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PROJECT TOPIC: A PURPOSE FOR THE AL-BURHAN COOPERATIVE IN THE UNIVERSITY OF ILORIN

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CHAPTER ONE

1.1  BACKGROUND OF THE STUDY

Cooperative society may be described as a group of people with the common objective of creation of funds to be lent to its members, all the member must be residing in same, village or group of village (Onuoha, 1986). Cooperative society may also be described as the coming together (freely) of a group of people called cooperators for the purpose of improving their financial position or standing by putting their resources together which would have been difficult or almost impossible to achieve individually. The procedure can be inform of sharing, saving and deposit out of which will be lent to any member in need with reasonable interest (Epetimehin, 2006).

Cooperative Thrift and Credit Societies are member-based organizations that help members to address economic problems. They are not banking institutions because of their goal. The ultimate goal is to encourage thrift among the members and to meet credit needs of people who might otherwise fall prey to loan sharks and other predatory lenders (The Ledger, 2004). Cooperative societies are widely spread organization in developing countries, they are known for a strong commitment of, as well as participation in the decision making of their members (Haan et al., 2003).

The International Cooperative Alliance (ICA) in its Statement on the Cooperate Identity, in 1995, defines a cooperative as “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.” It is a business voluntarily owned and controlled by its member patrons and operated for them and by them on a nonprofit or cost basis (UWCC, 2002). It is a business enterprise that aims at complete identity of the component factors of ownership, control and use of service, three distinct features that differentiate cooperatives from other businesses (Laidlaw, 1974).

These societies mobilize local savings and administer credit to members, there by encouraging thrift and entrepreneurial activity. When first started, credit unions use relatively unsophisticated administrative practices, so that the costs are very small and most interest income from loans may either be distributed to the members or reinvested in the credit union within a capitalization programme. Consequently, they can be set up in poor communities, where access to means of secure savings and to credit at non-exploitative terms is of greatest importance (Olorunlomerue, 2011).

Cooperatives are community-based, rooted in democracy, flexible, and have participatory involvement, which makes them well suited for economic development (Gertler, 2001). The process of developing and sustaining a cooperative involves the processes of developing and promoting community spirit, identity and social organization as cooperatives play an increasingly important role worldwide in poverty reduction, facilitating job creation, economic growth and social development (Gibson, 2005).

Over some years, substantial work has been put into the use of computer in cooperative society for carrying out daily activities such as membership registration, loan monitoring and deduction and all other operation and transaction within and outside the society. Recently, there has been an upsurge in the information about capital base investments profit-sharing or dividends of co-operative society in Nigeria have since become as strong instrument of achieving rural, communal and national development (Osusuet al, 2006). There is an urgent need for the development of a centralized system for cooperative society so has to help in keeping large volume of data, performing necessary operation and reducing the number of hours spent on compilation and some other activities. This system intends to develop a centralized system where each cooperative society can log on with a unique password to register her society and also to give details of their financial statement such as (membership saving, loan issued, loan repaid, loan out-sand, net surplus or dividend, interest rate, number of register member etc.) at end of each fiscal year. These societies mobilize local savings and administer credit to members, thereby encouraging thrift and entrepreneurial activity. When first started, credit unions use relatively unsophisticated administrative practices, so that the costs are very small and most interest income from loans may either be distributed to the members or reinvested in the credit union within a capitalization programme. Consequently, they can be set up in poor communities, where access to means of secure savings and to credit at non-exploitative terms is of greatest importance (UNDESA, 1999).

 Challenges of Cooperative Societies

Cooperatives the world over are in a state of flux. In almost all parts of the world, cooperatives face one or more of the following crises: crisis of ideology, crisis of capital, crisis of credibility and crisis of management (Taimni, 1997).

 Cheney (1995) identified five challenges facing cooperatives. These are cultural transformation, competition and expansion, wage solidarity, centralization and reorganization, and programmes to increase productivity and participation. Groves (1985) on the other hand, posits that one of the major problems of cooperatives is how to keep balance in the two parts of cooperative business, efficiency and democracy since those who are charged with the operation of a cooperative chiefly the board and manager must serve two masters: the imperatives of good business practice and the social purpose of a community of people. Hence, to maintain their special character, cooperatives must be two things in one: a business organization and a social movement. This is what makes a cooperative a business enterprise with a human face and so, very difficult to manage. In striving for efficiency, cooperatives often tend to imitate other business, but in pursuing a social purpose they bring out the features, which make them different (Laidlaw, 1974).

