Managing a Co-Operative Society as Small Business Venture


The chamber Encyclopedia describes cooperative society as “A form of association formed for the purpose of trade, industry or Agriculture, in which membership is open to all the interested people, the service provided control is democratic, member share equally in the risk and responsibilities of the undertaking and any profit are distributes in proportion to the business which each has carried on through the organization”.

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This simply portrays cooperative as a business organization formed to take care of the economic need of it’s members.

H Calvert in his own definition stated that “Cooperative Society is a form organization where a person    voluntarily associate together as human beings. In the basic of equity, for the promotion of economic interest of themselves”

He concluded that in doing so, the following principle are observed.

OPEN MEMBERSHIP : there is free entry and free exit of members who qualified to do so.

  • DEMOCRATIC CONTROL: that is one man vote irrespective of the number of shares holding by members.
  • LIMITED INTEREST ON CAPITAL: interest is general limited to 5% on capital, this is to encourage human participation as against monetary investment only.
  • DIVIDEND ON PATRONAGE: incentives are given to attract more customers.
  • POLITICAL AND RELIGIOUS NEUTRALITY: Memberships transcend any political and religious affiliation.

6     PROMOTION OF EDUCATION: from Calvert opinion it infers that co- operative society is a business organization formed to operate with definite principles and practices.

According to C. H.  Franz in his book “The economic of co- operative enterprises” and that a universal definition of a cooperative  society is hard to define as a result of flexibility  of its organization  which can adapt it self is a variety of different purpose and widely diverging economic and  social system.

Consequently, many economists therefore decided     that it is not fair to fix a particular definition for cooperative society. They agreed that cooperative is not an end itself but a means to a certain goals and the opinion as hold this goal is to be achieved is always divided. Following to this, division in opinion, there emerged three main thoughts in this respect.

The cooperative  enterprises school of thoughts. This based its own definition that ‘cooperative society is a voluntary association of independent economic units that  is forms business and households to form a business  enterprise, organized, capitalized and managed by of and for it’s members patrons, furnishing or marketing at cost, good and services to patrons”. The primary objective of the society in this definition is the advancement of the member economic interests, protecting and maintaining the economic independence of the small entrepreneur and farm by balancing economic weakness of scale. The member of this group usually see in their society one type of economic organization among other best sent to their particular situation and needs in a competitive economic system.

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B     The cooperative common wealth school disagrees with the above definition. The school is against the competitive and capitalistic posture but support economic system based on mutual cooperation.

C     The socialist cooperative school defined it as an economic and social organization interest of the working people serving not only the progress which promotes, safeguard and realized the interests and aspiration of the working class. The stand of this school is the transformation of cooperative from capitalism to socialism and eventually to communism as part of the historical processes of voluntary development.


Finally, in this issue, Franz puts the definition to ma common denominator as a voluntary organization of economic unit based on equality, carrying out an allocated or self-given economic objective.


His opinion implies that cooperative society is in this nature neither capitalistic nor socialistic but a neutral means of the organization which can serve various aims in economic system and democratically controlled enterprise. A Cooperative society is an autonomous body in the sense that it is free from governmental and external control and domination. Members join voluntary as a result of having acquired a new awareness through education to the benefits of cooperative.

It is association of person not capital I,e the interest of the members is the priority in reference to various authors, I can say that Cooperative enterprise is not based in one specific concept or social theory but a collection  of many ideas and concepts. Such as mutuality, the weak combing in solidarity for greater strength, equitable sharing of gain and losses, self-help, union of person with common problem, the priority of man over money and the non exploitation society.


This historical development will enable the researcher to know the position co-operative societies occupied in the socio-economic set up of the various countries of the world. There have always been instance in the histry of human society where individuals have come together to achieve certain aims in corporation with others.


In most tribal societies this has been a common feature. However, these  common were usually directed at fulfilling a certain temporay need, organized cooperative characters were comparatively rare, through some examples can be found through-out history I the middle age as well in classical time.


