The Philippine Cooperative Movement: Problems and Prospects

The Philippine Cooperative Movement:

Problems and Prospects (1986 – present)

by Prof. Jorge V. Sibal

 

Introduction

The Philippines, despite its positive prospects in economic development, continues to be confronted with the problems of poverty and income inequality. Income inequality comes in two dimensions– the inequality among classes (or the poor becoming poorer and the rich becoming richer) and inequality among regions (or the poor regions are being left behind by the fast paced development of the richer urbanized regions). (Ong, 1991)

People empowerment is the correct path in solving these twin problems of poverty and income inequity. According to Horacio Morales, empowerment is “a long-term process of transferring economic and social power from one center to another and/or the creation of a new center of socio-economic power complementary to or in competition with the traditional center” Jo Anne C. Barce (1995) added that (people) empowerment enables the transfer of “social, economic as well as political power from one class to another or from one region to another which could result to reconfiguration of people and geography”.

Cooperatives and other labor enterprises are among the major pillars of the people empowerment movement (Sibal, 1991). This empowerment movement, which is now known as the civil society movement, aspires for a strong pro-people mixed economic society where the state, private and civil society sectors are cooperatively harnessed in the development efforts of the society.

 

Brief History of the Philippine Cooperative Movement

The history of the cooperative movement in thePhilippinescan be divided into 3 stages (Sibal, 2001).

The first stage, from 1896 to 1941, is characterized by the aborted germination of coops by some revolutionary illustrados (or the pre-formation period), the introduction and endogenization of the Raiffeisen-type agri-based coops by American missionaries and teachers and western-educated Filipinos which featured the principles of self-help and self-reliance (or the formation period), and the introduction of state-initiated farmers coops by the American colonial administrators.

The second stage is from 1941 to 1986. This stage can be subdivided into 5 phases. The first phase is the period of Japanese occupation which featured a rapid increase in cooperatives as a result of food shortages. The second phase is the period of rehabilitation period after the 2nd World War. The third phase is the resurgence of the state-initiated coops while the fourth phase is the introduction and rise of the non-agricultural coops. The fifth and final phase is the martial law period and the “politization” of the coop movement.

The third stage of the Philippine coop movement is from 1986 to the present. The coop movement emerged as a potent political force as it allies with the NGO and trade union movements in pursuing the goals of people empowerment and the strengthening the country’s civil society sector. During the 1998 party list elections, the coop movement elected 3 sectoral representatives of the marginalized and underrepresented Filipinos. In 2010, the coop sector has 5 Party list representatives in the Philippine Congress. The various cooperative laws were codified under RA 6938 in 1990 and amended by RA 9520 in 2009.

Despite the cooperative movement’s active involvement in parliamentary struggle, it has avoided “politization” and too much state intervention under the principle of subsidiarity. The country’s operating cooperatives increased by 393 percent from 1983 to 1993, and by 540 percent from 1993 to 2009. The coops’ businesses shifted to higher value added multi-purpose coops and its total assets leaped from a measly P1.05 Billion in 1985 to P176 Billion in 2009. The movement’s contribution to the country’s GDP has reached 5.14 percent in 2007.

The moderate economic growth of the Philippine economy from 1986 to the present is at par with the ASEAN growth rate. However, the country’s performance in poverty reduction lagged behind. Thus, the focus of President PNoy Aquino’s Philippine Development Plan is an “inclusive growth” strategy. “Inclusive growth” means active participation of the citizenry in the creation of the country’s growth and at the same time a major beneficiary from the said growth (ILO, 2010). It is focused in maximizing job creation in reducing poverty. Hence, the role of the cooperative sector is a vital component in this national endeavor.

This paper will focus on the problem and prospects of the Philippine Cooperative movement in its third stage starting in 1986.

 

The Cory Aquino Presidency (1986-1992)

The 21-years of Marcos regime ended abruptly with a bloodless people-powered revolution in February 1986 (known as EDSA 1) which paved way to the revolutionary government of President Corazon C. Aquino. The downfall of the Marcos regime was caused by several factors. Among them were the massive graft and corruption in the government due to business cronism and a very serious debt crisis, widespread human rights abuses, suppression of labor rights and the failure of the land reform and cooperative programs in solving the widespread poverty of the people. Instrumental to the downfall of the Marcos government were the numerous non-government organizations (NGOs), the cause-oriented organizations and the Reform the Armed Forces Movement (RAM) within the military establishment which tried to launch an aborted coup.

