What kind of organization is a cooperative?

Cooperatives are a world where people come first, not money. The heart of the cooperative is the people. People with money do not form cooperatives. "Poor" people form cooperatives. Cooperatives, however, are not poor organizations.

Poverty means that people with the same problems, common interests and problems have the same solutions. A cooperative is not a for-profit organization that raises money. A cooperative, on the other hand, is a non-profit organization in which people work together to meet the common socio-economic and cultural needs and build human capital into social capital.

However, only those who choose to work and live together do not participate in the cooperative. On the other hand, the value of a cooperative is that people who have lost hope can come together and find hope again.

Cooperative culture is about helping others and working together.

The key to the survival and development of a cooperative is unity and trust.

Article 3.1 of the Law on Cooperatives of Mongolia defines a cooperative as follows:

"A cooperative is a legal entity formed by several persons voluntarily united in order to meet their common economic, social and cultural needs, jointly established by a democratic collective, with joint management and control, and operating on the basis of common property."

People form cooperatives to access new services that are expensive or do not exist at all, such as access to markets, organization of production and services, and sale of products. If you are interested in establishing a cooperative, you should study the legal, economic, organizational, and financial aspects of the cooperative. Careful study and planning in advance will increase your chances of success.

Preparations for the establishment

Often, the initiative comes from a small group of people meeting and sharing their concerns. Organizing a cooperative into this initiative is a complex issue. It may seem possible to solve the problem by forming a cooperative, but to make it more effective, it is important to meet and talk with many other interested people.

Founder's introductory meeting.

It is important for prospective members to have an introductory meeting to decide if our partners are really interested in starting a cooperative. The date of the meeting must be announced in advance.

The initiative group should select a leader from among themselves to organize the meeting and work out the agenda. These include:

• What are the common problems?
• How to decide, what is the best solution
• Principles and working conditions of the cooperative
• Advantages and disadvantages of the cooperative
• Members' financial and service obligations
• Cooperative structure
• Other issues of interest

There should be enough time for this meeting. If at the first meeting people are interested in the cooperative and want to discuss it in more detail, they should choose a working group.

Working group.

The members of the working group should be interested in running a cooperative and risk-free business. They are usually active members and partners of the cooperative and are elected to the first management. The working group should perform the following tasks. These include:

• Exploring the potential of cooperatives:
• Is there a chance for the proposed cooperative to succeed?
• Can it be useful to its members?
• Prepare a detailed plan of the proposed cooperative.

The working group should seek advice from someone with experience and knowledge of the cooperative's laws, finances, and operations. There are also two important studies that need to be done: member research and market research.

Directions for consultation:

Business and Cooperative Specialists - You need to get the information you need to start a cooperative, build a business, reach the market, and run a risk-free business.

Legal Adviser (preferably an attorney) - It is a good idea to develop legal documents or to review what you have developed and to seek advice on how to regulate contracts and rules.

Financial Advisor - Consultation is required to properly lay the groundwork for starting a cooperative's financial and accounting activities in accordance with the law.

Technical and technological consultant - Depending on the type of business of the cooperative, various advice can be obtained.

Areas of research - The working group should take steps to find out what the cooperative can do for its members and everything about future members of the cooperative. The study should consist of four parts:

• Members' needs –A cooperative is established only to meet the needs of its members.
• The size of the business –For a cooperative to be successful, its business size must be large enough to plan the necessary equipment and supplies.
• Location, type of business or type of service to be provided to prospective members –The first step is to discuss where, when, and how the cooperative will deliver its services to its members.
• Feedback from members– How do members who are interested in the cooperative participate in the cooperative and what do they think about the cooperative? The participation of members in decision-making and how they understand the nature of the cooperative are key to the success of the cooperative.

Market or supply research determines whether a cooperative can play an economic role in the market. This study will determine what kind of work is appropriate, the size of the business, and the financial capacity of the members concerned.

We will also need to consider in detail whether our members will be able to contribute the initial share capital.

In order for a cooperative to be more efficient, it is necessary to study ways to establish contacts with other business organizations (cooperatives, joint ventures, cooperatives). In general, it may be more effective to seek advice and research from a professional association and work together.

