Jayachandran/Mint

Jayachandran/Mint

Year of the cooperative, a year for localization

Year of the cooperative, a year for localization

The year 2012 is the UN year of cooperatives. After a roller-coaster year for microfinance—where markets were a solution, then markets created a problem, a state reigning in the markets while being a player—it is a good time to reflect on where it started and where it thrives. We have three examples and a few thoughts. These institutions did not exist for profits, not scale, just relevance to their customers.

Sewa Bank was established in 1974. The word microfinance was not coined yet. Muhammad Yunus of the Grameen Bank was experimenting with his three-share farm and had not ventured into microcredit. More than 6,000 women collected about 70,000 to set up a cooperative that would keep their savings, lend and provide social security. It thrives and continues to serve women, with no external funding, no private equity, no professionals. Rustic women sit on the floor and conduct board meetings. The bank is profitable and most importantly relevant. It has seen a transition of leadership from Ela Bhatt; there has been a refocus on business priorities, never a crisis. They have a business of 175 crore serving about 87,000 members having more savings than loans.

Jayachandran/Mint

In the late 1980s, M. Rama Reddy and Shashi Rajagopalan of the Cooperative Development Foundation (CDF) tried replicating the Mulukanoor. They found it difficult to change the culture of the cooperatives, and the government intervened to negate their work. Later on, they embarked on a different journey of promoting women’s and men’s thrift cooperatives in two districts of AP. They trained the people on accounting, internal audit, conduct of meeting and writing of minutes. Yes, cooperative principles were taught, but it was important to do good housekeeping. The women’s cooperatives collectively have a membership of more than a lakh, savings of more than 30 crore and loans less than savings. No bank borrowings. The men’s cooperatives have lesser membership of around 70,000, but more savings of around 35 crore, and loans less than borrowings. No bank borrowings. Rama Reddy is long retired and Rajagopalan who went to be on the central board of the Reserve Bank of India passed away last year. CDF is now managed by women, not qualified professionals.

In addition to the above are patha sansthas—a plethora of cooperatives in the Kolhapur district, a cooperative in Amalsad, Gujarat, one in Shridharpur, West Bengal—that are examples of what collectives could do, without any support of the government, of the banking system, without professionals.

These initiatives have two aspects. First, they are built on local contributions, local resources, local savings and local capital. Second, they remained relevant to their members. They have adapted when the members changed cropping patterns; when the members’ needs changed. They identified the most relevant financial and service needs of the members, before members could articulate. They imposed a culture of discipline. A member of a cooperative in Yendagandi, AP, told us: “The greatest service that our president has done for us is being strict.." When they became irrelevant, the members show anger by withdrawing from the cooperative as they did in Achanta, AP.

Research has shown there is a relationship between financial stakes, patronage, satisfaction levels and the control they exercise. In this year of cooperatives, if we emphasize the importance of thrift instead of pumping loans, that may be the best service to cooperatives. They will find local solutions to local problems.

M.S. Sriram is an independent researcher and consultant, and former professor at the Indian Institute of Management, Ahmedabad.

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