The NGOs have sprouted prior to and during the Cory Aquino administration and their numbers reached to about 20,000 nationwide with 17,000 reportedly registered with the Securities and Exchange Commission (SEC). These NGOs include civic organizations, professional groups, foundations, political groups, cause-oriented groups, trade unions, government-initiated organizations and other groups that were non-profit and non-government agencies.

According to Araceli Gonzales, the NGO bloc within the Cory Aquino government has shown that neither the state sector nor the formal (private) sector of the economy was really genuinely concerned with the alleviation of mass poverty.  The NGOs therefore have to address the poverty and powerlessness of the majority of the people as their principal mission.

The cooperative movement had established long relationship with the NGO and trade union movements. Both movements are listed as among the major pillars of the civil society movement. Ignacio Borja (1996) narrated his observations:

The NGOs were established during the dark days of the dictatorship.

            While they emphasize education for the oppressed, they find the coop concept

            an inseparable component of sustainable development. They assisted groups

            which were popularly known as people’s organizations (P0s). POs were also

            asking for the knowledge and ways of cooperativism. The commitment to

            develop the POs as self-reliant future partners compelled the NGOs to develop

            them as coops despite the NGOs strong aberrations against anything that will

            lead POs to be materialistic, capitalistic and money-greedy which in many cases,

            undermined the socio-political orientation they initiated in the group”.

The 1987 Constitution under President Cory Aquino was cooperative-friendly but it avoided the past mistake in organizing state-initiated cooperatives for political and anti-insurgency purposes. Article XII, Section 15 of the 1987 Constitution provided for the promotion of growth and viability of cooperatives as instruments of equity, social justice and economic development under the principles of subsidiarity and self-help. The government recognized that cooperatives are self-governing entities which shall initiate and regulate their own affairs to include education, training, research and other support services with the government giving assistance when necessary.

The Constitutional provisions on cooperatives were operationalized onMarch 10, 1990with the enactment of RA 6938 (Cooperative Code of thePhilippines) and RA 6939 (Cooperative Development Authority Act). The CDA took over the functions of the Bureau of Cooperative Development (BCOD) of the Department of Agriculture. It was placed under the Office of the President and is headed by a chairman and 6 administrators. As the lead agency, the CDA was tasked to coordinate the efforts of other government branches, subdivisions, instrumentalities and agencies in providing technical guidance, financial assistance and other services to cooperatives.

President Cory Aquino’s cooperative development program learned from the past failures of excessive government loans or credit support to cooperatives as in the Farmers’ Cooperative Marketing (FACOMA) and the Samahang Nayon (SN). Through the KABISIG programs, government did not engage in organizing cooperatives. Instead, government agencies channeled their development programs through the network of coops, NGOs and POs especially in food distribution, family planning, barrio facilities and livelihood projects. Partnering with a coop, for example, delivers to more constituents the services of government at least cost.

 

President Ramos’ People Empowerment Goals and the Civil Society (1992-1998)

The administration of Pres. Fidel V. Ramos formulated a vision of human development and global competitiveness based on the principle of people empowerment. It continued the cooperative development program of the Cory Aquino administration. Executive Order Nos. 95 and 96 were issued by President Ramos onJune 8, 1993in order to enhance the coordination efforts in creating a conducive environment in cooperative development among all government agencies including the local government units (LGUs) and the establishment of cooperative development councils in national, regional, city or municipal levels.

Under the Local Government Code of 1991 (RA 7160), the local development councils at levels of LGUs were operationalized which gave the coops, NGOs and POs the opportunity to actively participate in local governance. This gave rise to the new concept of the partnership of the government, private and civil society sectors in the development efforts of society. It was observed that the coop movement, together with the NGOs and POs emerged as the country’s third sector (civil society). The coop movement is the “largest socio-economic institution in the country. It has a total membership of 3.2 million and 19.2 million family beneficiaries” (Braid, 1993).

As ofAugust 31, 1993, there were a total of 25,125 registered cooperatives which signified a tremendous increase of 7.5 times from 1985. The total number of cooperatives confirmed was 4,495 or 17.8 percent of the total registered. This signified that there were still a large number (more than 80 percent) of failed or unviable cooperatives. However, the confirmed coops which were viable coops grew rapidly since the total assets of the coop movement leaped from a measly P1.05 Billion in 1985 to P118.4 Billion in 1995, and to P176 Billion in 2009 (Table 1).