It is helpful for the working group to visit the homes of prospective members who are interested in one-on-one discussions and listen to their views.

Second round meeting.

Based on professional advice and research, the working group estimates economic needs and develops a detailed business plan.

However, it is advisable to arrange a second meeting of members before developing a business plan. During this time, we will discuss the results of the members' and market research, discuss whether to continue or stop the establishment of the cooperative, and move on to the next stage. During the meeting, members may be asked to provide start-up capital to confirm their readiness to join the cooperative and to finance organizational costs.

Once it is decided to establish a cooperative, the working group will develop the business plan and rules of the cooperative. The draft business plan and charter should clarify the cooperative's activities and business status prior to the establishment of the cooperative.

Organize a meeting to establish a cooperative

• Meeting place
• Meeting time (date)
• Advertisers to founders and founders and supporters of more than 9 people / members /

Hold a founding meeting

• Decide whether to establish a cooperative
• To discuss and approve the draft “Charter of the Cooperative” in accordance with the law and the specifics of its activities
• To elect and approve the board of directors and members of the supervisory board
• Keep minutes of the meeting

Three basic principles that express the nature of a cooperative

• In the sense that those who invest and finance a cooperative receive the services of the cooperative, the CUSTOMER-OWNER
• Cooperative members or service recipients monitor, inspect and coordinate the activities of the cooperative. CONSUMER-CONTROLLER
• CONSUMER-BENEFITS by distributing income and profits to the members of the cooperative

The cooperative's guidelines are the guidelines used to guide the cooperative's values in its operations. The International Cooperative Alliance adopted seven basic principles of cooperatives at its 1995 Congress.

The goals of an organization can be expressed in terms of its existence. Therefore, the purpose of the organization is the same as its general purpose. Simply put, why does this organization exist in the end?

Why are the goals of a cooperative different from those of other businesses?

A cooperative is an organization based on a group of people, that is, a group of people working together to set goals for what they cannot do one by one. Thanks to this organization, people help themselves to earn more money or get the services they need.

If the market was perfect and many traders did not compete with each other, there would be no need for cooperatives

Founder's introductory meeting

It is important to have an introductory meeting to decide whether future cooperative members are really interested in starting a cooperative.

The initiative group should select a leader from among themselves to organize the meeting and work out the agenda. These include:

• What are the common problems? How to solve them?
• Members' financial and service obligations
• Cooperative organization, etc.

Establish a second working group of founders

• We will study the possibility of establishing a cooperative
• Get advice
• Explore the needs of members to develop business-appropriate ideas
• Develop a draft charter

Hold a founding meeting

From the founding meeting:

• Establish a cooperative
• Concluding an agreement to establish a CSC
• Discuss and approve the rules
• Establish a Board of Directors and a Supervisory Board in accordance with the Charter
• Election of the Chairman of the Board (Cooperative) and the Chairman of the Supervisory Board

Register as a legal entity and get a certificate stamp

The legal period is 10 working days

Hold a board meeting:

From the Board meeting:

• Member recruitment procedure                         
• Rules of procedure of the board
• Procedures of the Supervisory Board
• Percentage Funding procedure
• Cooperative reserve fund regulations
• Procedure for granting a price difference for the sale of raw materials
• Profit distribution procedure
• Procedures for rewarding and leading members

Develop a sustainable and efficient business plan

Hold an all-members meeting

Approve the BUSINESS PLAN

Start a herder primary cooperative

Cooperatives have the following types of activities. These include:

Raw material processing cooperative.

To protect and improve the quality of wool, cashmere, hides, skins, game and natural resources collected by its members through private livestock production, hunting and use of natural resources (sorting of wool and cashmere by color and type, salting of hides and skins, supply of hunting skins, pickling of mushrooms, etc.). It is more suitable for working in rural areas.

Production cooperative

It produces consumer goods and sells them to its members and to the market. Such cooperatives provide two types of services to their members. First: to provide the necessary things, and second: to provide jobs.

 Supply and procurement cooperative

It is a cooperative established for the purpose of obtaining the necessary goods, materials, items and equipment through the market. In our context, we will focus on the supply of consumer goods, small industrial equipment, butter, salt, chemicals, construction materials and tools.

