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CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

Today, in an era when many people feel powerless to change their lives, cooperatives represent a strong, vibrant, and viable economic alternative. Cooperatives are formed to meet peoples’ mutual needs. They are based on the powerful idea that together, a group of people can achieve goals that none of them could achieve alone. For over 160 years now, cooperatives have been an effective way for people to exert control over their economic livelihoods. They provide a unique tool for achieving one or more economic goals in an increasingly competitive global economy. As governments around the world cut services and withdraw from regulating markets, cooperatives are being considered useful mechanisms to manage risk for members in Agricultural or other similar cooperatives, help salary/wage earners save for the future through a soft-felt monthly contribution that is deducted from source, own what might be difficult for individuals to own by their efforts, strengthen the communities in which they operate through job provision and payment of local taxes. Cooperatives generally provide an economic boost to the community as well. Incidentally, cooperative despite its old age is not very popular in Nigeria. Only recently worker cooperatives started gaining ground among working class citizens, most of who find it difficult to save part of their salaries/wages for the rainy day. Hitherto, cooperative societies were thought to be associations meant only for farmers, small traders and other very low-income earners. This explains why quite a number of cooperative farmers are found, particularly in southern Nigeria.

Against this background, this project examines the role of cooperative societies in economic development with a view to throwing some light on the nature and features of cooperatives, the benefits and the formation and management of cooperative societies. The project investigates the ways in which cooperatives can act as agents towards sustainable community development. The justification of the study precipitates from the fact that although investigating the role of cooperatives on the international scale is not a new phenomenon, In Nigeria, results of such researches are still scanty and incomprehensive. The project is a descriptive survey, which involves the collection of data for the purpose of describing the role of cooperative societies in economic development. The remainder of the project is organized as follows. Section two gives a background on cooperatives, which serves as the theoretical framework. Section three assesses the role and mechanism of cooperative societies. Section four highlights the steps involved in starting a cooperative. Section five discusses the challenges facing cooperatives and section six summarizes and concludes.

The International Cooperative Alliance (ICA) in its Statement on the Cooperate Identity, in 1995, defines a cooperative as “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.” It is a business voluntarily owned and controlled by its member patrons and operated for them and by them on a nonprofit or cost basis (UWCC, 2012). It is a business enterprise that aims at complete identity of the component factors of ownership, control and use of service, three distinct features that differentiate cooperatives from other businesses (Laidlaw, 2014).

Although there is no consistency to the exact origin of the co-operative movement, many academics argue the origins lie within Europe (Shaffer, 2010; Holyoake, 2018). The first recorded co-operatives date back to 1750 in France, where local cheese makers in the community of Franche-Comté established a producer cheese cooperative. Within the decade, co-operatives had developed in France, United Kingdom, United States and Greece. In 1844 the Equitable Pioneers of Rochdale Society (EPRS) was formed. With the goal of social improvement, twenty-eight unemployed community members saw the opportunity to pool their limited resources and attempt cooperation for the good of the group. Even though co-operatives appeared in the century previous, Rochdale is seen as the first ‘modern’ cooperative since it was where the co-operative principles were developed (Wikipedia, 2016; Gibson, 2015; and Abell, 2014).

The successful example of cooperative business provided by the Rochdale Society, which also established between 1850 and 1855 a flourmill, a shoe factory, and a textile plant, was quickly emulated throughout the country. By 1863 more than 400 British cooperative associations, modelled after the Rochdale Society, were in operation. Thereafter the English movement grew steadily, becoming the model for similar movements worldwide. Notable among the European countries in which consumer cooperation received early popular support were France, Germany, Belgium, Austria, Italy, Denmark, Finland, Norway, and Sweden (Abell, 2014).

