Institutions adrift

  • Cooperatives play a key role in economic development, but they need an overhaul

Feb 23, 2017-

Cooperatives were established in Nepal to improve the socio-economic condition of rural people through mutual cooperation, trust and activities. Their image today is a mix of trust and mistrust. Despite this perception, cooperatives are counted as a successful enterprise, parallel to the private and public sectors in terms of economic impact. Cooperatives started as a tool of the government to give relief and earn goodwill while keeping an eye on various activities. After the restoration of democracy in 1990, cooperatives were visualised as a way of life for the people, the foundation of economic and political democracy. Yet, despite the success of some cooperatives, their public image is not very good because they have become a means to enjoy facilities without obligations. 

A system for cooperatives

The Cooperative Act 1992 helped create 

various national and central level unions. Consequently, several central and district unions have been created without a grassroots foundation. The rationale for 

creating a federal body, a cooperative of cooperatives, lies within the constituents who see the need for such cooperation. Hence, a federation of cooperatives will succeed if its members create it to meet a need and if they maintain control over the federation. Cooperation is a system. There has been no inter-cooperative relationship. There is virtually a total absence of institutional as well as sectoral planning in the cooperative sector. The federal organisations do not pay much attention to their constituent units, with the result that various units in the organisational structure function in isolation rather than  in unison. 

The so-called cooperative leaders may boast that the number of cooperatives in the country is increasing every year and that it is a sign of cooperative development. But that is no proper gauge of development. We need to consider whether cooperatives have been running on the basis of cooperative values and principles, or like a private company. A cooperative can only be a genuine cooperative when it has a dedicated leadership, professionally competent management and enlightened membership.

The confidence of members is necessary. To develop a genuine cooperative, cooperative leaders need to give this serious thought. However, they lack clarity, and most of the time, personal interests override cooperative interests. Cooperatives should not be dragged into party-based politics. They must be kept free from active politics. Some politicians see cooperatives merely as vote banks while some treat them as real banks with one-way service—withdrawals only. The tendency to use cooperatives for private interests is on the increase. Hence, the principle of political neutrality in cooperatives is becoming a dream.

Long term survival

The cooperative sector is facing more competition and diversification in the areas of management, marketing, production and other integrated aspects. Amid a free market economy and liberalisation process, cooperatives have to change their strategy for their long-term survival by providing many more services to their members and being competitive with a sound business plan. Unless cooperatives survive and thrive, economic policies will bear a poisonous fruit. Rural areas continue to suffer high inflation and low real prices for their produce. In the present situation, farmers have to take risks, invest money and toil simply to ensure a supply of cheap food to the urban élite. 

This situation where wealthy people gain advantages at the expense of the poor has to be reversed, and cooperatives are the only institution that can ensure this. Economic policies appear to have accelerated a move towards capital intensive technologies in the pursuit of more efficient and profitable methods of production. Mass production and production by the masses has become the byword of industry, and the system favours the resource-rich. Cooperatives possess some peculiarities that make them different from other business enterprises and voluntary organisations. Cooperatives aim to provide goods and services to their members more economically. They provide the benefits of economies of scale, increase bargaining power, supply useful tools and technical knowhow, conduct 

savings mobilisation and loan disbursement and solve problems of fragmentation of landholdings. Thus, cooperatives have an important role in the economic development of a country like Nepal.

The government has drafted a new Cooperative Bill in 2016 and submitted it to Parliament for approval. There may be some minor lapses and weaknesses in the bill which are amendable. However, the so-called leaders or rulers of cooperatives are dead set against this bill. This is because the bill is designed to prevent wrongdoings by cooperatives and make them genuine, vibrant and supportive institutions to benefit resource-poor members of the community. Hence, it is necessary for all stakeholders and beneficiaries to work to transform cooperatives into institutions based on cooperative values and principles.


- Acharya is a former director of the National Cooperative Development Board 

Published: 23-02-2017 08:11

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