Cooperative Societies, Types, and Benefits

A cooperative society is a concept prevalent globally in all industries such as agriculture, food, finance, and healthcare.

Cooperative societies in India defend the interests of the weaker sections of society. A cooperative society is a group of people banding together voluntarily for the sake of the members’ well-being.

Meaning and definition of the cooperative society

A cooperative society in India is a non-profit organisation that was initiated to serve its members. In a cooperative, people from the same social class group band together to realise common goals.

Poor individuals or members of society’s weaker parts typically work to create such a society. A society represents impoverished people. An economically disadvantaged individual can improve and elevate their economic situation through mutual aid and form a cooperative society.

Cooperation implies working together to improve their economic situation. A society embodies the principle of ‘all for one and one for all‘. All members work together to run this organisation.

Many corporate businesses are formed to make a profit, whereas cooperative societies are established to serve the members of the society for the common good, not to make a profit.

History of Cooperative Societies in India

Cooperative societies in India have existed since the pre-independence period. In the late 1890s, many farmers in Western Maharashtra protested persecution by money lenders. In 1904, the British government in India enacted the Cooperative Society Act 1904 to help impoverished farmers reliant on moneylenders for agricultural loans.

The provisions of these acts were eventually broadened to include cooperative finance agencies and banks in rural and urban regions. However, during World War II, cooperative groups in India encountered difficulties because of the increase in the prices of agricultural commodities.

After independence, India’s ‘cooperative movement’ gained traction. The government recognised the importance of the cooperative sector in promoting the rural economy. The movement included proposals in its Five Year Action Strategies series of development plans. At least one cooperative organisation was promoted in each hamlet. It also aided in the establishment of cooperative farms.

In India, cooperative societies grew from the agricultural market to the credit sector and subsequently to large-scale industries such as housing, fishing, and banking. This phenomenon resulted in the establishment of many forms of cooperative organisations in India.

Types of Cooperative Societies in India

Cooperative societies in India are categorised into six types based on the number of members and the nature of the operation.

Cooperative Farming Society

  • The agriculture industry in India is the largest; farmers in the country must earn a profit for their goods. However, this sector is economically weaker due to various factors, including farmer debts, expensive equipment, agents or intermediaries, among others.
  • Farmers set money aside to consolidate farming equipment, seeds, fertilisers, and so forth. They earn more through cooperative farming than individual farming because the profit is split based on their landholdings.
  • The benefits of cooperative farming groups in India include increased agricultural productivity and profit.

Cooperative Credit Society

  • Cooperatives offering financial services to their members such as deposits, short-term loans, and so on
  • Members of these societies are all individuals who make deposits in them. These societies raise funds through deposits from their members and offer them short-term loans at a low-interest rate.
  • These schemes assist members by shielding them from the high-interest rates of commercial banks, which typically do not match the demands of farmers or economically disadvantaged groups.

Producers’ Cooperative Association

  • These societies are critical for developing India’s middle and small businesses.
  • These cooperatives are for producers such as fishery owners, farmers, craftsmen, local artisans, and many other companies. Amul dairy, India’s largest cooperative, is the most remarkable example.
  • Without intermediaries, the output is pooled and distributed by the cooperative, creating a direct consumer-producer interaction.
  • Buyers of the goods may be members, non-members, or general public.

Cooperative Consumer Society

  • Consumers create these cooperatives.
  • Consumers for such cooperatives acquire items in bulk to decrease costs and sell them to its members (and nonmembers as well) at cheaper rates to receive household goods at an affordable price.
  • Bulk purchases and sales result in price reductions for customers, which is an additional benefit. These cooperatives establish storefronts for selling all items under one roof. Apna Bazaar, for example, is an Indian consumer cooperative.

Cooperative Marketing Society

  • Marketing cooperatives help farmers market or sell their goods the same way as farming cooperatives help farmers with pre-farming necessities.
  • These cooperatives assist farmers in economically selling their products. They also provide farmers with services such as a sales platform, cold storage, produce grading, among others.
  • Fruit and vegetable cooperatives, cotton cooperatives, and sugarcane cooperatives are the largest and most sought-after marketing cooperatives.

Cooperative Housing Society

  • With land costs soaring, housing is a major challenge for the average person in cities and towns. In such cases, individuals organise cooperatives to acquire property, build buildings, and sell them to the members.
  • To become a cooperative housing society member, a person must buy a house or acquire shares in the cooperative.

Characteristics of Cooperative Societies

The cooperative society in India adheres to democratic, egalitarian values. It is intended for mutual assistance. People who are not financially secure may join these cooperatives and work toward a shared objective.