In 1895, International Cooperative Alliance (ICA), a non-governmental organization was established as umbrella organization to promote friendly and economic relations between cooperative organizations of all types, nationally and internationally. The major objective of the ICA is to promote and strengthen autonomous cooperative organizations throughout the world. In order to achieve its aims, the ICA organizes international, regional, and sectoral meetings. The ICA also aims to promote exchange of information such as news and statistics between cooperatives through research and reports, directories, international conferences, and two quarterly publications: ICA News and the Review of International Co-operation. It represents the cooperative movement generally, for instance through its membership of the UN.

Since its creation, the ICA has been accepted by cooperators throughout the world as the final authority for defining cooperatives and for determining the underlying principles, which give motivation to cooperative enterprise. World membership in ICA gives some idea of the size of the cooperative movement today. In 1895, the founding congress had 194 members; in the mid-1980s the ICA recorded a membership of about 355 million individuals; in 1999, the ICA’s organizations represented 750 million people; and since 2002 it was estimated that more than 800 million people are members of worker, agriculture, banking, credit and saving, energy, industry, insurance, fisheries, tourism, housing, building, retailer, utility, social and consumer cooperatives societies (Levin, 2012; Encarta, 2015; and Wikipedia, 2016).

Cooperatives are based on basic values and principles. Cooperative values are general norms that cooperators, cooperative leaders and cooperative staff should share and which should determine their way of thinking and acting (Hoyt, 2016). The values, which are articulated by the ICA in a statement in 1995, include self-help, self-responsibility, democracy, equality, equity and solidarity. The values statement further articulates values of personal and ethical behaviour that cooperators actualize in their enterprises. They describe the kind of people cooperators strive to be and the traits they hope to encourage through cooperation. These are honesty, openness, social responsibility and caring for others.

Cooperative principles on the other hand, are guidelines by which cooperatives put their values into practice. The principles rest on a distinct philosophy and view of society that helps members judge their accomplishments and make decisions (Hoyt, 2016). Before 1995, the ICA has made two formal statements of the cooperative principles, in 1937 and 1966. In 1995, the ICA redefines, restates and expands the cooperative principles from six to seven in order to guide cooperative organizations at the beginning of the 21st century. The principles are: Voluntary and Open Membership; Democratic Member Control; Member Economic Participation; Autonomy and Independence; Education, Training and Information; Cooperation among Cooperatives; and Concern for Community.

Cooperatives are community-based, rooted in democracy, flexible, and have participatory involvement, which makes them well suited for economic development (Gertler, 2011). The process of developing and sustaining a cooperative involves the processes of developing and promoting community spirit, identity and social organisation as cooperatives play an increasingly important role worldwide in poverty reduction, facilitating job creation, economic growth and social development (Gibson, 2015).

Cooperatives are viewed as important tools for improving the living and working conditions of both women and men. Since the users of the services they provide owned them, cooperatives make decisions that balance the need for profitability with the welfare of their members and the community, which they serve. As cooperatives foster economies of scope and scale, they increase the bargaining power of their members providing them, among others benefits, higher income and social protection. Hence, cooperatives accord members opportunity, protection and empowerment - essential elements in uplifting them from degradation and poverty (Somavia, 2012). As governments around the world cut services and withdraw from regulating markets, cooperatives are being considered useful mechanisms to manage risk for members and keep markets efficient (Henehan, 2017).

In a number of ways, cooperatives play important role in global and national economic and social development. With regard to economic and social development, cooperatives promote the “fullest participation of all people” and facilitate a more equitable distribution of the benefits of globalization. They contribute to sustainable human development and have an important role to play in combating social exclusion. Thus the promotion of cooperatives should be considered as one of the pillars of national and international economic and social development (Levin, 2012)

In addition to the direct benefits they provide to members, cooperatives strengthen the communities in which they operate. According to Somavia (2012) cooperatives are specifically seen as significant tools for the creation of decent jobs and for the mobilization of resources for income generation. Many cooperatives provide jobs and pay local taxes because they operate in specific geographical regions. According to Wikipedia (2016) and Levin (2012) it is estimated that cooperatives employ more than 100 million men and women worldwide.

