BIBLIOGRAPHY TANACIO, DIDITH S. NOVEMBER 2009....
BIBLIOGRAPHY
TANACIO, DIDITH S. NOVEMBER 2009. Failure Factors of a Cooperative:
The Case of Ud-udan Mothers Cooperative in Itogon, Benguet. Benguet State
University, La Trinidad, Benguet.
Adviser: Jovita M. Sim, MSc.
ABSTRACT
The study was conducted to look into the causes of the failure of the Ud-udan
Mothers cooperative in Itogon, Benguet. Unless the causes are not identified then they
could not be solved and the cooperative would remain a failure.
The data were gathered from officers and members through personal interviews
with the aid of a survey questionnaire. The collected data were tabulated and analyzed
using frequency counts and percentage.
The cooperative started as an association nemd Ud-udan Camote Bayating Mining
Calhore. The association started as a sari-sari store selling basic goods to members and
non-members in the community.
Majority of the respondents jined the cooperative to avail of the services such as
provision of credit facilities and provide goods on credit to the members.
Results of the study showed that the causes of the failure of the Ud-udan Mothers
Cooperative are the non-payment of credit by members that led to lack of cash for
operation; lack of cooperative education and training for leaders and members; not
updated records; inefficient leaders and lack of capital to sustain the operation. All these
factors were contributory to the failure of the cooperative resulting to its closure.
On the plan of the members to revive the cooperative it is recommended that the
cooperative has to educate the members first about the principles and practices of
cooperative rights, privileges as well as their responsibilities so that they could participate
in meetings and patronize the cooperative. Likewise the officers and members should
also be educated on the same aspects including the management principles of a
cooperative.
ii
TABLE OF CONTENTS
Page
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
i
Abstract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
i
Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
iii
INTRODUCTION
Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
Statement of the Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
Objectives of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
Importance of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
Scope and Delimitation of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
REVIEW OF LITERATURE
Perception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Cooperative and Cooperativism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Objectives of a Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
Cooperative and Stable Societies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Cooperative Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Cooperative Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Nature and Character of Cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
Cooperative Attributes in Facing Crisis . . . . . . . . . . . . . . . . . . . . . . . . . .
9
Democratic Management and Leadership
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
Reasons Why a Cooperative Fails . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11
iii
METHODOLOGY
Locale and Time of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
Respondents of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
Data Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
Data Gathered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
Data Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
RESULTS AND DISCUSSION
Evolution of the Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14
General Information About the Respondents . . . . . . . . . . . . . . . . . . . . . .
15
Reasons of Members in Joining the
Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
Sources of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
Perception/Understanding About a
Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
Benefits Received from the Cooperative . . . . . . . . . . . . . . . . . . . . . . . . .
19
Economic and Social Benefits Derived
from the Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
Services Availed from the Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . .
21
Factors Contributory to the Failure of the
21
Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reasons of Failure of the Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . .
22
Lessons Learned from the Four Years of
23
Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
iv
SUMMARY, CONCLUSION AND RECOMMENDATION
Summary
26
Conclusion
28
Recommendation
29
LITERATURE CITED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
31
APPENDICES
Request Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31
Survey Questionnaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33
v
1
INTRODUCTION
Rationale
Cooperatives are usually organized and owned by low-income people.
Cooperatives can readily provide the credit needs of poor and middle class at a minimal
interest. Cooperative also encourages savings. By patronizing the cooperative, a member
can save because goods sold in the cooperative are cheaper compared to sari-sari stores in
the same location. Furthermore, the members can get back a part of what they spent in the
cooperative in the form of patronage refund. The members owned the cooperative and
they are also its customers. The more members patronizing the cooperative services, the
more it would grow and the higher the benefits it could give to the members.
The success or failure of a cooperative depends on the strength of the tripod that
holds the cooperative: the members, the leaders, and the management staff. The members
can contribute to the success of the cooperative by patronizing its services, and paying
their credit regularly. They should also participate in decision making by electing
responsible officers and leaders. The leaders must be dedicated and truly committed to
the business of the cooperative. The management staff must possess the necessary skills
that is needed by the business must be honest and committed to their work.
The Ud-udan Mothers Cooperative was organized by 20 members who were all
women, first as an association. Their aim is to sell consumer goods to the members at
reasonable prices. They started as an association in May 1991 and in November of the
same year they converted it into a cooperative with 50 members. At its initial operation, it
was successful but after a short time it failed. At this time the cooperative is no longer
operating because it has no more capital.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
2
This study was therefore conducted to look into the causes of the failure of the
cooperative. Unless the causes are not identified then they could not be solved and the
cooperative would remain a failure.
Statement of the Problem
The study sought to answer the following questions:
1. How was the cooperative organized?
2. What were the services offered by the cooperative?
3. What were the perceptions and knowledge of members regarding:
a. Cooperative operation, cooperative purpose and goal.
b. Benefits derived from the cooperative
c. Services of the cooperative
d. Factors contributory to the failure of the cooperative
4. What the reasons of the failure of the Ud-udan Mothers Cooperative?
5. What are the lessons learned by the members and officers from the failure?
Objectives of the Study
The study aimed to:
1. determine the evolution of the cooperative,
2. identify the services offered by the cooperative,
3. determine the perception and knowledge of members of Ud-udan Mothers
Cooperative on the following:
a. cooperative, its operation, purpose and goal;
b. benefits from their cooperative
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
3
c. services of their cooperative
d. factors contributory to the failure of the cooperative
4. to determine the reasons of failure of the cooperative;
5. Identify lessons learned from the 4 years of operation.
Importance of the Study
This study was conducted to know what caused the failure of the Ud-udan
Mothers Cooperative and to know the perceptions of the members about the operation of
the cooperative. The result of this study may serve as a guide to the members and the
leaders of the cooperative regarding their decision to revive it. It would also provide
information to other cooperative leaders specially the causes of the failure of the
cooperative in order to avoid the same mistakes in their own cooperatives.
Scope and Delimitation of the Study
This study focused on the documentation of the evolution of the cooperative, the
perception and knowledge of members on the operation, purpose, and goal of the
cooperative, and their perception as to what have caused the failure of the cooperative.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
4
REVIEW OF LITERATURE
Perception
Perception is defined as the process of gathering information through our senses
organizing and making sense of it, through their previous experience and learning
attitudes and interest, needs, feelings and current situation. Perception differs from
individual due to variety of personal, socio-economic and cultural differences. Age,
gender and past experiences are example of personal perception filters (Kovalik and
King, 2008).
Cooperative and Cooperativism
The word cooperative is derived from the French word “COOPERARI”. The
word “CO” means “with” combined with “OPERARI” (to work syos, operas, work),
cooperatives delineates the concept of working together (Ansay and Baiguen, 1996).
Furthermore, cooperative is defined cooperative as private business organization
that is owned and controlled by the people who use its products, supplies or services.
Although cooperatives vary in type and membership size, all were formed to meet the
specific objects of members, and are structured to adapt to member’s changing needs
(Rural Cooperative Center, 2001). Cooperatives are formed by individuals who
coordinate among themselves (horizontal coordination) to achieve integration in their
business activities.
Although people have been working together with their mutual benefit throughout
human history, the cooperative form of business organization began during the Industrial
Revolution in England. Cooperatives were useful for promoting the interest of the less
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
5
powerful members of society. Farmers, producers, workers and consumers found that
they could accomplish more as a group than they could individually (Rural Cooperative
Center, 2001).
Wheihe (2004) said, cooperatives are special purpose organizations that have
unique attributes compared to the other forms of enterprise. They are independent,
member-owned and democratically governed business, created with equity financed by
members who invest in order to benefit through their patronage. Cooperatives are built on
a “collective identity and shared identity. This network characteristic is faced with the
national and/or regional conflict and hostile monopolistic alien enterprises and /or with
middlemen/usurers.
Cooperatives work well in traditional societies where “mutuality” and informal
cooperative activities are embedded in the form of common property, shared water and
grazing rights and informal financial sharing among vendors in market. Cooperative may
be a natural evolution in common property systems. Cooperative function effectively well
beyond “clan” and extended families because they offer economic benefits through
collective action. Through focusing on where market links are weak, economic returns
can be considerable when properly organized.
Objectives of a Cooperative
Republic Act 6938, Article 7 states that the primary objective of every
cooperative is to provide goods and services to its members and thus enable them to
attain increased income and savings, investments, productivity and purchasing power and
promote the equitable distribution of net surplus through maximum utilization of
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
6
economic scale, cost sharing, without conducting the affairs of the cooperative for
eleemosynary or charitable purposes.
A cooperative shall provide maximum economic benefits to its members, teach
the efficient ways of doing things in a cooperative manner, and propagate cooperative
practices and new ideas in the business and management and allow the lower income
group to increase ownership in the wealth of this nation (Molitas, 2004)
Cooperative and Stable Societies
Cooperatives bring special values to stabilization and democratization. The
“devolving of power in stable and just ways” is the issue where cooperatives appear to
have a particular advantage to other type of organization. Cooperatives networks and
integrated systems have a greater potential for broad scale recovery; and they engage
more people as effective actors to help influence and democratize senior decision makers.
Cooperative leaders have frequently been tapped for leadership roles in recovering states
because they are seen as less partisan and effective at working with large groups in
democratic practices (Hirschman, 1984).
Cooperative Development
Cooperative development includes both successes and failures. The documents
attempts to show that cooperatives are more likely to succeed when cohesive groups have
similar needs and where governments, donors or development agencies do not impose on
cooperatives. Cooperatives galvanized basic commercial interest, and access markets
with sufficient strength to permit at least modest margins for members. In many conflict
prone societies, informal cooperation exists at the tribal and clan level, within the market
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
7
place and in dealing with common property systems. Cooperatives can be built on these
imbedded cultural norms. But to support development goals, they must be organized on
business principles, first and foremost, which may require integrated efforts beyond a
single homogenous group.
Cooperative Principles
In social sciences, the cooperative principle describes how people interact with
one another. Make your contribution such as it is required, at the stage at which it occurs,
by the accepted purpose or direction of the talk exchange in which you are engaged. The
phrase as a prescriptive command, the principle is intended as a prescription of how
people normally behave in conversation.”
