Cooperatives: Defining the movement

Ghaz Ghazali

Should you ask any Malaysian, aged between 30 and 40, about cooperatives – or ‘koperasi’ in Malay – many would associate the word with the place for students to buy exercise books and stationeries at very low prices.

While sounding very nostalgic to most of us, the school cooperatives do exemplify the most rudimentary form of business.

FROM THE BOOKS: A store assistant arranges exercise books at a secondary school’s cooperative shop. This shop – one amongst many in schools nationwide – exemplifies the most rudimentary form of the cooperative business. — Bernama photo

“It is not very much different. It is exactly how a cooperative is managed on a micro-scale,” said Noor Zeeta Mohd Ramli, director of Co-operative College of Malaysia (MKM) – Sarawak branch when met by BizHive Weekly in an interview.

In definition, a cooperative is basically an association or organisation formed by a group of individuals who share the same ultimate aspiration, namely towards mutual welfare of its members.

While it is a form of business that expects returns from its activities, the body itself is not solely profit-oriented.

“The very nature of it being set up by like-minded individuals with the same aim sets cooperatives apart from normal businesses. First and foremost, a cooperative is formed primarily for the benefits of its members,” explained Noor Zeeta.

Administered democratically, a cooperative can have between six to 15 individuals to sit on its board membership. Membership count, however, is subject to one cooperative’s own set of inhouse laws; although the Cooperatives Commission of Malaysia (SKM) – the nation’s overseeing body for cooperatives – does not set any limit.

OPTIMISTIC GOAL: Cooperatives Commission of Malaysia (SKM) – the nation’s overseeing body for cooperatives – targets to collect RM24 billion in business returns by year-end from economic activities carried out nationwide.

How it began?

Initially, the cooperative movement was introduced in the then-known Malaya by the British colonial government in 1909. It took root in 1922 in response to rural problems relating to credit and indebtness, according to University of Malaya’s former deputy vice-chancellor LJ Fredericks in his 1973 publication ‘Cooperative Structure and Government Policy in Malaysia’ for the Institution for Economics On Statistic.

Fredericks further outlined in the book that the earliest societies to be formed were rural credit societies for the peasants, farmers and fishermen – with the thinking that these societies would help to eliminate exploitative middlemen credit sources. Apart from the establishments of credit societies, efforts were also directed at forming marketing societies in 1930.

In urban areas, there was the development of the ‘Thrift and Loan Societies’ particularly for government servants; and later the demand for consumer societies.

In the post-World War II period, cooperatives remained preoccupied with indebtedness, although there were changes in the colonial policy towards the role of the movement. The creation of the Rural and Industrial Development Authority (Rida) in 1950 – which was later expanded into Majlis Amanah Rakyat (Mara) – helped to facilitate this objective.

Moving forward, the cooperative expansion into marketing societies grew from six in 1947, to 257 in 1956; whilst for the consumer society in 1956, it was 239 from only seven in 1947, according to an International Labour Organisation (ILO) report released in 1958.

Archival data from MKM showed that by 1956, a total of 2,123 cooperatives were registered in Malaya, with a membership of 240,301 individuals.

Today, cooperatives in Malaysia, as a whole, is worth RM21 billion in annual turnover, according to latest data from overseeing body SKM.

Addressing challenges

Nevertheless, the movement’s contribution to the nation’s gross domestic product (GDP) is still marginal.

According to MKM director-general Idris Ismail, cooperatives only contributed about one per cent to total gross domestic product (GDP) in 2010. In comparison, co-operatives in Switzerland and France contributed around 16 and nine per cent, respectively, to GDP.

“Even our fellow Asean member Vietnam derives 8.6 per cent of its GDP from cooperatives. As such, our co-operators should be more agressive and proactive to expand their contributions to the nation’s economy,” he stressed in a recent speech.

In her view, Noor Zeeta described the situation as a ‘paradox dilemma’.

“We simply don’t have the urgency to set up cooperatives towards a common goal. Obviously, we can say that our economy is stable enough for us to not be dependent to cooperatives, unlike developing Vietnam.

