Advantages and Disadvantages of Cooperative Society

The word “cooperative” means to work together and cooperate with each other, similarly, in a cooperative society, a group of people forms a voluntary association to benefit the members and work for the betterment of society, especially for the weaker sections. According to “The Cooperative Societies Act 1912”, – Cooperative organization is “a society which has its objective for the promotion of economic interests of its members in accordance with cooperative principles.

Advantages of Cooperative Society

1. Easy to Form: There are no big formalities for the formation of a Cooperative Society. Moreover, it is voluntary, so there is no compulsion to any organization person or business associate to form, and join any cooperative society. A minimum of ten members can start a cooperative society, and there’s no limit to the maximum number of members in a cooperative society.

2. Limited Liability: The risk factor of members is limited to the extent of capital brought by them in the cooperative society. In case of insolvency or dissolution, the personal assets of the members are not liable for repayment of debts, which makes the members of a cooperative society feel safe and protects their economic interests.

3. Stability: As the cooperative society holds the position of a separate legal entity, it is not affected by the death, retirement, or admission of any member. A cooperative society is not much affected by its members as they have to work on the basis of the rules and regulations provided in the act. Even though members have a voting right in choosing the managing committee member, it does not have much effect on the working of the business. 

4. Equality in Voting Right: Each member in a cooperative society has one vote to elect the member of the managing committee, as it follows the principle of ‘ONE MAN ONE VOTE’. Every member has an equal voting right, no matter whether they have contributed less or huge capital to the business. Having a say in the matters of the business also puts a great emphasis on them. Besides, a cooperative society is a democratic association, which means that it treats everyone the same irrespective of their caste, gender, or creed. 

5. Support from the Government: As a cooperative society works majorly for the benefit of poor and weaker sections of the society, it gets great support from the government in the form of low taxes, subsidies, loans with low rates of interest, etc.

Disadvantages of Cooperative Society

1. Conflict and Disputes: As the members of a cooperative society belong to different cultural and social aspects their thinking varies, which leads to a greater possibility of conflicts. Members try to make personal gains and keep aside the service motive, which hampers the working of a cooperative society. In other words, the difference in personal motive and social motive of the members of the society results in conflicts among them affecting the overall business.

2.  Lack of Privacy: As there are different members in a cooperative society, it is difficult to maintain a level of secrecy. Every decision is taken in a meeting with an open discussion, which makes it difficult to maintain confidentiality about the operations of the business. Besides, a cooperative society has an obligation to disclose the decisions of the meeting under the Societies Act (7).

3. Lack of Efficiency: It is difficult for the cooperative society to earn and make a profit on a large scale because it works for welfare motives. The amount of profit earned by the society is not sufficient to appoint skilled and experienced members for proper management. Even if any of the members agree to give honorary services to the cooperative societies, they do not have sufficient means to handle it well. 

4. Government Control: When a cooperative society grows and develops into a big unit, then the government would interfere in its operations. The cooperative society has to comply with rules and regulations related to auditing of accounts, profit, etc., which affects the freedom of operations.

5. Limited Resources: Each member brings limited capital and expects a higher return, which is difficult for a cooperative society to provide at an early stage. Moreover, it is formed for the welfare of society and its members; therefore, the profit motive is ignored to some extent.