The cooperative principle goes both ways: speakers observed the cooperative
principle and listeners which are meanings that are not spicily conveyed on what it is
said, but that can nonetheless be inferred. All cooperatives around the world are guided
by the same 7 principles:
a. voluntary and open membership
b. democratic member control
c. member economic participation
d. education, training and information
e. cooperation among cooperatives
f. concern for community
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
8
Nature and Character of a Cooperative
Cooperatives as association of people and as business enterprise are distinguished
from other organizations by their nature and character. To disregard or fail to appreciate
their true nature and character is to deviate from the cooperative principles and ideals and
to lose sight the ultimate objective of the cooperative movement (Fajardo, 1999).
1. Cooperatives are service oriented. Cooperatives are organized to serve their
members by providing them the goods and services they need at cost. Members
contribute to the capital of the cooperative in the sense that they cannot invest their
money in capitalist enterprise in which primary objective is to get the maximum profit
from their investment (members join cooperatives because they need their services).
2. Cooperatives are community oriented. Cooperative work for the welfare of
their members but at the same time integrates themselves into the life of community in
particular and that in the nation in general.
3. Cooperatives are people oriented. Cooperatives are not merely economic
instruments concerned with dividends and related, economic and financial returns.
4. Cooperatives are owned, manage and patronized by their members. Ownership
is very important factor in the success of any cooperative. It is necessary in order that the
members have authority to manage and control their cooperative. If a cooperative is
started and operated solely from borrowed capital, it violates the principle of self help
and losses much of its autonomous character.
5. Cooperative and business enterprise. Cooperative business is real business.
Cooperative, if they are to play a meaningful economic role in community life, must
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
9
serve and reform as the other financial and business institutions operating in the country
today. Cooperatives developed best through self-help and mutual help.
Cooperative Attributes in Facing Crisis
The following are cooperative attributes in facing crisis according to Parnell
(2001):
1. Diversity in membership. Cooperatives are group businesses that provide
tangible returns to individual members who define their own needs and have a personal
stake in the success of a business. They create economic cooperation in fractured
societies with participation open to all including women, ethnic minorities and those
practicing different religions. Cooperatives have been effective at building economic
social ties across religious and ethnic barriers mainstreaming poor and discriminated
group into conventional economies.
2. Emphasis on markets. Successful cooperatives worldwide emphasize markets,
financial systems controlled by members and communities, and participation in economic
activities in which cooperative members-even if very little and share in the risks and
returns of a group business. They relay on programs without hand outs and insist on user
fees/in-kind contributions.
3. Economies of scale. Cooperatives aggregate production and increase quality
from many small producers so that they are able to compete for market, purchase inputs
and attract professional management. By establishing remunerative markets cooperatives
encourage and support farmers investment in modern technology, such as exporting
coffees, natural foods, cheese and other non-traditional products.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
10
4. Savings, loans, and insurance. Credit unions help and maintain secure savings
that in turn provide sustainable micro-credit to small producers and their businesses.
They provide life and property protection to low income and underserved populations and
lower their risks from unexpected events, including natural and manmade disaster.
5. Coop-to-coop market linkages. The United States, Japan, European cooperative
development programs and sponsored cooperative development programs and member-
to-members technical assistance for developing country cooperatives, especially in
specialty coffee, organic cocoa, vegetable, herbs, etc. Expensive consumer cooperative
networks in Japan and Europe have been in the forefront of these efforts and to a lesser
extent, US natural food.
Democratic Management and Leadership Trust
The following are the democratic management and leadership trust according to
Varshney (2001):
1. Cooperatives are organized around a common need, and belief in the value of
the collective action. Strong cooperatives have devised management mechanisms that
allow all members to feel like the organization serves their needs:
a. Members demand responsiveness from leadership
b. Members feel confident in the oversight of management
c. Management is based on fairly meeting the needs of all members
People who lead management have bought into democratic principles of
management-successful leaders how to lead effectively with responsiveness, transparency
and fairness.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
11
2. Access to resource. Cooperatives are organized to build better lives for
members around improved access to resources-either better incomes (e.g. business
associations, agricultural coops) or improved living conditions (e.g. housing coops). They
have the potential to be an effective path in opening up economic opportunity for those
without it. Cooperatives can improve socio-economic status within communities, and
reduce conflict and competition over the control and sharing of scarce resources (e.g.
water user cooperative).
3. Effective in conflict-prone society. Cooperatives represent an exceptionally
organized, motivated group of individuals. When effective and well managed, they have
the potential to form critical masses of political and economic power. When structured in
effective apex organizations, they have proved able to play a significant role in national
policies, the selection of national leaders and lobbying in behalf of their based
membership.
Reasons Why a Cooperative Fails
a. Errors in financial policy, such as over-extension of credit, too little capital,
poor accounting records, lack of financially sound systematic program for reimbursement
of equity.
b. Errors in educational and social work. This begins by failing to teach
cooperative function, neglecting general educational programs, failure to develop
member loyalty or countering the development of factions within the association.
c. Management errors, such as inadequate inventory, poor location, improper
equipment, neglected appearance of physical facilities, employee dishonesty, ineffective
management, incompetent directors, nepotism, poorly conducted meetings, admittance of
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
12
disloyal and dissatisfied members (National Cooperative Business Association, 1996-
2008).
Saldo, (2005) stated that many cooperatives failed because of mismanagement.
Cooperative managers were not only incompetent but also corrupt. They were poorly
trained and had not developed proper attitudes and values such as honesty, integrity and
deep sense of social responsibility.
Furthermore, Saldo, (2005) stated that several factors, internal and external to the
organization influenced the management performance of the cooperative. The internal
factors include educational attainment, member’s involvement if decision making. The
external factors include members’ professional development and cooperative linkages.
Despite the importance and progress brought by the cooperatives, there are problems and
constrain within the cooperative itself, which may determine its success or failure for
providing sustained cooperative education and training leading to lack of qualified
managers and a system to help recruit and train individual members and lack of
government financial assistance.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
13
METHODOLOGY
Locale and Time of the Study
The study was conducted in Itogon, Benguet with Ud-udan Mothers Cooperative.
The study was conducted from December, 2008 to March, 2009.
Respondents of the Study
Data gathered from key informants (officers of the coop) and members of Ud-
udan Mothers Cooperative, a total of forty members and ten officers served as
respondents of this study.
Data Collection
Data were gathered through personal interview with the aid of survey
questionnaires.
Data Gathered
Data gathered included the history of the cooperative, reasons of members in
joining the cooperative, their perceptions about the cooperative, services availed by the
members and benefits received from the cooperative, reasons why the cooperative failed
and the lessons learned by the members from the cooperative operation.
Data Analysis
The data and information was tabulated, analyzed using simple statistical tools
such as frequency counts, percentage and other appropriate tools.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
RESULTS AND DISCUSSION
Evolution of the Cooperative
According to the key informants interviewed Ud-udan Mothers Cooperative
started first as an association with the name Ud-udan Camote Bayating Mining Calhore
Association. This was organized in May, 1991 by twenty women. These women saw the
need for a sari-sari store in the community where the households could buy their needs.
They were encouraged and assisted by the nuns of Virac, Itogon to organize the
association. The starting capital of P10,000 was loaned by an NGO ( Priests and nuns of
Virac, Itogon, Benguet). The association started as a small sari-sari store that sells basic
goods to the households of Ud-udan. Many people were buying from the store and the
volume of goods increased. However, in October of the same year the store was
destroyed by a strong typhoon and the merchandise were spoiled including the records.
The calamity did not discourage the members. They continued the operation starting from
what was left after the damage. They transferred the location of the store to another
location and they converted it into a cooperative. They invited other women to join so
they started the cooperative with 50 members. Each member gave one hundred pesos
(P100) as share capital. Members so they transferred the location the members wanted
to accept more members into the organization so they converted it into a cooperative in
November 1991. The cooperative started with 50 members and since they were all
women they named it as Ud-udan Mothers Cooperative. They collected P100 from each
member as share capital. They included rice and liquor in the commodities that they sell.
The rice and liquor were salable but these were again the items usually bought on credit
by the members. Credit sales increased and accumulated until their operating capital was
15
tied up with the receivables. Because the officers and the members were relatives, the
officers were ashamed to force the members to pay their credit. Because of this situation
the cooperative closed.
General Information about the Respondents
The respondents were all women and majority of them were laborers (87%) while
the rest (13%) were sidewalk vendors. As to their ages, 17% each belonged to the 20-25
and 26-30 age brackets. Six or 20% were 31-35 years old, 13% were 36-40 years old,
10% were 41-45 years old, another 17% were 46-50 years old, and 6% were 51-55 years
old. This shows that most of the respondents were still young. Their educational
attainment ranges from no formal education to college graduate. There were 3 or 10%
who did not go to school. Majority (53%) was either elementary graduate or reached
elementary. Twenty percent were either high school graduate or had reached high school
level while 17% reached the college level with only one college graduate. This finding
shows that majority of the members of the cooperative had gone to school but few
reached college level.
Table 1. General information of the respondents
PARTICULARS
FREQUENCY
PERCENTAGE
Occupation
Laborer
26
87.0
Sidewalk vendor
4
13.0
TOTAL
30
100
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
16
Table 1. Continued.
PARTICULARS
FREQUENCY
PERCENTAGE
Age
20-25
5
17.0
26-30
5
17.0
31-35
6
20.0
36-40
4
13.0
41-45
3
10.0
46-50
5
17.0
51-55
2
6.00
TOTAL
30
100
Educational Attainment
No formal education
3
10.0
Elementary level
16
53.0
High school
6
20.0
College
5
17.0
TOTAL
30
100
Reasons of Members in Joining the Cooperative
Table 2 shows the reasons of members in joining the cooperative. There were two
reasons mentioned by majority (97%) of the respondents. The first reason was they joined
the cooperative because they believed that the cooperative could provide their needs,
specially the consumer goods. The second reason for joining the cooperative was because
they wanted to learn some skills regarding the cooperative.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
17
Sources of Funds
Table 3 presents the sources of funds of the cooperative, as perceived by the
officers who served as respondents of this study. Eighty percent of the ten officers
interviewed mentioned share capital. Seven or 70% said part of their funds was from fees
paid by members and 2 or 20% mentioned borrowings. This finding shows that some
officers were not aware of the other sources of their funds specially borrowings that only
very few knew it.
Perception/Understanding About a Cooperative
Table 4 presents the perception or understanding of respondents about a
cooperative in relation to operation and cooperative purpose and goal.
Operation. The finding revealed that almost all the respondents said that the
cooperative operates to provide credit facilities to the members and also to provide goods
Table 2. Reasons of members in joining the cooperative
REASON OF JOINING
FREQUENCY
PERCENTAGE
Provide their consumer needs
29
97
Learn some skill regarding cooperative
29
97
* Multiple response
Table 3. Source of funds of the cooperative
PARTICULAR
FREQUENCY (N=10)
PERCENTAGE
Share capital
8
80
Fees paid by members
7
70
Borrowings
2
20
* Multiple responses
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
18
on credit basis. This implies that the members were not aware on the principles and
practices of cooperatives. One of the practices of a cooperative is cash trading. This
contradicts to what the respondents know about the operation of a cooperative.
Cooperative purpose and goal. The result shows that almost all (97%) the
respondents perceived that the cooperative promotes cooperation among members.
Twenty 8 of the respondents or 93% said that the purpose of a cooperative is to help the
members in time of emergency thru the provision of credits (cash or goods). In this
aspect, the members viewed the cooperative as a provider not as a business. They saw the
cooperative as having a social responsibility to the members. Twenty seven or 90%
mentioned that the goal and purpose of a cooperative is to promote knowledge of
cooperative principles and practices among the members, 83% said the cooperative
coordinates and facilitates activities of members and 76% said it sponsors
studies/trainings in economic, legal, financial and social phase of cooperation.
Table 4. Perception/understanding of the respondents about a cooperative
PERCEPTION/UNDERSTANDING
FREQUENCY PERCENTAGE
Operation
Provide credit facilities
29
97
Provide goods on credit
29
97
Cooperative purpose and goal
To promote cooperation among members
29
97
Help members in time of emergency
28
93
Promote knowledge of coop principles and
27
90
practices
Coordinate and facilitate activities of members
25
83
Sponsor studies/trainings in economic, legal,
23
76
financial and social phase of cooperation
*Multiple responses
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
19
Benefits Received from the Cooperative
Table 5 presents the benefits received by the respondents from the cooperative.
Majority (90%) of the respondents said that they received benefits from their cooperative.
They said that the cooperative had provided them with goods they need. Only 50%
mentioned that the cooperative had provided them their capital and other needs in cases
of emergency. This shows that only half of the respondents availed of credit from the
cooperative for their business capital.
This implies that the cooperative, though it lasted for only a short time, had
helped its members in the past. In fact, the respondents are willing to revive the
cooperative because they realized the help of the cooperative. They always run to the
cooperative in times of emergency needs.
Economic and Social Benefits Derived
from the Cooperative
Table 6 presented the economic/financial and social benefits derived by the
respondents from the cooperative. In financial/economic benefits, a great majority (97%)
derived patronage refund, 80% pointed credit of low interest rate, and some respondents
mentioned higher earnings from their investment (share capital) in the form of interest or
dividend and financial aid. As for social benefits, 70% pointed out they improved
Table 5. Benefits received by the respondents from the cooperative
BENEFITS RECEIVED
FREQUENCY PERCENTAGE
Provided the capital and other emergency needs
15
50
Provided goods needed
27
90
* Multiple responses
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
20
their social dealing (overcame shyness), and the respondents also acquired skill regarding
cooperative management and their leadership qualities was improved. Some developed
their leadership abilities when they became leaders in the cooperative.
The result implies that members had benefited from the four years operation of
the cooperative. It shows in the study that almost all the respondents derived patronage
refund from the cooperative and majority also were able to overcome their shyness when
the members were involved in the cooperative. The leadership potentials of some officers
were developed.
Table 6. Economic/financial and social benefits derived by the respondents
BENEFITS DERIVED
FREQUENCY PERCENTAGE
Financial/Economic Benefits
Higher earnings from investment (share capital)
14
47
Patronage refund
29
97
Credit at low interest rate
24
80
Financial aid
19
63
Social Benefits
Improved social dealing (overcame shyness)
21
70
Acquired skills regarding cooperative
12
40
Management
Improved leadership qualities
14
47
* Multiple responses
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
21
Services Availed from the Cooperative
Table 7 shows the services availed of the respondents from the cooperative,
83.33% availed credit on consumer goods and 20% mentioned hospitalization credit.
The result implies that most of the respondents availed credit and some borrowed
cash from the cooperative when they needed especially for hospitalization expenses. The
cooperative only offered consumer service but it also lend cash to members who badly
need money for hospital expenses.
Factors Contributory to the Failure of the Cooperative
Table 8 presents the factors contributory to the failure of Ud-udan Mother
Cooperative as perceived by the respondents. Almost all the respondents (93%) pointed
to delinquency of members in paying credit, 90% each for lack of cooperative education
of leaders, lack of cooperative education and training of members, and records are not
updated. Twenty three or 77% pointed to lack of capital to sustain the operation. The lack
of capital was due to nonpayment of credit by the members. The cooperative was cash
strap and had nothing to purchase goods therefore they had nothing to sell. Another factor
mentioned by 23% was inefficient leaders. They observed that the officers managing the
cooperative do not have the appropriate skills due to lack of education.
Table 7. Services availed by the respondents from the cooperative
BENEFITS DERIVED
FREQUENCY
PERCENTAGE
Credit on consumer goods
25
83
Hospitalization credit
6
20
* Multiple responses
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
22
Table 8. Factors contributory to the failure of Ud-udan Mothers Cooperative
BENEFITS DERIVED
FREQUENCY PERCENTAGE
Lack of Cooperative education of leaders
27
90
Lack of coop education and training of members
27
90
Inefficient leaders
7
23
Delinquency of members in paying credit
28
93
Records not updated
27
90
Lack of capital to sustain the operation
23
77
* Multiple responses
Reasons of Failure of the Cooperative
Despite the importance and progress brought by the cooperatives, there are
problems and constraints within the cooperative itself that may determine its success or
failure.
As shown in Table 9, the common reasons of failure of the cooperative
encountered were: lack of training/education of members and officers, lack of capital and
poor location as pointed by 90% each. Aside from the low level of formal education of
many members they were not trained or educated on the management of a cooperative.
Lack of capital was due to the high credit of members thus the cooperative has no more
money to buy goods for sale and poor location was also pointed because the location of
the store was far from the residence of the members. Eighty percent mentioned non-
participation of members and poorly conducted meetings. They mentioned these because
many members do not attend meetings so most of the time scheduled meetings did not
push thru. Improper improvement and poor accounting records are some reasons of
failure of the cooperative as pointed by 50% of the respondents. According to the
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
23
respondents, who are officers of the cooperative, they have poor knowledge about
bookkeeping thus their records were incomplete. The standard way of recording was not
followed. They only recorded their credit sales.
In relation to management, some respondents mentioned the following reasons:
Ineffective/poor management, inefficient collection of credit, credit delinquency of
borrowers, employee dishonesty and errors in financial policy. The officers who handled
the management of the cooperative were high school and many of them had not attended
any training on cooperative management. Aside from lack of accounting records, there
were no specific management policies to be followed in the operation of the cooperative.
It just operated like a “sarisari” store and the storekeeper was the one who decided what
to do because of lack of policy.
The result implies that the most problem encountered of the cooperative were lack
of training/education of officers and leaders, non-participation of members and poorly
conducted meetings. The members of the cooperative were considered the highest policy
making body in the cooperative so they should always be consulted for major decisions in
the cooperative operations.
The cooperative as a business fails if there is insufficient working capital as stated
by Lister (2006). Furthermore, he stated that insufficient working capital is crucial for
business.
Lessons Learned from the Four Years of Operation
Table 10 shows the lessons learned of respondents from the four years of
operation. Respondents pointed that the rights and responsibility as members, their
leadership qualities was developed or improved and they gained some skills regarding
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
24
cooperatives. Some respondents said that they learned that proper handling of business is
the best way to success.
From the four years of operation, the respondents learned a lot and one of these is
they learned that as a member they should settle their obligations because it is important
for the success of a business. This implies that members only came to realize these things
after their cooperative have failed. Thus, given a second chance to operate maybe they
would do better.
Table 9. Reasons of failure of the cooperative according to the officers
REASONS OF FAILURE
FREQUENCY PERCENTAGE
Education
Lack of training/education of members & officers
9
90
Management
Non-participation of members
8
80
Inefficient/poor management
5
50
Inefficient collection of credit
4
40
Credit delinquency of borrowers
5
50
Employee dishonesty
4
40
Errors in financial policy
5
50
Improper improvement
7
70
Poorly conducted meetings
8
80
Poor accounting records
9
90
Financial
Lack of capital
9
90
Poor location
9
90
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
25
Table 10. Lessons learned from the four years of operation
LESSONS LEARNED
FREQUENCY PERCENTAGE
Leadership qualities was developed or improved
25
83
Gained some skills regarding cooperatives
23
77
Learned the rights and responsibility as a member
27
90
Proper handling of business
17
57
* Multiple responses
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
SUMMARY, CONCLUSION AND RECOMMENDATIONS
Summary
The study was undertaken to document the evolution of Ud-udan Mothers
Cooperative and to determine the perception and members’ knowledge on cooperative
and its operation regarding on cooperative operation, cooperative purpose and goal,
benefits derived from the cooperative, its services and factors contributory to the failure
of the cooperative, and to find out the reasons of the failure of Ud-udan Mothers
Cooperative and to identify the lessons learned by the members and officers of the
cooperative. However to minimize from the same mistake/failure, the study could help to
determine the cause/factors in the failure of the cooperative.
The data were gathered from officers and members through personal interviews
with the aid of survey questionnaires, and questions that were not understood by the
respondents explained by the researcher. Each of the officers and members were given
questionnaire. The collected data were tabulated and analyzed using frequency tables and
percentage.
Non-government organization motivated the community of Ud-udan to join
cooperative, and because of their encouragement, the mothers of Ud-udan converted the
association into a cooperative. Since the officers and members of the former cooperative
were all married women, they named their cooperative as Ud-udan Mothers Cooperative
(UMC). The cooperative leaders decided to sell rice since they know that rice is a major
basic food needs.
The finding showed that one reason of members in joining the cooperative was to
learn some skill regarding cooperative management. Another reason given was that the
27
cooperative could provide their consumer needs. They could buy consumer goods from
the cooperative and avail of patronage refund.
