1.
Introduction/Background:
The
co-operative concept in the form of Guthi, Parma, Dhikuri, Dharmabhakari etc
has been used from a very beginning in Nepalese societies. Characteristics of
these historical social institutions are almost resembled with primary form of co-operatives.
For the institutional development of such societies, the then government aimed to
adopt co-operative system as a means for economic social and cultural
development of the people as well as an appropriate and effective tool for
rural development. The then government established the Department of Co-operative
under the Ministry of Planning, Development and Agriculture in 1953 A.D (2010
B.C). The modern cooperative movement initiated from Rapti Valley (Chitwan
District) as a part of flood relief and resettlement program. At the first time
13 credit cooperative societies established in 2013B.S. were provisionally
registered under the executive order of the then government which got legal
recognition after the enactment of Cooperative Societies Act
2016B.S.(1959A.D.). The first Co-operative Societies Act was revised several
times and it was replaced by the Sajha Societies Act in 2041B.S.(1984A.D.).
After the restoration of multiparty democracy the Sajha Societies Act was
replaced again by the Co-operative Act 1992. The Department of Co-operative has
provided the authority for registration and regulations of co-operative
societies/unions/federations under the Acts.
The
interim Constitution of Nepal, 2063 has considered Cooperative sector as one of
the three pillars for national development. Several types of cooperatives
societies operated in the country are Saving and Credit, Multipurpose, Dairy,
Agriculture, Fruits and Vegetables, Bee Keeping, Tea, Coffee, Consumers,
Energy, Communication etc. including production, financial and service. Nepal
has initiated its cooperative movement after 1950 AD. Policy and programs
launched by the government have emphasized the importance of Cooperative
modality to maintain peace in the society by means of self employment and to
expedite the development works. It is believed that some 3 million people are
already affiliated so far in more than 20000 cooperatives and more than 50000
people are employed directly in Cooperative business.
2.
Status of Cooperatives in Nepal
With the restoration of democracy
in 1990 and promulgation of a new Cooperative Act in 1992, there has been
resurgence in the cooperative movement in Nepal. This is evidenced by the fact
that the number of registered cooperatives has grown to 9362 ( Statistics on
Nepalese Cooperative Societies & Unions, Government of Nepal, Ministry of
Agriculture & Cooperatives, Department of Cooperatives, 2007, July 9) as of
the record up to April 13, 2007, compared to 830 in 1990. With the increase in
number, cooperatives have diversified their involvement in micro & medium
level enterprises. Indeed cooperative sector is flourishing one of the largest private
sector business enterprises in Nepal. One of the factors that have contributed
to the rapid expansion in both the number and the enterprise coverage of
cooperatives is the new policy and legal regime allowing grassroots based
spontaneous initiatives of communities to organize themselves into cooperatives
for doing business and serving the communities. This is in contrast to the
government led and government directed cooperatives prior to 1990.
There are presently nearly 9,362
primary cooperatives and these are federated into a number of subject-specific
cooperative unions at the district level (72), district cooperative unions
(49), central cooperative union (5), and 1 national cooperative bank. The
National Cooperative Federation is the apex level representative body of all
the cooperatives at the national level. Among the five central level
cooperative
unions, there is one each for
dairy, coffee, fruits and vegetables, consumers, and savings and credit.
Department
of Co-operative have the following vision,
mission, goals and objectives:
Vision:
The
long term vision is to develop cooperatives as one of the lead sector for
economic development of the country.
Mission:
The
mission of the Cooperatives Department is to develop the values and principles
based cooperatives in the country and the plan would be delineated for the
fulfillment of long term vision.
Goal:
- Cooperatives will be developed as the foundation pillar
of the economy for the economic growth, member saving deposits
mobilization, operation of agriculture and micro-enterprises, and creating
awareness of the people on Cooperative concepts.
- Cooperatives will be developed as the medium to address
the economic, social and cultural needs of people as a mechanism to
contribute in community development and service delivery.
Objectives
- To create conducive environment for the establishment
of member base cooperative societies based on membership following
cooperative principles and values to fulfill the needs of their members.
- To collect small and scattered amounts of resources
from the member at local level to create an economic force and to invest
those resources for their own economic, social and cultural development.
