Co-ops can be a lifeline for businesses

A few weeks ago, farmers from Chitwan staged a demonstration by dumping their vegetables on the streets in protest of the government's inability to establish a viable market for their agricultural products. Soon after, farmers in Ilam followed the suit, this time dumping eggs and chicken on the streets. While consumers in cities like Kathmandu complain about high prices, farmers often claim that middlemen hold too much power. The problem of market imbalance is not limited to Nepal's agricultural sector; it also extends to other small industries, where producers face undue use of market power by middlemen and retailers, resulting in increasing prices for consumers. Since cooperatives have been used globally to tip the scale when unfair market practices hurt either producers or consumers, Nepal can also promote cooperatives as a way to improve competition and ensure the sustainability of businesses. A cooperative is a member-owned business established with the primary goal of serving its members. In this business model, the consumers of a cooperative's products and services are mostly its owners. The primary focus of the cooperative is service to its members, but like any other business, they must strive for profitability. Such profit is shared among members or used as a reserve to offer future products at lower rates. As a result, cooperatives have been globally adopted as a way for producers and consumers to protect themselves from the influence of middlemen and monopolistic businesses, and as a means for people to help themselves when other businesses don’t find it profitable to do so. While in Nepal, the term "cooperative" is often associated with savings and credit services, cooperatives around the world also work in areas of production, marketing, distribution, etc. Membership of a cooperative is open for everyone and can be obtained or relinquished at will. Unlike profit-making businesses, every member, regardless of their financial contribution, is entitled to a single vote in matters concerning the cooperative. The members elect a board of directors for governing a cooperative. In terms of operation, cooperative businesses may appear similar to privately-owned businesses, but they retain elements of democracy and prioritize collective benefit. Although cooperatives are not a perfect business model, they provide a unique and valuable alternative that helps to counteract some of the undesirable aspects of capitalism. Recognizing this potential, the Constitution of Nepal has placed heavy emphasis on co-operatives as a means for attaining economic growth.

However, co-operatives are not immune to challenges. They face intense competition from corporate businesses, which have more streamlined management. The co-operative model also may be difficult to implement in ventures that require significant capital investments. Additionally, the democratic structure of co-operatives, in which every member has an equal vote, can lead to power struggles and politics within the organization. And just like any other business model, the success of a co-operative also depends on a number of other internal and external factors. And although co-operatives can play a role in mitigating some of the negative impacts of capitalism, they are not a replacement for capitalism as a whole.

At first glance, co-operatives often tend to be associated with rural economies and small-scale industries. However, this assumption is far from the truth, as co-operatives have proved to be successful in large and complex businesses as well. A prime example is Amul, a brand that started as a co-operative society of farmers of two villages in Gujarat, India, in response to the exploitative practices of middlemen, in 1946. Today, it is jointly controlled by 3.6 million milk producers in Gujarat and has an annual turnover of approximately$7 billion. Another successful co-operative is IFFCO, which has an annual revenue of approximately $3.5 billion and produces and sells fertilizers in India. Established in 1967 by farmers with support from the Indian government, IFFCO operates multiple fertilizer plants throughout India to provide affordable and high-quality fertilizers to farmers. In the United States, co-operatives offer affordable healthcare and energy supply to their members. One notable example is Hoosier Energy, which was established in 1949 by farmers in Indiana to power their homes and farms. Hoosier Energy is a generation and transmission cooperative that supplies electricity to its member co-ops, which then supply electricity to consumers. Electric cooperatives came into existence in the US when the investor-owned utilities were either unwilling to serve in remote areas due to a lack of profitability or where residents sought more affordable options. Mondragon Corporation, founded in 1956 as a small workshop producing paraffin heaters in Basque, Spain, has grown into the world's largest worker-owned multipurpose co-operative. With operations in finance, retail, manufacturing, and education, it demonstrates the versatility and success of the co-operative model. Even the beloved football club, Barcelona, operates as a co-operative institution. Recently, some co-operatives in Nepal have experienced a severe liquidity crisis, raising doubts about the overall stability and sustainability of the co-operative sector in the country. But cooperatives still hold potential for the country and can play a crucial role in promoting economic democracy. They can also be a valuable tool for advancing aspirations of social democracy enshrined in the Constitution of Nepal. Some cooperatives operating in Nepal have already proved exemplary in terms of production and marketing of products of rural areas. With some additional effort, Nepal can use the same model to derive more value to the producers. Co-operatives also have potential in terms of creating a platform for member consumers to source goods and services by negotiating prices and terms directly with producers. In this regard, they can serve as an efficient alternative to not just profit-oriented retailers but also certain government corporations. In Nepal, the co-operatives model also holds prospects in various other industries such as electricity, telecommunication, sports and recreation, transportation, health and insurance, in terms of increasing the competitiveness of the sector and making them more consumer-focused. Historically, successful co-operatives have emerged when individuals have prioritized communal benefits over personal gains. However, the government also has an important role to play in protecting and promoting those co-operatives. In India, the significance of co-operatives had been acknowledged early on, and the success of organizations like Amul and IFFCO can be attributed to government ownership and backing. The recent creation of the Ministry of Cooperation in India further demonstrates the country's commitment to using co-operatives for its development. The Government of Nepal should learn from India's experience in incorporating co-operatives into its economic development plans. In Nepal, a significant portion of the population does not understand the business model and benefits of co-operatives. In fact, the topic is even overlooked in academic curriculums. To address this gap, co-operatives should be incorporated into curriculums, so that new generations can understand and embrace this model for solving common problems. Additionally, taking steps to raise public awareness on co-operatives can encourage people to choose this model as a means of addressing their shared challenges. Last but not the least, the role of regulators for co-operatives is also crucial in promoting knowledge about co-operatives, resolving conflicts, ensuring good governance, and facilitating access to government benefits and incentives. The author is an MBA and a student of Law