The following are some characteristics of cooperative societies in India:

  • Voluntary Formation and Participation: Joining a cooperative is simple and free. The procedure of joining and leaving a cooperative group is entirely voluntary.
  • Each member has one vote: Cooperatives, as previously indicated, operate on democratic ideals. Every cooperative has a chief managing committee, and by the general membership, the members are elected.
  • Independent body: The government of India recognises a registered cooperative society as an independent organisation. It has the authority to make its own decisions for the interest of its members.
  • Mutual benefit: People in the middle and lower-income levels always gain from cooperatives. They assist one other in achieving larger earnings beyond their typical incomes and build mutual trust.
  • No financial risks: A cooperative does not have financial hazards because cooperatives primarily function based on cash and direct transactions. Other people do not give credit, except financial cooperatives, which shield them from damages caused by poor loans. Therefore, cooperatives are an excellent way to prevent economic hazards.
  • Objective to assist: The primary goal of a cooperative society in India is to assist people in navigating difficult financial situations and gain support and aid from neighbouring communities. It improves communal relations.
  • Fair profit distribution: Surplus produce or profits are divided fairly among members according to their shares in the cooperative sector.
  • Professional Management: All cooperatives should be run professionally. It is essential to have regular audits. A centralised registrar oversees regulation.

Significance of Cooperative Societies in India

Cooperatives play a crucial role because they are an organisation for the impoverished, ignorant, and unskilled people. The following is a list of the cooperative sector’s relevance to India:

  • Cooperative offers agricultural credits and finances when the public and private sectors fail to do so.
  • The cooperative sector gives strategic inputs to the agriculture sector, whereas consumer societies satisfy their consumption needs at reduced rates.
  • Societies overcome agricultural development restrictions.

Benefits of Cooperative Societies in India

Various advantages of cooperative societies in India can be as follows:

Combating poverty and ensuring food security

Cooperatives provide small holders in partner nations a larger voice in the global supply chain by allowing them to market their goods jointly. The ILO estimates that cooperatives market roughly half of the world’s rural agricultural production.

Offering low-cost financing

Credit unions and other financial cooperatives provide long-term financing to persons who cannot access regular banks. Credit unions provide a secure approach to savings and loads because they are operated by and for people in the community and lend prudently.

Increasing local expertise and profit

Cooperatives create and disseminate business knowledge because they are governed by and for local people. Profits are reinvested in the cooperative, the local community, or dispersed to local owners. Cooperatives are an excellent self-help strategy.

International collaboration is essential.

Cooperatives cooperate extensively as a worldwide movement centred on the notion of self-help. Strong cooperative networks allow practitioners worldwide to learn from one another and exchange best practices.

Creating better jobs

Cooperatives employ about 100 million people worldwide, and 3 billion rely on them for a living. Whether for farmers, labourers, or office employees, they strive to give exemplary work with job security and good working conditions.

Women’s Empowerment

A cooperative society in India promotes gender equality because they are open and democratic organisations. Many women hold prominent positions in cooperatives and have created a considerable number of cooperatives to provide them with an income.

Challenges to the Cooperative Society in India

  • Local politicians have influenced cooperatives in India for decades, and this has considerably influenced the region’s domestic politics. Politicians profit by preventing poor people from receiving their initial advantages.
  • Another problem is the poor infrastructure and organisation of cooperatives, which could be primarily attributed to a lack of funding. Cooperatives should be assisted or subsidised for achieving these goals.
  • If the cooperative work is small, its members are underpaid.

Therefore, cooperative organisations should address these issues and look out for the interests of their members.


Cooperative Societies in India aims to satisfy the requirements of its members according to cooperative ideals. Cooperative societies are democratic organisations owned and governed by unitary, independent, and self-help members. The entire system is democratically governed, and the members elect representatives to govern their cooperatives’ business. The cooperatives appoint and dismiss management and employees.

Every issue is discussed democratically by a simple majority of votes. Members share profit and loss depending on their engagement as customers of the cooperatives’ services, and share capital is not the focus of the study.

The cooperative society in India provides education and training to their members, elected representatives, managers, and staff to actively contribute to the growth of their cooperatives. They work together through local, national, regional, and worldwide organisations and serve their members most efficiently and strengthen the movement. They also aim to ensure the long-term growth of the communities they operate.

FAQs Regarding Cooperative Society in India

How does a cooperative society work?

Mutual aid and welfare are the guiding principles of a cooperative society. As a result, the principle of service dominates its operation. If a surplus is created, then it is dispersed to the members as a dividend by the society's bye-laws.

What is a Multi-State Credit Cooperative Society (MSCS)?

A multi-state credit cooperative has members from more than one state. The Multi-State Cooperative Society Act, 2002, was established in 2002 to regulate such multi-state cooperatives, and it is governed by the office of the Central Registrar of Cooperative Societies.

Who manages a cooperative society in India?

The cooperative society members collectively get referred to as the general body, whereas the members who govern the cooperative society are referred to as the management committee. They run a cooperative society democratically. The rule is ‘one member, one vote’. Therefore, members may have a say in management.

What are the disadvantages of a cooperative society?

  • Limited Funding
  • Management Inefficiency
  • Lack of Motivation
  • Disagreements and factionalism among members
  • A lack of competition;
  • Personal gains are weighted
  • Corruption
  • Absence of undue government intervention
  • Lack of expertise
  • Lack of understanding of cooperative society principles