Financing and Marketing Management

Unit 1 - Cooperation

1.10. Causes which have retarded the growth of the movement
Various causes have been responsible for the weaknesses and poor performance of the cooperative movement.
“The main causes for the limited progress of the cooperative movement have been :
i)the laissez faire policy of the state; ii) the illiteracy of the members; iii) the life of the individual was not treated as a whole by the movement; iv) small size of the primary unit; v) undue reliance on honorary service; and vi)inefficiency in management” – the Report of the Cooperative Planning Committee, 1946.
The factors which have retarded the growth of the cooperative movement are :
i)poverty and mal-nutrition; ii)widespread indebtedness iii) high percentage of illiteracy iv) lack of business experience v) uneconomic holdings vi) inadequate transportation and storage vii) dearth of regulated markets viii)exploitation by moneylenders and middlemen ix) great price fluctuations and x) antiquated method of cultivation” –Haugh, E.M. Cooperative Movement in India, 1948.
Important factors that have retarded the development of the movement are:
Lack of Spontaneity
The urge of the cooperation has come from the Government and not from the people themselves. While in countries like Germany, Ireland and Italy, Cooperatives were organized by cooperative enthusiastic like Raiffeisen, Horace Plunket and Luzzati, but in India, the movement was started by the government as a remedy to solve the problem of rural indebtedness, and the organization was entrusted to the official Registrars. The movement was started by government initiative, kept in order by government audit and financed by government credit, has remained till recently an official movement. In the words of F.A.O, “ In India a cooperative society has become a semi state organization in which there is hardly any initiative, auto activity, autonomy, not to speak of auto-finance, on the side of the members”. Thus the lack of spontaneity in the Indian cooperative movement is admittedly one of its greatest inherent weaknesses. The continuance of the state control at every step has been damaging to the highest interest of the movement.
Lack of Knowledge of Principles of Cooperation
In practice, societies are constantly found in which most or even all the members are largely illiterate and ignorant of cooperative principles. Neglect of education in cooperative principles and practice, for departmental official, honorary workers as well as office bearers, staff and members of the cooperative societies has exacted a heavy toll. These personnel are not capable of properly discharging their duties. Lack of training and of the understanding of the cooperative principles is responsible for the chief defects of the members. In the absence of education, even the simple rules and principles cannot be got in the heads of the illiterate people.
All that these societies mean to the cultivators is that they are a bank from which they can get money at a cheaper rate, that there is no harry in repaying the loans, and that it does not matter much if the loan is utilized for some other purposes than for which it was taken. People, therefore, join societies only to get loans or scarce commodities, to secure some other privileges and as soon as these purposes are achieved, the membership may be left.
Inefficient management
The management of the societies is very inefficient due to lack of trained and qualified personnel. As a result of this the societies suffer from lack of proper accounting practices, irregularities or loans and maintenance of false records. Loans are granted recklessly and extensions given without reasonable causes.
Managing committees and chairmen are too often allowed to usurp all power, and the office bearers often find themselves helpless and lack moral courage in dealing with the faults and misdemeanours of the members. Very often members of the board of management are themselves defaulters and no prompt action is taken against them. Even where defects are obvious and admitted, there is reluctance to liquidate societies whose condition is beyond remedy. Further, concentration of control into the hands of fewer members prevents smaller producers from getting adequate credit.
According to Rural Credit Review Committee, “a major factor of weakness in the working of cooperative credit is that there has been no recognition of the need for following a business-like approach in running these institutions and securing management of the required quality.” Since the personnel of the societies is recruited not on the basis of merit but on the basis of pressures and favouritism, so complaints of graft, inefficiency, corruption, accumulation of over dues, fake entries of realization and advances, lack of owned funds and diversion of funds etc. are often heard.
Thus the sound and healthy ground of the movement has been retarded due to gross mismanagement and misuse of powers of the cooperatives.
Existence of too many dormant and non-viable societies
A fairly large number of cooperative societies (about 25%); as also the industrial cooperatives (about 33% of the total) are dormant or weak. Most of such societies remain only on paper in the records of cooperative department. This situation is due to the fact that several of the societies which have been classified as ‘active’ or ‘non-dormant’ have in fact been doing only token business and, hence are not active in the true sense.
It appears that inspite of the acceptance of the principle at all levels, that such dormant and non-viable societies should be either amalgamated, liquidated or reorganized, serious attention has not been paid to this fact due to local political pressures.
Failure to serve the needy strata
This is a general weakness of the movement. Credit is beyond the reach of many whose assets are scanty and is readily available to the few who are men of means. The credit societies are of no use in the poorest districts where the cultivators are most in need of aid. It is worse than useless to give loans to cultivators who are permanently incapable due to fragmentation and subdivision of holdings and climatic or other difficulties. It is only in the most prosperous areas that credit societies have been mostly successful.
Absence of self help
Elements of thrift and savings amongst the members have been yet small. There is low proportion of deposits per member. The central cooperative banks and the apex banks have failed to attract sufficient deposits from their members. Thus, self help and self reliance (which are the chief characteristics of the cooperative movement) are conspicuous by their absence in India.
Inadequacy of finance
The lack of finance available to the members has been another weakness of the movement. Loans are not granted as and when they are required, and also not in sufficient quantity. Sufficient time elapses between a loan application is put and the money actually disbursed. Moreover, loans are often given in one lump sum instead of being paid in installments. This makes cooperative finance highly inelastic and artificial.
Mis-utilisation and division of cooperative loans
A study on the utilization of co-operative loans revealed that diversion is an extensive practice among borrowers. The credit was utilized for non-agricultural and non-production purposes.
Cooperative credit has not been the Controlled credit
Almost all the members of a society join it merely to get the money from it, and few really understand the need for restricting credit for the productive purposes. It may be pointed out here that the efficiency of the co-operative finance would be considerably increased if a co-operative society has control over the produce of the members on the one hand, and on the other, can ensure the proper application of the loans advanced by it.