How to Form a Co-operative

A business, which is operated and owned, by a group of individuals having mutual benefit is known as Co-operative. The ICAS has defined Co- Operative as an autonomous association of people who come together with a mutual goal and mutual benefits. They unite out of mutual interest, needs, community reasons, etc. you can also form a co-operative and know how to form a co- operative.

Many business organizations are also Co- operative businesses. Many banks, societies, small business groups are co- cooperatives. However, there is a procedure to form a co- operative.

Why are Co- operatives formed?

Co-operatives were formed with a motive to gain or access goods or services, which were otherwise not accessible. Co- operatives have an archaic history. In 1930’s, farmers had started Rural Electric Co-operatives to obtain the electric services. They previously did not get this service from private utility companies.

In 1700’s, Co-operative Insurance Societies were formed. This society enabled working people to get fire insurance at affordable prices. In 1800’s agricultural co- operative societies were started to help farmers access the agricultural requirements like equipments, cattle, etc. In the early 1900’s, financial co-operative banks were set up. These co-operatives enabled working people to open savings accounts; avail of credit facilities, etc.

Reasons for forming Co-Operatives:

  • Equalizing access to all
  • To increase bargaining power
  • Sharing the burden of costs of new technology
  • Giving access to the needy
  • Reducing risks involved in any business or enterprise
  • Helping purchase in bulk to lower the cost
  • Providing credit

It is not difficult to start a co-operative. There are certain rules and guidelines that help you start your co-operative. Rules like minimum number of members, minimum capital, etc. will help you form your co-operative.

Following steps will tell you “how to form a co-operative?”

  1. People with similar interests, aims or needs can come together.
  2. These people can then contact the FET College in their vicinity. In this college, they have to undergo 4 weeks of training. It is mandatory, that at least 50% of the members attend this training.
  3. In this training the members will be trained regarding the operation of co-operatives, rules, regulations, developing a business plan, designing a constitution and at last fill in the application form to register their co-operative society.
  4. Once you fill in the application, it is send to the Department of Economic Development (DED). From here the application is forwarded to the Registrar of Co-operatives, i.e. CIPRO in the DTI or Department of Trade and Industry
  5. The entire process of registration takes 4-6 weeks. The business plan and the application for funds for this co-operative is sent to Ithala. A ZNT 31 application has to be completed which is placed in the KZN provincial list of service providers.
  6. Once the Co-operative funding is approved, the co-operative has to join a business incubation program by KZN, managed by Masifundisane Training and Development College.
  7. This training program supports the co-operatives to operate and assists them for six months.
  8. After 6 months, the co-operative is moved out of this incubation program and then it finally flourishes as an Independent business.

These are the steps to form a co-operative society. The procedure looks lengthy but is very simple and your co-operative society gets all the support before functioning independently. The funding and training program will help you strengthen the foundation of your co-operative and make you ready to face any challenge.

Go ahead, form your co-operative. However, make sure you have a strong business plan.

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One Response to “How to Form a Co-operative”

  1. tshepo says:

    Hi we are a group of 5 members and wish to form a co operative but we need help on forming it please help

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