The government has prepared a draft cooperative act which has barred board members of cooperatives from holding executive posts. 

The provision has been put in place amid concerns about the board members’ involvement in embezzling people’s deposit.

“The provision will help maintain check and balance at cooperatives along with eliminating conflict of interest,” said Shankar Prasad Adhikari, secretary at the Ministry of Cooperatives and Poverty Alleviation, at an interaction organised by Nepal Cooperative Journalist Society. He said the provision would be enforced for cooperatives based in both rural and urban areas.

A report prepared by Gauri Bahadur Karki-led commission some two years ago had found 130 crisis-ridden 

misappropriating Rs11 billion of the people’s savings. 

The report showed most of the crisis-ridden institutions, including Oriental Cooperative that alone embezzled Rs5.5 billion, landed in trouble because of their board members’ involvement in funds misappropriation.

However, cooperatives and their associations have been opposing the government’s plan. Tek Prasad Chaulagain, president of District Cooperatives Association, Kathmandu, said it was not feasible for many cooperatives to maintain separate board members and executives. 

“Many cooperatives open just once a week in rural areas, while many others 

open from early in the 

morning to late in the evening. So the provision cannot be applicable to such cooperatives,” he said.

Keshav Badal, lawmaker and president of National Cooperative Federation, said a large number of cooperatives could not manage separate board members and executives. He said at around 28,000 out of 32,000 cooperatives, board members were working as executives.

Adhikari, however, made it clear all of the aforementioned types of cooperatives would have to abide by the new provision so that they ran professionally.

The proposed Act has also provisioned that cooperative members have to maintain 1:10 share capital-to-saving ratio. This means, depositors have to purchase shares amounting to 10 percent of their deposits. 

Currently, the members can purchase a share worth Rs100 to deposit money.

The proposed Act has also barred more than one individual from a family from becoming founder member. Secretary Adhikari said it would curb the practice of collecting huge money through the involvement of several family members and using the funds for the family interest by maintaining strong influence on the board. 

The draft Act has removed the current provision of cooperatives requiring to put 25 percent of their profits in reserve fund and provide dividend from the rest. 

The proposed Act has also provisioned jail terms of 

three months to seven years for promoters involved in embezzling funds, depending on the degree of offense. 

The existing Act does not have any provision of such penalty and the culprits are booked under fraud cases.