- To promote Co-operative system as a means of economic,
social and cultural development of the marginalized people living in the
country.
- A Co-operative system will be developed as a
means of transforming the traditional mode of agricultural and
non-agricultural production into commercial production in rural level.
- To motivate stakeholders to operate co-operative
movement based on the cooperative rules, regulations and principles.
- Co-operative societies unions federations are used as
the effective local institutional mechanism to achieve the national goal
of “poverty alleviation.”
Cooperative Act, 1992
The preamble of the Cooperative Act,
1992 has quoted as "Whereas it is expedient to provide for the formation
and operation of various type of cooperative societies and unions for the
social and economic development of the country's farmers, workers, artisans,
people possessing inadequate capital and low income groups, landless and
unemployed people or social workers for the benefit of general consumers on the
basis of mutual cooperation and cooperative principles." The important
provisions of the Cooperative Act, 1992 includes registration of cooperative
societies/unions, distribution of membership, operational procedures,
appointment of registrar, authority of registrar, delegation of authority,
mobilization of resources, integration and disintegration of cooperatives,
system of information recording and auditing of accounts, rebates and
incentives to cooperatives, dissolution and liquidation of cooperatives,
regulations and penalties to defaulters etc. Some special features of the Act
are simple registration procedures, legal and corporate personality, equality,
elected board of directors, voluntary membership, autonomy, self regulatory
mechanism, federal structure of cooperative movement, limited liability of
members, wide scope of cooperative business etc.
Cooperative Movement
At the beginning the then government
emphasized on the concept of self-help in order to accelerate the development
process at local level aimed to mobilize resources for socio–economic
development of people through co-operative movement. Co-operative Department
had provided authority and made directly involved in establishing, operation
and regulating co-operative societies and unions. After the restoration of
democracy in 1990 A.D (2046 B.S.), the democratic government enacted the Co-operative
Act 1992 A.D (2048 B.S) and the Co-operative Regulations 1993 A.D (2049 B.S.)
The new Cooperative Act has provided an opportunity to the Nepalese people to
establish independent and autonomous co-operative societies by themselves,
according to their capacity to fulfill their own needs. The Co-operative Act
1992 A.D (2048 B.S) has firmly accepted the cooperative principles and provided
a legal base both for the establishment of co-operative
societies/unions/federations and application of co-operative values, norms and
principles into practice. At present, the Department of Co-operatives is
working under the Ministry of Agriculture and Co-operatives to enhance the
local entrepreneurship as well as to develop local leadership through the
promotion, regulation and development of Co-operatives for economic, social and
cultural development of their members.
Types of Cooperatives:
1. Agricultural
Cooperatives
2.
Dairy Cooperatives
3.
Small Farmer Cooperative (SFCL)
4.
Coffee Cooperatives
5.
Multipurpose Cooperatives
6.
Herbal Cooperatives
7.
Tea Cooperatives
8.
Electricity
9.
Savings and Credit Cooperatives
10. Health
Cooperatives
11. Science
and Technology Cooperatives
12. Consumer
Cooperatives
13. Other
Cooperatives
The Cooperative Act 1992 has
firmly accepted the cooperative principles and provided a legal base both for
the establishment of cooperative societies/unions/federations and application
of cooperative values, norms and principles into practice. At present, the
Department of Cooperatives is working under the Ministry of Agriculture and
Cooperatives to enhance the local entrepreneurship as well as to develop local
leadership through the promotion, regulation and development of cooperatives
for economic, social and cultural development of their members.
Introduction of National
Cooperative Federation of Nepal
Introduced Cooperative Movement
in 1956 with the objective of rehabilitating the flood-stricken people and
raising living standard of people.
Established the National Cooperative Federation of Nepal (NCF/N) for
leading the cooperative movement on June 20, 1993. The vision of national
cooperative federation is to promote and
establish such Nepalese civil society where the Democracy, Equality, Solidarity,
Social justice, Caring for other and Gender-Balanced sustainable development
through cooperation will be prevalent. It has the mission to unite, lead, represent and serve
members through their cooperatives at all level for their economic, social
& cultural development.
