What are cooperatives?

Description of cooperative societies as people-owned enterprises.

A cooperative is an autonomous association of persons who voluntarily unite to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.

Thus, cooperatives are enterprises owned by all their members, whether natural or legal persons. Regardless of the type of membership, cooperatives are managed democratically under the rule of “one member, one vote”.

These organisations place people—not capital—at the centre of their activity and, like any other enterprise, can be defined by three basic interests: ownership, control and benefit. However, only in cooperatives are these three interests generated and governed directly by the members.

Distinctive features

Types of members
Social organisation
Economic and financial structure
Tax regime
Cooperative integration

The cooperative principles

Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity.
Like their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

cooperative
principles

Voluntary and open membership

Cooperatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without discrimination based on gender, social status, race, politics or religion.

Democratic member control

Cooperatives are democratic organisations controlled by their members, who actively participate in setting policies and making decisions. Those serving as elected representatives are accountable to the membership.

Member economic participation

Members contribute equitably to, and democratically control, the capital of their cooperative. Part of the capital is usually common property of the cooperative. When appropriate, members receive limited compensation on subscribed capital as a condition of membership. Surpluses are allocated to develop the cooperative, build reserves, benefit members in proportion to their transactions, or support other activities.

Autonomy and independence

Cooperatives are autonomous, self-help organisations controlled by their members. If they enter into agreements with other organisations —including governments— or raise capital from external sources, they do so on terms that ensure democratic member control and maintain their cooperative autonomy.

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 also inform the general public —particularly young people and opinion leaders— about the nature and benefits of cooperation.

Cooperation among cooperatives

Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.

Concern for community

Cooperatives work for the sustainable development of their communities through policies approved by their members.

Types of cooperatives

Depending on the activity carried out between the cooperative and its members, cooperatives are classified as:

Producer cooperatives Their goal is to improve members’ income, whether they are small entrepreneurs, self-employed workers or independent professionals. Examples include agricultural cooperatives, service cooperatives and maritime cooperatives.
Worker cooperatives Their goal is to meet employment needs through the cooperative organisation of work and to produce goods or services for third parties.
Consumer cooperatives Their goal is to generate savings for members’ incomes, whether organisations or individuals.
Integral cooperatives When the aim is both to improve income or achieve savings and to meet people’s employment needs.

Some cooperatives —whether producer, worker, consumer and user, or integral— due to the economic activity they carry out or the uniqueness they represent, are given a specific legal designation: housing cooperatives, education cooperatives, credit cooperatives and health cooperatives.

Sectors of activity

Production fields where cooperatives operate

Cooperatives are present in practically all sectors of the economy, from agriculture to financial services, from housing to healthcare, from retail to renewable energy. There are cooperatives that are schools, childcare cooperatives, elder-care cooperatives, freelancers’ cooperatives, veterinarians’ cooperatives, technical engineers’ cooperatives… the list is endless. What they all share is that their foundation is the membership, they are driven by social and economic concerns and are guided by seven internationally recognised principles.

Any economic activity can be organised through a cooperative. Deciding which class of cooperative fits a project’s needs will depend first on the type of members that make up the organisation and, in some cases, on the economic activity to be carried out.

Moreover, beyond their economic role, cooperatives have a social function that improves the quality of life of their members and of those they relate with. For these reasons, the cooperative movement aims to have an impact at every life stage: from childhood to old age, including youth and adulthood.

How to get started?

What should be kept in mind when creating a cooperative?

A cooperative is a unique way of doing business that requires a different approach to development, since it is both a business and an association of people, and the cooperative’s success will depend on how the foundations for each of these two dimensions are built.

The development process is not easy; however, worldwide there are many cooperative business experiences that are growing and consolidating the economies of the territories where they operate and that can serve as models and guidance. It is important to contact a Federation of cooperatives to receive the necessary professional advice.

Likewise, there is no single guide that answers all the questions that may arise in the process of creating a cooperative, beyond the legal form, since each cooperative is unique in terms of self-management and organisational autonomy and also in terms of the membership that forms its social base.

Therefore, to start shaping a cooperative business we must be clear, on the one hand, that the business project in a cooperative is driven by a collective of people, natural or legal, and not by a single person; and, on the other hand, that it has its own corporate organisation very different from that of investor-owned companies. Below are the main planning aspects to keep in mind: