A Primer on Setting-Up a Cooperative in the Philippines, Part 1

Organizing a cooperative can both be complex and simple. It requires, first of all an understanding of the basic needs of the perspectives cooperative members. It demands patience from the co-organizer who must take the cooperative goal and objectives, its visions and long term goals a real part of the members lives.

But it can be also easy because the Cooperative Code of the Philippines (RA 6938) has devised very clean cut steps for the coop-organizer and members. This question and answer form should make organizing cooperatives a little more understandable to the cooperative organizer.

What Is A Cooperative?

A cooperative is a duly registered association of persons with a common bond of interest, who have voluntarily joined together to achieve a lawful common social or economic end, making equitable to contribution to the capital required and accepting a fair share of the risks and benefits of the undertaking in accordance with universally accepted cooperative principle.

By forming a cooperative you pool money, human resources and talent to build capital and work together to produce more goods and raise incomes. Through cooperatives, you can look for the other sources of loans at low interest rates of borrowing form informal lenders or users. The cooperative can also be a mechanism for marketing your produce.

What are the Principles of Cooperativism?

The cooperative principles were reformulated by the International Cooperative Alliance in Vienna in 1966 during its 23 Congress.

The first principle is anchored on voluntarism. This means that each member of a cooperative becomes a member voluntarily and is not restricted by social , political or religious discrimination . In fact anyone who meets the qualifications set by a cooperative’s bylaws can be a member if he willingly shoulders their responsibility.

The second principle is democracy. Coops are democratic organizations with officers and managers elected or appointed in a manner agreed on by members. Each member, no matter the amount of his share, is entitled to one vote.

The third principle is the limitation of share capital interest. In the context of cooperativism, interest on a member share capital is limited so that no person- especially those with money- can have an overwhelming equity in the coop. This prevents the domination of the coop’s affairs by wealthy members at the expense of poorer members and the organization as whole.

The fourth principle, essentially a manifestation of the third principle, revolves on the sharing all location of cooperatives surplus or savings. At bottom, it mandates distribution of surplus equitably so that no member, gains at the expense of another. Surplus are, by decision of the member, used for developing the coop’s business interests, providing common services to members in proportion to their transactions with the cooperatives.

The fifth principle, makes provision for the education and training of cooperatives members, officers and employees, and of the general public in the principles and techniques of cooperation.

The sixth principle harps on the promotion of cooperation between cooperatives at local, national and international levels.

The seventh principle is the concern for community by working for its sustainable development through policies approved by the cooperative members.

What Are The Kinds Of Cooperative?

  • Credit Cooperative- promotes thrift and savings among its members and creates funds in order to grant loans for productivity
  • Consumer Cooperative- the primary purpose is to procure and distribute commodities to member and non-members;
  • Producers Cooperative – undertakes joint production whether agricultural or industrial;
  • Service Cooperative- engages in medical, and dental care, hospitalization, transportation, insurance, housing , labor, electric light and power, communication and other services; and
  • Multi- Purpose Cooperative – combines two (2) or more of the business activities of these different types of cooperatives.

According to membership and territory, the following are the categories of cooperatives:

In terns of membership:

  • Primary -The members of which are natural persons of legal age;
  • Secondary- The members of which are primaries;
  • Tertiary – The member of which are secondaries upward to one or more apex organizations. Cooperatives whose members are cooperatives are called federations or unions.

In terms of territory, cooperatives are categorized according to areas of operation which may not be coincide with the political subdivisions of the country.

What are the General Steps in Forming a Cooperative?

Basically, there six steps in setting up a cooperative.

First, get organized. You must have at least 15 members to do that. At once determine the common problems you would want solved and the basic needs you would want provided for through a cooperative. You may want to include increasing of your production, marketing of your produce, credit assistance, power generation, banking or insurance and other similar needs.

Determining your problems and needs will also help you classify the kind of a cooperative you will be organizing.

