Rural Cooperation: In The Cooperative Movement in Tanzania

10. Procedures for Organizing A Cooperative Society

10 Procedures for Organizing A Cooperative Society 138 Rural Cooperation: In The Cooperative Movement in Tanzania There are procedures which are usually followed in order to establish a cooperative society. To plan to start a cooperative involves conducting a sequence of events. This chapter analyzes the procedures for organizing a cooperative society. The challenges which may be encountered in procedures of forming a cooperative society are discussed. 10.1 Reasons for Organizing a Cooperative There are four reasons to establish a cooperative society: Firstly, a cooperative may be formed to improve material living conditions of the members (United Republic of Tanzania (1991) Cap. 7). Secondly, a cooperative may enable members to satisfy their needs by providing services in business, education, transport, communication, as well as to providing consultative services to members in order to improve their business. Thirdly, to promote cooperative education among members and non-members to motivate them in cooperative business (United Republic of Tanzania (1991) Cap. 7 (1). Fourth, to increase capital resources by encouraging thrift, wise use of credit and preventing usury. Cooperatives may also expand existing market opportunities if they have business experts to search for new markets for products (Kistler, A. 1984). In order to establish a successful cooperative, there should be objectives of the new cooperative as well as consideration of the legal, economic, and financial aspects of the cooperative business (Cook, M. 1993). 10.2 Factors to Consider in Organizing a New Cooperative The need to form a cooperative comes from different sources. People who have experiences of other cooperatives may suggest forming their own cooperative. The idea to form a cooperative may also originate with a cooperative specialist. Individuals in a community can also propose to form their cooperative in order to solve their social and economic problems. A suggestion to form a cooperative society may come from larger cooperatives especially regional associations wishing to extend channels. The idea of setting up a cooperative is discussed by few people in the area and if the suggestion is accepted, preliminary meetings should be convened for discussion by more people in the area. Preliminary meetings should include by people who have an idea about cooperative organization. These people can convince others of the common interest to organize a cooperative. The meetings will determine the common problems that need to be solved. If there is support and approval of the idea, a survey committee of people who can do business Chapter Ten 139 research should be formed to conduct study of the social and economic conditions under which the cooperative will be formed (Schaars, M.A. 1970: 12-13). The survey committee should conduct an economic survey to collect facts which can have important bearing upon the success or failure of the proposed cooperative society: 10.2.1 The Potential Volume of Trade The survey committee has to find out if the cooperative will have enough business to meet its operating expenses and at the same time leave some margin of savings. The minimum volume of products depends on the area which will be served by the cooperative, the intensity of production within that area, and the amount of products which the potential members within that area can deliver. 10.2.2 The Resources A cooperative needs resources such as land, buildings, and equipment to handle the estimated volume of products. The Committee has to ascertain the resources needed and decide whether the physical resources will be rented, purchased, or constructed. These matters have important bearing upon the amount of capital that will be required. 10.2.3 Funds Needed to Begin Operations. If the volume of business and the cost of acquiring the necessary physical resources are known fairly accurately, then the amount of start-up funds needed can be estimated reasonably well. Sources of funding should be proposed by the survey committee. 10.2.4 Operating Costs The committee should estimate operating costs to see whether any worthwhile savings can be realized. The survey committee may estimate what volume of products would be necessary to make the venture worthwhile for the members. 10.2.5 Experience of Potential Members in Other Cooperatives Membership support for cooperative may be there if members have had some good experiences with cooperatives. If the member had little or no experience in cooperation, the beginning should be modest. (Schaars, M.A. 1970: 12-13). 10.2.6 Assess the Potential Supplies The survey committee has...