The respondents were women with a mean age ranging from 20-30 years old, and
they are all residents of Ud-udan. Moreover, the study showed that the share capital
contribution of members were the main source of funds of UMC.
On perception and members knowledge on cooperative and its operation
regarding on cooperative, almost all of the respondents perceived the cooperative as
providing credit services in terms of cash and consumer goods. In relation to cooperative
purpose and goal, majority pointed out that the purpose and goal of a cooperative is to
promote cooperation among members. However, 93% said that cooperative should help
members especially in time of emergency, 83% pointed coordinate and facilitate
activities of members and advice appropriate authorities related to cooperatives. In
addition, 76% mentioned that cooperative should sponsor their studies or trainings
regarding economic, legal, financial and social phase operation of cooperative for them to
know how a cooperative runs as a business.
The respondents derived benefits from the cooperative in terms of
financial/economic benefits and social benefits. Majority derived patronage refund, some
respondents pointed out that they benefited from credit at low interest rate and other had
received interest on their share capital. Some also derived financial aid, like
hospitalization. In the form of social benefits, majority improved their social dealing,
some has gained skill regarding cooperative management, and their leadership qualities
was improved.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
28
Ud-udan Mothers Cooperative had stopped their operation due to non-payment of
credit by members that led to lack of cash for operation. Likewise, lack of cooperative
education and training for leaders and members and not updated records, inefficient
leaders and lack of capital to sustain the operation were the factors contributory to the
failure of the cooperative.
The problems encountered by the cooperative were lack of training/education of
members and officers, non-participation of members and poor accounting records.
Moreover, inefficient/poor management, inefficient collection of credit, credit
delinquency of borrowers, employee dishonesty, and errors in financial policy were the
other problems encountered.
The lessons learned by the respondents from the four years operation of the
cooperative knew the rights and responsibilities of a member are important to the success
of a cooperative. The respondents also gained some skill on how to operate a business
that they can use if they would revive Ud-udan Mothers Cooperative.
Conclusion
The following conclusions were drawn from the result of the study:
1. At first, Ud-udan Mothers Cooperative was an association. Because of the
encouragement of non-government organization, the women of Ud-udan decided to
convert the association into a cooperative.
2. The reasons of members in joining the cooperative were for their own self-
interest like to learn some skills regarding cooperative management and for the
cooperative to provide their consumer needs.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
29
3. The concept of the respondents about a cooperative was very limited. What
they know was that a cooperative provides credit services to members. They just look at
the cooperative as a source of credit and not as a business that needs cash in order to
operate and give more services to them.
4. Although the cooperative failed in its business operation, it provided some
benefits to the members like patronage refund, credit to members when they were in dire
need of cash or consumer goods, and their social dealing was improved.
5. The cooperative encountered problems like poor record keeping, lack of
policies on the operation of the cooperative, poor conduct of meetings, mismanagement,
and delinquency of members in paying their credit. All of these were a result of lack of
education on the part of the members and the officers.
6. The factors that caused the failure of the cooperative was the lack of education
of members and officers, lack of policies, and poor records but the major factor that led to
the closure of the operation was the delinquency of members in paying their credit.
7. The members and officers learned that knowing the rights and responsibilities
of members is very important in the successful operation of a cooperative.
Recommendations
Since the founder and the members intend to revive the operation of the
cooperative, the following recommendations are given:
1. The cooperative has to educate the members first about the principles and
practices of cooperative, their rights, privileges as well as their responsibilities so that
they could participate in meetings and patronize the cooperative.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
30
2. Formulate complete and specific policies to guide them in the operation of the
cooperative business. They could ask the help of CDA or other successful cooperative
who maybe interested to assist them on policy formulation and even on the education of
members.
3. The cooperative should also train a bookkeeper and a manager to handle the
business operation of the cooperative so that complete records would be installed.
4. The cooperative should have effective strategies in collecting loans and
accounts receivable of members in order to attain continuous operation. Credit policies
should be strictly implemented to all the members.
5. Notice of meetings should be posted or issued at least week before the meeting.
Meetings are important because it serves as the means of sharing information and venue
for participative decision making.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
LITERATURE CITED
ANSAY, C.L. and E.P. BAIGUEN, 1996. Establishment of a Laboratory Cooperative at
the Benguet State University. BS Thesis, Benguet State University, La Trinidad,
Benguet. P 1.
FAJARDO, F.R. 1999. Cooperatives, 6th Edition. Published and Distributed by Rex
Bookstore, Manila. P. 36.
HIRSCHMAN, A. 1984. Getting Ahead Collectively; Grassroots Experiences in Latin
America, Intangible Benefits and Cost of Cooperatives.
KOVALICK, C. and P. KING. 2008. Personal Perceptions. Retrieved on September 10,
2008 from http://www.educ.kent.edu/community/VLO/prception/index.html.
NATIONAL COOPERATIVE BUSINESS ASSOCIATION. Copyright 1996 - 2008.
Retrieved on September 19, 2008 from http://www.ncba.coop/abcoop
absuccess.cfm.
PARNELL, E. 2001. The Rule of Cooperatives and Other Self-Help Organizations in
Crisis Resolution.
RURAL COOPERATIVE CENTER, 2001. Cooperatives. Retrieved on September 19,
2008. from http://www.cooperatives.ucdavis.edu/whatis/index.html.
SALDO, A. 2005. Profile of Non-Operating Cooperatives in Bagulin, La Union. BS
Thesis. Benguet State University, La Trinidad, Benguet. P.
VARSHNEY A., 2001. Ethic Conflict and Civic Life: Hindus and Muslims in India.
University of Michigan. Yale University Press.
WHEIHE, T. 2004. U.S. Overseas Cooperative Development Council.
APPENDIX A
Letter to the Respondents
DEPARTMENT OF AGRICULTURAL ECONOMICS AND
AGRIBUSINESS MANAGEMENT
Benguet State University
La Trinidad, Benguet
Sir/Madam,
I am Didith S. Tanacio, a fourth year BS Agribusiness student major in
Cooperative Management of Benguet State University. I am presently conducting a
research titled “Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet” as a partial requirement for my course.
In this connection, may I request a portion of your precious time to answer the
attached questionnaire and please give your honest answers. Rest assured that all
information you will provide will be treated with utmost confidentiality.
Thank you very much for sharing me a part of your most precious time. God
Bless!
Sincerely yours,
DIDITH S. TANACIO
33
APPENDIX B
Survey Questionnaire for Officers of the Cooperative
Name of respondent _____________________________________________________
Position in the cooperative ________________________________________________
General information about the cooperative
Name of Cooperative __________________________________________________
Type of cooperative ___________________________________________________
Address _____________________________________________________________
Date organized/start of operation _________________________________________
Area of operation _____________________________________________________
Municipality ______________________________________________________
Barangay ________________________________________________________
Sitio of barangay ___________________________________________________
Sources of funds
________ Share Capital
________ Deposits of members
________ Fees, specify _____________________________________________
________ Revolving capital
________ Borrowings
Composition of members:
_______ Miners
_______ Men
_______ others, specify
_______ Indigenous community _______ Women _____________________
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
34
Reasons of Failure of the Cooperative
______ Non-participation of members
______ Inefficient/poor management
______ Lack of training/education of officers and members
______ Lack of capital
______ Inefficient collection of loans/credit
______ Credit delinquency of borrowers
______ Management staff/officers not committed
_____ not regular inventory of sales
_____ employee dishonesty
_____ incompetent directors
_____ poorly conducted meetings
_____ inefficient leaders
_____ records are not updated
______ Poor location
______ Others (please specify) ______________________________________________
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
35
Survey Questionnaire for the Members
Profile of the Respondents
Name __________________________________________________________________
Address ________________________________________________________________
1. Reasons of joining the cooperative:
______ Provide basic food needs for my family
______ To learn some skills regarding cooperatives
______ Others (please specify) _______________________________________
2. What benefits did you receive from the cooperative?
______ Provide capital
______ Provide goods that I need
______ Others (please specify) _______________________________________
3. What are the problems you encountered in the cooperative?
_______ Cooperative store is always close
_______ Cannot provide the amount/quantity I need
_______ Does not inform me about the meeting
_______ Price is too high
_______ Others (please specify) _______________________________________
4. Who motivated you to join the cooperative?
______ Relative
_______ Friends
______ Officemate
_______ Others (please specify) _______________
5. Have you attended the pre membership Education (PMES)?
______ Yes
_______ No
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
36
If yes, who conducted? ________ Our cooperative
________ Other cooperative, please specify ___________
6. What are the contents of PMES they discuss?
_______ Principles and philosophy of cooperative
_______ Situational analysis (socio-economic status of members)
_______ Rights and responsibility as members
_______ Benefits accruing members: patronage refund, interest on capital and
stock of dividends
_______ Program of orientation with focus on the program/services of the
cooperative
_______ Others (please specify) _______________________________________
7. Have you attended education and training activities?
_______ Yes
_______ No
If yes, what are these trainings?
_______ Policy formulation
_______ Journalizing and posting
_______ Characteristics of leaders
_______ Function of leaders
_______ Financial and policies formulation
_______ Auditing procedures and techniques
_______ Business management
_______ Training implementation and evaluation
_______ Causes of delinquency
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
37
_______ Credit collection policies
_______ Others (please specify) _______________________________________
8. What are the benefits you derived from the cooperative?
A. Financial/Economic benefits
_______ Higher interest for my savings
_______ Higher earnings for my investments (share capital) in the form of
interest or dividend
_______ Patronage refund
_______ Credit of low interest rate
_______ Financial aid
_______ Others (please specify) _______________________________________
B. Social benefits
_______ Improvement in any social dealing (overcome shyness)
_______ Acquired skills regarding cooperatives
_______ My leadership qualities was developed or improved
_______ Others (please specify) ______________________________________
9. What are the services of the cooperative that you availed?
_______ Credit
_______ Savings and time deposit
_______ Hospitalization
_______ Others (please specify) ______________________________________
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
TANACIO, DIDITH S. NOVEMBER 2009. Failure Factors of a Cooperative:
The Case of Ud-udan Mothers Cooperative in Itogon, Benguet. Benguet State
University, La Trinidad, Benguet.
