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HISTORY OF COOPERATIVES IN THE PHILIPPINES |
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A Filipinos traveling in Europe during the later part of
the 19th century must have been impressed with the success
of a new economic movement in effecting a gradual
metamorphosis of the economic and social life of the people
ion those countries. At the turn of the century, Filipinos,
in increasing number, traveled and studied abroad and
brought home with them new ideas. It was this group of
Filipinos who were in close in contact with the new
economic movement in Europe. Two names worthy of note were
Dr. Jose P. Rizal and Teodoro Sandiko.
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Rizal, after his side trip to Sandakan, Borneo in 1892,
requested Governor Despudol that he and some relatives and
friends be permitted to move to that place and found a
colony under the cooperative plan of Robert Owen. Instead,
he was arrested for treason and banished to Dapitan,
Zamboanga del Norte. In Dapitan, Rizal had his ideas in
cooperation partially fulfilled. He put up a school for the
poor community on a purely cooperative basis. He also
established a cooperative store with the help of his
pupils. One noteworthy group organized by Rizal was the
La Sociedad de los Abacaleros (Society of Abaca
Producers). This functioned for only one year. Rizal
returned the members share capital without any loss.
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Teodoro Sandiko, in his travels in Europe, must have had
a close contact with the cooperative movement in Germany
where he came across with the Raiffeisen movement. He was
very much impressed by this type of cooperative and he
looked forward for an opportunity to have it introduced
here in the Philippines. As destiny might have its choice,
Sandiko had his chance when he was appointed one of the
early governors when Civil Government, under the Americans,
was established.
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The Rural Credit Law. As soon as Civil Government
was established, Filipino participation in government was
encouraged. Teodoro Sandiko, then governor of Bulacan,
prepared a bill patterned after the Raiffeisen type of
credit union and had Rep. Albert Barreto of Zambales
sponsor the bill in the lower House of Congress. The
principal aim of this bill was to protect and develop
the agricultural interest of the country. When the
Barreto sponsored bill was presented it readily obtained
unanimous approval on January 20, 1908. The Philippine
Commission however, turned it down.
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Undaunted by this defeat the sponsors of the bill again
put it through in the Second Philippine Legislature. This
time it was sponsored in the Lower House by Rep. Rafael
Corpuz who succeeded Rep. Barreto from Zambales. The bill
was ably presented in both Houses and it was finally passed
into law on February 11, 1914 and became Act 2508. When
this Act was finally made into law, Gov. Sandiko earned a
title of Father of Cooperation in this country.
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The administration of the Rural Credit Law was entrusted
to the Bureau of Agriculture. The first rural credit
association that was organized under this Law was the
Agricultural Credit Cooperative Association of Cabanatuan,
Nueva Ecija. It was formed on October 18.1916. With this
initial organization farmers in the different provinces
were organized. At the end of 1926 there were 544 rural
credit cooperatives organized in the 42 provinces and by
1930 there were 571 associations formed all over the
country. In 1935, however, about 90% of these cooperatives
were inactive with no funds left in their treasury. The
experiment on rural financing, through cooperatives was a
failure.
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Marketing Cooperatives. As soon as the
organization of rural credit cooperatives was in full
swing, The Cooperative Marketing Law (Act 2425) was enacted
and approved on December 9, 1927. The rural credit
associations were designed to help finance the productive
efforts of the farmers. In order to provide incentives to
the farmers to produce more an efficient machinery for the
profitable marketing of their products should be provided.
Wherever rural credit associations were organized
cooperative marketing societies were also designed to be
organized.The apparent weakness of the rural credit
cooperatives, however, failed the enthusiasm of farmers to
organize themselves into cooperative marketing
associations. By 1939 only 164 societies were actually
organized with a total membership of around 5,000 farmers.
With this number only 35 reported their sale of products to
the Bureau of Commerce. The number of associations
reporting indicated that only 20% of the organized
associations were active.
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Causes of the failure of early cooperatives in the
Philippines. Filipino economists and students of
cooperatives in this country have often attributed the
failure of cooperative societies in this country to the
following causes:
- Incompetent management
- Lack of proper understanding of the principles,
practices true aims, and purposes of cooperative
associations
- Improper use of credits by the borrowers who, instead
of using money borrowed for production, spent it for
fiestas or luxuries.
- Defective securities.
- Political interference particularly in the collection
of overdue accounts
- Lack of compensation of officers
- Inadequate character and moral responsibility in
handling the other fellow’s money
- Lack of adequate safeguard against unscrupulous
officers who took advantage of their position to grant
loans to themselves and their compadres which
later proved disastrous to the system.
- The dominance of the individualistic attitude instead
of the spirit of cooperation among the people.
- Inability of cooperatives to secure adequate
capital
- Their dependence on alien suppliers and
distributors
- Ineffectiveness of the government and promotion of
cooperative organizations
- Inadequate marketing facilities
Considering the experiences of similar societies in
other countries, however, the fundamental cause of failure
in a cooperative enterprise is the lack of proper
understanding of the principles and true aims of
cooperative associations, and the non-adherence to them in
actual operation of cooperative enterprises.
