CoOps For Inclusive Growth & Development: Scenario in India and Abroad

Satish Marathe,
Founder Member, Sahakar Bharati and Director, Central Board, Reserve Bank of India

Indian Scenario:

CoOperatives (CoOps) are self help Economic Enterprises and play a vital role in uplifting socio-economic conditions of their members and the local community amongst in which they operate. Locally owned, people-centric CoOps have served as catalysts for social organization and cohesion. Concerned as they are for their members and the community, CoOps have evolved into a unique model nurturing democratic functioning, human values and respect for environment. 

In India, CoOp sector has always had a spiritual content and evolved on ethical values as it was led by towering leaders like Acharya Vinoba Bhave, Vaikunthbhai Mehta and Dhananjayrao Gadgil. 

India is a developing country facing a variety of problems viz population explosion, low productivity, inequalities, low living standards, etc. Agriculture sector remains the livelihood to two-third of India’s population and gives employment to about 57% of work force. It is also a major source of raw material to a large number of industries. CoOps have been playing a significant role in providing agricultural credit, distribution of agricultural inputs, providing market access, etc.

Indian CoOp movement is the biggest movement in the world and has made tremendous progress in several sectors of the Indian economy. In the early period, the CoOp movement was limited to providing rural credit. 

CoOps have covered 100 percent villages and 75 percent of rural households through a network of over 8 lakhs CoOps with membership of well over 25 crores. In fertilizer production and distribution, the fertilizer CoOps command a major share of the market. In the production of Sugar, the share of CoOps is about 50% and in Cotton processing, it also has a significant share. Till recent past, the CoOp sector accounted for about 55% of the looms in the handloom weaving sector.

Way back in 2002, NABARD in its Annual Report had observed that the CoOp have contributed significantly to the growth of institutional infrastructure in the rural areas and individual capital formation in the agricultural sector. 

Present Status:

The lacklustre performance of CoOps in India can be attributed primarily to dormant membership and lack of active participation of members in the management of CoOps. Mounting overdues in CoOp Credit Institutions (as agriculture remains dependent on the vagaries of weather), inadequate mobilization of own resources, over dependence on Governmental and Institutional support, lack of professional management, bureaucratic and political control, etc have proved harmful to its growth. 

These are the areas which need to be attended to by suitable legislative and policy support to the CoOps.

Moreover, as a result of misconstrued economic policies pursued for the past several years, weaker segments viz. small farmers, workers, tribals, economically backward communities, etc. are facing severe hardships and deprivation, resulting in severe economic imbalances that have generated inequality and inequity. This situation has led to a strong and growing feeling of injustice and exclusion amongst the underprivileged. 

​Unfortunately, Central and State Governments have refused to recognise the salient characteristics of the CoOps and have failed to harness its potential to achieve growth through participation of people. 

The World Bank estimates that food demand will double by 2030 as the world’s population increases by another two billion people. There is an urgent need for India to increase output of food.  The solution lies in encouraging formation of farmer CoOps (PACs in India) to improve productivity, processing of agri produce and to provide access to markets. 

Farmer CoOps to reach their full potential need to increasingly engage in agro processing. To be successful, in the initial years, PACs will need both finance and technical support.

At a time when small farmers are struggling to survive in tough market conditions viz falling prices and inadequate farm subsidies, CoOps need to operate markets on behalf farmers-producers and directly sell their products to the consumers. Farmer CoOps need assistance to improve the quality of their produce for export.

Legal Framework:

In India, the first CoOp Credit Societies Act was a Central Act enacted in 1904. Subsequently, under the Montague- Chelmsford Reforms of 1919, CoOperation became a provincial subject and provinces were authorized to enact their own CoOp laws. Post independence, ‘CoOperative Societies’ has remained a State subject under entry No 32 of the State List of the Constitution of India.

The International CoOperative Alliance (ICA) Identity Statement and CoOp Principles, the United Nations Guidelines of 2001 and the ILO Recommendation No. 193 relating to CoOps have served to guide formation of CoOps, as well as to limit the role of the State to one of providing an enabling legal and financial environment, and level-playing field, to enable CoOps to operate on a sustainable basis alongside other types of economic enterprises. 

It has recommended the State to provide a wide range of support such as human resource development, access to credit, services for marketing, etc without infringing the autonomy of CoOp.

These mechanisms recommend that there should be an ‘ early and complete disengagement of governments from the internal affairs of CoOps ’. While it does not advocate complete withdrawal of Government, it recommends an institutional framework by which the Government registers CoOps and regulates them in the same way as other forms of economic enterprises. 

Looking to the recommendations of UNO, in India the 100 years old State CoOp Acts, need to be radically redrafted in the context of changed economic, political and social scenario and create an enabling legal and financial environment to empower the CoOps.