Adviser: Jovita M. Sim, MSc.
ABSTRACT
The study was conducted to look into the causes of the failure of the Ud-udan
Mothers cooperative in Itogon, Benguet. Unless the causes are not identified then they
could not be solved and the cooperative would remain a failure.
The data were gathered from officers and members through personal interviews
with the aid of a survey questionnaire. The collected data were tabulated and analyzed
using frequency counts and percentage.
The cooperative started as an association nemd Ud-udan Camote Bayating Mining
Calhore. The association started as a sari-sari store selling basic goods to members and
non-members in the community.
Majority of the respondents jined the cooperative to avail of the services such as
provision of credit facilities and provide goods on credit to the members.
Results of the study showed that the causes of the failure of the Ud-udan Mothers
Cooperative are the non-payment of credit by members that led to lack of cash for
operation; lack of cooperative education and training for leaders and members; not
updated records; inefficient leaders and lack of capital to sustain the operation. All these
factors were contributory to the failure of the cooperative resulting to its closure.
On the plan of the members to revive the cooperative it is recommended that the
cooperative has to educate the members first about the principles and practices of
cooperative rights, privileges as well as their responsibilities so that they could participate
in meetings and patronize the cooperative. Likewise the officers and members should
also be educated on the same aspects including the management principles of a
cooperative.
ii
TABLE OF CONTENTS
Page
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
i
Abstract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
i
Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
iii
INTRODUCTION
Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
Statement of the Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
Objectives of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
Importance of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
Scope and Delimitation of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
REVIEW OF LITERATURE
Perception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Cooperative and Cooperativism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Objectives of a Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
Cooperative and Stable Societies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Cooperative Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Cooperative Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Nature and Character of Cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
Cooperative Attributes in Facing Crisis . . . . . . . . . . . . . . . . . . . . . . . . . .
9
Democratic Management and Leadership
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
Reasons Why a Cooperative Fails . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11
iii
METHODOLOGY
Locale and Time of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
Respondents of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
Data Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
Data Gathered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
Data Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
RESULTS AND DISCUSSION
Evolution of the Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14
General Information About the Respondents . . . . . . . . . . . . . . . . . . . . . .
15
Reasons of Members in Joining the
Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
Sources of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
Perception/Understanding About a
Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
Benefits Received from the Cooperative . . . . . . . . . . . . . . . . . . . . . . . . .
19
Economic and Social Benefits Derived
from the Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
Services Availed from the Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . .
21
Factors Contributory to the Failure of the
21
Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reasons of Failure of the Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . .
22
Lessons Learned from the Four Years of
23
Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
iv
SUMMARY, CONCLUSION AND RECOMMENDATION
Summary
26
Conclusion
28
Recommendation
29
LITERATURE CITED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
31
APPENDICES
Request Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31
Survey Questionnaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33
v
1
INTRODUCTION
Rationale
Cooperatives are usually organized and owned by low-income people.
Cooperatives can readily provide the credit needs of poor and middle class at a minimal
interest. Cooperative also encourages savings. By patronizing the cooperative, a member
can save because goods sold in the cooperative are cheaper compared to sari-sari stores in
the same location. Furthermore, the members can get back a part of what they spent in the
cooperative in the form of patronage refund. The members owned the cooperative and
they are also its customers. The more members patronizing the cooperative services, the
more it would grow and the higher the benefits it could give to the members.
The success or failure of a cooperative depends on the strength of the tripod that
holds the cooperative: the members, the leaders, and the management staff. The members
can contribute to the success of the cooperative by patronizing its services, and paying
their credit regularly. They should also participate in decision making by electing
responsible officers and leaders. The leaders must be dedicated and truly committed to
the business of the cooperative. The management staff must possess the necessary skills
that is needed by the business must be honest and committed to their work.
The Ud-udan Mothers Cooperative was organized by 20 members who were all
women, first as an association. Their aim is to sell consumer goods to the members at
reasonable prices. They started as an association in May 1991 and in November of the
same year they converted it into a cooperative with 50 members. At its initial operation, it
was successful but after a short time it failed. At this time the cooperative is no longer
operating because it has no more capital.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
2
This study was therefore conducted to look into the causes of the failure of the
cooperative. Unless the causes are not identified then they could not be solved and the
cooperative would remain a failure.
Statement of the Problem
The study sought to answer the following questions:
1. How was the cooperative organized?
2. What were the services offered by the cooperative?
3. What were the perceptions and knowledge of members regarding:
a. Cooperative operation, cooperative purpose and goal.
b. Benefits derived from the cooperative
c. Services of the cooperative
d. Factors contributory to the failure of the cooperative
4. What the reasons of the failure of the Ud-udan Mothers Cooperative?
5. What are the lessons learned by the members and officers from the failure?
Objectives of the Study
The study aimed to:
1. determine the evolution of the cooperative,
2. identify the services offered by the cooperative,
3. determine the perception and knowledge of members of Ud-udan Mothers
Cooperative on the following:
a. cooperative, its operation, purpose and goal;
b. benefits from their cooperative
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
3
c. services of their cooperative
d. factors contributory to the failure of the cooperative
4. to determine the reasons of failure of the cooperative;
5. Identify lessons learned from the 4 years of operation.
Importance of the Study
This study was conducted to know what caused the failure of the Ud-udan
Mothers Cooperative and to know the perceptions of the members about the operation of
the cooperative. The result of this study may serve as a guide to the members and the
leaders of the cooperative regarding their decision to revive it. It would also provide
information to other cooperative leaders specially the causes of the failure of the
cooperative in order to avoid the same mistakes in their own cooperatives.
Scope and Delimitation of the Study
This study focused on the documentation of the evolution of the cooperative, the
perception and knowledge of members on the operation, purpose, and goal of the
cooperative, and their perception as to what have caused the failure of the cooperative.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
4
REVIEW OF LITERATURE
Perception
Perception is defined as the process of gathering information through our senses
organizing and making sense of it, through their previous experience and learning
attitudes and interest, needs, feelings and current situation. Perception differs from
individual due to variety of personal, socio-economic and cultural differences. Age,
gender and past experiences are example of personal perception filters (Kovalik and
King, 2008).
Cooperative and Cooperativism
The word cooperative is derived from the French word “COOPERARI”. The
word “CO” means “with” combined with “OPERARI” (to work syos, operas, work),
cooperatives delineates the concept of working together (Ansay and Baiguen, 1996).
Furthermore, cooperative is defined cooperative as private business organization
that is owned and controlled by the people who use its products, supplies or services.
Although cooperatives vary in type and membership size, all were formed to meet the
specific objects of members, and are structured to adapt to member’s changing needs
(Rural Cooperative Center, 2001). Cooperatives are formed by individuals who
coordinate among themselves (horizontal coordination) to achieve integration in their
business activities.
Although people have been working together with their mutual benefit throughout
human history, the cooperative form of business organization began during the Industrial
Revolution in England. Cooperatives were useful for promoting the interest of the less
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
5
powerful members of society. Farmers, producers, workers and consumers found that
they could accomplish more as a group than they could individually (Rural Cooperative
Center, 2001).
Wheihe (2004) said, cooperatives are special purpose organizations that have
unique attributes compared to the other forms of enterprise. They are independent,
member-owned and democratically governed business, created with equity financed by
members who invest in order to benefit through their patronage. Cooperatives are built on
a “collective identity and shared identity. This network characteristic is faced with the
national and/or regional conflict and hostile monopolistic alien enterprises and /or with
middlemen/usurers.
Cooperatives work well in traditional societies where “mutuality” and informal
cooperative activities are embedded in the form of common property, shared water and
grazing rights and informal financial sharing among vendors in market. Cooperative may
be a natural evolution in common property systems. Cooperative function effectively well
beyond “clan” and extended families because they offer economic benefits through
collective action. Through focusing on where market links are weak, economic returns
can be considerable when properly organized.
Objectives of a Cooperative
Republic Act 6938, Article 7 states that the primary objective of every
cooperative is to provide goods and services to its members and thus enable them to
attain increased income and savings, investments, productivity and purchasing power and
promote the equitable distribution of net surplus through maximum utilization of
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
6
economic scale, cost sharing, without conducting the affairs of the cooperative for
eleemosynary or charitable purposes.
A cooperative shall provide maximum economic benefits to its members, teach
the efficient ways of doing things in a cooperative manner, and propagate cooperative
practices and new ideas in the business and management and allow the lower income
group to increase ownership in the wealth of this nation (Molitas, 2004)
Cooperative and Stable Societies
Cooperatives bring special values to stabilization and democratization. The
“devolving of power in stable and just ways” is the issue where cooperatives appear to
have a particular advantage to other type of organization. Cooperatives networks and
integrated systems have a greater potential for broad scale recovery; and they engage
more people as effective actors to help influence and democratize senior decision makers.
Cooperative leaders have frequently been tapped for leadership roles in recovering states
because they are seen as less partisan and effective at working with large groups in
democratic practices (Hirschman, 1984).
Cooperative Development
Cooperative development includes both successes and failures. The documents
attempts to show that cooperatives are more likely to succeed when cohesive groups have
similar needs and where governments, donors or development agencies do not impose on
cooperatives. Cooperatives galvanized basic commercial interest, and access markets
with sufficient strength to permit at least modest margins for members. In many conflict
prone societies, informal cooperation exists at the tribal and clan level, within the market
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
7
place and in dealing with common property systems. Cooperatives can be built on these
imbedded cultural norms. But to support development goals, they must be organized on
business principles, first and foremost, which may require integrated efforts beyond a
single homogenous group.
Cooperative Principles
In social sciences, the cooperative principle describes how people interact with
one another. Make your contribution such as it is required, at the stage at which it occurs,
by the accepted purpose or direction of the talk exchange in which you are engaged. The
phrase as a prescriptive command, the principle is intended as a prescription of how
people normally behave in conversation.”
The cooperative principle goes both ways: speakers observed the cooperative
principle and listeners which are meanings that are not spicily conveyed on what it is
said, but that can nonetheless be inferred. All cooperatives around the world are guided
by the same 7 principles:
a. voluntary and open membership
b. democratic member control
c. member economic participation
d. education, training and information
e. cooperation among cooperatives
f. concern for community
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
8
Nature and Character of a Cooperative
Cooperatives as association of people and as business enterprise are distinguished
from other organizations by their nature and character. To disregard or fail to appreciate
their true nature and character is to deviate from the cooperative principles and ideals and
to lose sight the ultimate objective of the cooperative movement (Fajardo, 1999).