 

Table 1. Philippine Cooperatives, 1939-2009

Year 1939 1969 1977 1980 1985 1993 2009
Number 570 1,530 1,897 2,941 3,350 25,125 78,611
No. (Confirmed) 1,142   4,494 23,836
Membership (000s) 105    555    460    223    337 3,200   5,856*
Assets (million)     3.4      30    129    280 1,503 118,400 176,020
Capital (million) n.a. n.a.    129    194    627
Sources: 1939-1985- Gray Wine Think Tank, 1993- CDA, 2009- CDA & DOF
*1993 (Braid) & 2009 membership covers only confirmed coops

 

As shown in Table 2, the increase in the number of confirmed and successful coops were in multipurpose coops at 8,107 percent, credit coops at 185 percent, service at 514 percent, marketing at 184 percent, and producers at 181 percent. Coops that declined in numbers were in consumers and area marketing.

Agricultural multipurpose coops became the biggest type at 2,189 or 48 percent of the total number of confirmed coops, credit coops at 24 percent, non-agricultural multipurpose coops at 7 percent, consumers at 6 percent, service at 4 percent, and producers at 3.6 percent. The data show that the coops’ businesses shifted from credit to the more high value added multipurpose coops.

 

Table 2- Statistical Information of All Types of Cooperatives (1985 and 1993)

1985 BCOD 1993CDA %Increase/(Decrease)
Total Registered 3,350 25,125 750
Samahang Nayon (SN) 4,496     –      –
No. of Reporting/Confirmed Coops 1,142 4,494 393.5
  • Credit Coops
   592 1,095 184.9
  • Consumers
   305    290 (   4.9)
  • Producers
     65    118 181.5
  • Marketing
     87    160 183.9
  • Service
     35    180 514.2
  • Multipurpose (agri)
     27 2,189 8,107.4
  • Multipurpose (non-agri)
   –    334     –
  • Area Marketing
     17      16 (   5.8)
  • Coop Bank
     29      29      0
  • Coop Federation
   –      40    –
  • CoopUnion
     43    –
Sources of Data: BCOD and CDA

 

In August 1993, President Cory Aquino initiated the establishment of the Institute for People Power and Development (IPPD) to encourage strategic planning and economic integration among coops. IPPD engaged in various coop research projects nationwide and it organized its first Strategic Planning andResearchCenterfor Coops (SPARCC) in Davao City.

Teresita Coloma (1996) of CDA summed up the accomplishments of the cooperative movement after the EDSA Revolution:

“If national development indicators mean among otherst GDP xxx and the assets acquired, then the cooperative sector has made its share to the national economy, maybe not of much significance yet, but definitely the fastest growing sector to contend with as indicated by its growth rate of 700 percent over the four years (4,000 to 35,000 registered from 1990 to 1994) and the GDP contribution from July 1994 to July 1995 in the amount of P141.3 Billion. xxx  In terms of individual taxes paid by the cooperative sector to the government less subsidies by way of tax exemptions, mid-1995 placed the figures as P5.3 Billion. As to the capital formation among cooperatives, 1995 saw a 9 percent or P30.49 Billion contribution while personal consumption also accounted 9 percent or P97.14 Billion contribution”.

One recent positive move in trying to solve this perennial problem of lack of education was the founding of the National Association of Cooperative Education (NACE) in 1996. Through NACE, regional, provincial, municipal and even barangay chapters were targeted to be organized in order to promote coop education and training at the provincial and grassroots levels. At the core of the NACE is the CDA and all its regional branches, all state colleges and universities, coop and NGO training centers, coop federations, councils and unions, LGU provincial/municipal coop development offices and the various government organizations and agencies like the Departments of Agriculture, Agrarian Reform, Trade and Industry, Education, Culture and Sports, Environment and Natural Resources, Science and Technology, NEDA, TESDA, CHED, NHA, TLRC, PCUP and GFIs like the Land Bank of the Philippines, GSIS, SSS, PNB, etc.

OnAugust 12, 1996, DECS Order No. 55 was issued which contained the guidelines in converting all school canteens in all primary and secondary schools into teachers coops.

In the first party list elections in the country, five coop and coop-based parties won 6 out of 13 sectoral representative seats for the marginalized and underrepresented sectors of society. These include 2 seats for APEC (Association of Philippine Electric Cooperatives) and one each for Coop Natcco Network Party, ABA(Alyansang Bayanihan ng mga Magsasaka, Manggagawang-bukid at Mangingisda), Luzon Farmers Party (Butil) and NACUSIP (National Congress of Unions in the Sugar Industry of thePhilippines).