World Scenario:

The CoOp sector worldwide has about one Billion members in over 100 Countries.  It is estimated that CoOps account for more than 100 million jobs around the world. Across different countries, the proportion of the CoOp membership to population varies, but is as high as 1 in 2 persons as in Finland and Singapore, 1 in 3  in Canada, New Zealand, Honduras, and Norway, 1 in 4 in the USA, Malaysia and Germany.  

Viewed in terms of households, CoOp membership represent as much as 1 in 2 households in Finland and 1in 3 in Japan. 

In terms of percentage of a country’s GDP attributable to CoOps, the proportion is highest in Kenya at 45 per cent, New Zealand with 22 percent.  CoOps account for over 80 per cent of milk production in Norway, New Zealand and the USA.  

They account for 71 per cent of fishery production in Korea, 40 per cent of agriculture in Brazil, 25 per cent of Savings in Bolivia, 24 per cent of the health sector in Colombia, 55 per cent of the retail market in Singapore, 36 per cent in Denmark and 14 per cent in Hungary. 

Credit-Banking CoOps:

The continued financial crisis, post 2008, is characterised by massive public bail-out of Private and Public Sector Financial Institutions 

At the same time, member/owned CoOp Financial and banking Institutions, including Credit Unions, have remained primarily focused on the needs of their members and have prudently refrained from taking excessive risks that plagued many large global Banks and Financial Institutions.  Hence, coop credit institutions are growing from strength to strength.

There are some 52,000 CoOp Banks and Credit Unions, serving 177 million members in 100 Countries, with the World Council of Credit Unions being their Umbrella Organisation. Rabo Bank which is one of the largest CoOp Banks in the world is a shining example of CoOp Banking model.  

In rural areas, Savings and Credit CoOps not only provide access to financial services, which are lacking, but also play an important role in the promotion of small and micro businesses. They bring the kind of financial “deepening” that is necessary for the poor to attain a sustainable growth.

In the case of Tanzania, for example, after a Presidential Commission analysed the problems faced by the CoOps, a new CoOp law was enacted that ensured CoOps being run professionally, by elected representatives. This reform has led to strong growth in the Savings and Credit CoOps and in Coffee CoOps, in particular. 

Health CoOps:

In the now-developed countries, the CoOps have developed without much Government support. In many countries, “Friendly” or Mutual Health Societies have emerged that cover sickness and provide basic health care. In countries with a mixed system of State and Private funding, such as France, Germany and the Netherlands, becoming a member of one of the health mutuals is even today very common for people to gain access to health care. 

In the USA, some of the largest health providers are Consumer CoOps. In the Pacific Northwest, one CoOp provides health care to over 570,000 members while in the Mid-West another has as many as 630,000 members.

In Japan, 120 Consumer CoOps provide health care to around three million members, who meet in small “han” groups to discuss preventive health issues.  

Brazil has the biggest CoOp medical system in the world and is operating in over 80 per cent of Brazil’s by counties. With thousands of doctors who are members, there CoOps cover over 12 million members.

As the population ages, CoOps are now providing personal services and social care for older people and people with disabilities.

Consumer CoOps:

Consumer CoOps which originated in Britain are today market leaders in Italy, Switzerland, Singapore and Japan. They are equally active in the Scandinavian countries and Atlantic Canada.

Even in the UK, which has seen the emergence of large consumer chains, Consumer CoOps have all along maintained over 20% market share and have remained pre-eminent in the small supermarket sector. Consumer CoOps have a strong record of providing decent work culture to their employees while adhering to fair trade practices. 

Housing CoOps:

Even Housing CoOps have played an important role in developed economies. Much of the housing built in Norway and Sweden, in the second half of the last century, has been CoOp. 

Housing CoOps in the USA have been popular amongst the retired people. They have been effective wherever private or public renting has failed. In New York, a large number of residential apartments, homes, etc which were abandoned by private landlords have been taken over and renovated by Housing CoOps for low income groups.

In Britain, CoOps have taken over unpopular ‘Council’ estates even as tenant-owned CoOps are challenging conventional landlords.

Water CoOps:

In Wales, when privatization of water, to investor-owned businesses, proved unpopular, the same was taken over by semi-CoOps whose members are stakeholders. As in Wales, in Bolivia too, CoOps have emerged as serious alternative to privatisation of water services for urban consumers. 

Insurance CoOps:

Some of the world’s biggest insurers are CoOps. The International CoOp and Mutual Insurance Federation (ICMIF) represent over 180 Insurance CoOps in 70 countries, with substantial accrual of premium. Behind the success of these insurance companies is the underpinning principle of pooling risks of large numbers of people without having to pay out large dividend to outside investors, thereby providing insurance at affordable costs. 

Workers’ CoOps :

In 1970s and 1980s, Worker CoOps played a big role in preserving jobs by taking over failed businesses, particularly, in West Europe.  

