Cooperative Organisation

Introduction to Cooperative Organizations in Nepal


Cooperative organizations play a pivotal role in the economic development of many countries around the world, including Nepal. These organizations are built on the principles of cooperation, self-help, and mutual assistance. In Nepal, cooperative organizations have a long history and have been instrumental in addressing various economic and social challenges. This article provides an overview of cooperative organizations in Nepal, their features, common forms, registration and renewal procedures, and their significant role in the economic development of the country.

Features of Cooperative Organizations

Cooperative organizations are distinct entities with unique features that set them apart from other types of business structures. In Nepal, these features are closely aligned with international cooperative principles and are regulated by the Cooperative Act, 2017. Here are some key features of cooperative organizations in Nepal:

  1. Voluntary and Open Membership: Cooperative organizations are open to all individuals who share a common need or interest and are willing to contribute to the cooperative’s objectives. Membership is voluntary, and there are no discriminatory criteria for entry.

  2. Democratic Control: Cooperatives in Nepal operate on democratic principles, with members having equal voting rights. Important decisions are made collectively, and leadership positions are typically elected by members.

  3. Economic Participation: Members of cooperative organizations actively participate in the business and share in the benefits and risks. They contribute to the capital and resources of the cooperative and are entitled to a fair share of the profits.

  4. Autonomy and Independence: Cooperative organizations are autonomous and self-governing entities. They make decisions independently of external influences, and members have the power to control their organization’s affairs.

  5. Education and Training: Cooperatives in Nepal emphasize the education and training of their members and employees to ensure their active participation and understanding of the cooperative’s objectives and operations.

  6. Cooperation Among Cooperatives: Cooperative organizations often collaborate with other cooperatives, following the principle of mutual cooperation. This can involve joint ventures, resource sharing, or collective advocacy.

  7. Concern for the Community: Cooperative organizations have a broader social mission beyond profit-making. They are committed to the sustainable development of their communities and contribute to social and economic well-being.

Common Forms of Cooperative Organizations

Cooperative organizations in Nepal can take various forms, depending on their specific objectives and functions. Some of the common forms of cooperative organizations in Nepal include:

  1. Agricultural Cooperatives: These cooperatives are formed by farmers and agricultural producers to collectively manage and market their agricultural products. They help farmers access resources, technology, and markets while improving their bargaining power.

  2. Savings and Credit Cooperatives (SACCOS): SACCOS are financial cooperatives that provide savings and credit facilities to their members. They promote financial inclusion and offer affordable financial services to individuals and small businesses.

  3. Consumer Cooperatives: Consumer cooperatives are formed by consumers who wish to collectively purchase goods and services at lower prices or with better terms. These cooperatives often operate retail stores or purchase goods in bulk to distribute to their members.

  4. Housing Cooperatives: Housing cooperatives help members access affordable housing by pooling resources to purchase land and construct residential buildings. Members have a stake in the cooperative’s assets and enjoy the benefits of collective ownership.

  5. Worker Cooperatives: In worker cooperatives, employees collectively own and manage the business. This model ensures that workers have a say in the decision-making process and share in the profits generated by the enterprise.

  6. Marketing Cooperatives: Marketing cooperatives help small-scale producers access larger markets by aggregating their products and collectively negotiating better prices and terms with buyers.

Procedure of Registration and Renewal of Cooperatives in Nepal

Provision for Registration: The Cooperative Act of 2017 provides the legal framework and provisions for the registration of cooperative organizations in Nepal. This act outlines the rights, responsibilities, and regulations that govern cooperatives in the country.

  1. Formation of a Promoter Group: The first step in establishing a cooperative organization is the formation of a promoter group. This group should consist of at least 25 individuals who share a common need or interest and are willing to become members of the cooperative.

  2. Drafting the Bylaws: The promoter group must draft the cooperative’s bylaws, which should outline the organization’s objectives, structure, membership criteria, decision-making processes, and other essential details.

  3. Registration Application: The promoter group submits a registration application to the Department of Cooperatives, along with the drafted bylaws and other required documents, such as a feasibility study, project proposal, and a list of initial members.

  4. Inspection and Verification: The Department of Cooperatives conducts an inspection and verification process to ensure that the proposed cooperative complies with the Cooperative Act and other relevant regulations.

  5. Registration Certificate: Upon approval, the cooperative is issued a registration certificate, and it officially becomes a legal entity. The certificate confirms the cooperative’s name, registration number, and other essential information.

  6. Renewal of Registration: Cooperative organizations in Nepal must renew their registration every five years. The renewal process involves submitting updated information, financial statements, and other required documents to the Department of Cooperatives.

  7. Compliance and Reporting: Registered cooperatives are required to comply with the Cooperative Act and submit regular reports and financial statements to the Department of Cooperatives. Non-compliance may lead to penalties or deregistration.

