Question

Write short note on demerits of Co-operative society.

Answer 1

The important among the disadvantages are:

1. Lack of Secrecy:

A cooperative society has to submit its annual reports and accounts with the Registrar of Cooperative Societies. Hence, it becomes quite difficult for it to maintain secrecy of its business affairs.

2. Lack of Business Acumen:

The member of cooperative societies generally lack business acumen. When such members become the members of the Board of Directors, the affairs of the society are expectedly not conducted efficiently. These also cannot employ the professional managers because it is neither compatible with their avowed ends nor the limited resources allow for the same.

3. Lack of Interest:

The paid office-bearers of cooperative societies do not take interest in the functioning of societies due to the absence of profit motive. Business success requires sustained efforts over a period of time which, however, does not exist in many cooperatives. As a result, the cooperatives become inactive and come to a grinding halt.

4. Corruption:

In a way, lack of profit motive breeds fraud and corruption in management. This is reflected in misappropriations of funds by the officials for their personal gains.

5. Lack of Mutual Interest:

The success of a cooperative society depends upon its members’ utmost trust to each other. However, all members are not found imbued with a spirit of co-operation. Absence of such spirit breeds mutual rivalries among the members. Influential members tend to dominate in the society’s affairs.

Answer 2

DEMERITS OF CO-OPERATIVE SOCIETY

1) Due to the low membership fees and equal dividends policy, the funds with the co-operative society is low and so they heavily rely on government funding for their resources. As a result, they are unable to correctly plan their fiscal needs. Also, they can not spend on technology for developing themselves due to limited funding.

2) In India, these societies were established by the government and so involvement of a wider section of the society is not there.

3) Even though these societies are aimed to benefit the poor, the rural rich ensure that they are benefited by electing themselves to key positions and exploiting the resources. This also means that most of the times the managing committee lacks the required skills to run the society.

4) The credit provided by the societies is only for production purposes and not for personal purposes. As a result, the poor still depend on money lenders for other financial needs.

5) Such societies can not be formed in all types of businesses and so is limited in its scope for application.

6) The members tend to put blame on others when there is a failure within the society. This is due to the whole society sharing the responsibilities instead of just one individual being responsible for it.

7) Since the effort-reward ratio is skewed in such societies, there is lack of motivation among members to work harder to improve these societies.

8) Due to influence and interference of politics in these societies, the involvement of public is low in such societies.