 

The Administrations of President Estrada (1999-2000) and President Arroyo (2000-2009)

Under the short-lived Estrada administration, the National Anti-Poverty Commission (NAPC) was created under RA 8425 (Social Reform and Poverty Alleviation Act). NAPC took over the functions of the Presidential Commission to Fight Poverty, the Social Reform Council and the Presidential Council for Countryside Development. NAPC’s task is to prepare and implement an action plan to ensure the provision of houses, jobs and health assistance to the poor with the help of related government agencies. The main vehicle of the NAPC is expected to be the cooperative movement and the civil society sector.[6]

In 2003, Dr. Mannie Santiaguel (2011) reported that the coop sector has contributed P517 Billion or 12.5 percent of the country’s GDP and has provided direct and indirect jobs to at least 1.5 million people. The CDA and the Department of Finance in 2007 gave another data on the contribution of the cooperatives movement to GDP estimated at 5.14 percent (See Table 6). The CDA estimated the total assets of 23,836 cooperatives in 2009 amounted to P176.02 Billion (Table 4).

Another significant development is the success of the microfinance program which started in 1997 as a national government strategy. The Philippinesis now the second best worldwide in the microfinance business, and the leader in the Asia Pacific region. This was based on a study conducted by the Economist Intelligence Unit (EIU), the business information arm of The Economist Group that publishes The Economist.

The top 10 rankings are as follows:Peru,Philippines,Bolivia,Ghana,Pakistan,Ecuador,El Salvador,India,ColombiaandKenya. The study covered 54 countries and the evaluation criteria include regulatory framework, investment climate and level of institutional development. In terms of regulatory framework,Philippines,CambodiaandPakistanshared top position. The three Asian countries were followed byPeru,Bolivia,Ghana,Kenya,KyrgyzRepublicandUganda. In terms of institutional development, thePhilippinestopped all Asian nations at sixth overall behindBolivia,Ecuador,Peru,El Salvador, andNicaragua.

Among the factors of the country’s success in microfinancing are:

  1. The Bangko Sentral ng Pilipinas (BSP) allowed rural and thrift banks to sell authorized micro-insurance products and issued a circular for accrediting rating agencies for microfinance, which, according to the EIU, is a move to encourage local microfinance institutions to be externally rated.
  2. The BSP also issued rules on the extension of housing microfinance and eased requirements for agricultural microfinance. The entry of major commercial banks and telecommunications companies into microfinance is also seen as a contributory factor towards the advancement of the sector.
  3. The signing into law of the Credit Information Systems Act (CISA) and the subsequent approval of its implementing rules and regulations (IRR) are also positive developments.

The DOF-National Credit Council (DOF-NCC) sought to improve the state of local cooperatives by developing a supervision and examination manual, launched advocacies for cooperatives, and pushed for the RA 9520 of 2008. A standardized national strategy for microinsurance and the provisions of grants and technical assistance were formulated(Wikipedia, 2011).

In 1999, a workers cooperative started supplying manpower services which expanded to messengerial, janitorial, harvesting, sanitation, washing services, etc. The Bureau of Local Employment (BLE) reported that the initial 43 manpower cooperative contractors and subcontractors in 2002 ballooned to 255 four years after, some engaging in subcontracting businesses. Workers coops are organized by workers including self-employed who are members and owners at the same time.

Controversies arose when private manpower agencies complained unfair competition practices against these coops. Workers cooperatives claimed that they are exempt from VAT and other taxes as well as from the coverage from the Social Security System (SSS). The Supreme Court ruled in 2007 that Asiapro Cooperative, reputedly the largest workers coop is covered by the SSS and the existence of employer-employee relationship between the coop and its owner-members.

The National Confederation of Cooperatives (Natcco) was awarded three ISO Certifications on February 21, 2009  in Integrated Management Systems (ISO 9001:2000), Environmental & Health Management (ISO 14001:2004), and Occupational Health & Safety Management (OHSAS 18001:2007).