H.C Franz said that the rise and expansion of the modern social and political changes has its root in the far-reaching economic social and political changes which took place in Europe in the later eighteenth and all through the nineteenth century especially the industrial revolution and liberation of the peasantry from the forming feudalistic system.

The traditional society which was centered on self-contained village life and on the strictly regulated guide system in towns began to disintegrate. Capitalism at its worst, together with growing urbanization led to appalling The traditional society which was centered on self-contained village life and on the strictly regulated guides system in the towns began to disintegrate. Capitalism at its worst, together with growing urbanization led to appauling social conditions in the newly formed working class. In the rural areas small farmers became increasingly in debated to serious money lenders. These lenders exploited the fact that the farmers who have lived more or less at subsistence level was now in desperate need of money to buy supplies for cultivation of cash crops, buy more modern equipment and to supply good services to customers at reasonable price and provision of fertile ground for idea for a new social and economic order.

In England men like Robert Owen (1771-1858) and Dr. William King (1786 – 1869) inspired through the theories and efforts the upbringing of consumer movement which had its first succeed in the venture of Rochdale pioneers, started in 1844 and subsequently spread all over the world.

The Agricultural cooperative movement had its starting point mainly in Germany where Fredrich  Willben Raiffeisen (1818- 1888) and Wilhelm Haas (1839-1913) built up within a year fairly complete system of rural cooperation including credit, supply and marketing. The growing success of cooperation among urban small traders, business and artisans was due to the German Hermann schulze Delitzsh (1808-1883) through formation of peoples’ bank and cooperative supply organization. The motive of these early cooperators were based either on the mere feeling of Christians Humanitarian responsibilities of a man faced by misery of his fellow men as the case of Rainffeison, Haas, Plunkett, etc. the British colonial administration introduced cooperation in India at the turn of century after the of Rainffeison and Luzzatte credit societies in Germany and Italy. From India, it spread to the large of Asia, where it found particular success in Japan and the late twenties to East Africa.



Cooperative development in Nigeria is basically initiated through the assistance of the government. The type of cooperative introduced into Nigeria was imported from India. In 1933, the British which was then ruling the country, commissioned the cooperative expert, Mr C.F. Strickland to study in India and to recommend the possibility of introducing cooperative institutions into Nigeria. He summitted his report in 1934 and 1935. The first cooperative registration enacted as a cooperative ordinance No. 6 of 1935.Major E. F. G. Haig was later appointed the first Registrar of cooperative society to promote, supervise and register cooperative societies under the ordinance.

In 1952, Nigeria Administration was spited  three  regional government and from then cooperative matters became exclusive concern to each region and later states. Before 1935, groups of people has been organized to produce and to export Agricultural crops, cocoa, palm kernel, and cottons after the enactment of the cooperative ordinance. It became necessary to organize these groups of purpose of producing good quality abroad and for the purpose of training farmers to supply good products.


The following are the kinds of cooperative societies in Nigeria.

  1. Agricultural cooperative societies
  2. Cooperative marketing society
  3. Group farming cooperative society
  4. Cooperative community farming societies
  5. Cooperative thrift and credit societies
  6. Cooperative producing marketing societies
  7. Oil mill cooperative societies
  8. Rice mill cooperative societies
  9. Village multi-purpose cooperative societies
  10. Farmer multi-purpose cooperative societies
  11. Farmer single-purpose cooperative societies

Non-Agricultural cooperative societies

  1. Consumer cooperative societies
  2. Industrial cooperative societies
  3. Transport cooperative societies
  4. Weavers cooperative societies
  5. Educational cooperative societies
  6. Building cooperative societies
  7. Craft cooperative societies
  8. Saving and loan cooperative societies.

As their names depicts, one can understand that every of them can be detected according to either economic activities engage or sectors (Agricultural small industries, trade craft etc operating on).