1. Cooperatives are service oriented. Cooperatives are organized to serve their
members by providing them the goods and services they need at cost. Members
contribute to the capital of the cooperative in the sense that they cannot invest their
money in capitalist enterprise in which primary objective is to get the maximum profit
from their investment (members join cooperatives because they need their services).
2. Cooperatives are community oriented. Cooperative work for the welfare of
their members but at the same time integrates themselves into the life of community in
particular and that in the nation in general.
3. Cooperatives are people oriented. Cooperatives are not merely economic
instruments concerned with dividends and related, economic and financial returns.
4. Cooperatives are owned, manage and patronized by their members. Ownership
is very important factor in the success of any cooperative. It is necessary in order that the
members have authority to manage and control their cooperative. If a cooperative is
started and operated solely from borrowed capital, it violates the principle of self help
and losses much of its autonomous character.
5. Cooperative and business enterprise. Cooperative business is real business.
Cooperative, if they are to play a meaningful economic role in community life, must
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
9
serve and reform as the other financial and business institutions operating in the country
today. Cooperatives developed best through self-help and mutual help.
Cooperative Attributes in Facing Crisis
The following are cooperative attributes in facing crisis according to Parnell
(2001):
1. Diversity in membership. Cooperatives are group businesses that provide
tangible returns to individual members who define their own needs and have a personal
stake in the success of a business. They create economic cooperation in fractured
societies with participation open to all including women, ethnic minorities and those
practicing different religions. Cooperatives have been effective at building economic
social ties across religious and ethnic barriers mainstreaming poor and discriminated
group into conventional economies.
2. Emphasis on markets. Successful cooperatives worldwide emphasize markets,
financial systems controlled by members and communities, and participation in economic
activities in which cooperative members-even if very little and share in the risks and
returns of a group business. They relay on programs without hand outs and insist on user
fees/in-kind contributions.
3. Economies of scale. Cooperatives aggregate production and increase quality
from many small producers so that they are able to compete for market, purchase inputs
and attract professional management. By establishing remunerative markets cooperatives
encourage and support farmers investment in modern technology, such as exporting
coffees, natural foods, cheese and other non-traditional products.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
10
4. Savings, loans, and insurance. Credit unions help and maintain secure savings
that in turn provide sustainable micro-credit to small producers and their businesses.
They provide life and property protection to low income and underserved populations and
lower their risks from unexpected events, including natural and manmade disaster.
5. Coop-to-coop market linkages. The United States, Japan, European cooperative
development programs and sponsored cooperative development programs and member-
to-members technical assistance for developing country cooperatives, especially in
specialty coffee, organic cocoa, vegetable, herbs, etc. Expensive consumer cooperative
networks in Japan and Europe have been in the forefront of these efforts and to a lesser
extent, US natural food.
Democratic Management and Leadership Trust
The following are the democratic management and leadership trust according to
Varshney (2001):
1. Cooperatives are organized around a common need, and belief in the value of
the collective action. Strong cooperatives have devised management mechanisms that
allow all members to feel like the organization serves their needs:
a. Members demand responsiveness from leadership
b. Members feel confident in the oversight of management
c. Management is based on fairly meeting the needs of all members
People who lead management have bought into democratic principles of
management-successful leaders how to lead effectively with responsiveness, transparency
and fairness.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
11
2. Access to resource. Cooperatives are organized to build better lives for
members around improved access to resources-either better incomes (e.g. business
associations, agricultural coops) or improved living conditions (e.g. housing coops). They
have the potential to be an effective path in opening up economic opportunity for those
without it. Cooperatives can improve socio-economic status within communities, and
reduce conflict and competition over the control and sharing of scarce resources (e.g.
water user cooperative).
3. Effective in conflict-prone society. Cooperatives represent an exceptionally
organized, motivated group of individuals. When effective and well managed, they have
the potential to form critical masses of political and economic power. When structured in
effective apex organizations, they have proved able to play a significant role in national
policies, the selection of national leaders and lobbying in behalf of their based
membership.
Reasons Why a Cooperative Fails
a. Errors in financial policy, such as over-extension of credit, too little capital,
poor accounting records, lack of financially sound systematic program for reimbursement
of equity.
b. Errors in educational and social work. This begins by failing to teach
cooperative function, neglecting general educational programs, failure to develop
member loyalty or countering the development of factions within the association.
c. Management errors, such as inadequate inventory, poor location, improper
equipment, neglected appearance of physical facilities, employee dishonesty, ineffective
management, incompetent directors, nepotism, poorly conducted meetings, admittance of
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
12
disloyal and dissatisfied members (National Cooperative Business Association, 1996-
2008).
Saldo, (2005) stated that many cooperatives failed because of mismanagement.
Cooperative managers were not only incompetent but also corrupt. They were poorly
trained and had not developed proper attitudes and values such as honesty, integrity and
deep sense of social responsibility.
Furthermore, Saldo, (2005) stated that several factors, internal and external to the
organization influenced the management performance of the cooperative. The internal
factors include educational attainment, member’s involvement if decision making. The
external factors include members’ professional development and cooperative linkages.
Despite the importance and progress brought by the cooperatives, there are problems and
constrain within the cooperative itself, which may determine its success or failure for
providing sustained cooperative education and training leading to lack of qualified
managers and a system to help recruit and train individual members and lack of
government financial assistance.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
13
METHODOLOGY
Locale and Time of the Study
The study was conducted in Itogon, Benguet with Ud-udan Mothers Cooperative.
The study was conducted from December, 2008 to March, 2009.
Respondents of the Study
Data gathered from key informants (officers of the coop) and members of Ud-
udan Mothers Cooperative, a total of forty members and ten officers served as
respondents of this study.
Data Collection
Data were gathered through personal interview with the aid of survey
questionnaires.
Data Gathered
Data gathered included the history of the cooperative, reasons of members in
joining the cooperative, their perceptions about the cooperative, services availed by the
members and benefits received from the cooperative, reasons why the cooperative failed
and the lessons learned by the members from the cooperative operation.
Data Analysis
The data and information was tabulated, analyzed using simple statistical tools
such as frequency counts, percentage and other appropriate tools.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
RESULTS AND DISCUSSION
Evolution of the Cooperative
According to the key informants interviewed Ud-udan Mothers Cooperative
started first as an association with the name Ud-udan Camote Bayating Mining Calhore
Association. This was organized in May, 1991 by twenty women. These women saw the
need for a sari-sari store in the community where the households could buy their needs.
They were encouraged and assisted by the nuns of Virac, Itogon to organize the
association. The starting capital of P10,000 was loaned by an NGO ( Priests and nuns of
Virac, Itogon, Benguet). The association started as a small sari-sari store that sells basic
goods to the households of Ud-udan. Many people were buying from the store and the
volume of goods increased. However, in October of the same year the store was
destroyed by a strong typhoon and the merchandise were spoiled including the records.
The calamity did not discourage the members. They continued the operation starting from
what was left after the damage. They transferred the location of the store to another
location and they converted it into a cooperative. They invited other women to join so
they started the cooperative with 50 members. Each member gave one hundred pesos
(P100) as share capital. Members so they transferred the location the members wanted
to accept more members into the organization so they converted it into a cooperative in
November 1991. The cooperative started with 50 members and since they were all
women they named it as Ud-udan Mothers Cooperative. They collected P100 from each
member as share capital. They included rice and liquor in the commodities that they sell.
The rice and liquor were salable but these were again the items usually bought on credit
by the members. Credit sales increased and accumulated until their operating capital was
15
tied up with the receivables. Because the officers and the members were relatives, the
officers were ashamed to force the members to pay their credit. Because of this situation
the cooperative closed.
General Information about the Respondents
The respondents were all women and majority of them were laborers (87%) while
the rest (13%) were sidewalk vendors. As to their ages, 17% each belonged to the 20-25
and 26-30 age brackets. Six or 20% were 31-35 years old, 13% were 36-40 years old,
10% were 41-45 years old, another 17% were 46-50 years old, and 6% were 51-55 years
old. This shows that most of the respondents were still young. Their educational
attainment ranges from no formal education to college graduate. There were 3 or 10%
who did not go to school. Majority (53%) was either elementary graduate or reached
elementary. Twenty percent were either high school graduate or had reached high school
level while 17% reached the college level with only one college graduate. This finding
shows that majority of the members of the cooperative had gone to school but few
reached college level.
Table 1. General information of the respondents
PARTICULARS
FREQUENCY
PERCENTAGE
Occupation
Laborer
26
87.0
Sidewalk vendor
4
13.0
TOTAL
30
100
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
16
Table 1. Continued.
PARTICULARS
FREQUENCY
PERCENTAGE
Age
20-25
5
17.0
26-30
5
17.0
31-35
6
20.0
36-40
4
13.0
41-45
3
10.0
46-50
5
17.0
51-55
2
6.00
TOTAL
30
100
Educational Attainment
No formal education
3
10.0
Elementary level
16
53.0
High school
6
20.0
College
5
17.0
TOTAL
30
100
Reasons of Members in Joining the Cooperative
Table 2 shows the reasons of members in joining the cooperative. There were two
reasons mentioned by majority (97%) of the respondents. The first reason was they joined
the cooperative because they believed that the cooperative could provide their needs,
specially the consumer goods. The second reason for joining the cooperative was because
they wanted to learn some skills regarding the cooperative.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
17
Sources of Funds
Table 3 presents the sources of funds of the cooperative, as perceived by the
officers who served as respondents of this study. Eighty percent of the ten officers
interviewed mentioned share capital. Seven or 70% said part of their funds was from fees
paid by members and 2 or 20% mentioned borrowings. This finding shows that some
officers were not aware of the other sources of their funds specially borrowings that only
very few knew it.
Perception/Understanding About a Cooperative
Table 4 presents the perception or understanding of respondents about a
cooperative in relation to operation and cooperative purpose and goal.