RA 9520 (Cooperative Code of 2008) amended RA 6938. It took effect onMarch 22, 2009. Among the salient features of the Cooperative Code are:

 

  1. Increased the number of types of cooperatives from six to 21. The original types include credit, consumers, producers, marketing, service and multipurpose. The new types of cooperatives include advocacy, agrarian reform, cooperative bank, dairy, education, electric, financial service, fishermen, health services, housing, insurance, transport, water service, workers and other types to be determined by the CDA.
  2. Added two additional mandated committees (mediation and conciliation, and ethics) to other mandated committees- credit, election and audit.
  3. Added a 7th cooperative principle of concern to the community and allocated not more 3 percent from the cooperative’s net surplus (Art. 4).
  4. Reduced the number of shares owned by an individual member from 20 percent to 10 percent of the total share capital of the cooperative.
  5. Additional definitions (Art. 5)
    1. Representative assembly – full membership elected by sectors, chapter or district to exercise powers delegated to them by the general assembly
    2. Officers – members of board of directors, different committees created by the GA, general manager or CEO, secretary, treasurer and members holding other positions as provided for in their bylaws
    3. Social Audit – a procedure wherein the cooperative assesses its social impact and ethical performance vis-à-vis its stated mission, vision, goals and code of social responsibility for coops.
    4. Performance Audit – refer to an audit on the efficiency and effectiveness of the cooperative as a whole, its management and officers, and its various responsibility centers…
    5. Subsidiary cooperative – any organization whose membership comes from a cooperative, organized for any other purpose different from that of, and receives technical, managerial and financial assistance from the said cooperative.
    6. Federation of cooperatives– three or more primary cooperatives, doing the same line of business
  6. The function of a coop federation should complement, augment or supplement and not conflict, compete with, nor supplant the business or economic activities of its members.
  7. Board of Directors (Articles 37, 38, 39)- Responsible for strategic planning, direction, setting and policy formulation Term shall be fixed in the coop bylaws. A term is 2 years. Prohibition against holding any other position involved in the day-to-day operations and management. Disqualification of persons engaged in business similar to the cooperative
  8. Committees and Officers (Art. 43)- Additional committees- Mediation and Conciliation, and Ethics. All officers and committee members are required to undergo trainings conducted by accredited institutions by the CDA. There shall be no compensation except for per diems. If cooperative reports a net loss for the preceding year, officers are not entitled to per diems
  9. Functions, Responsibilities and Training Requirements (Art. 44)- The functions and responsibilities of the directors, officers and committee members, as well as their training requirements shall be in accordance with the rules and regulations issued by the Authority
  10. Responsibilities of Cooperatives- Accountant/bookkeeper is responsible for maintenance and safekeeping of books of accounts. The Audit committee is responsible for continuous and periodic review of books of accounts; monitor adequacy and effectiveness of management’s control system and audit the performance of the cooperative. Audited financial statements are required to be posted in principal office
  11. Tax Treatment of Cooperatives (Art. 60, 61)- Coops are not subject to taxes and fees imposed under the National Internal Revenue Code (NIRC) and other tax laws for cooperatives transacting business with members only. Transactions with members are not subject to taxes and fees, including final tax on members’ deposits and documentary tax. Non-members will pay VAT; coop will collect and remit to BIR. Provided, finally that at least 25 percent of net surplus of coop is returned to members as interest and patronage refund. The cooperative is responsible for collection and remittance of individual withholding taxes (proper recording).
  12. Additional Privileges- Faculty cooperatives have right of first refusal in management of canteen and other services related to the operations of educational institutions. Housing agencies and financial institutions shall create a window for financing housing projects.
  13. Audit- Financial audit should be conducted by an external auditor in good standing with the Philippine Institute of Certified Public Accountants (PICPA) and accredited by Board of Accountancy. CDA. Social and performance audits may be conducted by an independent social auditor accredited by CDA.

 

Present President PNoy Aquino and the Coop Movement (2010-present)

The coop Party list groups in the Philippine Congress elected 5 Party list representatives in 2010. Elected were: Representatives Ponciano D. Payuyo of APEC; Isidro O. Lico of ATING COOP; Agapito H. Guanlao of BUTIL; and Cresente C. Paez and Jose R. Ping-ay of COOP NATCCO.

The Development Bank of the Philippines (DBP) and the National Electrification Administration (NEA) agreed last July 2011 to jointly finance capital expenditures of electric cooperatives in order to help them reduce systems loss and eventually lower cost of electricity. Electric coops registered with NEA are non-stock and non-profit coops, hence these coops cannot raise capitalization on their own. To assure the credit worthiness of the electric cooperatives, the Department of Energy (DOE) will establish a credit and governance risk rating and scoring system with the assistance of the World Bank’s Global Environment Facility (Remo, 2011).

