IIMBx: Cooperatives and Producer Companies

This course is about cooperative business, cooperative movement, cooperative organization, cooperative model, types of cooperatives, and cooperative development. In the beginning, the concept of a cooperative is explained and how it is different from an investor owned company. We also explain why this form of organization is required for producers in the dairy, agriculture, weaver artisan and other sectors of the economy.

We then discuss the basic principles of a cooperative and why they evolved. These principles were enunciated by the International Cooperative Alliance (ICA) of all countries. We provide a brief overview of the success of cooperatives in different countries. We discuss some issues in regulation, and the legal and constitutional issues in India. We also discuss how genuine, member owned FPOs or cooperatives can revitalize agriculture in India which still employs over 50% of the population. There are some basic issues related to finances. These include acquiring the initial capital to set up FPOs or cooperatives that are independent of outside control, whether from the Government or the NGOs. Working capital is another important issue for non-dairy, seasonal crops. Distribution of profits is different from the shareholder companies.

There are organizational issues regarding the structure and Governance of cooperatives.

The most important aspect of this course is how to set up such cooperatives. The context is set in rural India with small farmers, most of whom have no irrigation and hence are rain dependent. They have little capital to invest either in farming or in any cooperative. The quality of their produce is also highly variable. Market prices and crop yields are erratic and volatile. We explain how an external promoting agency, typically an NGO can go into a new region and set up successful Cooperatives. The roles of the two entities, the NGO and the FPO are clearly defined. We touch upon the full life cycle from inception to a sustainable mature successful cooperative. The two basic principles: member owned and governed cooperatives, and no financial subsidy are used to discuss how to set up independent sustainable cooperatives. We use evidence from successful cooperatives to show how this was done. The business aspect, especially marketing is also discussed.