The beginning of the 20th century in India witnessed the dawn of a new economic institution — cooperatives. Meant to meet credit needs of people, in rural and urban areas, these institutions were purely an outcome of a government initiative to ameliorate economic worries of the colonial citizens of that time.

The Cooperative Credit Societies Act of 1904 and 1912, the Constitutional Reforms in 1919 and the recommendations of various committees such as Royal Commission on Agriculture (1928), Committee on Cooperative Planning (1945), during the British regime contributed a lot in shaping the organisational structure of cooperatives here.

However, the movement lacked spontaneity, as most cooperatives formed were the result of state patronage. Also, the growth of the movement was skewed as bulk of the societies formed were confined to giving credit.

After Independence, cooperatives expanded to all walks of economic life. They continue to receive official patronage.. The rural credit cooperatives comprising Primary Agricultural Credit Society (PACS), District Cooperative Central Banks (DCCB) and State Cooperative Banks in the short- and medium-term credit structure and Primary Cooperative Agriculture and Rural Development Banks (PCARDB) and State Co-operative Agriculture and Rural Development Banks (SCARDB) in the long-term credit structure assisted and guided by Nabard play a key role in not only purveying credit but also in mopping up local savings.

In fact, the spatial spread of the credit cooperatives have contributed in their own way in moving towards financial inclusion. The recent demonetisation programme, though laudable, has disrupted the normal life of people and in particular the operations of credit cooperative institutions (CCI).

Impact on cooperatives

Kerala, an advanced State in terms of development of CCIs, is among the States that were hit the most by demonetisation. The problem got accentuated as the RBI barred DCBs from accepting deposits in demonetised currency, creating panic and loss of confidence among the public towards CCIs.

Currently, even urban cooperative banks are excluded from accepting deposits under the income declaration scheme, which will end on March 31.

The grounds advanced by the Centre/RBI on excluding CCIs in implementing demonetisation, among others, include that CCIs are not covered under core banking solutions that they don’t strictly adhere to KYC norms and lack professional management. Although the reasons for excluding cooperatives to not stand fully stand up to scrutiny, particularly in the case of Kerala, there is scope for them to improve their act.

CCIs must take this opportunity to introspect and improve management processes. The members who constitute the owners of cooperatives, board of directors who lead, employees who run the day-to-day affairs, and bureaucrats who represent supervisory machinery should take it as a challenge to correct themselves.

Participation, empowerment

Members are the cardinal stakeholders of any cooperative as the growth of the organisation solely depends on their patronage. Unfortunately, neither are the members aware of their role, nor are the other stakeholders (management committee, employees, government, etc.) ready to recognise and respect this role. Members should realise that their eternal vigilance alone could guarantee autonomy, independence and progress of their cooperative.

The words of Luzatti, famous Italian cooperator, assumes relevance here: “A cooperative with vigilant members and a weak financial base will be preferred to a cooperative with casual members having strong financial base.”

To remedy the present situation the following actions can be done. One, incorporate provisions in the law quantifying the minimum level of participation by a member in the business of the society annually. Two, legally specify the contours of democratic participation by members. Failure on these two counts should result in disqualification of members.

Three, enhance member education programmes by comprehensively revamping the existing arrangement for education. Four, take proactive steps for dissemination of success stories of cooperatives in mainstream media including social media to create awareness and positive feel among the public at large.

Governance, professionalism

An effective leader stands apart from others in terms of his vision and commitment and these qualities are required more so in a cooperative venture. Leaders such as Tribhuvandas Patel (Amul), Vithalrao Vikhe Patil and Thathya Sahib Kore (Pravara and Warana cooperative complexes in Maharashtra) had such qualities aplenty besides the ability to convert a crisis into an opportunity.

Such leaders not only had the ability to identify the felt needs of the people but also had the vision to employ committed professionals to ensure the sustenance of the organisation overtime. Therefore, the need of the hour is the emergence of enlightened leaders who can even influence policy formulation by government favourable to cooperatives.

What cooperatives must shun, as pointed out by author-thinker Edgar Parnell, are leaders who are “nest featherers, main chancers, ego builders, recognition seekers, hijackers, political ladder climbers, dogma pedlars, do gooders and asset accumulators”.

Conversion of ideas/policies in to tangible outcomes in any organisation depends upon professionals. Cooperatives lag way behind other institutions in terms of professional management and this gap has to be bridged at the earliest if cooperatives have to survive in the present competitive environment.

A professional in a cooperative — besides possessing universally accepted qualities of mastery over the domain, adherence to ethics and association with professional bodies — should invariably possess the quality of empathy as s/he has to mainly deal with ordinary folks. V Kurien (Amul), GK Panicker (Kerala Dinesh Beedi) are examples. There is an urgent need to institutionalise and strengthen arrangements for ensuring sound human resources management practices in cooperatives covering recruitment, compensation package, re-skilling, career advancement and social security of employees of all cadres.

To conclude, cooperatives, therefore, must develop on their intrinsic strengths.

Sasikumar is director in charge at the Institute of Cooperative Management, Kannur. Urs is a deputy director at the institution. The views are personal