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The ACCFA Financing Program. In recognition of
the strategic position occupied by our farmers in the
social structure and economic development of the country,
the Congress of the Philippines in 1952 enacted Republic
Act 821. This law established a system of liberal credit
which is specially designed to meet the needs of the small
farmer. It also created an administrative agency known as
the Agricultural Credit and Cooperative Financing
Administration (ACCFA). To implement the great task of
rural financing, four general and interrelated objectives
of the law are set forth as follows:
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To assist small farmers in securing liberal
credit.
- To promote the effective groupings of farmers into
cooperative associations.
- To establish an orderly and systematic marketing
machinery for, and controlled by, the small farmers.
- To place agriculture on a basis of economic equality
with other industries.
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Cooperative Principles |
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Every Cooperative shall conduct its affairs in
accordance with Filipino culture and experience and the
universally accepted principles of cooperation such as:
Open and Voluntary membership- membership in a
cooperative shall be voluntary and available to all
individuals regardless of their political, racial or
religious background or beliefs.
Democratic Control- cooperatives are democratic
organizations. Its affairs shall be administered by
persons elected or appointed in a manner agreed upon by
members. Members of primary cooperatives shall have equal
voting rights on an one-member-one vote principle, while
a secondary or tertiary cooperative shall have voting
rights as delegate of members-cooperatives, but such
cooperatives shall have only five (5) votes. The votes
cast by the delegates shall be deemed as votes cast the
members thereof.
Member Economic Participation- members
contribute equitably to and control the capital of their
cooperative. At least part of that capital is usually the
common property of the cooperative. Members usually
receive limited compensation, if any, on capital
subscribed as a condition of membership. Members allocate
surpluses for any or all the following purposes:
developing their cooperative, possibly by setting up
reserves, part of which at least would be indivisible;
benefiting members in proportion to their transactions
with the cooperative; and supporting other activities as
a approved by the membership.
Autonomy and Independence- cooperatives are
autonomous, self-help organizations controlled by their
members. If they enter into agreements with other
organizations (including governments) or raise capital
from external sources, they do so on terms that ensure
democratic control by the members and maintain their
cooperative independence.
Education, Training and Information-
cooperatives provide education and training for their
members, elected representatives, managers, and employees
so they can contribute effectively to the development of
their cooperatives. They inform the general
public-particularly young people and opinion leaders
about the nature and benefits of cooperation.
Cooperation among Cooperative - cooperatives
serve their members more effectively and strengthen the
cooperative movement by working together through local,
national, regional, and international structures.
Concern for the Community- cooperatives work
for the sustainable development of their communities
through policies approved by their members.
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Cooperative Practices |
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Cooperatives follow certain operational guidelines.
These are practical response to local needs. Some are
adopted from standard international practices, others are
local innovations. But all these are aimed at perfecting
cooperative operations. They are:
Capital Formation Starting a new cooperative
can create a need for substantial capital. A problem
develops when trying to operate with limited membership
equity capital. The task of financing a new cooperative
with member equity alone is usually impossible.
Therefore, the best source of additional funds needed is
from members in the form of: a) membership fee or
purchase of stock; b) agreement to withhold portion of
net earnings profits); c) by assessment based on units of
products sold or purchased.
Cash Trading- This is business done on a cash
and carry basis. The customer enjoys at least the use of
the goods and services for the cash payment he/she gives.
Cash trading promotes equality since anybody with cash
can enjoy the service patronage. This practice can train
members to observe the habit of balanced spending.
Furthermore, the cooperative would be able to avoid bad
debts and stabilize business operations. Finally, it is a
way of increasing growth.
Selling at market price- Cooperatives offer
goods and services at prevailing market prices. This
promotes stability. It can cope with operational expenses
and cover up the negative effects of shrinkage,
depreciation and losses. It helps maintain the prices of
goods;
Cooperatives can avoid destructive competition-
Fostering constructive competition among cooperatives
will safeguard the interests of consumers. Cooperatives
are encouraged to cooperate in unison and bring their
joint power in the market up to the level achieved by
enterprises that are operated for the benefit of other
stakeholders. They cooperate in order to get a fair deal
from the large scale buyers of their products. Consumers
cooperate to get a better deal from manufacturers and
suppliers. Credit unions are formed to counter the power
of large scale financial institutions. Price fixing
agreements and cartel methods are prevented.
Constant expansion- As organizations,
cooperatives have to grow for community services.
Expansion is a must. It is done intensively and
extensively. New members should be recruited to
accumulate more capital and savings to support operation
of the expanded business and services which in the long
run will provide more benefits for them. However, members
in this regard should undergo continuous education and
training to learn various management practices/techniques
and effective financial supervision.
Quality standardized goods- Cooperatives are
intended to develop communities through the production of
high quality goods and provision of better services.
Cooperatives could help by patronizing only standardized
products and services of high quality. Hence, different
types of cooperatives will strive to improve their goods
and services to stand competition with business
establishments. This in turn will be instrumental in
improving life in the country.
