Options for cooperatives

RA 9520, otherwise known as the Philippine Cooperative Code of 2008 integrates the many laws that govern other types of cooperatives into a consolidated law. Examples of these cooperatives that used to be covered by separate and distinct laws are those in the Electric, Transport and the Water Services businesses.

What is common, though, in the new law is that it allows these cooperatives to engage in related businesses that would enhance their services to its members.

From the traditional Credit Cooperatives, the most popular and easy to establish type of cooperatives, the new law now envisions the establishment of honest to goodness Financial Services cooperatives much similar to those in the private sector. These cooperatives are expected to bring to the countryside such services as investments, insurance, and even Micro lending.

Providing Credit to their members, after years of operations, have become a nightmare to most community type of cooperatives as they rely on the voluntary and honest participation of the members in the repayment of such loans. Unfortunately, those who operate on traditional Credit granting policies with no effective collection system always end up with high delinquency rate.. a problem that has besieged the sector since the 1950s. The same, though, does not exists on Institutional type of Credit Cooperatives as most loans are paid through regular payroll deductions.

Because of these situation, cooperatives saw the need to grant credit only to those with legitimate use such as for livelihood, home improvements , school fees and the like. Emergency request to “pay electric bills,” cover expenses for overseas placement, and payment for other loans are slowly disappearing among the purposes that are acceptable to the cooperative.

One way by which cooperatives can ensure that loans are utilized for more productive purposes such as livelihood, is for them to tie up with legitimate Direct Selling and Networking Companies. In this way, Coop members will get initial training on concepts of entrepreneurship, simple business management and operations, marketing strategies and personal finance aside from specific product knowledge and compensation scheme.

A cooperative can draw up agreements that credit may be granted for the purpose of the member getting into the Direct Selling or Networking business. The loan can be released directly to the company to pay off their starting operations. And because coop members are supervised and monitored by representatives of the company, the loan amortization, can be paid directly from the bonuses or commissions granted by the company. In this way, delinquency is minimized, prompt payment is achieved, while the member enjoys his new found livelihood.

The cooperative can earn higher returns on these agreements if the Coop themselves are appointed Depot or Service Centers where their members can make their purchase of the products. Most Companies pays additional Handling Fee or Service Charges to the Cooperatives for helping distribute the products. These Other Income, on the other hand, becomes part of the Total Income of the Cooperative which later on redound to the benefits of their members as Patronage Refunds or Dividends, declared at year end.

Care though should be observed that cooperatives deal only with legitimate Direct Selling and Networking Companies. Some factors to consider are: a.) length of time that the Company been operating in the country b.) the people behind the company and c.) existence of products that are registered with duly authorized government agencies.

Over all, cooperatives gain by improving their Services through this agreement. Other income would definitely increase which in turn is translated to increased Dividends and Patronage Refund. –TEODORO ESTACIO, Manila Bulletin