The structure of cooperative movement is inform of pyramid in terms of number and membership. They are:

  1. primary cooperative
  2. Secondary cooperative

The primary cooperative: the primary cooperative societies from the grassroots of cooperative movement. The outstanding feature of primary cooperative t is that their membership is made of individual natural persons. They are usually formed in villages and urban.

The secondary cooperative: in secondary cooperative, the area of operation covers wider ground than the primary societies. It is the societies of the second order. The distinguishing feature is that primary societies are the members and share holders of the secondaries. They are inform of unions and councils. The union is normally at the state level e.g. the defunct Anambra cooperative union ltd where this is form at the local level to be an umbrella at the primary societies in that locality.

The tertiary cooperatives: tertiary cooperatives are the third order. The membership consist of both primary and secondary societies as a result of direct membership. Ideally, only secondary societies are suppose to form the membership apex cooperatives. In defunct Anambra state members of apex comprise both primary and secondary and in some cases, individuals, persons. The case cooperative and commerce Nigerian Plc, the role is that apex cooperative should be form by secondaries that where primaries and individual persons are form to belong, it becomes exceptions. The area of operation according to Chukwu will cover the area of operation of its constituent member. This may be identify with the geographical area of the region state, country and internationally.

In a politically federated country, functionally specialized regional/state apex as well general region/state apex above all other region etc. bodies in the given state may exist. Furthermore, sectorally / functionally specialized internal bodies like Africans confederation of cooperative saving and credit association (ACOSCA) Nairobi, World council of credit union (WOCCU) and spacialised internal cooperative. Example international cooperative alliance (ICA) are often refers as apex.


  1. Employ paid secretaries/mangers to run number of societies that can not individually pay for such services.
  2. Supply some services that can not by supplied by each society to its members.
  3. Help in securing and grating loans either in cash or in kind to the members.
  4. Carry out development and cooperative education work in the locality.


  1. Coordinate the activities of the traders union in the state.
  2. Represent the unions and sector of the movement at both national and international levels.
  3. Provides aids to societies through the unions.

d Carter for general education and development in the state especially by publishing magazine, papers and books.

  1. See for the uniformity of the movement in the state.


  1. Coordinate the activities of the state apexes.
  2. Represent the movement internationally.
  3. Assist the development of the movement in the country by assisting in education and promotional works of the movement in the federation.
  4. Seek for the uniformity of the movement as in the three above internationally for their members.



This section tends to know weather or the otherwise government is participating in development of cooperative and if yes, how its policies influence development and growth of cooperative enterprises and if no, to know and ascertain the impact on the financing of the cooperative project in Oji-River L.G.A. in particular and Nigeria in general.

Nural Islaan (1974) pointed out that government in many countries has taken the leadership in organizing the cooperative because of the unlikely spontaneous emergence of development leadership. These, he said has some limitations. In so far as government executive in charge of organizing co-operatives are frequently not drawn from the amongst the local people, they are not local leaders that do generate confidence and trust. He suggested that since cooperative organizations can serve as an effective coordination and local government is another channel through which effective coordination of activities of the multiple development agencies can be achieved, a proper integration of cooperative with local government should be maintained. A close integration of two would ensure maximum efficient utilizations of local resources both financially and human in the development of rural areas.


Margaret Digby on her comment, stated that “cooperative in its original form was a free and a spontaneous movement and its participants were usually anxious to avoid any form of state control.

Cooperative according to her had been sufficient to safeguard growth and efficient functioning in economically developed countries. She however owned the active control of cooperative by government in most development countries, to the fact that the idea of cooperative was too new and the knowledge for development of spontaneous cooperative movement strong enough to make real contribution to the economy.

Government involvement in aid assistance to the cooperative movement as a whole varies from country to another depending on the level of economic and institutional development on the level of illiteracy and intellectual sophistication of the majority of the citizens as well as on the specific circumstances of the areas.