Sales cooperative

This includes a cooperative that sells its own products and its members' personal products (livestock, meat, wool, cashmere, hides, skins, raw materials, milk, butter, goods, etc.) at market prices. We have the widest range of operations in Mongolia.

Service cooperative

It is a cooperative that provides its members with services such as hairdressing, photography, hotel, dry cleaning, laundry, transportation, hot water, shoe repair, and tailoring. The largest number of such cooperatives is in Ulaanbaatar, Darkhan and Erdenet. There is a great need in soums and rural areas.

Construction and housing construction and renovation cooperative

It will build new buildings and renovate old buildings with the participation of its members in accordance with the orders of its founders. This has the advantage of being comparable to that performed by a large construction company.

Consumer cooperatives

A consumer cooperative shall provide its members with consumer goods, materials and items, and sell its products, primary and secondary raw materials in the market. The main features of this cooperative are:

Members are not required to participate in the work of the cooperative in person, but must receive the services of the cooperative.

In addition to providing these services, the cooperative also provides services to non-members and distributes the profits to its members.

This type is the first type of cooperative in Mongolia.

Agricultural cooperative

Forms of cooperatives engaged in livestock production, veterinary services and agriculture based on the share capital of their members. In some ways, it seems to overlap with production and service cooperatives, but it should be emphasized in the Mongolian context. Mongolian herders have a lot of experience with this type of cooperative. Depending on the type of activity, they are called Farmers', Vegetables' and Herders' Cooperatives.

Savings and credit cooperatives

A cooperative established to receive credit and savings services. Provides loans and financial services based on members' equity and savings. This is important in the current context of an incomplete banking system and relatively high interest rates.

Insurance cooperative

Although the law does not provide for such a type of cooperative, such a cooperative may be established to protect its property, health, and life from risk, to obtain reasonable compensation, and to provide adequate income in the absence of risk. It will also be set up to provide services to its members that commercial insurance companies are not interested in or cannot provide.

Mutual assistance cooperative.

Socially oriented services; for example, for the purpose of providing health care, procurement of medicines, education services, day care and recreation for its employees. This cooperative is mainly funded by service fees, so the distribution of profits takes into account the fact that the service was received first.

Multi-generation cooperative

A cooperative is considered to be a multi-generational or multi-purpose cooperative if it carries out the services and business provided by several types of cooperatives, not just one type. Examples include cooperatives that supply their members and founders with goods and materials, engage in animal husbandry and agriculture, run small businesses, provide services, provide loans, and insure.

Full cooperative

It is a select cooperative that provides all kinds of social, economic, cultural and household services to its members.

Cooperative

Cooperatives may establish joint ventures with other cooperatives and legal entities for the purpose of conducting joint business activities. The law stipulates that at least 51 percent of the members of a cooperative must be a cooperative.

Advantages of establishing a cooperative

• Problems that cannot be solved by one person are solved together
• People with the same suffering and need have the same interests and can work together
• The principle of "one for all, all for one" is implemented
• Citizens join cooperatives to help themselves. Cooperatives are formed to help their members
• The law does not specify the amount of cash and assets required to establish a cooperative, so many people with less money can participate.
• A person who is unable to provide money and possessions can earn money by combining his efforts
• One member has one vote, regardless of the amount of property contributed to the cooperative
• Because each member manages the cooperative together, the principle of self-governance applies
• Regardless of the amount of investment in the cooperative, each member has the right to monitor the activities of the cooperative on an equal basis
• Regardless of the amount of investment in the cooperative, each member is fair and liable.
• Its ability to adapt more quickly to meet specific local needs that cannot be addressed nationally allows it to compete successfully in the local market.
• Compactness allows you to flexibly change the direction of your business
• There is a lot of opportunity to work profitably because of the low tax rate
• Each member develops himself in order to manage the cooperative well and make it profitable. In this sense, the cooperative always pays attention to improving the knowledge and skills of its members

Weaknesses of the cooperative

• Assets are limited
• There may be a lack of management
• The rights of some members may be restricted at times
• Responsible for compensation
• It takes time to make a decision
• A quarterly balance sheet is prepared
• There is a taxpayer