Types of co-operatives societies in kenya

Business studies study module

May be grouped according to;

Nature of their activities

  1. Producer co-operatives
  2. Consumer co-operatives
  3. Savings and credit co-operatives

Level of operations

  1. Primary co-operatives
  2. Secondary co-operatives

Producer co-operatives

This is an association of producers who have come together to improve the production and marketing of their products.

Functions

  • Obtaining better prices for their members products
  • Providing better storage facilities for their products
  • Providing better and reliable transport means for moving the products from the sources to the market and building feeder roads
  • Providing loans to members
  • Providing services of grading, packing and processing to the members
  • Providing farm inputs e.g. fertilizers, seeds, insecticides e.t.c on credit to members
  • Educating and advising members on better methods of farming through seminars, field trips, films and demonstration

-In this type of co-operative members are paid according to the quantity of the produce a member has delivered to the society.

Examples,

KCC-Kenya Co-operative Creameries

K.P.C.U-Kenya Planters Co-operatives Union

K.G.G.C.U-Kenya Grain Growers Co-operative Union

Consumer Co-operatives

-These are formed a group of consumers to buy goods on wholesome and sell them to the members at existing market prices.

-Their aim is to eliminate the wholesalers and retailers and hence obtain goods more cheaply

-The co-operatives allow their members to buy goods on credit or in cash

-Members of the public are also allowed to buy from the society at normal prices thereenabling the society to make more profits

-The profits realized is shared among the members in proportion to their purchases i.e the more a member buys, the buyer his/her share of profit

Examples;-Nairobi consumer co-operative union, Bee-hive consumer co-operative society and City-chicken consumer co-operative society

Advantages

  • Sell goods of high quality
  • Sell goods to members at fair prices
  • Sell goods to other people at normal prices theremaking more profit
  • Buy goods directly from the producers thereeliminating middlemen. They are therefore able to make more profit
  • Can give credit facilities to the members
  • Can pay interest on capital to the members
  • Sell a variety of goods to the members at a place where they can easily get them

Disadvantages

Consumer co-operatives are not popular in Kenya because of the following

  • They face stiff competition from large scale retailers such as supermarkets and multiple shops who buy goods directly from the producers and sell-them to consumers at low prices
  • Cannot offer to employ qualified staff
  • Majority of their members have low income, so raising off capital is a problem
  • Kenya, being an agricultural country, produces enough subsistence goods for itself. It therefore does not require consumer co-operatives
  • Reluctance of non-members to buy from the shops lowers the turn-over
  • Mismanagement of the shops is rampant

Savings and credit co-operatives societies (SACCO’S)

-They are usually formed employed persons who save part of their monthly salary with their co-operative society, through check-off system

-Their money earns goods interest and when one has a significant amount saved, he/she become entitled to borrow money from the society for any personal project e.g. improving their farms, constructing houses, paying school fees e.t.c

-The SACCOS charge lower interest on loans given to members than ordinary banks and other financial institutions.

-The societies have few formalities or requirements to be completed before giving a loan. These are:

  1. Membership
  2. Members salary
  3. Members saving

Guarantee from fellow members

-Profits earned the SACCO’S maybe shared among the members inform of dividends.

-Most SACCO’S have insured their members savings and loans with co-operative insurance services (CIS).This means if a member dies his/her beneficiaries are not called upon to repay the loan and the members savings/shares is given to the beneficiaries.

-They are the main institutions that provide loans to most people who do not qualify for loans from commercial banks because they do not ask for securities such as title deeds required the bank.

d) Primary co-operative societies

-These are co-operative societies composed of individuals who are either actual producers, consumers or people who join up together to save and obtain credit most conveniently

-Consumer co-operative societies and most SACCO’S are primary co-operative societies because they are composed of individuals.

-Most primary co-operative societies operate at the village level, others at district levels and a few at national levels.

e) Secondary co-operative societies

-They are usually referred to as unions

-They are generally composed of primary co-operative societies as their members

-They are either found at district levels or at national levels.

Advantages of co-operative societies:

  • Since the properties of co-operatives are owned collectively, they are able to serve the interest of the members effectively
  • They have limited liability
  • Membership is free and voluntary
  • Members share profits of a co-operative through dividend that are given
  • They have improved the standards of living of their members through increased income from their produce and through savings from incomes.
  • Co-operatives benefit their members through giving them credit facilities and financial loans which they could not have got from local banks
  • They are run on a democratic basis i.e. all members have an equal chance of being elected to the management committee.
  • Many co-operatives are large scale organizations hence able to get the benefits of large scale organizations e.g low production costs leading to low prices of products
  • Co-operative enjoy a lot of support from the government and when they are in financial and managerial problems, the government steps in to assist them

Disadvantages

  • Majority of the co-operatives are small in size and therefore cannot benefit from economies of scale.
  • Members have a right to withdraw from the society and when they do, co-operatives refunds the capital back which might create financial problems to the society.
  • Corruption and embezzlement of funds is a problem for many co-operatives.
  • Most co-operatives are not able to attract qualified managerial staff hence leading to mismanagement.
  • Many suffer from political interference. Sometimes; the election of the management committee is interceded with some people with personal interest in certain candidates hence the best person may not be elected to run the affairs of the society. This leads to poor management and inefficiency.
  • Members may not take keen interest in the affairs of a co-operative society because their capital contribution is small.

Dissolution of co-operative societies

-A co-operative society may be dissolved under any of the following circumstances.

  1. Order from commissioner of co-operatives
  2. Voluntary dissolution members
  3. Withdrawal of members from the society leaving less than ten members
  4. If the society is declared bankrupt



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