In this view, Franz Helm maintained that in the historical development of cooperation, there were stages especially in the beginning when some government rather reserved and suspicious and even openly hostile in their attitude to cooperative. This was mainly because the leaders of cooperative had pressed for reforms. He continued by saying that there are four basic different policies which government can, in the present day adopt towards cooperative.


  1. A) The government takes no particular interest in cooperative movement apart from providing it with the necessary legal basis for registration and under some circumstances granting minor privilege in form of reduced tax rate. In the recognition of the valuable services to the community other wise, the movement remains completely independent and all of from the government.


  1. B) The government shows a certain degree of active interest in the development of the cooperative by providing some basic facilities, assistance and incentive through measures in the fiscal economic or agricultural policy. This is to assist the societies in the formation and operation.


  1. C) Government goes beyond the attitude on an interested and approving by stander and takes a real part in organizing and controlling cooperative special department headed by the registrar or commissioner who is responsible for implementation of government policy in this respect.


  1. D) The government not only support cooperative activity but directly participates in the formation and running of the societies, often discriminates against or excluding other forms of enterprises in favour of cooperative. Cooperative in many companies are an important instrument that help the government in attaining its goals in the sphere of Agrarian reforms, production in assuring supplies of communities, construction and the accomplishment of cultural transformation.

Commenting on the attitude of government towards cooperative movement, Benjamin MacDonald indicated that “in some countries, government remain neutral about cooperative activities, while in others government encourage and give support both financially and otherwise, yet in some countries, government may constitute it for political infiltration.

Akin Feminwa (1984) has it that government is a source of cooperative failure. Government interference on Agricultural cooperatives is inevitable because of their dependence on government for financial support, source of input material and protections. They require funds from government as members find it difficult to contribute funds to finance their activities. Most of the materials have to be imported and this requires government approval and good will, and the agricultural product of the cooperative need protection either to avoid foreign protection or as regards to exploitation.

In conclusion, J. O Taiwo said that “it is advisable for the government to give better recognition to cooperative and to offer practical aids, infrastructures and legislation to cooperative enterprise”. Industries manufacturing essential goods should come out in more positive way to help cooperative gain technical skill for production, distribution and developing small scale industries.

Lastly, A.F. Laidlaw (1988) is a paper prepared for the International Cooperative Alliance (ICA) in his question “what is the proper role the government” answer thus:

To encourage and assists with financial support but never dominate or tried to manage.

Cooperatives that aim at improving the condition of the poor will need special assistant from government but must be without bureaucratic and intimate supervision.

If cooperative are to be used as a strong instrument of economic development, experienced cooperative must be involved in the planning.



There are certain principle adopted to guard all types of cooperative societies whether consumer, producer, single purpose, or multi-purpose relationship with its members and the community at large.

These principal clearly distinguished cooperative societies from other types of business enterprises.

According to Franz C. Helm “The Foundation mental principal of cooperative were thought to be those established by the Rochdale Pioneers.

They include:

  1. Open membership.
  2. Democratic control
  3. Continuous education of members
  4. Patronage rebate
  5. Sale of pure and unadulterated goods.
  6. Goods sold at a current market rate and cash only.
  7. Neutrality in race, religion and policies.


Some of these principles are no longer applied to the modern cooperative due to new development within the cooperative movements.





The principle of open membership means that cooperation should be a voluntary association. Members or people should not be forced or intimidated into joining the society.


The Criteria are as follows:

  1. Term of Entry: The amount of payment of share capital and entrance fee have been set according to the economic capacity of members.


  1. Legal Qualification for members:

This is limited by the bye-law of every society, according to occupation, area of residence, age etc.


iii.      Price Policy

This is done through adopting differential prices.



This principle is based on equality of members in all policy decision affecting the society. There is equal voting right, however this may be moderated by certain qualification such as number of years of membership, level of literacy and extent of patronage.