Operation. The finding revealed that almost all the respondents said that the
cooperative operates to provide credit facilities to the members and also to provide goods
Table 2. Reasons of members in joining the cooperative
REASON OF JOINING
FREQUENCY
PERCENTAGE
Provide their consumer needs
29
97
Learn some skill regarding cooperative
29
97
* Multiple response
Table 3. Source of funds of the cooperative
PARTICULAR
FREQUENCY (N=10)
PERCENTAGE
Share capital
8
80
Fees paid by members
7
70
Borrowings
2
20
* Multiple responses
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
18
on credit basis. This implies that the members were not aware on the principles and
practices of cooperatives. One of the practices of a cooperative is cash trading. This
contradicts to what the respondents know about the operation of a cooperative.
Cooperative purpose and goal. The result shows that almost all (97%) the
respondents perceived that the cooperative promotes cooperation among members.
Twenty 8 of the respondents or 93% said that the purpose of a cooperative is to help the
members in time of emergency thru the provision of credits (cash or goods). In this
aspect, the members viewed the cooperative as a provider not as a business. They saw the
cooperative as having a social responsibility to the members. Twenty seven or 90%
mentioned that the goal and purpose of a cooperative is to promote knowledge of
cooperative principles and practices among the members, 83% said the cooperative
coordinates and facilitates activities of members and 76% said it sponsors
studies/trainings in economic, legal, financial and social phase of cooperation.
Table 4. Perception/understanding of the respondents about a cooperative
PERCEPTION/UNDERSTANDING
FREQUENCY PERCENTAGE
Operation
Provide credit facilities
29
97
Provide goods on credit
29
97
Cooperative purpose and goal
To promote cooperation among members
29
97
Help members in time of emergency
28
93
Promote knowledge of coop principles and
27
90
practices
Coordinate and facilitate activities of members
25
83
Sponsor studies/trainings in economic, legal,
23
76
financial and social phase of cooperation
*Multiple responses
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
19
Benefits Received from the Cooperative
Table 5 presents the benefits received by the respondents from the cooperative.
Majority (90%) of the respondents said that they received benefits from their cooperative.
They said that the cooperative had provided them with goods they need. Only 50%
mentioned that the cooperative had provided them their capital and other needs in cases
of emergency. This shows that only half of the respondents availed of credit from the
cooperative for their business capital.
This implies that the cooperative, though it lasted for only a short time, had
helped its members in the past. In fact, the respondents are willing to revive the
cooperative because they realized the help of the cooperative. They always run to the
cooperative in times of emergency needs.
Economic and Social Benefits Derived
from the Cooperative
Table 6 presented the economic/financial and social benefits derived by the
respondents from the cooperative. In financial/economic benefits, a great majority (97%)
derived patronage refund, 80% pointed credit of low interest rate, and some respondents
mentioned higher earnings from their investment (share capital) in the form of interest or
dividend and financial aid. As for social benefits, 70% pointed out they improved
Table 5. Benefits received by the respondents from the cooperative
BENEFITS RECEIVED
FREQUENCY PERCENTAGE
Provided the capital and other emergency needs
15
50
Provided goods needed
27
90
* Multiple responses
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
20
their social dealing (overcame shyness), and the respondents also acquired skill regarding
cooperative management and their leadership qualities was improved. Some developed
their leadership abilities when they became leaders in the cooperative.
The result implies that members had benefited from the four years operation of
the cooperative. It shows in the study that almost all the respondents derived patronage
refund from the cooperative and majority also were able to overcome their shyness when
the members were involved in the cooperative. The leadership potentials of some officers
were developed.
Table 6. Economic/financial and social benefits derived by the respondents
BENEFITS DERIVED
FREQUENCY PERCENTAGE
Financial/Economic Benefits
Higher earnings from investment (share capital)
14
47
Patronage refund
29
97
Credit at low interest rate
24
80
Financial aid
19
63
Social Benefits
Improved social dealing (overcame shyness)
21
70
Acquired skills regarding cooperative
12
40
Management
Improved leadership qualities
14
47
* Multiple responses
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
21
Services Availed from the Cooperative
Table 7 shows the services availed of the respondents from the cooperative,
83.33% availed credit on consumer goods and 20% mentioned hospitalization credit.
The result implies that most of the respondents availed credit and some borrowed
cash from the cooperative when they needed especially for hospitalization expenses. The
cooperative only offered consumer service but it also lend cash to members who badly
need money for hospital expenses.
Factors Contributory to the Failure of the Cooperative
Table 8 presents the factors contributory to the failure of Ud-udan Mother
Cooperative as perceived by the respondents. Almost all the respondents (93%) pointed
to delinquency of members in paying credit, 90% each for lack of cooperative education
of leaders, lack of cooperative education and training of members, and records are not
updated. Twenty three or 77% pointed to lack of capital to sustain the operation. The lack
of capital was due to nonpayment of credit by the members. The cooperative was cash
strap and had nothing to purchase goods therefore they had nothing to sell. Another factor
mentioned by 23% was inefficient leaders. They observed that the officers managing the
cooperative do not have the appropriate skills due to lack of education.
Table 7. Services availed by the respondents from the cooperative
BENEFITS DERIVED
FREQUENCY
PERCENTAGE
Credit on consumer goods
25
83
Hospitalization credit
6
20
* Multiple responses
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
22
Table 8. Factors contributory to the failure of Ud-udan Mothers Cooperative
BENEFITS DERIVED
FREQUENCY PERCENTAGE
Lack of Cooperative education of leaders
27
90
Lack of coop education and training of members
27
90
Inefficient leaders
7
23
Delinquency of members in paying credit
28
93
Records not updated
27
90
Lack of capital to sustain the operation
23
77
* Multiple responses
Reasons of Failure of the Cooperative
Despite the importance and progress brought by the cooperatives, there are
problems and constraints within the cooperative itself that may determine its success or
failure.
As shown in Table 9, the common reasons of failure of the cooperative
encountered were: lack of training/education of members and officers, lack of capital and
poor location as pointed by 90% each. Aside from the low level of formal education of
many members they were not trained or educated on the management of a cooperative.
Lack of capital was due to the high credit of members thus the cooperative has no more
money to buy goods for sale and poor location was also pointed because the location of
the store was far from the residence of the members. Eighty percent mentioned non-
participation of members and poorly conducted meetings. They mentioned these because
many members do not attend meetings so most of the time scheduled meetings did not
push thru. Improper improvement and poor accounting records are some reasons of
failure of the cooperative as pointed by 50% of the respondents. According to the
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
23
respondents, who are officers of the cooperative, they have poor knowledge about
bookkeeping thus their records were incomplete. The standard way of recording was not
followed. They only recorded their credit sales.
In relation to management, some respondents mentioned the following reasons:
Ineffective/poor management, inefficient collection of credit, credit delinquency of
borrowers, employee dishonesty and errors in financial policy. The officers who handled
the management of the cooperative were high school and many of them had not attended
any training on cooperative management. Aside from lack of accounting records, there
were no specific management policies to be followed in the operation of the cooperative.
It just operated like a “sarisari” store and the storekeeper was the one who decided what
to do because of lack of policy.
The result implies that the most problem encountered of the cooperative were lack
of training/education of officers and leaders, non-participation of members and poorly
conducted meetings. The members of the cooperative were considered the highest policy
making body in the cooperative so they should always be consulted for major decisions in
the cooperative operations.
The cooperative as a business fails if there is insufficient working capital as stated
by Lister (2006). Furthermore, he stated that insufficient working capital is crucial for
business.
Lessons Learned from the Four Years of Operation
Table 10 shows the lessons learned of respondents from the four years of
operation. Respondents pointed that the rights and responsibility as members, their
leadership qualities was developed or improved and they gained some skills regarding
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
24
cooperatives. Some respondents said that they learned that proper handling of business is
the best way to success.
From the four years of operation, the respondents learned a lot and one of these is
they learned that as a member they should settle their obligations because it is important
for the success of a business. This implies that members only came to realize these things
after their cooperative have failed. Thus, given a second chance to operate maybe they
would do better.
Table 9. Reasons of failure of the cooperative according to the officers
REASONS OF FAILURE
FREQUENCY PERCENTAGE
Education
Lack of training/education of members & officers
9
90
Management
Non-participation of members
8
80
Inefficient/poor management
5
50
Inefficient collection of credit
4
40
Credit delinquency of borrowers
5
50
Employee dishonesty
4
40
Errors in financial policy
5
50
Improper improvement
7
70
Poorly conducted meetings
8
80
Poor accounting records
9
90
Financial
Lack of capital
9
90
Poor location
9
90
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
25
Table 10. Lessons learned from the four years of operation
LESSONS LEARNED
FREQUENCY PERCENTAGE
Leadership qualities was developed or improved
25
83
Gained some skills regarding cooperatives
23
77
Learned the rights and responsibility as a member
27
90
Proper handling of business
17
57
* Multiple responses
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
SUMMARY, CONCLUSION AND RECOMMENDATIONS
Summary
The study was undertaken to document the evolution of Ud-udan Mothers
Cooperative and to determine the perception and members’ knowledge on cooperative
and its operation regarding on cooperative operation, cooperative purpose and goal,
benefits derived from the cooperative, its services and factors contributory to the failure
of the cooperative, and to find out the reasons of the failure of Ud-udan Mothers
Cooperative and to identify the lessons learned by the members and officers of the
cooperative. However to minimize from the same mistake/failure, the study could help to
determine the cause/factors in the failure of the cooperative.
The data were gathered from officers and members through personal interviews
with the aid of survey questionnaires, and questions that were not understood by the
respondents explained by the researcher. Each of the officers and members were given
questionnaire. The collected data were tabulated and analyzed using frequency tables and
percentage.
Non-government organization motivated the community of Ud-udan to join
cooperative, and because of their encouragement, the mothers of Ud-udan converted the
association into a cooperative. Since the officers and members of the former cooperative
were all married women, they named their cooperative as Ud-udan Mothers Cooperative
(UMC). The cooperative leaders decided to sell rice since they know that rice is a major
basic food needs.
The finding showed that one reason of members in joining the cooperative was to
learn some skill regarding cooperative management. Another reason given was that the
27
cooperative could provide their consumer needs. They could buy consumer goods from
the cooperative and avail of patronage refund.
The respondents were women with a mean age ranging from 20-30 years old, and
they are all residents of Ud-udan. Moreover, the study showed that the share capital
contribution of members were the main source of funds of UMC.
