On the brink

  • The degrading standard of cooperatives in Nepal is largely due to lack of regulations
- Nav Raj Simkhada

Apr 5, 2016-

Community-based cooperatives are a cost-effective and sustainable approach to providing financial and non-financial services in the remote areas of Nepal. Cooperatives are efficient in catering to the needs of the people who are not effectively served by the state or the private sector. They have grown tremendously over last 25 years in the country. Community-based cooperatives are significant to developing countries like Nepal because they can be used to implement poverty alleviation programmes in a cost-effective and sustainable manner. Recognising this contribution and the potential of cooperatives for the socio economic development of the country, the government established the Ministry of Cooperatives and Poverty Alleviation (MoCPA) in 2012 to address the needs of a growing number of cooperatives.

The cooperative sector in Nepal comprises the National Cooperative Federation, an apex body of the cooperatives of all types, 20 Central Cooperative Unions, 321 District Cooperative Unions, and about 32,000 primary cooperatives of various types. The sector has served about five million members and provided direct employment to about 55,000 people. The primary cooperatives have mobilised Rs61 billion as share and reserve capital and provide loans worth Rs154 billion. 

Too many, too little

The figures look impressive, but the institutional capacity and quality of service of many cooperatives are not up to par. In 2014, 130 cooperatives, mostly in the Kathmandu Valley, were declared ‘troublesome’ since they allegedly misappropriated Rs11.41 billion. There are thousands of such cooperatives in the country that misuse and mishandle hard earned savings of the members. 

Due to the lack of resources and expertise, most of the cooperatives’ unions are dormant. Issues like professionalism, effective monitoring, and integration of cooperatives operating in the same locality while safeguarding members’ savings are not given importance. The distinct roles of different types of federations both in the district and central levels are not clear either. As most of the cooperatives are providing financial and non-financial services to their members, there is little need for separate unions. At present cooperatives and their federations represent different sub-sectors of agriculture such as tea, coffee, cardamom, orange, vegetable, potato, honey, milk and other.

I have conducted mapping of cooperatives covering all major geographical locations (plains, hills and mountains) as a part of my assignment with various developmental organisations.  The study revealed that in some VDCs or wards of municipalities there are more than 50 cooperatives. During discussions, government officials and cooperatives admitted that it is better to have fewer, but sustainable cooperatives. 

The degrading standard of cooperatives in Nepal is largely due to lack of regulations. The Department of Cooperative (DoC) registers new cooperatives without assessing the needs or conducting feasibility study. Neither the cooperatives nor the government is concerned about protecting the members’ investment. 

The importance of cooperatives is not reflected in the budget and the programmes of the government either—only 0.21 percent of the total budget was allocated for the cooperative sector in the fiscal year 2014/2015. The ministry also lacks resources to monitor and provide technical support to weak cooperatives, and the available human resources are not fully utilised due to lack of expertise. 

Coordination woes

Moreover, there are serious duplication problems among governmental and non-governmental organisations at the grass-roots level. The same person is a member of similar types of community-based organisations (sometime 

more than 10). The MoCPA should bring government agencies and developmental organisations together and device policies for the cooperatives. Bringing various organisations under one umbrella will produce synergy effects in poverty alleviation initiatives. The focus of the ministry must be on institutional development of cooperatives. It should coordinate with other governmental and non-governmental organisations to make livelihood and other 

services available to the cooperatives and their members. In the leadership of MoCPA, relevant stakeholders, including ministries, the National Planning Commission, developmental organisations, and others should formulate shared vision, strategies and activities. 

Strategies to attack poverty must be made from different quarters. Powerlessness, illiteracy, poor health, lack of skills and difficulty in accessing resources are the principal causes of poverty. One agency alone cannot tackle all these issues as different interventions need different expertise. Therefore, the MoCPA must focus on building strong grass-roots level organisations or cooperatives and effective monitoring of the sector; and there must be good coordination between various service providers to address other poverty-related problems. The stakeholders’ coordination mechanism should be developed at the national and district levels to review the commitments made in the previous year, issues to be resolved and plans and budget for the coming years.


(Simkhada is pursuing a PhD on ‘Leadership Styles and Performance of Financial Cooperative’ at Kathmandu University)

Published: 05-04-2016 08:19

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