Discuss the characteristics, merits and limitation of cooperative form of organisation. Also describe briefly different types of cooperative societies.

1. They can maintain direct relations with the manufacturers or wholesalers.
2. They can ensure a steady supply of goods and services of high quality at reasonable price.
3. They can help producers in purchase of raw material for production of goods and services.
4. They can help their members sell their goods at a profit.
5. The funds of the society are used in giving loans to needy members on easy terms.
6. Co-operatives also help small farmers to cultivating land collectively.
7. They also help in providing land or flats to their members.

The Merits of co-operative organization are as follows :

Easy to Form: 

• As compared to a joint stock company, it is easy and simple to form a cooperative society.
• The legislative formalities required for its formation are not many.
• It is economical, as the expenses involved in its formation are comparatively less.

Democratic Management

• A cooperative society is managed in a true democratic way.
• All the members have a say in its working.
• They elect a managing committee on the basis of 'one-man-one-vote.'
• This committee looks after the working of the organisation in the general interest of the members.
• It is not controlled by vested interest only.

Limited Liability

• The members' liability remain limited to the extent of capital contributed by them.

Open Membership

• Membership in a co-operative organisation is open to all having a common interest.

State Patronage

• The co-operatives have been adopted by the Government as an instrument of economic policy.
• Therefore, they are assisted in various ways by the Government so as to make them a success.

Scope for Internal Financing 

• Since a cooperative society has to create some compulsory reserves out of its profits, there is enough scope for ploughing back of profits in such organisation.
• This source of internal finance can be utilized for modernization and growth of the co-operatives.

Other benefit

• Certain non-economic benefits are also received by members through co-operatives like credit societies promote habits of thrift.

The Limitations of a co-operative organization are as given below :

Lack of Secrecy

• A co-operative society, being separate legal entity is required to disclose fuller information to its members. Thus, secrets of the business cannot be maintained.

Lack of Motivation

• Since there are restrictions on the rate of dividend, the members of the managing committee do not feel motivated enough to put their best to make the organisation's success.

Limited Size

• Since the principle of co-operation cannot be extended beyond a certain limit, the co-operatives are likely to fail if they choose expansion of their organisation like big joint stock companies.
• Large-scale production or distribution is not suitable for co-operative organization.

Limited Capital

• Co-operatives are usually at a disadvantage in raising capital because of the low rate of return on capital invested by members.

Inefficient Management

• The management is generally inefficient becasue the managing committee consists of part-time and inexperienced people.

Excessive Government Interference 

• The co-operatives are exposed to a considerable degree of regulation by the co-operative department.
• While a certain degree of control is good, too much of it and unwanted interference acts as a deterrent to the voluntary nature of co-operatives and goes against the operational flexibility of the co-operatives and usually affects efficiency of management of the cooperatives.

The different Types of co-operative society are:-

1. Consumers co-operative societies: Consumer co-operatives are organised by consumers to eliminate middle men and to establish good relations with the manufacturers or wholesalers. These co-operatives are formed by consumers to ensure a steady supply of goods and services of high quality at reasonable prices.
2. Producers co-operative societies: Producers co-operatives are formed to help the members in processing inputs for production of goods or services. These societies generally provide raw materials, tools and other facilities to its members.
3. Co-operative marketing societies: Co-operative marketing societies are voluntary associations of small producers, who find it difficult to individually sell their products at a profit. The main purpose of such a society is to ensure a steady and ready market for the output of its members.
4. Co-operative credit societies: Such societies are formed to provide financial help in the form of loan to member. The capital of these societies consist of share capital contributed by the member and the deposits made by them and outsiders.
5. Co-operative farming societies: In co-operative farming societies, small farmers join together and pool their resources for cultivating their land collectively. Their object is to take the benefit of economies of large scale farming and maximizing agricultural output.
6. Co-operative housing societies: They are formed to provide residential accommodation to the members. They undertake the development of land and/or construciton of house/flat on the land.