The
objective of the National Cooperative Federation of Nepal is
· To
promote and develop the cooperative movement in Nepal on the basis of the
cooperative principles and the people's needs with their own initiative and participation.
· To
promote, strengthen and develop the cooperatives through cooperative trainings,
education & specific projects in order to make efficient & viable
cooperatives.
·
To
organize seminars, workshops, awareness creating programs on the emerging
issues & lead the movement for safeguarding & practicing the
cooperative norms, values & principles.
·
To
promote the business for the economic benefits of the members by way of developing
marketing networks for products.
·
To
provide leadership to the cooperative movement and to represent on behalf of
cooperatives in the Government & other national and international forums.
3.
Impacts of Cooperatives at agriculture sector in Nepal:
Co- operatives have
direct and indirect impacts on socio-economic development by promoting and
supporting entrepreneurial development, creating productive employment, raising
incomes and helping to reduce poverty while enhancing social inclusion, social protection
and community-building. Whilst cooperatives directly benefit their members,
they also offer positive externalities for the rest of society, and have a
transformational impact on the economy. Some of the specific ways cooperatives
contribute to development goals include:
Agricultural
cooperatives play an important role in food production and distribution,
and in supporting long-term food security.
Agricultural
cooperatives also promote the participation of women in economic production,
which, in turn helps in food production and rural development: through
cooperatives, women are able to unite in solidarity and provide a network of
mutual support to overcome cultural restrictions to pursuing commercial or
economic activities. For example, women-only cooperatives in South Asia
facilitate economic independence and improve the social standing of women
through their active participation in businesses and management. A survey in
Nigeria indicated that compared to non-cooperative members, women engaged in
cooperative activities were better off, both in terms of productivity and
economic well-being.
Financial
cooperatives (credit unions, savings and credit cooperatives or cooperative
banks) enable easy access to savings and credit at low-cost. They work
by pooling limited capital: members‘ mandatory purchase of ownership shares in
the cooperative and their deposit/savings accounts serve as the funding base to
enable the cooperative to extend credit to members. Financial cooperatives are
the largest providers of microfinance services to the poor. It is estimated
that globally, financial cooperatives reach 78 million clients living below a
poverty line of $2 per day. In South Asia, for example, 54.5 per cent of
borrowers living below $2 per day were served by cooperatives, compared to 19
per cent served by other microfinance providers. Financial cooperatives thus
play a central role in the achievement of an inclusive financial sector that
encompasses the poor.
Financial cooperatives
contribute to poverty reduction in various ways. Access to credit to finance
micro, small and medium enterprise generates employment and incomes. Low-cost
savings facilities for the poor and small depositors help to reduce members‘
vulnerabilities to shocks such as medical emergencies, and encourage future
investments, including education and small business enterprises. Empirical
research of the last decade has demonstrated that demand for savings services
exists, even among the poorest. If formal means of savings are unavailable,
poor people tend to use livestock, jewellery or other informal arrangements
that typically have a low or negative interest rate. For people living in
poverty, savings is critical to counterbalance the cyclicality of income.
In
Nepal, cooperatives are substantial providers of social and economic protection,
especially health coverage and loan. In some countries, they participate in the
management of compulsory health insurance or provide services through their
networks of health and social facilities. Governments have partnered with
cooperatives to extend social protection. For example, the Yeshasvini
Cooperative Farmers Health Scheme (Karnataka, India), which serves 2 million
people, is financed by members, annual premium contributions and government subsidy.
Cooperatives have been instrumental
in peace building. In Sri Lanka and Nepal, cooperatives have been the only
independent organizations allowed by all parties to operate in conflict zones.
The report points out that like
other business enterprises, cooperatives have limitations, and will thrive in
supportive environments and struggle in others. The success of cooperatives is
a function of capable management and governance and the ability to adapt to prevailing
business conditions. The primary means therefore of leveraging cooperatives for
socio-economic development is to promote their formation and growth in a
sustainable manner, consistent with cooperative values and principles and
respectful of their autonomy. This requires a sound policy and legislative
framework and a level playing field vis-à-vis other enterprises’.
The programme-promoted by the
cooperative had wider reach compared to the self-promoted ones as they had
poverty alleviation as their objective.