RA 9520 provides that electric cooperatives can convert themselves into stock cooperatives provided that these cooperatives register with the CDA. Out of 119 electric cooperatives, about 12 electric cooperatives have registered with the CDA while the remaining coops stayed with the NEA.

The country’s biggest federation National Confederation of Cooperatives (NATCCO) and the second largestMindanaoAllianceSelf-HelpSocieties–SouthernPhilippinesEducationalCooperativeCenter(MASS-SPECC) have agreed to merge or consolidate by 2012. MASS-SPECC has more than 150 members and more than P350 Million assets. NATCCO has 450 members in 75 provinces and 99 cities nationwide and P1.8 Billion in assets.

NATCCO has successfully engaged in a microfinancing program called Microfinance Innovations in Cooperatives (MICOOP). It is composed of 452 member cooperatives nationwide with 1.6 million individual members. The program has opened 75 branches all over the country since it began in 2007. The partner cooperative has the option to buy out NATCCO of its shares. The MICOOP program now co-manages 51 branches, providing consultancy, monitoring, and mentoring to the branch staff..

One of MICOOP partners is the Department of Agrarian Reform (DAR) which offered multi-financial services such as loans for farm inputs, housing (repair), savings, educational and health needs. Started in 2008, the project’s aim is to transform 20 targeted cooperatives into viable intermediaries providing microfinance and bank-like financial services. A loan fund of P10 million was released to each cooperative to set up and operate the MICOOP credit facilities, while DAR released P900,000 additional fund for technical assistance to trainings and researches to hone farmers’ knowledge, skills and competencies. The provinces covered by the DAR-assisted MICOOP are in Zamboanga del Norte, Quezon, Negros Oriental, Isabela, Bohol, Occidental Mindoro, Bicol, Iloilo, Ilocos Norte, Benguet, Surigao del Sur, Agusan del Sur, Bukidnon, Romblon, Palawanand Batangas.

Bangko Sentral ng Pilipinas (BSP) issued Circular 694 on October 14, 2010 which expanded microfinancing to include “micro-credit” (providing loans), “micro-deposits” (accepting deposits)), and micro-insurance (providing “services that meet the needs of the low-income sector for risk protection and relief against distress, misfortune and other contingent events”).

Section 4 of the Circular states: “Microfinance is the provision of a broad range of financial services such as deposits, loans, payment services, money transfers and insurance products to the poor and low-income households, generally for their micro enterprises and small businesses, to enable them to raise their income levels and improve their living standards.” Targeted as main players in microfinance are cooperatives, non-government institutions and banks.

“The features include a minimum balance requirement not exceeding one hundred pesos (P100), non-applicability of dormancy charges and an average daily savings account balance not exceeding fifteen thousand pesos (P15,000)…”

The PNoy Aquino administration’s development agenda promised more region-based anti-poverty programs that include food subsidies for the poor, more support for micro enterprises and private-public partnership in infrastructure projects. President PNoy promised during the 5th anniversary of PinoyME to “consolidate the remaining credit programs for the poor under the more competent branches of government’ for more efficiency and effectiveness. He promised to “continue the revolution that my mother and others started in making entrepreneurship among the poor a strategy for poverty alleviation” (Cooperatives Philippines, 2011).

Planning Secretary Cayetano Paderanga (2011) said that the Philippine Development Plan (PDP) 2011-2016 recognized the role of cooperatives in achieving “inclusive growth” where the benefits of growth are shared by all Filipinos. He added that cooperatives help in mobilizing local savings for development in the informal financial sector.

 

“Cooperatives are highly client-responsive development-oriented organizations that nurture and promote savings at source, all for the benefit of their members and their families. We propose to strengthen cooperative development in most endeavors as a means of creating jobs and spreading wealth. And I think that there are ideas that are being spawned in the National Cooperative Movement


Among the programs pushed in the Philippine Development Plan, involving cooperatives, is the promotion of the use of alternative financial channels of credit and financing where innovative products and services are used in underserved and unserved areas of the country.

Credit, multi-purpose and rural-banking cooperatives form a sizeable number in the cooperative sector and lead in providing alternative financial products and services to their members. These meet the providential needs of members such as the financing of education plans, health maintenance and even life insurance.”