“Seeing this, we’re actually a bit complacent,” she stated.

Cooperatives — reloaded

Nonetheless, it would get a full recharge this year, beginning with SKM’s target to collect RM24 billion in business returns by year-end from economic activities carried out nationwide.

As commission’s executive chairman Datuk Md Yusof Samsudin said, it should be a realistic goal.

“To date, cooperatives’ economic activities have generated RM21 billion. A bulk of it is derived from the big cooperatives, with an annual turnover of more than RM5 million. Many of the cooperatives are engaged in the plantation, housing, transport and food processing business,” he pointed out.

On MKM’s sideview, Idris urged cooperative players to be bold towards exploring various fields, at the same time taking calculated risks to create new opportunities as well as jobs prospects. Under the National Cooperatives Model 2011-2020, the government has underscored the role of entrepreneurial culture, as well as the importance of creating and reinforcing human capital with any cooperative operation.

“Only with such capabilities can the sector be thriving. We aim to make co-operatives as vital a sector on par with both the private and public sectors going forward,” he said.

All said, a target would be pointless without any implementation. Thus, this is where MKM comes into play.

COOPERATIVE UNITED: (From left) Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Ismail Sabri Yaakob, together with his deputies Datuk Tan Lian Hoe dan Datuk Rohani Abdul Karim showcase COOP 1M-branded products after launching the ‘Cooperative Directory’ book in Kuala Lumpur. Seen on far right is SKM’s executive chairman Datuk Md Yusof Samsudin. — Bernama photo

The early years

Originally planned in 1948 but only established in November 1956, MKM – then known as the ‘Cooperative College of Malaya’ – could only accommmodate 36 in-campus participants at the time. During its first year, the institute offered only three programmes namely the cooperative officer’s course, cooperative supervisor’s course and rural cooperative leadership course.

In 1958, a number of new courses were introduced that catered for both Bumiputera and non-Bumiputera cooperatives, as well as the consumer societies. Most notably, the institute also conducted programmes specially-tailored for women – signifying its role towards the socio-economic betterment of the post-war community then.

Fifty-five years later, the movement has grown to become a recognised institution dedicated towards endorsing the development of cooperatives in the country – offering not only accreditated certificate-level programmes but also undergraduate degree programmes.

In East Malaysia, MKM established its first branch in Kota Kinabalu in 1997, before setting up one in Kuching in 1998. Currently, it has seven branches nationwide.

East Malaysian story

“In Sarawak, we already have our existing Certificate in Cooperative Management Programme for our in-campus participants. For 2012, we are going to undertake the effort to have this course being conducted via online through our long-distance learning (PJJ) programme,” said MKM Sarawak’s Noor Zeeta. “As such, geographical and location factors will not be the obstacles for future participants to enrol for MKM programmes.”

Apart from the certificate courses, MKM Sarawak’s diploma programmes have also included its Diploma in Cooperative Management and Diploma in Professional Auditing for Cooperatives, both certified by the Malaysian Qualifications Agency and Public Service Department, making both recognised by any institute of higher learning in the country.

On degree programmes, the college tied up with Universiti Utara Malaysia (UUM) to conduct its Bachelor in Business Administration, with a major in Cooperative Management.

“However, our masters’ programme is still in the blueprint,” disclosed Noor Zeeta. “It is our aim to produce able and employable graduates for the industry.”

For this year, MKM would be eyeing an intake of 3,020 participants for both in- and out-campus programmes in its Sarawak branch, and 2,655 participants in its Sabah college.

“While these numbers seem ambitious, MKM’s aim has always been on producing quality graduates – not just quantity,” added Noor Zeeta.

Viable venture On the subject of graduates, Noor Zeeta believed that setting up a cooperative could be the most viable career option for unemployed youngsters, especially university graduates.

“It’s very obvious – graduates are the winners. A cooperative doesn’t need a monumental capital, making it a good platform for these youngsters to work together and venture into a business line that is less risky.