Educating, training and retraining of members in general and officers in particular is always a challenge to cooperatives especially in developing countries. A cooperative without a strong component of education is in danger of losing its essential character, that is, the human and personal characteristics which distinguish it as a cooperative. Education is of paramount importance to the cooperative sector. Unless all those responsible for cooperatives (directors, officers, members, staff) are well informed and knowledgeable, cooperatives are likely, in some countries, to become much like capitalist, profit-seeking business, or in other countries to become handmaids of the State. Education makes people easy to lead, but difficult to drive; easy to govern but impossible to enslave.

Assuming the validity of the sector concept (the "mixed economy", as it is often called), cooperators face such questions as what type of business activity is most suitable for each of the three sectors, public, private and cooperative? Are there certain kinds of business that rightfully belong to the public sector? Are there others, which are best left to private enterprise? What kinds, ideally, are most suitable for the cooperative way of business? Are there some fields in which all three may engage and compete? Hence, one other challenge that cooperative societies face is the choice of business most suitable for the enterprise.

Another challenge facing cooperatives is adaptation. No business in a national economic system is completely independent and self-sufficient but operates in conditions of dependence and interdependence. Both capitalist business and cooperatives depend to some extent on the State and services provided by the State (highways, water supply, the postal system, etc.). Similarly, the State and public enterprise depend greatly on private enterprise, or on cooperatives. Sometimes private-profit business depends on cooperatives. And, of course, the reverse, cooperatives depending on private business in some way or other, is quite common. Thus, cooperatives cannot be thought of as an exclusive economic system but rather as one section of the total economy. They constantly operate in co-existence with other forms of business and sometimes in conjunction with them. Co-operatives therefore, have to adapt themselves by struggle in one place, by agreement in another - to the elements of a complex environment, partly free and partly organized. It must now decide what place it means to claim for itself in the new economy, either organized or in process of organization.

In addition, the cooperative sector suffers from an internal handicap of its own making: the frequent failure of various types of cooperatives to work closely together as a sector. Because of their voluntary and democratic nature, cooperatives have been reluctant to impose strict disciplines on themselves - they much prefer to act by common consent and persuasion. Often, management of cooperatives relies on relationship or is moved by sympathy to act against even the societies’ bylaws. This indeed has a lot of repercussion particularly in the developing economies and is against the 6th principle of cooperatives: Cooperation among Cooperatives. The different needs of customers, members, patrons, and owners challenges the cooperative’s board of directors and manager to make good business decisions. Business earnings of the cooperative must be great enough to systematically rotate the investment of members, pay patronage, and offer goods and services at reasonable prices or pay fair market value for customer’s products. This unique business structure dictates that the manager, board of directors, and members understand the business and cooperative structure.

To better tackle the above problems, Taimni (1997) suggested, in addition to fore mentioned, that cooperatives should make optimum use of all resources and strive continuously to enhance productivity of resources; ensure highest efficiency while providing services to members; improve management capabilities and competencies through effective organizational designs and structures; mobilize capital and lay greater stress on internal capital formation and accumulation; develop and retain human resources - members, leaders, staff and managers; forge strategic alliance with key institutional actors in the new environments; evolve and sustain integrated, vertical structures; increasingly focus on directly enhancing socio-economic conditions of their members by undertaking value-added operations; encourage members' participation through improved, diversified services; and strictly adhere to the values of honesty, openness, caring and concern for community and environments.

 Once this is done, it is hoped that cooperatives would be able to overcome the problems and challenges facing them. It however, calls for maintaining balance between economic and social purposes, emphasizing differences, relating with other cooperatives both at national and international levels, and maintaining a favourable public image.

1.2  STATEMENT OF THE PROBLEM

            The major problems of cooperative societies include among others;

·         Inadequate financing

·          Unqualified/inexperienced management committee

·         Uncommitted membership  

·         Lack of clear policy guideline on cooperatives

·         Government attitudes towards cooperatives development

Lack of infrastructural facilities like regular and stable electricity, accessible roads, pipe-borne water etc.


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