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The development of rural areas has always been the priority. Rural areas are now developing at a massive speed and in almost every aspect. Cooperative societies are playing a great role in the same. To support rural development, a co-operative society in a rural area follows the idea of mutual aid and self-help. Every member joins a co-operative society to help others rather than to make a profit. The function of cooperative societies in rural development will be discussed in this article. Now, let’s take a moment to know how a cooperative society actually functions.

The formation of a co-operative society occurs when persons with common economic, social, and cultural goals come together voluntarily to create an organisation. The primary goal of this society is to meet the needs of the poor and those living in rural areas of the country. It is critical to the advancement of settlements.

Characteristics of a cooperative society

Characteristics of a Co-operative Society

A cooperative society possess various features but here are some of the features that can help you recognise if the organisation is a cooperative society:

  1. Separate Legal Entity
  2. Voluntary Association
  3. No Personal Motive
  4. State Authority
  5. Democratic Administration

Let’s discuss these features in detail

  •  Separate Legal Entity

The Co-operative Societies Act requires a cooperative society to be registered. Registration establishes it as a distinct legal entity. Its existence differs significantly from that of its members.

  • Voluntary Association

Only when all members freely take on the task of creating one can such a society be formed. A co-operative society can be joined or formed by anyone who shares a common interest. Members can also leave the association at any time by notifying the other members. 

  • No Personal Motive

Members of a co-operative society cannot have any personal motives because they are working towards a common goal. The primary goal of co-operatives is to provide services to their members rather than to make a profit. Profit maximisation is a critical goal for other businesses, but it is not for co-operatives.

  • State Authority

Government regulation and control are in place for cooperative societies. The Cooperative Societies Act, 1912, or the State Cooperative Societies Act can be used to register a cooperative society in India.

  • Democratic Administration

Every year, a co-operative society’s annual general meeting (AGM) is conducted, at which the managing committee, which oversees the co-operative society’s operations, is elected.

Cooperative societies’ role in rural development

Despite the fact that agriculture is the primary source of revenue and employment in rural regions, the situation is farcical in that the vast majority of rural residents are impoverished and hungry. The cooperative society is critical to addressing the deplorable conditions in rural areas. 

Cooperative societies have played an important part in the development and integration of rural populations. The role of cooperative societies in rural development is complex, encompassing many aspects of rural life. It seeks to improve the economic and social well-being of its members and communities.

Let’s talk about some of the ways through which the cooperative societies have benefited the rural population, in order to understand more about it:

  1. Small-scale industries benefit from cooperative organisations’ efforts to give new and worldwide opportunities, and artisans aid them with necessary credit and skill assistance. This increases their employment options and, as a result, their standard of living.
  2. Co-operatives have played a significant role in channelizing money lending in a formal manner by establishing up Co-operative banks and credit societies in rural India, which has seen the largest number of cases of farmers’ suicide owing to exploitation by money lenders. It has aided people in rural areas in becoming financially self-sufficient, and it provides loans and other banking services to farmers and other business owners. They are also encouraged to put their money in a savings account to earn a nice interest rate.
  3. Women’s empowerment is another important role of cooperative societies in rural development. These societies educate rural women to be aware of their rights and empowered via skill development through a variety of activities. These societies have worked on the ground to break down cultural and societal barriers to women’s growth.
  4. Cooperative societies have had an impact on rural education by encouraging kids to go to school. In India, cooperative schools can be found all around the country. Many cooperative societies collaborate with non-governmental organisations to offer a variety of skill development programmes that focus on the advancement of a specific profession.
  5. Producers, manufacturers, and farmers benefit from co-operative societies because they assist them overcome challenges such as a lack of raw materials, machinery, and basic input by making it freely available.
  6. Co-operative societies have aided many poor sectors of rural communities by offering access to new technologies, good training in natural resource management, and raising agricultural output by increasing the availability of goods.
  7. The goal of a co-operative organisation is to provide not only social benefits, but also financial rewards to people who work in agriculture.

Hardships faced in rural areas

Despite their significant contribution to rural development, cooperative organisations face a number of challenges. The main problem they face is the shortage of funds. It’s working capital is low and insufficient due to which they are unable to meet their requirements . As a result, these societies face a significant financial dilemma and are unable to pursue their job properly. Furthermore, because politicians employ cooperative societies as a vote bank, these society can be easily exploited by politicians which can be a real task to deal with.  Furthermore, there have been occasions where certain members of these societies have joined the organisation for personal advantage. It deviates from the initial objective and causes a schism in the community.

Types of cooperative societies

Types of Co-operative Societies

Let’s explore six major types of cooperative societies that exist in India:

1. Consumer cooperative society

These communities cater mostly to clients seeking lower-cost household goods. The organisation purchases items or products in big quantities directly from the producer at wholesale costs and resells them to its members, obviating the need for an intermediary. The goods are sold in cash to both members and non-members.

2. Producer cooperative society

In a competitive market, these types of organisations, sometimes known as industrial co-operatives, watch out for small-scale manufacturers. Within the cooperative, production and distribution are managed. Farmers, ayurvedic herbal medicine makers, organic product dealers, handicraft or handloom producers, artists, and so on are examples of these producers.

3. Credit cooperating society

A Co-operative Society is one that is created by a collection of diverse types of people who all have the same goal of promoting self-sufficiency. A Credit Co-operative Society is defined as a group of people who are working together to achieve a common goal.

The provisions of the Multi State Cooperative Societies Act, 2002 govern such organisations. This act, together with other norms, contributes to the betterment of society. This would also provide communities the functional autonomy they need to function correctly. The government passed the ‘Multi State Cooperative Societies

Bill,’ which got royal assent from both houses of parliament before it came the law, in order to promote such needs.

It can further be divided into two categories:

  • Agricultural cooperative societies
  • Non-agricultural cooperative societies

Any organization needs to be registered, as after the registration it enjoys various benefits. The registration of  credit cooperative society will allow it to:

Promote self sufficiency, Less compliance, Limited liability, same rights, no barriers to membership,

4. Marketing co-operative society

These are urban and rural financial societies that offer low-interest loans to members, shielding them from large debts owed to traditional moneylenders. In a sense, they perform a fundamental yet highly personalised banking function. Savings accounts, FDs, RDs, pension plans, and other deposit options are available.

5. Housing co-operative societies

Housing co-ops are a type of society that provides low- and middle-income people with inexpensive housing. By purchasing shares in the cooperative, one can become a member. Instead of owning real estate, members own a share in the corporation as a whole, which provides them with a home. These communities are frequent in both urban and semi-urban areas. They build apartments or flats for members to live in and collect money in installments.


Cooperative societies play a major role in the development of rural areas. These societies have proved to be a helping hand in rural development. Although they have to face several challenges like shortage of funds, etc.  Despite these obstacles, cooperative organizations are playing an increasingly important role in the development of rural communities across the country. The involvement of cooperative societies will be critical to the future success of rural communities. Every Indian citizen should recognize the value and relevance of cooperative organizations, as they contribute significantly to economic equality and welfare. A thriving network of cooperative societies enhances the standard of living of the weaker and middle-income sectors of society as agents of change and reformation, although formally channelizing money lending they are not the dominant public or private financial institutions.

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