On perception and members knowledge on cooperative and its operation
regarding on cooperative, almost all of the respondents perceived the cooperative as
providing credit services in terms of cash and consumer goods. In relation to cooperative
purpose and goal, majority pointed out that the purpose and goal of a cooperative is to
promote cooperation among members. However, 93% said that cooperative should help
members especially in time of emergency, 83% pointed coordinate and facilitate
activities of members and advice appropriate authorities related to cooperatives. In
addition, 76% mentioned that cooperative should sponsor their studies or trainings
regarding economic, legal, financial and social phase operation of cooperative for them to
know how a cooperative runs as a business.
The respondents derived benefits from the cooperative in terms of
financial/economic benefits and social benefits. Majority derived patronage refund, some
respondents pointed out that they benefited from credit at low interest rate and other had
received interest on their share capital. Some also derived financial aid, like
hospitalization. In the form of social benefits, majority improved their social dealing,
some has gained skill regarding cooperative management, and their leadership qualities
was improved.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
28
Ud-udan Mothers Cooperative had stopped their operation due to non-payment of
credit by members that led to lack of cash for operation. Likewise, lack of cooperative
education and training for leaders and members and not updated records, inefficient
leaders and lack of capital to sustain the operation were the factors contributory to the
failure of the cooperative.
The problems encountered by the cooperative were lack of training/education of
members and officers, non-participation of members and poor accounting records.
Moreover, inefficient/poor management, inefficient collection of credit, credit
delinquency of borrowers, employee dishonesty, and errors in financial policy were the
other problems encountered.
The lessons learned by the respondents from the four years operation of the
cooperative knew the rights and responsibilities of a member are important to the success
of a cooperative. The respondents also gained some skill on how to operate a business
that they can use if they would revive Ud-udan Mothers Cooperative.
Conclusion
The following conclusions were drawn from the result of the study:
1. At first, Ud-udan Mothers Cooperative was an association. Because of the
encouragement of non-government organization, the women of Ud-udan decided to
convert the association into a cooperative.
2. The reasons of members in joining the cooperative were for their own self-
interest like to learn some skills regarding cooperative management and for the
cooperative to provide their consumer needs.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
29
3. The concept of the respondents about a cooperative was very limited. What
they know was that a cooperative provides credit services to members. They just look at
the cooperative as a source of credit and not as a business that needs cash in order to
operate and give more services to them.
4. Although the cooperative failed in its business operation, it provided some
benefits to the members like patronage refund, credit to members when they were in dire
need of cash or consumer goods, and their social dealing was improved.
5. The cooperative encountered problems like poor record keeping, lack of
policies on the operation of the cooperative, poor conduct of meetings, mismanagement,
and delinquency of members in paying their credit. All of these were a result of lack of
education on the part of the members and the officers.
6. The factors that caused the failure of the cooperative was the lack of education
of members and officers, lack of policies, and poor records but the major factor that led to
the closure of the operation was the delinquency of members in paying their credit.
7. The members and officers learned that knowing the rights and responsibilities
of members is very important in the successful operation of a cooperative.
Recommendations
Since the founder and the members intend to revive the operation of the
cooperative, the following recommendations are given:
1. The cooperative has to educate the members first about the principles and
practices of cooperative, their rights, privileges as well as their responsibilities so that
they could participate in meetings and patronize the cooperative.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
30
2. Formulate complete and specific policies to guide them in the operation of the
cooperative business. They could ask the help of CDA or other successful cooperative
who maybe interested to assist them on policy formulation and even on the education of
members.
3. The cooperative should also train a bookkeeper and a manager to handle the
business operation of the cooperative so that complete records would be installed.
4. The cooperative should have effective strategies in collecting loans and
accounts receivable of members in order to attain continuous operation. Credit policies
should be strictly implemented to all the members.
5. Notice of meetings should be posted or issued at least week before the meeting.
Meetings are important because it serves as the means of sharing information and venue
for participative decision making.
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
LITERATURE CITED
ANSAY, C.L. and E.P. BAIGUEN, 1996. Establishment of a Laboratory Cooperative at
the Benguet State University. BS Thesis, Benguet State University, La Trinidad,
Benguet. P 1.
FAJARDO, F.R. 1999. Cooperatives, 6th Edition. Published and Distributed by Rex
Bookstore, Manila. P. 36.
HIRSCHMAN, A. 1984. Getting Ahead Collectively; Grassroots Experiences in Latin
America, Intangible Benefits and Cost of Cooperatives.
KOVALICK, C. and P. KING. 2008. Personal Perceptions. Retrieved on September 10,
2008 from http://www.educ.kent.edu/community/VLO/prception/index.html.
NATIONAL COOPERATIVE BUSINESS ASSOCIATION. Copyright 1996 - 2008.
Retrieved on September 19, 2008 from http://www.ncba.coop/abcoop
absuccess.cfm.
PARNELL, E. 2001. The Rule of Cooperatives and Other Self-Help Organizations in
Crisis Resolution.
RURAL COOPERATIVE CENTER, 2001. Cooperatives. Retrieved on September 19,
2008. from http://www.cooperatives.ucdavis.edu/whatis/index.html.
SALDO, A. 2005. Profile of Non-Operating Cooperatives in Bagulin, La Union. BS
Thesis. Benguet State University, La Trinidad, Benguet. P.
VARSHNEY A., 2001. Ethic Conflict and Civic Life: Hindus and Muslims in India.
University of Michigan. Yale University Press.
WHEIHE, T. 2004. U.S. Overseas Cooperative Development Council.
APPENDIX A
Letter to the Respondents
DEPARTMENT OF AGRICULTURAL ECONOMICS AND
AGRIBUSINESS MANAGEMENT
Benguet State University
La Trinidad, Benguet
Sir/Madam,
I am Didith S. Tanacio, a fourth year BS Agribusiness student major in
Cooperative Management of Benguet State University. I am presently conducting a
research titled “Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet” as a partial requirement for my course.
In this connection, may I request a portion of your precious time to answer the
attached questionnaire and please give your honest answers. Rest assured that all
information you will provide will be treated with utmost confidentiality.
Thank you very much for sharing me a part of your most precious time. God
Bless!
Sincerely yours,
DIDITH S. TANACIO
33
APPENDIX B
Survey Questionnaire for Officers of the Cooperative
Name of respondent _____________________________________________________
Position in the cooperative ________________________________________________
General information about the cooperative
Name of Cooperative __________________________________________________
Type of cooperative ___________________________________________________
Address _____________________________________________________________
Date organized/start of operation _________________________________________
Area of operation _____________________________________________________
Municipality ______________________________________________________
Barangay ________________________________________________________
Sitio of barangay ___________________________________________________
Sources of funds
________ Share Capital
________ Deposits of members
________ Fees, specify _____________________________________________
________ Revolving capital
________ Borrowings
Composition of members:
_______ Miners
_______ Men
_______ others, specify
_______ Indigenous community _______ Women _____________________
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
34
Reasons of Failure of the Cooperative
______ Non-participation of members
______ Inefficient/poor management
______ Lack of training/education of officers and members
______ Lack of capital
______ Inefficient collection of loans/credit
______ Credit delinquency of borrowers
______ Management staff/officers not committed
_____ not regular inventory of sales
_____ employee dishonesty
_____ incompetent directors
_____ poorly conducted meetings
_____ inefficient leaders
_____ records are not updated
______ Poor location
______ Others (please specify) ______________________________________________
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
35
Survey Questionnaire for the Members
Profile of the Respondents
Name __________________________________________________________________
Address ________________________________________________________________
1. Reasons of joining the cooperative:
______ Provide basic food needs for my family
______ To learn some skills regarding cooperatives
______ Others (please specify) _______________________________________
2. What benefits did you receive from the cooperative?
______ Provide capital
______ Provide goods that I need
______ Others (please specify) _______________________________________
3. What are the problems you encountered in the cooperative?
_______ Cooperative store is always close
_______ Cannot provide the amount/quantity I need
_______ Does not inform me about the meeting
_______ Price is too high
_______ Others (please specify) _______________________________________
4. Who motivated you to join the cooperative?
______ Relative
_______ Friends
______ Officemate
_______ Others (please specify) _______________
5. Have you attended the pre membership Education (PMES)?
______ Yes
_______ No
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
36
If yes, who conducted? ________ Our cooperative
________ Other cooperative, please specify ___________
6. What are the contents of PMES they discuss?
_______ Principles and philosophy of cooperative
_______ Situational analysis (socio-economic status of members)
_______ Rights and responsibility as members
_______ Benefits accruing members: patronage refund, interest on capital and
stock of dividends
_______ Program of orientation with focus on the program/services of the
cooperative
_______ Others (please specify) _______________________________________
7. Have you attended education and training activities?
_______ Yes
_______ No
If yes, what are these trainings?
_______ Policy formulation
_______ Journalizing and posting
_______ Characteristics of leaders
_______ Function of leaders
_______ Financial and policies formulation
_______ Auditing procedures and techniques
_______ Business management
_______ Training implementation and evaluation
_______ Causes of delinquency
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
37
_______ Credit collection policies
_______ Others (please specify) _______________________________________
8. What are the benefits you derived from the cooperative?
A. Financial/Economic benefits
_______ Higher interest for my savings
_______ Higher earnings for my investments (share capital) in the form of
interest or dividend
_______ Patronage refund
_______ Credit of low interest rate
_______ Financial aid
_______ Others (please specify) _______________________________________
B. Social benefits
_______ Improvement in any social dealing (overcome shyness)
_______ Acquired skills regarding cooperatives
_______ My leadership qualities was developed or improved
_______ Others (please specify) ______________________________________
9. What are the services of the cooperative that you availed?
_______ Credit
_______ Savings and time deposit
_______ Hospitalization
_______ Others (please specify) ______________________________________
Failure Factors of a Cooperative: The Case of Ud-udan Mothers
Cooperative in Itogon, Benguet / Didith S. Tanacio. 2009
Document Outline
- Failure Factors of a Cooperative:The Case of Ud-udan Mothers Cooperative in Itogon, Benguet
- BIBLIOGRAPHY
- ABSTRACT
- TABLE OF CONTENTS
- INTRODUCTION
- REVIEW OF LITERATURE
- METHODOLOGY
- RESULTS AND DISCUSSION
- SUMMARY, CONCLUSION AND RECOMMENDATIONS
- LITERATURE CITED
- APPENDIX