“Moreover, it can be in any industry under the sky; those from the IT field can provide IT-related services, those with business background can set up a mini-coop store providing retail items as well as services like laundry-cleaning, photostating and design services. All they need to do is register with SKM under the Cooperative Act 1993, which can be done either at the counter, by phone or even via online.

“From where I see it; where there’s a will, there’s a way. It’s just a matter of whether one wants to do it, or not,” she underlined.

Overcoming obstacles

While only contributing about one per cent of the country’s GDP, the cooperative’s very characteristic as a socio-economic-oriented enterprise makes it one of the most viable businesses one can venture into.

Out of the country’s over 8,100 cooperatives, about 729 are from Sarawak, constituting a membership of 350,000 individuals with shares worth RM150 million and accumulated assets worth RM351 million. In Sabah, around 728 state-registered cooperatives have generated RM222 million in revenues, or about 2.3 per cent of total revenues reaped by cooperatives nationwide.

Moreover, the cooperative sector has been identified by the government to be developed as one of the major earners in the country, with an aim towards increasing its contribution to five per cent to the GDP by next year, and 10 per cent by 2020.

Nonetheless, it would take more than a set of comprehensive courses along with government’s endorsements and targets to make the sector more vibrant, said Noor Zeeta.

“You have the most favourable setting: stable economy, national growth agenda, government support, and good policies; but it will not work without planning – most crucially, succession planning,” she pointed out.

Noting that most of the co-operators comprised mainly from the older generation while seeing a lack of interest amongst the youngsters, Noor Zeeta underscore the need to change the circumstance towards achieving the target for 2020.

“The succession plan is a two-way effort: getting ready to hand over the cooperative to capable successors and at the same time, encouraging more youngsters to be involved in cooperatives.

“Both have to be flexible. New bloods have to take over the older ones. Both sides have to flexible enough to undertake changes and challenges. W e want the cooperative board members to also consist of these young talents; rather than just being cooperative members. Thus, the senior members have this responsibility on their shoulders to groom these youngsters.”

Another challenge would be the great need for change in attitude and mentality which according to Noor Zeeta, would require a major paradigm shift.

“Great people talk about ideas and making them work. Small people, on the other hand, talk about other people,” she said. “Cooperatives, just as any other businesses, can become successful.

“In saying this, society should dispel the ‘subsidy mindset’. Of course, assistance and support are abound, but one has to work and earn for it; rather than relying on it. We have to move with the times.”

The competitive factor

Stating that in the era of ‘google-lisation’ where everything could be reached at the touch of the fingertips, Noor Zeeta stressed that business players had to be competitive  – even more so for co-operators.

“Nothing should be left for granted. While it is not profit-oriented, a cooperative needs turnovers to be able to distribute the benefits to members; hence, the need of a competent and capable management team. The name ‘cooperative’ itself doesn’t warrant it to become a ‘one-man show’.”

Taking examples of cooperatives in countries such as India and Canada, Noor Zeeta noticed that many of the board members encouraged and train their children to manage cooperatives.

“These cooperative board members even sponsor scholarships for their children, in the hope that they may take over the management when the timing is right. Just as a full-fledged business operation, a cooperative must have professionals running it,” she said.

What’s next?

Reinforcing the need for the younger population to fully understand cooperatives and its function as a business operation, Noor Zeeta believed that the whole generation should  see the industry from a  ‘helicopter’s view’.

She strongly believed that rather than waiting for jobs to come knocking at the doors, youngsters and graduates should take a look at setting up cooperatives, which could work both as a career and a continuous learning process.

“Business is still the best opportunity. Even in Islam, it is said that nine-tenth of ‘rezeki’ (sustenance) derives from businesses,”  she highlighted.

“With the business world being  a playground, anyone in it is a player. As such, you have to play the game competitively. But unlike any game, there’s plenty of room for winners, especially for co-operators.

“So long as you’re 18 years old and above Malaysian,” she quipped.