In Nigeria, cooperatives can provide locally needed services, employment, circulate money locally and contribute to a sense of community or social cohesion. They can provide their employees with the opportunities to upgrade their skills through workshops and courses and offer youth in their base communities short and long-term employment positions. Students could also be employed on casual-appointment basis during long vacations. Through these, cooperatives will contribute to economic development.

1.2       Statement of the Problem

Cooperatives the world over are in a state of flux. In almost all parts of the world, cooperatives face one or more of the following crises: crisis of ideology, crisis of capital, crisis of credibility and crisis of management (Taimni, 2017).

Cheney 2015) identified five challenges facing cooperatives. These are cultural transformation, competition and expansion, wage solidarity, centralization and reorganization, and programmes to increase productivity and participation. Groves (2015) on the other hand, posits that one of the major problems of cooperatives is how to keep balance in the two parts of cooperative business, efficiency and democracy since those who are charged with the operation of a cooperative chiefly the board and manager must serve two masters: the imperatives of good business practice and the social purpose of a community of people. Hence, to maintain their special character, cooperatives must be two things in one: a business organization and a social movement. This is what makes a cooperative a business enterprise with a human face and so, very difficult to manage. In striving for efficiency, cooperatives often tend to imitate other business, but in pursuing a social purpose they bring out the features, which make them different (Laidlaw, 2014).

Educating, training and retraining of members in general and officers in particular is always a challenge to cooperatives especially in developing countries. A cooperative without a strong component of education is in danger of losing its essential character, that is, the human and personal characteristics which distinguish it as a cooperative. Education is of paramount importance to the cooperative sector. Unless all those responsible for cooperatives (directors, officers, members, staff) are well informed and knowledgeable, cooperatives are likely, in some countries, to become much like capitalist, profit-seeking business, or in other countries to become handmaids of the State. Education makes people easy to lead, but difficult to drive; easy to govern but impossible to enslave.

Assuming the validity of the sector concept (the "mixed economy", as it is often called), cooperators face such questions as what type of business activity is most suitable for each of the three sectors, public, private and cooperative? Are there certain kinds of business that rightfully belong to the public sector? Are there others, which are best left to private enterprise? What kinds, ideally, are most suitable for the cooperative way of business? Are there some fields in which all three may engage and compete? Hence, one other challenge that cooperative societies face is the choice of business most suitable for the enterprise.

Another challenge facing cooperatives is adaptation. No business in a national economic system is completely independent and self-sufficient but operates in conditions of dependence and interdependence. Both capitalist business and cooperatives depend to some extent on the State and services provided by the State (highways, water supply, the postal system, etc.). Similarly the State and public enterprise depend greatly on private enterprise, or on cooperatives. Sometimes private-profit business depends on cooperatives. And, of course, the reverse, cooperatives depending on private business in some way or other, is quite common. Thus, cooperatives cannot be thought of as an exclusive economic system but rather as one section of the total economy. They constantly operate in co-existence with other forms of business and sometimes in conjunction with them. Co-operatives therefore, have to adapt themselves by struggle in one place, by agreement in another - to the elements of a complex environment, partly free and partly organized. It must now decide what place it means to claim for itself in the new economy, either organized or in process of organization.

In addition, the cooperative sector suffers from an internal handicap of its own making: the frequent failure of various types of cooperatives to work closely together as a sector. Because of their voluntary and democratic nature, cooperatives have been reluctant to impose strict disciplines on themselves - they much prefer to act by common consent and persuasion. Often, management of cooperatives relies on relationship or is moved by sympathy to act against even the societies’ bylaws. This indeed has a lot of repercussion particularly in the developing economies and is against the 6th principle of cooperatives: Cooperation among Cooperatives.

The different needs of customers, members, patrons, and owners challenge the cooperative’s board of directors and manager to make good business decisions. Business earnings of the cooperative must be great enough to systematically rotate the investment of members, pay patronage, and offer goods and services at reasonable prices or pay fair market value for customer’s products. This unique business structure dictates that the manager, board of directors and members understand the business and cooperative structure.

