Get into a mission mode on co-ops
Posted on October 23, 2010 | Author: M Rajshekhar | View 420 | Comment : 1
REFORMS in cooperative law are back on the radar,with the growing recognition that much more needs to be done to encourage the emergence of self-reliant farmer organisations.Early this year,an expert panel proposed many initiatives,including changes in the moneylending law to reduce the debt burden of farmers and providing them better access to institutional credit.Shashi Rajagopalan,member of the Nabard and RBI boards,gained handson experience in promoting credit cooperatives and farmers agri-processing units during her two-decade stint with an NGO.She reckons cooperatives need more autonomy to deliver and this can happen only with radical reforms in the cooperative laws.A critic of the halo surrounding microfinance institutions (MFIs),Ms Rajagopalan has also been co-opted in the RBI panel that is looking into loan practices of MFIs.
When I worked for the revival of Primary Agricultural Cooperative Societies,I discovered that no amount of member education helped.What really mattered was raising the members financial stake.Once their stake in the cooperative was significant,they almost always chose the right person as president.Without financial stake,members tended to choose flamboyant persons who were good at accessing dole or credit.With high stakes,they opted for strict disciplinarians and financiallyprudent persons as leaders.
Today,financial inclusion is about thirdparty institutions,including banks,reaching out to the poor.However,experience across the world,especially in the more advanced countries,tells us that sustainable financial inclusion is possible only through memberowned savings and credit cooperatives.When members save,you have a stronger cooperative along with wealth retention at the local level.Both profits of the cooperatives and the members savings stay at the local level,and get invested locally, she said.
Also,the fact that a large number of people in alarge,contiguous area have access to credit on a regular basis means there is ever-increasing purchasing power.You automatically have a service sector emerging that is sustainable because it is not propped from outside.Wherever you have good cooperatives,we almost always see flour mills,tea shops,workshops,masons and transport coming in first into the village.Sooner or later,you see the housing improve.
This trend is a story by itself.According to Ms Rajagopalan,during field studies of the panel chaired by U C Sarangi on credit-related issues of farmers,the (committee) members met tenant farmers who accessed as much as.20,000 by way of agricultural loans from these thrift cooperatives,without documentation.
Which third party can afford to do that,or have the confidence of collecting such loans Intimate knowledge of members and,more important,the knowledge in each member that his/her loan came from the savings of neighbours,is what gives strength to these institutions,Further,as these are not closely-held institutions,and as they present their audited statements and annual reports with memberwise details,their figures can be trusted.The fact is that thrift and credit coops have shown that from day one,they are profitable.That,within a decade or two,these institutions were offering.10,000-20,000 loans to tenant farmers,marginal farmers and oral lessees people others wont even be willing to lend to.What are we waiting for We need to get into a mission mode on promoting cooperatives, she says.
According to her,cooperatives need functional autonomy to come out from the stranglehold of political parties.In the name of promoting cooperatives,politicians played havoc with their funds.Those who did not get tickets to contest the assembly polls or defeated legislators were all accommodated as nominees on the boards of cooperatives,given that elections had been withheld.Over time,the members ceased to see the cooperatives as their own.Therefore,unless cooperative laws change for the better,they cannot flourish.
Indeed,over the past 15 years,nine states have introduced liberal cooperative laws,but appear to be working overtime now to disband them now.Andhra Pradesh has drafted a new cooperative law that yet again takes away the autonomy of self-reliant cooperatives.There is also a proposed constitutional amendment on cooperatives that says the conduct of elections shall vest in such an authority as may be provided for by the legislature of the state.Would you do that for companies Cooperatives,even if large,are private institutions.The question of third parties conducting elections for them,or a part in the constitution being dedicated to their governance issues,simply doesnt arise.