Cooperative wholesale business or interlending
(cooperative bank). Cooperatives can be organized
with enough people and capital. They respond to the needs
of the community. Needs arise when there are people. The
expansion of membership may result in wholesale business.
In fact, to be effective, wholesale business,
interlending (cooperative bank), could be done by primary
societies. Defects from retail business could be
avoided.
The benefits from the wholesale are
considerable. Members can market and acquire the
goods and services at the right price and quality. They
can even lower and raise savings. They can also influence
the production of badly needed goods and services;
Minimize expenditures A significant factor
favoring the growth of cooperative is its being a
community project. Their officers do not receive
remuneration. If they get compensation, it is only in the
form of allowances, per diems, or honoraria. When audit
shows that the cooperative is not capable or can afford
the minimum wage, only employees get paid regularly. The
government can give exemption. Furthermore, laws may
allow exemption from income and sales taxes. Minimizing
expenses should not be taken as a remedy to cover up the
weaknesses of the system. It is not to be conceived as a
form of dole-outs, but rather , it should be considered
as motivation to make the movement stand on its own and
soon attain its objectives. Once its objectives are
achieved, the movement can take its rightful place in the
development of the country.
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Types of Cooperative |
Credit Cooperative:promotes thrift and savings
among its members and creates funds in order to grant
loans for productive and provident purposes.
Consumer Cooperative:The primary purpose is to
procure and distribute commodities to members and
non-members.
Producers Cooperative:undertakes joint
production whether agricultural or industrial.
Marketing Cooperative:engages in the supply of
production inputs to members, and markets their
products.
Service Cooperative:engages in medical and
dental care, hospitalization, transportation, insurance,
housing.
Multi- Purpose Cooperative:combines two (2) or
more of the business activities of these different types
of cooperatives.
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Categories of Cooperatives |
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Cooperative shall be categorized according to membership
and territorial consideration. In terms of membership,
cooperatives shall be categorized into:
Primary- The members of which are natural
persons of legal age.
Secondary- The members of which are
primaries.
Tertiary - the members of which are secondaries
upward to one (1) or more apex organizations.
Thus, those with cooperative memberships are considered
federations or unions as the case may be. In terms of
territory, cooperatives shall be categorized according to
areas of operation which may or may not coincide with the
political subdivisions of the country but, those organized
by minors shall be considered a laboratory
cooperative and must be affiliated with a registered
cooperative. It is governed by special guidelines
promulgated by the CDA.
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Kinds of Membership in a Cooperative |
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A cooperative has two kinds of members: regular members
and associate members.
A regular member is entitled to all the rights
and privileges of membership as stated in the Cooperative
Code and the coops by laws.
An associate member has no right to vote and be
voted upon and is entitled only to such rights and
privileges provided by the cooperative by laws.
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Privileges of a Cooperative |
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Cooperative registered under R.A. 6938 shall,
notwithstanding the provisions of any law to the contrary,
be also accorded the following privileges:
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Cooperatives shall enjoy the privilege of depositing
their sealed cash boxes or containers, documents or any
valuable papers in the safes of the municipal or city
treasurers and other government offices free of charge,
and the custodian of such articles shall issue a
receipt acknowledging the articles received duly
witnessed by another person;
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Cooperatives organized among government employees,
notwithstanding any law or regulation to the contrary,
shall enjoy the free use of any available space in
their agency, whether owned or rented by the
Government;
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Cooperatives rendering special types of services and
facilities such as cold storage, ice plant,
electricity, transportation, and similar services and
facilities shall secure a franchise therefor, and such
cooperatives shall open their membership to all persons
qualified in their areas of operation;
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In areas where appropriate cooperatives exist the
preferential right to supply government institutions
and agencies rice, corn and other grains, fish and
other marine products meat, eggs, milk, vegetables,
tobacco and other agricultural commodities produced by
their members shall be granted to the cooperatives
concerned;
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Preferential treatment in the allocation of
fertilizers and in rice distribution shall be granted
to cooperatives by the appropriate government
agencies;
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Preferential and equitable treatment in the
allocation or control of bottomries of commercial
shipping vessels in connection with the shipment of
goods and products of cooperatives;
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Cooperatives and their federations, such as market
vendor cooperatives, shall have preferential rights in
management of public markets and/or lease of public
market facilities, stall or spaces;
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Credit cooperatives and/or federations shall be
entitled to loans, credit lines, rediscounting of their
loan notes, and other eligible papers with the
Development Bank of the Philippines, the Philippine
National Bank, the Land Bank of the Philippines and
other financial institutions except the Central Bank of
the Philippines;
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Cooperatives transacting business with the
Government of the Philippines or any of its political
subdivisions or any of its agencies or
instrumentalities, including government-owned and
controlled corporations shall be exempt from
pre-qualification bidding requirements; and
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Cooperatives shall enjoy the privilege of being
represented by the provincial or city fiscal or the
Office of the Solicitor General, free of charge, except
when the adverse party is the Republic of the
Philippines.
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