price fixing agreements and cartel methods are prevented.

Constant expansion - As organizations, cooperatives have to grow for community services. Expansion is a must. It is done intensively and extensively. New members should be recruited to accumulate more capital and savings to support operation of the expanded business and services which in the long run will provide more benefits for them. However, members in this regard should undergo continuous education and training to learn various management practices/techniques and effective financial supervision.

Quality standardized goods - Cooperatives are intended to develop communities through the production of high quality goods and provision of better services. Cooperatives could help by patronizing only standardized products and services of high quality. Hence, different types of cooperatives will strive to improve their goods and services to stand competition with business establishments. This in turn will be instrumental in improving life in the country.

Cooperative wholesale business or interlending (cooperative bank). Cooperatives can be organized with enough people and capital. They respond to the needs of the community. Needs arise when there are people. The expansion of membership may result in wholesale business. In fact, to be effective, wholesale business, interlending (cooperative bank), could be done by primary societies. Defects from retail business could be avoided.

The benefits from the wholesale are considerable. Members can market and acquire the goods and services at the right price and quality. They can even lower and raise savings. They can also influence the production of badly needed goods and services;

Minimize expenditures - A significant factor favoring the growth of cooperative is its being a community project. Its’ officers do not receive remuneration. If they get compensation, it is only in the form of allowances, per diems, or honoraria. When audit shows that the cooperative is not capable or can afford the minimum wage, only employees get paid regularly. The government can give exemption. Furthermore, laws may allow exemption from income and sales taxes. Minimizing expenses should not be taken as a remedy to cover up the weaknesses of the system. It is not to be conceived as a form of dole-outs, but rather , it should be considered as motivation to make the movement stand on its own and soon attain its objectives. Once its objectives are achieved, the movement can take its rightful place in the development of the country.

What are the Types of Cooperative?

Credit Cooperative:promotes thrift and savings among its members and creates funds in order to grant loans for productive and provident purposes.

Consumer Cooperative:The primary purpose is to procure and distribute commodities to members and non-members.

Producers Cooperative:undertakes joint production whether agricultural or industrial.

Marketing Cooperative:engages in the supply of production inputs to members, and markets their products.

Service Cooperative:engages in medical and dental care, hospitalization, transportation, insurance, housing.

Multi- Purpose Cooperative:combines two (2) or more of the business activities of these different types of cooperatives.

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What are the Categories of Cooperatives?

Cooperative shall be categorized according to membership and territorial consideration. In terms of membership, cooperatives shall be categorized into:

Primary - The members of which are natural persons of legal age.

Secondary - The members of which are primaries.

Tertiary - the members of which are secondaries upward to one (1) or more apex organizations.

Thus, those with cooperative memberships are considered federations or unions as the case may be. In terms of territory, cooperatives shall be categorized according to areas of operation which may or may not coincide with the political subdivisions of the country but, those organized by minors shall be considered a laboratory cooperative and must be affiliated with a registered cooperative. It is governed by special guidelines promulgated by the CDA.


What are the kinds of membership in a Cooperative?

A cooperative has two kinds of members: regular members and associate members.

A regular member is entitled to all the rights and privileges of membership as stated in the Cooperative Code and the coops’ by laws.

An associate member has no right to vote and be voted upon and is entitled only to such rights and privileges provided by the cooperative’s by laws.


What are the Privileges of a Cooperative

Cooperative registered under R.A. 6938 shall, notwithstanding the provisions of any law to the contrary, be also accorded the following privileges:

* Cooperatives shall enjoy the privilege of depositing their sealed cash boxes or containers, documents or any valuable papers in the safes of the municipal or city treasurers and other government offices free of charge, and the custodian of such articles shall issue a receipt acknowledging the articles received duly witnessed by another person;
* Cooperatives organized among government employees, notwithstanding any law or regulation to the contrary, shall enjoy the free use of any available space in their agency, whether owned or rented by the Government;
* Cooperatives rendering special types of services and facilities such as cold storage, ice plant, electricity, transportation, and similar services and facilities shall secure a franchise therefor, and such cooperatives shall open their membership to all persons qualified in their areas of operation;
* In areas where appropriate cooperatives exist the preferential right to supply government institutions and agencies rice, corn and other grains, fish and other marine products meat, eggs, milk, vegetables, tobacco and other agricultural commodities produced by their members shall be granted to the cooperatives concerned;
* Preferential treatment in the allocation of fertilizers and in rice distribution shall be granted to cooperatives by the appropriate government agencies;
* Preferential and equitable treatment in the allocation or control of bottomries of commercial shipping vessels in connection with the shipment of goods and products of cooperatives;
* Cooperatives and their federations, such as market vendor cooperatives, shall have preferential rights in management of public markets and/or lease of public market facilities, stall or spaces;
* Credit cooperatives and/or federations shall be entitled to loans, credit lines, rediscounting of their loan notes, and other eligible papers with the Development Bank of the Philippines, the Philippine National Bank, the Land Bank of the Philippines and other financial institutions except the Central Bank of the Philippines;
* Cooperatives transacting business with the Government of the Philippines or any of its political subdivisions or any of its agencies or instrumentalities, including government-owned and controlled corporations shall be exempt from pre-qualification bidding requirements; and
* Cooperatives shall enjoy the privilege of being represented by the provincial or city fiscal or the Office of the Solicitor General, free of charge, except when the adverse party is the Republic of the Philippines.
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