Question: Cooperatives have the ability to strengthen people’s participation and initiate economic development in backward and rural areas. Elaborate.
Answer: Cooperatives are organization formed by people at the grassroots level to obtain a collective bargaining power for achieving common objectives. Some of the sectors where cooperatives operate are agriculture, spinning mills, sugar mills, dairies etc.
Working of cooperatives
- Collective funding
Cooperatives are set up through joint funding by all stakeholders. The corpus is created through membership and is later used for lending activities.
- Democratic administration
Cooperatives are not run by a single person or group. Elections to cooperatives are conducted by the state government to ensure that all stakeholders get to chose administrators.
Benefits of cooperatives
- Credit to unorganized sector
Institutional creditors such as commercial banks can lend to those having assets and fixed income. Cooperatives work without backing assets and income for lending.
- Low profit model
The profit margin for members is lower so that both the creditors and debtors do not face losses. Its main objective is service and not profits.
- Transparency in functioning
The cooperatives are structured in such a way that administration process is transparent. The government will also ensure that stakes of members are upheld.
- Easy to register
Registering and setting up a cooperative is very easy. The simplified process allows formation of new institutions covering all sectors.
Thus, cooperatives in India are strong but only in some parts. There is a need for strengthening them across the country to ensure holistic development.