To better tackle the above problems, Taimni (2017) suggested, in addition to fore mentioned, that cooperatives should make optimum use of all resources and strive continuously to enhance productivity of resources; ensure highest efficiency while providing services to members; improve management capabilities and competencies through effective organizational designs and structures; mobilize capital and lay greater stress on internal capital formation and accumulation; develop and retain human resources - members, leaders, staff and managers; forge strategic alliance with key institutional actors in the new environments; evolve and sustain integrated, vertical structures; increasingly focus on directly enhancing socio-economic conditions of their members by undertaking value-added operations; encourage members' participation through improved, diversified services; and strictly adhere to the values of honesty, openness, caring and concern for community and environments.

Once this is done, it is hoped that cooperatives would be able to overcome the problems and challenges facing them. It however, calls for maintaining balance between economic and social purposes, emphasizing differences, relating with other cooperatives both at national and international levels, and maintaining a favourable public image.

1.3       Objectives of the Study

The study sought to know the role of cooperative society on economic development of edo state.  Specifically, the study sought to;

1. access the economic development of edo state.

2. determine the role of cooperative society on economic development

3. examine the significant and unique contribution to solving some of the massive problems facing mankind today in edo state

1.4       Research Questions

1. What are the economic developments of edo state?

2. What are the roles of cooperative society on economic development?

3. What are the contributions to solving some of the massive problems facing mankind today in edo state?

1.5       Research Hypotheses

Ho1: There is no economic development in edo state.

Ho2: There are no roles of cooperative society on economic development.

1.6       Significance of the Study

This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.

1.7   Scope/Limitations of the Study

This study is on role of cooperative society on economic development of edo state.

Limitations of study

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8       Definition of Terms

Role: A role is a set of connected behaviors, rights, obligations, beliefs, and norms as conceptualized by people in a social situation. It is an expected or free or continuously changing behaviour and may have a given individual social status or social position.

Cooperative: A cooperative is "an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise". 

Society: A society is a group of individuals involved in persistent social interaction, or a large social group sharing the same geographical or social territory, typically subject to the same political authority and dominant cultural expectations.

Economic development: is the growth of the standard of living of a nation people from a low-income (poor) economy to a high-income (rich) economy. When the local quality of life is improved, there is more economic development.

REFERENCES

UWCC (2012): Cooperatives, University of Wisconsin Centre for Cooperative.

Laidlaw, A.F (2014): The Cooperative Sector, Columbia: University of Missouri

Shaffer, J. (2010): Historical Dictionary of the Cooperative Movement. London UK: The Scarecrow Press

Holyoake, G.J. (2018): The History of Cooperation, London UK: T. Fisher Unwin

Wikipedia (2016): Cooperative.

Gibson, R (2015): The Role of Cooperatives in Community Economic Development, RDI Working Paper # 2015-8

Abell, P. (2014): Cooperative Movement, Encyclopedia Encarta 2014 Edition

Levin, M. (2012): The Promotion of Cooperatives, ILO Cooperative Branch.

Encarta (2015): Cooperative Movement, Encyclopedia Encarta 2005 Edition

Hoyt, A. (2017): And Then There Were Seven: Cooperative Principles.

Gertler, M. (2011): Rural Co-operatives and Sustainable Development, Saskatoon SK: Centre for the Study of Cooperatives, University of Saskatchewan

Somavia, J. (2012): ILO Recommendations No 193 on Cooperatives.

Taimni, K.K. (2017): Cooperatives in the New Environments: A study of the Role of the Registrar of Cooperative Societies in Selected Countries in Asia, Rome: FAOUN

Cheney, G. (2015): “Democracy in the Workplace”, In Journal of Applied Communication, Vol. 23

Grove, F (2015): What is Cooperation? The Philosophy of Cooperation and It's Relationship to Cooperative Structure and Operations, Madison: UWCC Occasional Paper No. 6

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