Loan Utilization
Loans were mostly taken for
productive purposes, social activities, purchasing and repairing assets, and
for repaying previous loans. In particular, women borrowers mostly took loans
for social activities and for repaying previous loans. In most cases, loans
were used for the stated purpose; in some cases, however, loans taken for one
purpose were diverted to other purposes. Women members often did this to spend
money on the most needy aspects of the household.
Sources of Loan
Members approached other financial
service providers if the loan products offered by their co-operatives did not
meet their financial needs. Such financial service providers included banks,
other cooperatives, savings groups, moneylenders, friends, neighbours and relatives. Non-member households were
more dependent on moneylenders than member households were. Due to the loan
services provided by the cooperatives, member households were less likely to
approach other sources of loan than non-member
households were.
Repayment Problem
There were a few repayment
problems. Most of the borrowers who had problem in repaying their last loans
had invested them in non-profitable activities. Those members who had repayment
problem had taken loans from other financial sources. This suggests that, in such
cases, they had used the loans to repay the loans taken from their cooperatives
or had used the loans taken from their co-operatives to pay the loans taken
from other sources.
Diversification, Profitability
and Profit Use
Those members that had taken their
last loans for a number of different purposes usually had made profit out of
them. Higher profit was generated when members used higher amount of last loan
in diversified income-generating activities. In addition, the larger the size
of the last loan taken and the number of skill development training inputs
received, the higher was the profit.
The most important use of profit
was seen as ploughing it back into the enterprise. Other uses included
purchasing food and other household stuffs, which was the best thing they could
do with their profits.
Increase in Income
The incomes of cooperative
members noted higher increases since they joined the cooperatives as compared
to non-member households. This fact was supported by evidences of higher
increases in the assets of member households compared to nonmember households.
Expenditure Pattern
The per capita expenditure on
food consumption of member households was higher than that of non-member
households. This suggests higher income of member households compared to
non-member households.
Health expenditures of member
households were lower than those of non-member households. One possible reason
for this is that the member households were more aware of preventive health
than non-members were due to the intervention by co-operatives.
This indicates that the
cooperatives have contributed substantially to making their members more aware
of their own as well as their family members’ health. Expenditures of member
households on purchasing of assets such as land, gold jewellery, house,
vehicles, etc were higher than those of non-member households. This indicates greater
increase in the incomes of member households than those of non-member households.
Similarly, expenditure of member
households on their children’s education was more than that of non-member
households. This shows that members gave more priority to their children’s
education than non-member households did. This may be mainly because of two
reasons: first, now they had the money to do so, and, second, the attitude of member
households towards the schooling of their children had seen a positive change compared
to non-member households.
Well-being Status
Member households consumed
nutrient food items such as meat, milk, egg, fruits, etc more frequently than
non-member households did. Similarly, the diet of most of the member households
had improved.
It is assumed that children are
not sent to school because of poverty, lack of awareness of importance of
education and engagement of children in household chores. The proportion of
teenage children attending school was higher for member households as compared
to non-member households. Interestingly, however, among non-member households,
more female than male children were sent to school, whereas the reverse was the
situation in the case of member households. Member households were more likely
to have pukka (cemented with tin roof) latrines than non-member
households.
Empowerment
Women’s involvement in
decision-making in different matters, including household decisions, was taken
as a proxy indicator of their empowerment. Involvement of women members in
decision-making in various matters, such as opting for family planning, buying
and selling assets, participating in community development, participating in community
meetings, voting, taking loans, using loans and profits, was higher than that of
non-member women. In addition, women members were more informed about human
rights and women’s rights than
non-members were. Their involvement in various exposure programmes and
community development activities of cooperatives had made their mobility much
higher than that of non-members. This had helped women members to increase
their knowledge of different issues, which, in turn, had contributed to their empowerment.
Wider Impact
The micro-finance and other
services provided by the co-operatives had generated impact not only on the
livelihood of members at individual and household levels, but also on the community.
The impact was in terms of decrease in interest rates, principally those charged
by moneylenders, within the community; availability of better financial
services in the hills; establishment and expansion of markets in the community;
and build-up of social capital.