Even before coop is set up, a dedicated core group of people will do all the organizational and paper works is a must. From this core group, working commodities may be formed to set things moving. These committees may include membership, finance, executives, secretariat to name a few.

Second, prepare a general statement called an economic survey. This statement will help you measure your cooperatives chances of success.

Third, draft the cooperatives by-laws. The by-laws contain the rules and regulation governing the operation of the cooperative.

Fourth, draft the articles of cooperation. Here you indicate the name of the cooperative, its members, terms of existence and other pertinent description about your cooperative.

Fifth, secure bond of your accountable officers, normally the treasurer, or the treasurer and the manager. The amount of the bond is to be decided upon by the Board of Directors, based on the initial network of the cooperatives which includes the paid-up capital, membership fees and other assets of the cooperatives at time of registration.

Sixth, register your cooperative with the Cooperative Development Authority (CDA), you must submit four copies each of the Economic Survey, By- Laws , and Articles of Cooperation and Bond of Accountable Officer(s).

In every step, you may consult the CDA. The CDA emphasizes education as a key to the success of cooperatives.

Who May Become Members of a Primary Cooperative?

  • If you are a Filipino of legal age, you can be a coop member if you meet the qualifications prescribed by the coop’s by laws.
  • The board of directors act on application for membership.
  • A member may exercise his rights only after having paid the fees for membership and acquired shares in the cooperative,

What are the Kinds of Membership in the Cooperative?

  • A cooperative has two kinds of members; regular members and associate members.
  • A regular member is entitled to all the rights and privileged of membership as stated in the Cooperative Code and the coops by- laws.
  • An associate member has no right to vote and to be voted upon and is entitled to such rights and privileged provided by the cooperatives by laws.

What is the Minimum Number of Members in a Cooperative?

  • Fifteen (15) natural persons of legal age who are citizens of the Philippines.

Can Government Officers and Employees Join a Cooperative?

Yes, provided that:

  • Any officer of the government of the CDA shall be disqualified to be elected or appointed to any position in a cooperative;
  • Elected officials of the government, except barangay officials, shall be ineligible to become officers and directors of cooperatives; and
  • Any government employee may, in the discharge of his duties as member in the cooperative, use official time provided that the operations of the office where he works are not adversely affected.

What is an Economic Survey?

An economic survey is a general statement describing the structure, purpose, economic feasibility of the proposed cooperative, area of operation, size of membership and other pertinent data. It, in fact a project feasibility study. The structure describes the kind of cooperative being set, up whether it is primary, secondary or tertiary and whether it is a credit, consumer transport or any other type of coop.

The purpose defines the primary, secondary and other objectives of the cooperative. The area of operation merely indicates the general merely indicates the geographical or sectoral of the coop. For example, a cooperative may operate in, say Caloocan City; or it may operate in a certain sector like farmers. Size of membership is important so as to set limits to the coop’s scope of operation. This is closely related to cooperative structure.

The most important part of the survey is the economic feasibility. Here, the prospective coop members estimate the income and expenses of the cooperative. It makes a projection of the possible growth pattern of the cooperative certain period, probably three (3 ) years, and how this growth generates income and incurs expenses. It tries to anticipate obstacles and constraints and make allowance for them.

What Are Cooperative By-Laws?

By- laws should are the set of rules that determines how a cooperatives is to be run without confusion.

In general, by-laws should be consistent with the provisions of the Cooperative Code of the Philippines (RA 6938). The by-laws include:

  • The qualifications for membership; how they are acquired, maintained and lost;
  • The rights and obligations of members;
  • The condition for transfer of a share of interest;
  • The rules and procedures covering agenda, time, place, and manner of calling, covering , conduct meeting, quorum requirements, voting system, and other, matters related to the business affairs of the general assembly, board of directors, and committees;
  • The general conduct of the affairs of the cooperative , including the powers and duties of the general assembly, board of directors, committees and the officers, and their qualifications and disqualifications;
  • The manner in which capital may be raise and purpose for which it can be utilized;
  • The mode of custody and investment of net surplus;
  • The accounting and auditing systems.
  • The manner and limitations of loaning and barrowing, including limitations;
  • The methods of distribution of net surplus;
  • The manner of adopting, amending, repealing, and abrogating by-laws;
  • A conciliation or mediation mechanism for the amicable settlement of disputes among members, directors, officers and committees; and
  • Other matter pertaining to the purpose and activities of the cooperative.

