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Cooperatives are both associations of people and business enterprises. They are distinguished from other organizations by their philosophy, nature, and character. Failure to appreciate their true nature and character deviates from cooperative principles and ideals and loses sight of the ultimate objective of the cooperative movement.

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UPLBCDC

Pre-Membership Education Seminar

1. Cooperatives are service-oriented�� Cooperatives are organized to serve their members by providing goods and services at reasonable cost. Members contribute the capital of the cooperative so that goods and services can be appropriately provided through its business activities and not to maximize the profit or dividends their capital contributions will earn from the business.�� Cooperatives, in servicing the members, do not act as charitable organizations. Members are aware that the benefits come from their contributions, patronage refund, and mutual efforts to help one another. The motto is “Cooperative are not for profit and not for charity but for service.”�

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UPLBCDC

Pre-Membership Education Seminar

2. Cooperatives are community-oriented�� Cooperatives work for the welfare of their members by integrating themselves into the life of the community in particular and the nation in general. Cooperatives enhance the people’s welfare through increased productivity both the members and the communities where they are located. By the very nature of their concerns, cooperatives strengthen the economic, social, cultural, and ecological base of the communities where they operate.

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UPLBCDC

Pre-Membership Education Seminar

3. Cooperatives are people-oriented�� Cooperatives are not merely economic instruments concerned with dividends and related economic and financial returns. They are the mechanisms of change for total human development. This means the total development of man as human being in all the economic, political, cultural and spiritual aspects.

“the goal of cooperatives is to make people-people with sense of both individual and joint responsibility so that they may rise individually to a full personal life and collectively to a full social life.”

G. Fauquet

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UPLBCDC

Pre-Membership Education Seminar

4. Cooperatives are owned, managed, and patronized by members.

Cooperatives are member-owned, member-controlled, and member-used. Ownership is a very important factor in the success of any cooperative. It is very important that members have full authority to manage and control their cooperative. If a cooperative starts and operates solely from borrowed capital, it violates the principle of self-help and loses much of its autonomous character. Cooperatives must depend on the patronage of their own members and not from non-members. However, in certain cases a limited patronage by non-members may be allowed mainly for reasons of business viability and service to the community.

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8 of 31

UPLBCDC

Pre-Membership Education Seminar

5. Cooperatives are business enterprises.

� Cooperatives engage in businesses with social responsibility. They play a meaningful economic role in the community life by serving and performing as efficiently and responsively as the other financial and business enterprises. Cooperatives have to generate surplus to be able to continually improve and expand its services. They have to be viable, creative, enterprising, and efficient to continually grow and serve the needs of their members. Increasing patronage cannot be maintained without good quality service, management and performance. The net surplus generated from business operations are allocated to the members at the end of each year.

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UPLBCDC

Pre-Membership Education Seminar

6. Cooperatives develop best through self-help and mutual help

Robert Owen advocated the philosophy of self-help that inspired the “Rochdale Pioneers” to organize. He said “if you want something done, do it yourself”. This philosophy has been responsible for the success of many cooperatives all over the world-and it is the best alternative for the poor in any country to unite and help themselves out of their depressed condition. This is not to say that they should not be assisted. But assistance from outside, whether technical or financial, must not stifle but stimulate initiative, self-help, and self-reliance. The principle of subsidiarity also applies-that before asking or soliciting aid from the outside, self-determination and self-capability should be considered.

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UPLBCDC

Pre-Membership Education Seminar

� The role of government and non-government organizations in the development of cooperatives should be assistance and not dominance. They should not in any manner interfere in the purely internal affairs of the cooperatives, taking care that they preserve their autonomous and independent and self-help through mutual-help characters. On the part of the cooperatives being assisted, they should do their part by seeing to it that the objective of the assistance given is achieved-that they grow stronger rather than become dependent upon such assistance.

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11 of 31

UPLBCDC

Pre-Membership Education Seminar

7. Cooperatives serve best when they answer the real and felt needs of the member

How do we expect the members to participate in the activities and to patronize the business of their cooperative whose services they do not really need or feel they need? Of what benefit are cooperatives that do not serve the real needs of their members? It is important therefore that proper approaches and techniques are employed to ensure that the real needs of the members are identified and recognized before any cooperative is organized. The assisting agency or agencies should make the real need be felt by the members. The assistance should begin from the organization stage and sustained through the development stage up to the point when the cooperative begins to operate on a self-sustaining basis.

