Introduction
Cooperative credit societies have significant economic functions of providing credit, advancing financial cooperation and encouraging community uplift or development. These societies are the principles of cooperation, common interest, and self-help by which the vulnerable individual becomes a strong partner in search of financial security.
The following guide will give an outline of what the CCSs are, how they operate and what they can do for the members.
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What is a Cooperative Credit Society?:
A cooperative credit society is an assembly of people that share their money in an organized manner to enable them to get loans at a lower interest rate. Cooperatives are based on the principle of collaboration, and belong to, are managed and controlled by their members. Every person gets to put his or her pound in the decision, regardless of how much he or she has invested, thus an equality of votes and a democracy.
The chief goal of those societies is to offer credit at suitable rates of interest and advance the economic benefits of the members. Although the size of the cooperative credit societies may differ, the credit societies are established with laws regulating them internationally and enrolled under The Cooperative Societies Act.
These credit societies may contain the following characteristics of the following features:
Voluntary Membership
Actually the joining of a cooperative credit society is not compulsory but anyone may join the credit society provided he satisfies the conditions set down by the society. It brings together people with something in common, the community, the region, or the place of work.
Democratic Management.
The voting right of each member does not depend on the amount of money the members invest in the company. It has been observed that leadership positions conform to a consensus-based voting system of election.
Financial Inclusion
Cooperative credit societies aim at providing the unserved and uninceded people with member-intend products.
Limited Liability
The members’ liability in these cases often extends up to capital contribution or shares that they own.
Profit Sharing
Profits arising from the operation of a society over a fiscal year are distributed among members as dividends or bonuses after meeting all expenses and other payable.
The objectives of Cooperative Credit Societies have been defined as follows:
Offer cheap funds to members for any reason personal, business or even in agriculture.
Deposit with the members, offer savings schemes and encourage members to deposit for their financial benefits.
Financial services to the economically challenged groups of people should be provided.
Aid the growth of economy and all forms of self support amongst the people.
Create the safe, reliable foundation for common and effective handling of money.
Types Development of Cooperative Credit Societies:
1. Urban Cooperative Credit Societies themselves have provided a financial scenario for economic progress in the urban areas and other parts of the economy.
EXISTING IN URBAN CENTRES, THESE SOCIETIES ARE IN A POSITION TO MEET THE FINANCIAL REQUIREMENT OF THESE ENTITIES SUCH AS THE ILLITERATE TRADERS, SALARIED EMPLOYEES AND SMALL ENTREPRENEURS.
2. Rural CCs
Generally operating in the countryside, such societies lend money to farmers, as well as other members of the rural population, for purposes of agriculture, laying down of physical infrastructure in the country and for any other business that may be of concern to the rural sector.
3. Get details of PACS: Primary Agricultural Credit Societies
PACS provide mainly credit accommodation for agriculture and related endeavors. Most of them work at the village level, thus can easily be accessed by farmers.
4. Employee Credit Societies
They are usually established by employees of a particular organization which offer loan and other financial products particular to the members.
Cooperative Credit Societies therefore facilitate the following advantages to its members;
1. Affordable Financial Services
Customers seek low and reasonable interest charges and proper financial methods mainly for the improvement of their position, but not for a sake of making a profit.
2. Encouragement of Savings
Cooperative credit societies admit members to develop the practice of saving and therefore foster for long(duration) term basis financial stability.
3. Financial Inclusion
These societies also foot the financial needs of a section of people who otherwise may never come close to formal banking, especially in developing agrarian regions.
4. Member-Centric Operations
The promotion of the group interest is other aspect distinguished by the fact that every person in the society is both a contributor and stakeholders for this is usually marked by decisions taken that would be for the benefit of the group.
5. Trust and Transparency
Cooperative credit societies, therefore, exist on the democratic premise where the affairs of the societies are fully open, and the members are allowed to participate in decision making processes.
6. Tailored Solutions
Member-targeted financial products and services include; these include education loans and business funding, or a member may require farm development funds.
This paper seeks to establish some of the challenges faced by the cooperative credit societies.
1. Limited Resources
Sometimes, societies might not be able to access enough resources sometimes due to low capital buffers and mostly operating on contributions made by members.
2. Inefficiencies in Management
Another disadvantage of cooperative credit societies consists of inept managerial performance resulting from an elected leadership.
3. Regulatory Challenges
Bylaws and statutes may be costly, and can be even difficult for the small societies to implement and maintain.
4. Poor management and negligence to supervision
Lack of accountability hampers control and results in embezzlement or fraud within the organization.
Organization of a Cooperative Credit Society
Setting up a cooperative credit society involves the following steps:
Identify a Purpose
Find out the goal and aim of the society and also Other members of the society that the society intends to serve.
Form a Group
Form a pool of people having similar problems and objectives when it comes to access to funds.
Draft a Constitution
In this case, the following should be stated: The objectives of the society; provisions of the society’s by-laws; and the management of the society.
Register Under Relevant Laws
The process should be completed according to the law of Cooperative Societies Act or any other law.
Secure Capital Resources
Organise initial working capital either from the membership fees and contributions or engage in fundraising where necessary.
Set Up Operations
Set up a mechanism in the handling of records or archives, credit risk, and member relations.