Contribution
towards the Millennium Development Goals (MDGs)
The financial services provided
by the co-operatives had contributed to increasing the incomes of the people in
the hills. Similarly, capacity-building activities such as technical services,
training, etc provided cooperatives for their members had contributed to
creating self employment opportunities and increasing their incomes. In
addition, their activities had contributed to women’s empowerment, educational
status, health and sanitation situation, and asset accumulation of the client
base, thus improving the well-being of the people living in geographically
difficult areas. These, in turn, had contributed to the government’s poverty
alleviation efforts. In addition, the involvement of cooperatives in community development
activities had contributed to the development efforts of the country as well as
to addressing the development issues of the Millennium Development Goals
(MDGs).
Socio-economic Impact:
The cooperatives model was
effective in providing financial and social services for the community people
living in the hills. This model has, therefore, a role to play in poverty reduction
and development in remote hill areas. Therefore, the government programmes
and/or I/NGOs should continue to promote the poverty-focused cooperatives model
to improve access of financial services to the poor in the remote hill areas.
Self-promoted versus
Programme-promoted Cooperatives
The self-promoted cooperatives
had better financial performance and better performance in book- and record-keeping
than the programme-promoted ones had. The programme promoted cooperatives, on
the other hand, were strong in community development and in reaching the poor.
The self-promoted cooperatives were strong in financial management because the
promoters of these cooperatives were social elites who had experience in the
field of micro-finance, banking and cooperatives. On the other hand, the
programme promoted cooperatives were strong in the areas of community
development and targeting the poor because of the mandatory provision of their
promoters. Again, the self-promoted cooperatives had better outreach in terms
of membership size and were providing a greater variety of savings and credit
products to their members in comparison to the programme-promoted ones. Looking
at conditions such as geographical remoteness, low level of cooperative
education, high illiteracy, lack of financial management skills in remote hilly
areas, the self-promoted coperatives model, without any capacity building and
technical assistance package, may not be widely replicable. Therefore, the
government and non-government programmes should promote cooperatives in rural
hilly areas, along with capacity building and technical assistance package, for
the first few years so that they can serve the poor people as sustainable micro-finance
institutions (MFIs).
The donor agencies should focus
their support on promoting international best practices adapted to the national
context.
Improvement in cooperative
Services
Many cooperative members were
found seeking different sources of loan, which implies that the existing
financial services provided by cooperatives were not sufficient to cater to the
needs of their members.
Therefore, cooperatives should
diversify their financial products as per the needs of members, for which they
should conduct market research. Although the sample cooperatives intended to
provide diversified loan services, they could not do so for insufficient
capital base. Therefore, they should raise the required capital either
internally or by accessing funds from external lending agencies. The
programme-promoted cooperatives had more focus on social intervention than the self-promoted
ones.
Therefore, the self-promoted cooperatives
should initiate social intermediation programmes such as literacy, health
awareness campaign, skill development training and community development
activities to motivate as many community people as possible. It is not possible
to meet such expenses from their own funds. They should explore additional
resources from NGOs and donor agencies for the initiation of social intermediation
programmes.
The GOs and/or I/NGOs operating
in such areas should develop a forum that facilitates information exchange
mechanism for cooperatives at local level.
Targeting the Poor
Although cooperatives, especially
the self-promoted ones, had relatively great outreach, they had problems in
reaching the ultra poor in their working areas. Their membership being
voluntary, those who were aware and literate joined the programme and the poor were
left behind. They had no special programme that emphasized motivating the poor to
join them. Similarly, the existing products and services were not affordable
for the poor community people.
Therefore, cooperatives should
address these problems by developing strategies that would motivate the poor
people to join them. cooperatives should receive training and technical
assistance either from their own resources or through support of their
promoters to increase their institutional capacity.
Wider Impact
The activities of cooperatives
were found effective in generating wider impact in their areas of operation in
addition to the general impact on the livelihood of members at individual and
household levels. Enhancing institutional capacity of hill-based cooperatives
would increase their scope for generating wider impact. Furthermore, promotion
and strengthening of cooperatives in remote hilly areas of the country would
not only contribute to have wider impact but also to achieve the MDGs. Therefore,
the government should design and implement policies that focus on the promotion
and strengthening of cooperatives in rural hilly areas.