What does The Article of Cooperation contain?

The Article of Cooperation is a duly notarized document that legally binds all the signatories in the formation of a cooperative.

It should contain:

  • The name of the cooperative which shall include the word ” cooperative, ” e.g. Sta. Maria Multi-Purpose Cooperative;
  • The purpose of the cooperative and scope of business;
  • The term of existence of the cooperative (not more than 50 years);
  • The area of operation and the postal address of the registrants;
  • The common bond of membership;
  • The list of names of the directors who shall manage the cooperative; and
  • The amount of its share capital, the names, and residences of its contributors and a statement of whether the cooperative is primary, secondary of tertiary in accordance with Article 23 of R.A 6938.

How To Manage Your Cooperative

By organizing and registering a cooperative, you have taken the first steps toward helping prospective cooperative member make fuller use of their resources. The next steps requires a certain knowledge of management, of the provisions of laws affecting cooperatives, and most importantly, husbanding and channeling the coop’s assets into productive investments so that they will grow. Here are some basic facts you have to know about managing and running cooperatives profitably.

Does A Cooperative Follow A Basic Organizational Structure? Yes.

Your cooperative will need at least the following for its day to day operation.

  • General Assembly
  • Board of Directors
  • Set of Officers
  • Committee System
  • Hired management/ paid employees

What Is The General Assembly?

The General Assembly is the highest policy-making body of the cooperative and is the final authority in the management and administration of the affairs of the cooperative.

It is composed of members who are entitled to vote, duly assembled and constituting quorum.

The general assembly holds at least one meeting a year; the date of the meeting is fixed in the by laws, or within 90 days after the close of each fiscal year.

For newly registered cooperatives a special general assembly meeting must be called within 90 days from the date of approval.

What Are The Powers Of The General Assembly?

The General has the following exclusive powers which cannot be delegated:

  • To determine and approve amendments to the articles of cooperation and by laws;
  • To elect or appoint the members of the board of directors, and to remove them for cause;
  • To approve developmental plans of the cooperative; and
  • Other matters requiring a 2/3 vote of all the members of the general assembly

What Is The Board Of Directors?

The Board of Directors is the body that formulates policies, directs, supervises and manage the business of the cooperative.

It is composed of five (5) to fifteen (15) members elected by the general assembly.

Their term of office is determined by the laws of the cooperative. A term of office must not exceed two years. Also no director can serve for more than three (3) consecutive terms.

The board of directors must hold monthly meetings, unless the by laws say otherwise. Special meetings may be called any time by the chairman.

Directors cannot attend or vote by proxy at board meetings.

Who Can Be Members Of The Board Of Directors?

All regular members who meet the qualification and none of the disqualification set by the laws of the cooperative can be elected to the board of directors.

How Are The Officers Of The Cooperative Chosen?

The board of directors elect among themselves only the chairman and vice- chairman.

Then they either elect or appoint the other officers needed by the cooperative, such as the treasurer who takes custody of all the moneys, securities and papers and maintains complete records of its cash transactions and secretary who keeps the records of the cooperative.

What Are The Committees Needed By A Cooperative?

Through the bylaws, a cooperative may be form any committee it thinks necessary for its operation.

An executive committee may also be formed. The board of directors appoints its members and may, through a majority vote, delegate powers to it.


  1. By beth


  2. By cesar villarico


Leave a Reply

Your email address will not be published. Required fields are marked *