Cooperative movement gains global recognition via ICY 2012

ON October 31 last year, the United Nations (UN) proclaimed year 2012 as the International Year of Co-operatives (IYC) with a theme of ‘Co-operative Enterprises Build A Better World’.

The declaration entailed a UN resolution on the role of co-operatives in social development, of which the global body’s member states approved the resolution on Dec 18, 2009 during the 64th session of the UN General Assembly.

Dame Pauline Green

International Co-operative Alliance’s (ICA) president Dame Pauline Green commended the resolution towards recognising cooperatives as a business model which could serve as a major factor of economic and social development, as well as promoting the fullest possible participation in the economic and social development of people in both the developed and developing world – and that, in particular, cooperatives could contribute to the eradication of poverty.

Green, who is the first-ever woman president of the apex body for global cooperatives, assed that the resolution would also encourage all governments to create a more supportive environment for cooperative development, particularly with regards to securing finances for capacity-building.

“The IYC 2012 is a well-timed event that represents the depth of understanding of the entire co-operative movement,” she underlined. “The cooperative model is a better choice, and offers the basis for a more sustainable way to do business when compared to traditional capitalist models now under scrutiny.”

Marking the significance of the resolution, ICA had launched a new initiative late last year, designed to provide much needed finance to cooperatives in developing countries.

The Global Development Co-operative (GDC) would be slated towards supporting cooperative businesses in developing countries by raising US$50 million for the provision of access to low-cost loans for capital and infrastructure projects. It would target those with an interest in international development, as well as extending the reach and benefits of the co-operative model.

GDC has been developed by the UK’s The Co-operative Bank – part of the world’s largest consumer cooperative – and the ICA. The bank had devised the initiative as part of its parent’s – the Co-operative Group – pioneering ‘Ethical Plan’, a three-year rolling programme that would set out goals and targets to drive its ethical and cooperative aspirations. It would also provide administrative support to the GDC.

The GDC was unveiled at a special ceremony in New York in November for leaders from many of the largest 300 cooperatives in the world, organised by the ICA.

Amongst those who had already pledged their financial support for the initiative include the All China Federation of Supply and Marketing Co-operatives, Credit Cooperatif of France, Finlands’ SOK Corporation from Finland, the Indian Farmers Fertiliser Cooperative Ltd of India and Mid-Counties Co-operative.

In her view, Green added, “This initiative is a clear illustration of one of the founding principles of the movement – self-help amongst co-operatives.

“It will ensure that a positive and long-lasting legacy will remain from the  IYC, helping thousands of co-operators in the developing world. It will also continue our work to develop sustainable member-owned enterprises and embed civil society across the globe.”

The IYC 2012, as declared by the UN, would also strive towards drawing attention to major issues and encourage action; at the same time, raising awareness of cooperatives, seeking ways to leverage their contribution to socio-economic development and fostering more supportive regulatory frameworks. To date, the cooperative sector is estimated to have over one billion members in over 100 countries.

“This is why cooperatives have been resilient during the global financial crisis, employing over 100 million people worldwide, as well as enabling the development and welfare of societies in the most competitive economies,” underscored Green.

Bank Rakyat: Bank for the people

Bank Kerjasama Rakyat Malaysia Bhd (Bank Rakyat) was established in September 1954 under the Cooperative Ordinance 1948 under the name Bank Kerjasama Malaysia Bhd, following an expansion of the cooperative movement in Peninsular Malaysia in which cooperatives set up respective union banks to provide financial needs to their members.

On Sept 28, 1954, 11 of these union banks decided to merge and form Bank Agong (Apex Bank). In 1967, Bank Rakyat replaced Bank Agong with its membership opened not only to the cooperatives, but also to individuals. On Jan 6, 1973, the word ‘rakyat’ – which means ‘the people’ was added to the bank’s name, giving rise to its popularity.  In 1993, the Cooperative Act was reviewed, which allowed the bank to operate in Sabah and Sarawak. In May the same year, Bank Rakyat took a giant step towards becoming a syariah cooperative bank by introducing Islamic banking products. It became a full-fledged Islamic cooperative bank in 2002.