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UPLBCDC

Pre-Membership Education Seminar

8. Cooperatives develop best from bottom to top

Being mass-based organizations, cooperatives develop best from the bottom to the top. Organizationally, their development should be from the primary level to the secondary, tertiary, and up to the apex. Geographically, they should develop from the barangays to the municipal, provincial, city, regional, and national.

The primary cooperatives are the foundation stones of the whole cooperative structure. Organizing the apex before the base is like building the roof of the house before its foundation. Sooner or later, in such a case, the roof topples down because the foundation is weak and unable to support its load.

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UPLBCDC

Pre-Membership Education Seminar

9. The development of cooperatives is enhanced through a multi-sectoral approach

Having in mind the specific roles of each sector - the government, non-government, and the cooperative sector-must play, a multi-sectoral approach can ensure that all aspects of the development process are considered. This enhances the smooth and continuous development of the cooperatives. This approach involves the participation of all sectors from the planning stage to the implementation, evaluation and monitoring of all activities. Such approach enhances true people power-enlightened, democratic, and participative-in all levels, both organizational and geographical.

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PRINCIPLES AND PRACTICES

UPLBCDC

Pre-Membership Education Seminar

PRINCIPLES – an embodiment of ideas that determine the essential characteristics of an organization, distinguishing it from all other organizations.

PRACTICES – specific and practical application of a principle developed and agreed on among cooperators of a given country.

Practices are in accordance with unique conditions and circumstances, and thus may vary as to both time and space. In no situation however should a practice run counter to the essence of a given principle.

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COOPERATIVE PRINCIPLES

UPLBCDC

Pre-Membership Education Seminar

1. Voluntary and Open Membership

7. Concern for Community

2. Democratic Member Control

3. Member Economic Participation

4. Autonomy and Independence

6. Cooperation among Cooperatives

The cooperative principles are guidelines by which cooperatives put their values into practice.

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5. Education, Training and Information

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First Principle: Open and Voluntary Membership

UPLBCDC

Pre-Membership Education Seminar

Cooperatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination.

Practices:

No compulsory Membership
No discrimination against any person on account of religion, race or political belief.

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Second Principle: Democratic Member Control

UPLBCDC

Pre-Membership Education Seminar

Cooperatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary cooperatives members have equal voting rights (one member, one vote) and cooperatives at other levels are organized in a democratic manner.

Practices:

One-man, one vote
No proxy voting
General assembly as supreme authority
Decision-making by majority vote
Direct or indirect participation of all members in the control of the organization (i.e. through the election of officers, board of directors, audit committee, other committees.

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Third Principle: Member Economic Participation

UPLBCDC

Pre-Membership Education Seminar

Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. They usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing the cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative, and supporting other activities approved by the membership.

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Third Principle: Member Economic Participation

UPLBCDC

Pre-Membership Education Seminar

Practices:

Limited interest on share capital
Limitation of individual share contribution, not more than 20% of total capital
Provision of reserve funds
Provision of reserves for the development of the coop
Distribution of Interest on Capital and Patronage refund

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Fourth Principle: Autonomy and Independence

UPLBCDC

Pre-Membership Education Seminar

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

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Fourth Principle: Autonomy and Independence

UPLBCDC

Pre-Membership Education Seminar

Practices:

The General Assembly is the coop’s supreme authority
Leadership is confined to the coop members
The control and leadership is through members democratically elected to high responsibilities and the independence of the coop remains even when the coop becomes involved with other organizations such as funding agencies.

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UPLBCDC

Pre-Membership Education Seminar

Fifth Principle: Education, Training and Information

Practices:

Appointment of an Education Committee
Provision of an education fund out of net income or from gross income.
Requirements of pre-membership education before admission.
Ownership or membership meetings.
Continuous training of officers and staff.

Cooperatives provide education and training for their members, elected representatives, managers, and employees so that they can contribute effectively to the development of their cooperatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of cooperation.

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Sixth Principle: Cooperation Among Cooperatives

UPLBCDC

Pre-Membership Education Seminar

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

Practices:

Membership in secondary and tertiary organization
Participation in economic integration projects, like central fund, inter-coop trade, cooperative insurance, local, national, regional and international linkages.

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Seventh Principle: Concern for Community

UPLBCDC

Pre-Membership Education Seminar

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

Practice:

Members ensure that the policies they make will benefit the whole cooperative community (work towards improving their living standards based on their social values without compromising the resources available for future generations)