Difference between the cooperative organization and Company Business

Aspect Cooperative Organization Company Business
Ownership Structure Owned and controlled by members, who are also customers or users of the cooperative. Owned by shareholders or investors who may or may not be customers or users of the company’s products or services.
Purpose Primarily exists to meet the common needs and interests of its members, such as providing goods, services, or financial assistance. Primarily exists to generate profit for its shareholders or investors by providing products or services to customers.
Control Operates on a democratic basis, where members have equal voting rights, and major decisions are made collectively. Controlled by a board of directors or executives appointed by shareholders, with decision-making power often based on the number of shares owned.
Profit Distribution Profits are typically reinvested in the cooperative or distributed among members in proportion to their participation or patronage. Profits are distributed among shareholders in the form of dividends, with potential reinvestment in the company.
Access to Membership Membership is open to those who share a common need or interest and are willing to contribute to the cooperative’s objectives. Ownership of shares is typically open to anyone willing to invest, and there may be no direct relationship between ownership and usage of products or services.
Social Mission Often has a broader social mission beyond profit, such as community development, poverty alleviation, or sustainability. Primarily focused on maximizing profits for shareholders, with social or environmental goals as secondary considerations.
Capitalization Capital is contributed by members in the form of membership fees, purchases, or shares, with limited external sources of funding. Capital is raised from various sources, including shareholders, loans, bonds, and external investors.
Governance Operates under democratic governance, where members elect leaders and participate in decision-making processes. Governed by a board of directors, appointed executives, and shareholders’ meetings, with decision-making often based on shareholding percentages.
Liability Members’ liability is typically limited to their investment or shares in the cooperative. Personal assets are generally protected. Shareholders’ liability is typically limited to the value of their shares, and personal assets are protected from the company’s debts and liabilities.
Regulatory Framework Subject to specific cooperative laws and regulations that vary by jurisdiction and are designed to protect member interests. Governed by corporate laws and regulations that vary by jurisdiction and are designed to ensure transparency, accountability, and investor protection.
Exit Strategy Exiting a cooperative may involve selling or transferring membership shares or leaving the cooperative. Shareholders can easily sell their shares or transfer ownership, making it relatively straightforward to exit a company.
Profits vs. Member Benefits Profits generated are primarily reinvested or distributed among members to benefit them directly. Profits are distributed to shareholders, and the benefits to customers or users may not be as direct or substantial.
Decision-Making Transparency Generally, decision-making processes are transparent and involve active participation by members. Decision-making processes may not always be as transparent, especially in larger corporations.
Flexibility and Adaptability Cooperative structures can be flexible and adaptable to meet the changing needs of members and communities. Companies can adapt but may face greater resistance to changes in ownership structure or business direction.

It’s important to note that the specific characteristics and regulations governing cooperatives and company businesses may vary by country and jurisdiction, so the above comparison provides a general overview of the differences between the two organizational forms.

Role of Cooperatives in the Economic Development of Nepal

Cooperative organizations play a crucial role in the economic development of Nepal by contributing to various sectors of the economy and addressing specific challenges. Their impact can be seen in the following areas:

  1. Poverty Alleviation: Cooperatives in Nepal, particularly agricultural and savings and credit cooperatives, help reduce poverty by providing financial services, livelihood opportunities, and access to markets for rural communities. They empower marginalized groups, such as smallholder farmers and women, to improve their economic well-being.

  2. Financial Inclusion: Savings and credit cooperatives (SACCOS) extend financial services to underserved populations, including those in remote areas. They offer savings facilities, low-interest loans, and financial education, promoting financial inclusion and reducing the reliance on informal lenders.

  3. Agricultural Development: Agricultural cooperatives enhance the productivity and income of small-scale farmers by facilitating access to modern farming techniques, technology, and collective marketing. They also play a role in reducing post-harvest losses through collective processing and distribution.

  4. Employment Generation: Worker cooperatives create employment opportunities while ensuring worker rights and participation in decision-making. They contribute to decent work and a fair distribution of profits among employees.

  5. Rural Development: Cooperatives are often involved in community development initiatives, such as building infrastructure, providing education and healthcare services, and promoting sustainable agriculture and natural resource management.

  6. Food Security: Agricultural cooperatives play a significant role in ensuring food security in Nepal by promoting sustainable farming practices, increasing agricultural production, and improving access to markets for farmers.

  7. Access to Education and Healthcare: Some cooperatives run educational and healthcare institutions, providing affordable services to their members and the wider community.

  8. Encourage Saving: Cooperatives promote a culture of saving among their members. By providing safe and accessible savings facilities, they encourage individuals and families to set aside money for the future. This not only helps people build financial security but also provides a source of capital for investment.

  9. Provide Institutional Credit: Cooperatives, especially savings and credit cooperatives (SACCOS), offer access to affordable credit to their members. This financial support enables members to invest in income-generating activities, education, healthcare, and other essential needs, ultimately lifting them out of poverty.

  10. Eliminate the Middleman: Agricultural cooperatives help farmers bypass middlemen and connect directly with markets. By doing so, they ensure that farmers receive a fair price for their products and reduce the exploitation that can occur when intermediaries are involved.

  11. Support to Build Democratic Society: Cooperatives operate on democratic principles, giving members equal voting rights and encouraging active participation in decision-making processes. This fosters a sense of democracy and empowerment within communities.

  12. Development of Moral Character: Cooperative principles emphasize honesty, transparency, and mutual assistance. Being part of a cooperative helps individuals develop strong moral character, which is vital for building trust within communities.

  13. Improvement of Production and Distribution: Cooperatives often provide training and resources to members to improve production techniques and product quality. They also facilitate the efficient distribution of goods and services, ensuring that products reach consumers effectively.

  14. Proper Utilization of Resources: Cooperatives help members pool their resources, whether it’s land, capital, or labor, for collective benefit. This leads to the efficient and sustainable utilization of resources, reducing waste and improving productivity.

  15. Help for Economic Diversification: Cooperatives often engage in various economic activities, such as agriculture, finance, housing, and consumer services. This diversification of economic activities contributes to a more resilient and stable local economy.


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