With this landmark decision, Bank Rakyat became the third bank to offer total Islamic banking products in the country.

To date, Bank Rakyat has a total of 134 branches offering Islamic banking facilities to its customers. It is expected to record a pre-tax profit of RM1.85 billion for 2011 as well as a net profit to rise of RM1.45 billion.


Koperasi Green Sabah: Sabah’s ‘green’ cooperative

Koperasi Green Sabah Bhd (Koperasi Green Sabah) was registered as The Green Cooperative Society Ltd upon apporval by Colin Clarkson, Registrar Of Co-operative Societies in North Borneo on Aug 18, 1959. At first, there was no member registered except a pro-tem council that was established only as a requirement to set up the cooperative. It was only on April 5, 1972 that it had enlisted 153 members.

At first, the cooperative had a very slow start. It was not until it ventured into a number of key undertakings – namely its involvement in the Taman Rimba Housing Development, partnership with ExxonMobil Borneo to set up Esso gas stations in the state, and the establishment of an oil palm plantation subsidiary Syarikat Green Ladang Sdn Bhd – that it grew to become one of Sabah’s most progressive cooperatives.

Today, Koperasi Green Sabah has more than 1,737 registered members. For the financial year ended June 30, 2010, it accummulated some RM8.297 million in dividends returns.

Angkasa: The national apex movement

Angkatan Koperasi Kebangsaan Malaysia Bhd (Angkasa) is an apex cooperative that acts as the umbrella for elementary, primary and secondary cooperatives in the country. The body was founded by the the Cooperative Movement through the First Cooperative Congress in 1966 dan Second Cooperative Congress in 1971. It was officially registered on May 12, 1971.  While many associate Angkasa as the key provider of salary-deduction services to mostly public sector employees, it also offers educational, consultation and training services as well as granting loans under a list of schemes.

To date, Angkasa oversees more than 7,688 cooperatives in the country, comprising over seven million members. As of June 30, 2010, it generated dividend returns of some RM80.468 million.


Koperasi Tentera: Service for the nation

Koperasi Angkatan Tentera Malaysia Bhd (Koperasi Tentera) was established in November 1960, with an initial function as a thrift and loan cooperative. Fifteen years afterwards on November 1, the army cooperative diversified into becoming a multi-purpose cooperative as it ventured into new business programmes in line with the nation’s economic agenda.  It strode further in 1981, with new focus in investment of related commercial activities, eventually making Koperasi Tentera the strong, energetic business entity as it is today.

As of August 31 last year, Koperasi Tentera recorded a total of 145,335 registered members. Financial-wise, it registered a pre-tax profit of RM159 million in 2010 against RM136 million in the previous year.

Operational turnover for 2010 was RM250.6 million, an increase of 15.4 per cent or RM33.5 million year-on-year.

Ko-Perkasa: Showing strength in numbers

Koperasi Koperkasa Sarawak Bhd (Ko-Perkasa) was set up on Sept 6, 1949 with a membership of 124 individuals. Known then as the Sarawak  Government Employess Co-operatives Thrift and Loan Society Ltd (SGECOP), it changed its name to Koperasi Pekerja-pekerja Kerajaan Sarawak Bhd in 1979 before going for Koperasi Koperkasa Bhd in 1988. The word ‘Sarawak’ was later added into the moniker in 2009.

In 2010, Ko-Perkasa owned asset worth around RM151 million, which was around half of total worth in cooperatives’ assets statewide.

A major portion of these assets comprised 24 units of Ko-Perkasa’s premises across Sarawak.

As the namesake implies, Ko-Perkasa’s membership had been exclusive only to employees of Sarawak’s state government and statutory bodies before being extended to the private sector.

Only recently, the cooperative opened its membership to those working in Peninsular Malaysia and Sabah.

To date, its membership has reached to about 24,000 people.

 In 2010, Ko-Perkasa’s net profit was RM6.62 million.