(Please see updated Introduction to the Philippine Cooperative Code of 2008, taking into consideration the enactment of the new law, Republic Act No. 9520.)
A cooperative is a duly registered association of persons with a common bond of interest, who have voluntarily joined together to achieve a lawful common social or economic end, making equitable to contribution to the capital required and accepting a fair share of the risks and benefits of the undertaking in accordance with universally accepted cooperative principle.
The declared purpose of the law governing cooperatives (Republic Act 6938, also known as the Cooperative Code of the Philippines) is to foster the creation and growth of cooperatives as a practical vehicle for promoting self-reliance and harnessing people power towards the attainment of economic development and social justice. The law provides important benefits to the cooperative and its empowered members, based on our experience in handling client-cooperatives.
The following are the declared principles of cooperativism:
Open and voluntary membership. Membership in a cooperative is voluntary and available to all individuals regardless of their social, political, racial or religious background or beliefs.
Democratic control. Cooperatives are democratic organizations. Their affairs are administered by persons elected or appointed in a manner agreed upon by the members. Members of primary cooperatives have equal voting rights on a one-member-one-vote principle.
Limited interest in capital. Share capital shall receive a strictly limited rate of interest.
Division of net surplus. Net surplus arising out of the operations of a cooperative belongs to its members and shall be equitably distributed for cooperative development common services, indivisible reserve fund, and for limited interest on capital and/or patronage refund in the manner provided by law.
Cooperative education. All cooperatives shall make provision for the education of their members, officers and employees and of the general public based on the principles of cooperation.
Cooperation among cooperatives. All cooperatives, in order to best serve the interest of their members and communities, shall actively cooperate with other cooperatives at local, national, and international levels.
There are different kinds of cooperatives. In general, these are: (1) Credit cooperative, which promotes thrift and savings among its members and creates funds in order to grant loans for productivity; (2) Consumer cooperative, the primary purpose of which is to procure and distribute commodities to member and non-members; (3) Producers cooperative, which undertakes joint production whether agricultural or industrial; (4) Service cooperative, which engages in medical, and dental care, hospitalization, transportation, insurance, housing, labor, electric light and power, communication and other services; and (5) Multi- purpose cooperative, which combines two or more of the business activities of these different types of cooperatives. In terms of membership, cooperatives are classified as: (a) Primary, wherein the members are natural persons of legal age; (2) Secondary, the members of which are primaries; and (3) Tertiary, the member of which are secondaries upward to one or more apex organizations. Cooperatives whose members are cooperatives are called federations or unions.