This is a method of sharing surplus according to the members participation in the business. Patronage rebate can be either uneinformed average rate or of a differential rate which tries to take into account the various degree of profitability in different lines of commodity which a cooperation has patronized in the period under consideration.


The calculation of this rebate is therefore based on the relationship of the individual turnover to the total turnover and surplus.

  1. The rebate of Patronage Rebate =

Profit to be distributed   X       100

Total turn over


  1. Members patronage rebate                =

Members turnover                   X       Rate


  1. Neutrality in race, religion and politics

The principle of neutrality aims at recognizing every member as having equal opportunity. It permits people of different culture, religion and ideologies to pool their resources together for economic and social welfare.



members of the cooperative are expected to work towards the realization of their objectives such as objectives shown in the bye-law industries.

To encourage production and marketing activities, to organize the supply and distribution  of general consumer goods, to encourage members thrift among members and establishment of fund from which members can be given loans for business.

It is the duty of the members to make and amend bye-laws, to elect and dismiss office holders.

Members are responsible to make provisions for cooperative education and should make themselves available for course and workshop.


Management can be viewed in different ways, it can be define as a process of performing certain specific functions.

As a group, management connects those in the organization who guide, control or limit the activities of members at the lower level of the organization. According to Koonz and O. Donnel, management involves getting things done through and with people.

Light in turn define management as “the process of planning, organizing, directing, coordinating and controlling men, material, machines money so as to secure optimum objectives.

To say that management is a process means that it is a way of getting things done.

Management is not confide to business organization rather exists where there is a cooperative endeavour.

It must be born in mind that cooperative mostly are formed as a defensive weapon to correct the access in the economic system and in view of this should have a strong leadership that can bring about quick and decisive result for survival.

Cooperative needed a dedicated manager who understands the management function of planning, staffing, organizing, directing, coordinating and controlling.

  1. PLANNING: The ability to plan wills in the growth and survival of the organization, planning is a mental process and the quality of the plan rests on the mental capacities of the planner and adequate of information needed for planning. The tools for planning should be adopted like intelligence, experience, perception, judgment and conception to be able to determine primary and secondary objectives.


  1. ORGANISING: The manager or cooperators should understand the techniques involved in organizing. He ought to know the arrangement of his men, machine material (3ms) to operate without conflict. Ability to design good organizational charts will also help in managing the cooperative.


III.    Staffing:

The cooperative manager should know when to recruit new staff for the enterprise and what function to assign to them.

Cooperative managers should be careful in selecting the type of personnel needed by the enterprise. The incumbents must be influenced to behave in certain prescribing way to be able to reach the goal. The usual agreement that cooperator cannot afford to have skill personnel means that they cannot afford to grow should be indicated. They should learn on how to invest on human assets.



The purpose of control function is to ascertain that what is actually taken place conforms to the plan various controlling techniques are developed to control industries.

Organizations and this include budgeting break even analysis standard hour cost financial rations etc.


COORDINATING: Coordinating involves bringing of number of separate element to perform an organized and coherent unit. Cooperative enterprise involves more than one person and therefore should acquaints itself with function that is coordinating the plan, individual assignments, coordinating of various department and coordination of the internal activities of the business and outside the organization.

Cooperative management requires that the manager or cooperators should be conversant with office management, office personnel, book of final entry, job cost analysis, for effective management.


According to Professor J.C. Onah the pattern of management in cooperative societies conform to the simple order of management hierarchy comprising the general body of members of the society and elected members, the secretary and manager depending on the size of the cooperative.

The supreme power in the cooperative society is the general assembly of its members in general meeting. The decision of the general meeting are usually limited to important policies on the constitutional matter, members elects a decision making body such as the executive committee or supervisory committee which report the operation of the society’s project and business. The cooperative organization in each state comprises of four major strate namely: Apex societies, secondary, primary and individual cooperators.


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