Cooperative Society: Meaning, Features, Types, Advantages, Disadvantages


What is Cooperative Society ?

A co – operative society is a voluntary association of persons of moderate means , who unite together to protect and promote their common economic and social interests. It is based on the principles of collective effort, mutual self – help, equality, democracy, distributive justice and freedom. It represents an attempt by poor and weaker persons to protect themselves against the exploitation and oppression of the economically strong .

The term cooperation is derived from the Latin word ‘co-operari’, where the word “co” means ‘with’ and “operari” means ‘to work’. Thus, the term cooperation means working together. So those who want to work together with some common economic objectives can form a society, which is termed as cooperative society.

Features Of Cooperative Societies

Voluntary Association

The membership of cooperative societies is voluntary. A person can join cooperative society anytime or leave as per his desire. Religion, gender & caste do not matter in cooperative society. Membership is open to all the people.

Number of Members

A minimum of 10 members are required to form a cooperative society. In multi-state cooperative societies the minimum numbers of member is 50 from each state in case the member are individuals. The Cooperative Society act does not specify the maximum numbers of the cooperative society members.

Registration of the Cooperative Society

In India the cooperative societies registered under Cooperative Societies Act 1912 or the state Cooperative Societies Act. The Multi-state Cooperative Societies are registered under the Multi-State Cooperative Societies Act 2002. Once the society registered, the Society becomes a separate legal entity.

State Control

Since registration of cooperative societies became compulsory. From that period the every cooperative society came under the control and supervision of the government.

Return on Capital Investment

The members get return on their capital investment in the form of dividend. When the new member joins the society he/she needs to give some registration fees and needs to deposit some mandatory amount every month. At the end of financial year members get some return on their capital investment.

Democratic Management

The management of co-operative society is based on democratic lines. A body of members is elected to conduct and control the business. The body is elected through ‘one-man-one-vote-system’. Members can give their suggestions, opinions and problems.

Service Motive

The formation of co-operatives is based on service motive rather than a profit motive. Its objects to serve their members and not to maximize the profits. These societies provide different types of service to their members.

Equality of Voting Rights

The main principle of co-operative society is “one man one vote”. Irrespective management of a co-operative society is democratic. All important decisions are taken by majority.

Types of Cooperative Societies

Consumers’ Co-operative Societies

Such Societies are organised by the consumers to avoid exploitation by the middleman and to ensure steady supply of consumer goods and services at fair prices. A consumer’s co – operative store purchase the consumers good either from the manufacturers or the wholesalers and then sells them to its members at reasonable prices. The profits made by the society during a year are utilized for strengthening the reserve fund of the society, for declaring a moderate rate of dividend and for declaring a bonus to members according to the purchases made by them from the cooperative store.

Producers’ Co-operative Societies

The societies are by the small producers to fight against the big producers. It assists the member who need capital, materials and equipment to use their skills for the production of goods and services. The society supplies these things to the members and takes over their purchases for sale. Thus, a producers ‘ society not only provides money and materials to the small artisans but also undertakes to sell their products.

Co-operative Marketing Societies

Co-operative marketing societies are voluntary associations of small producers, who find it difficult to individually sell their products at a profit. The main purpose of such a society is to ensure a steady and favourable market for the output of its members. The output is pooled together and sold at the best price. The sale proceeds are distributed in proportion to the contribution of the members to the pool. Marketing co-operatives eliminate middleman and ensure honest trading practices in weighing, measuring and accounting.

Credit Co-operative Societies

Such societies are formed to provide financial help in the form of loans to members. The funds of these societies consist of share capital contributed by the members and the deposits made by them and outsiders. The funds are used in giving loans to needy members on easy terms. Thus, the members are protected from the exploitation of money lenders, who charge exorbitant rates of interest Another important purpose of creditco – operatives is to encourage the habit of thrift among their members.

Farmers’ Co-operative Societies

In co-operative farming societies, small farmers join together and pool their resources for cultivating the land collectively. Their object is to achieve economies of large scale farming and maximising agricultural output. Such societies are particularly important in the case of countries like India , where agriculture suffers from excessive sub – division and fragmentation of land . Co – operative farming makes it possible for members to use modern tools and equipments good seeds, fertilizer and irrigation facilities in order to achieve higher production.

Cooperative Housing Societies

Cooperative housing societies are established to help people with limited income to construct houses or flats at reasonable costs. The members of these societies consist of people want residential accommodation at lower costs. The aim is to solve the housing problems of the members by constructing and giving the option of paying in installments. These societies procure land from the government and construct flats or provide plots to members on which the members themselves can construct the houses as per their choice.

Advantages of Cooperative Societies

Ease of Formation

A co – operative society is a voluntary association and may be formed with a minimum of ten adult members. Its registration is very simple and can be done without much legal formalities.

Open Membership

Membership in a co-operative organisation is open to all having a common interest. A person can become a member at any time he likes and can leave the society by returning his shares without affecting its continuity.

Democratic Management

A co-operative society is managed in a democratic manner. It is based on the principle of one – man-one-vote. All members have equal rights and can have a voice in its management.

Limited Liability

The liability of the members of a co – operative society is limited to the extent of capital contributed by them. They do not have to bear personal liability for the debts of the society.


A co – operative society has a separate legal existence. It is not affected by the death , insolvency , lunacy or permanent incapacity of any of its members. It has a fairly stable life and continues to exist for a long period.

Promotion of Social Values

The cooperative societies promote social justice and mutual cooperation. They promote self help, moral value among the members. They also help to prevent concentration of economic power in few hands.

Disadvantages of Cooperative Societies

Limited Capital

The cooperative organisation is formed by the people who have limited resources and there is no compulsion to buy more than one share by each member.

Inefficiency in Management

Cooperative societies are unable to attract and employ expert managers because of their inability to pay them high salaries. The members who offer honorary services on voluntary basis are generally not professionally equipped to handle the management functions effectively.

Lack of Motivation

In cooperative organisation , there is no direct link between efforts and reward. Hence , members are not inclined to put their best efforts . There is no incentive for working efficiently.

Conflicts among Members

The members are from different sections of society. They may have difference of opinion and if any member follows rigid attitude, it can lead to conflicts. Generally, the selfish motive of members starts dominating and they forget the service motive .