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, the 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 the 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 cheesemakers 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 flour mill, a shoe factory, and a textile plant, was quickly emulated throughout the country. By 1863 more than 400 British cooperative associations, modeled 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, the International Cooperative Alliance (ICA), a non-governmental organization was established as an 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 the 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 act (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 the values of personal and ethical behavior 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 organization 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 an 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 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 a casual-appointment basis during long vacations. Through these, cooperatives will contribute to economic development.