Electricity CoOps :

Another important area of CoOp involvement is in utilities. US Electricity CoOps show that the CoOp model successfully works in rural areas where the private sector does not venture. In the USA, over 1000 Electricity CoOps supply power to around 12% of households, mainly in rural areas.

Electricity CoOps are also growing in the Philippines and Bangladesh. Like in the US, electricity CoOps in Bangladesh have a membership of about 28 million users. 

In Argentina, 58 per cent of rural electricity is supplied by CoOps, and CoOps are also strong in Telecommunications.

Rural CoOps:

There are primary producer CoOps, which supply inputs and do processing and marketing of products of farmers, fishermen and forestry workers. They include some of the world’s biggest businesses, including conglomeration of farmers, ranchers and primary CoOps whose success has enabled it to be listed in Fortune 500.  

Small Dairy CoOps are growing rapidly in Eastern Europe, Latin America, and Africa. There has been a major resurgence of marketing CoOps in Ethiopia, Zambia and Honduras. In Bosnia and in Serbia, for example, agricultural and marketing CoOps were formed in response to a growing supermarket sector.

In Ethiopia, now more than 85 per cent of Ethiopia’s total inputs in rural areas are distributed through CoOps, and over 75 per cent of its coffee is exported by CoOps.

In many countries, new liberal laws have been enacted resulting in formation of new CoOps. In almost all developing economies, the CoOp movement continues to grow in areas of Credit, Agricultural, Marketing, Dairy, Fisheries and even in a nascent sector like Tourism.

The CoOp sector is experiencing a renaissance despite many difficulties. A study of 11 countries in Africa estimates that around seven percent of Africans are members of CoOp. Even in countries where apex CoOps collapsed, such as in Uganda and Rwanda, the CoOps have continued to grow in large numbers. 


One of the biggest challenge to CoOps is the lack of awareness of their economic potential amongst the Governments and the general public.

In Europe, for example, the International Accounting Standards Board seeks to classify Members’ Share Capital in CoOps as Liability rather than Equity or Capital resulting in members being considered as Creditors of the CoOp rather than Equity owners. International CoOp organizations have opposed this treatment, as it is contrary to CoOp principles.  

Another concern is the treatment of CoOps (that have large market share) as a Monopoly. The Swiss Competition Commission is treating two Consumer CoOps as Monopolistic just because between them they have over 50 per cent of the market share, even though the consumers are themselves shareholders and own these CoOps. Hence, these CoOps are now seeking a review of the Monopoly law.   

A recent study of 450 CoOps in Tanzania and Sri Lanka states that CoOps lack access to finance and need support to expand their activities. Other constraints include lack of technology, trained leadership, lack of access to markets beyond their immediate locality and limited knowledge about opportunities.

Some CoOps are still held back by issues like over-regulation from Governments and poor internal governance which leads to trust deficit. Credit CoOps need to be strengthened to manage risk. 

Similarly, low level of participation by women is a challenge faced by many CoOps, a problem that is worse in agricultural CoOps. In addition, the challenge of low level of involvement of young people and the need for their greater participation cannot be ignored.

Healing Touch of CoOps:

Civil wars and ethnic conflicts have caused major disruptions and destroyed economies and infrastructure.  Yet there is evidence that even during these conflicts, CoOps have survived. In Sri Lanka and Nepal, they have been the only independent organizations, allowed by both sides, to operate in the war zone. In post conflict era, CoOps have played a crucial role in restoration of economy and rebuilding of civil society. 

In East Timor, a network of 20,000 farmers has been formed, processing one third of the coffee for export. In Rwanda, a Credit system was rebuilt with the support of World Council of Credit Unions without regard to ethnicity. In Bosnia, Cheese CoOps, and in Montenegro Dairy CoOps, have encouraged displaced refugees to return, while in El Salvador electricity CoOps have boosted the local economy enabling ex-combatants to find work. 

Similar stories can be told of Guatemala, Lebanon, Azerbaijan, Serbia and Montenegro. There is also evidence of CoOps bridging longstanding ethnic divides. 


Today as the world faces unstable financial systems, insecurity of food supply, growing inequality, rapid climate change and increased environmental degradation, etc, the CoOp sector, especially in India, presents itself as an important tool to realise sustainable Development Goals (SDGs).

With a view to achieve rapid development and social harmony, we ​also need to promote new models CoOps in services and in agri processing sectors.

Internationally, there is a growing consensus at all levels about the important role CoOps play and can play. The World Bank recognises the role of CoOps in revitalising the agricultural sector and the rural economy.  IMF survey, way back in 2007 noted that “CoOperative Banks have become important parts of many financial systems, with attendant potential financial stability”. 

CoOps may not be the complete solution to the world’s problems, but they are certainly a significant part of the solution – growth through people’s participation


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