 

Cayetano encouraged the coop movement to expand to microfinance which started in 1997 as a national government strategy.

Another program resulting from RA 9520 in 2009 is the creation of an environment for efficient operations of cooperatives. Cayetano observed that the lack of effective legal framework and supervisory oversight among coops has led to the fragmentation of development efforts and a poor database on the actual performance and contribution of the cooperative sector. This was confirmed by Cooperatives Philippines (2011): “…those who prepared the PDP had no data, had no access to data on the entities who comprise some 18 percent of the total assets of the financial system and 17 percent of the economic output in 2010”.
In this context, the PDP proposes the strengthening of the regulatory functions by the CDA, particularly in setting the parameters of regulations for transparent participation and decision making in governance and operation of cooperatives. In line with the PDP, the CDA’s Thrusts and Priorities in 2010 are as follows:

 

  1. Efficient Registration and Effective Regulation of Coops
    1. Registration of cooperatives and amendments to Articles of Cooperation and By-Laws
    2. Rationalization/purging of cooperative registry
    3. Formulations of guidelines, rules and regulations, etc.
    4. Evaluation of financial statements and Cooperative Annual Performance Reports
    5. Conduct of investigation and hearing of cases involving cooperatives and adoption of ADR mechanisms
    6. Formulation and implementation of rules and regulations, policies, guidelines, standards and the conduct of supervision and examination of cooperatives’ performance per RA 9520.
  2. Promotion and development of cooperatives
    1. Standards, plans and programs on cooperative research and information
    2. Development of materials and conduct of trainings on cooperative development
    3. Development of special projects on cooperative development
    4. Linkaging with local/international bodies and institutions on coop development
    5. Establishment and enhancement of library and research facilities
    6. Crafting of 2011-2015 Philippine Cooperative Medium-Term Plan (PCMTDP)
    7. Establishment of an awards, incentives and recognition program for cooperatives
    8. Continue adoption of quality management system (ISO 9001) for cooperative registration process
    9. Continuing renovation of Central office bldg.

 

III. Assessment, Problems and Prospects of the Philippine Cooperative Movement

 

Assessment of the Third Stage of the Cooperative Movement

Among the coop milestones from 1998 to 2009, according to the CDA, are as follows:

  1. 1998- establishment of a Standard Chart of Account for Coops
  2. 2003- establishment of performance standards for coops with savings and credit operations (called COOP PESOS)
  3. 2009- adopted Manual of Rules and Regulations (MORR) for the granting of License to Operate to Savings and Credit Cooperative (SCC) and its corresponding Manual of Supervision.
  4. Others milestones like certification of some coops to international standards like ISO for primary and secondary coops, recipients of international awards in marketing and production, and conferred with Credit Union brand within Asia.

COOP NATCCO Partylist Representative Cresente C. Paez in a privilege speech in Congress in 2010 recommend to the government the following:

  1. The government’s poverty reduction strategies should help and not imperil cooperative autonomy.
  2. There should be strong partnership between cooperatives and government in providing housing and microinsurance to the poor.
  3. The possibility of ‘cooperativizing’ water districts that are marred by local politics.
  4. Government assistance in rehabilitate ailing cooperative banks and requiring these banks to merge and consolidate.
  5. Government has to formulate a strategic policy direction to transform (Agrarian Reform Communities (ARCs) into cooperative models.
  6. Government has to legislate the conversion of electric cooperatives into genuine cooperatives with share capital from members to establish true ownership and democratic governance. This should be made compulsory.

 

Accomplishments of the Coop Movement

As shown in Table 3, the total registered cooperatives increased dramatically by 7.5 times from 1985 to 1993 compared to an increase of only a little over 3 times from 1993 to 2009. The performance of cooperatives was different with the percentage increase of reporting (or operating cooperatives which increased by 3.9 times from 1985 to 1993. The increase from 1993 to 2009 was higher at 5.3 times. This means that more cooperatives are becoming viable after they are registered in 1993-2009 compared to those registered in 1985-1993.

Table 3 also shows that the increases in the number of operating cooperatives were bigger in multipurpose cooperatives at 790 percent in 2009, followed by services at 448 percent, producers at 316 percent and marketing at 235 percent. Credit was steady at 157 percent in 2009. This implies that cooperatives continue to engage in higher value production processes compared to lower value processes involved in credit and consumer store operations.

Compared to the first and second stages of the coop movement where the government initiated and organized coops for political and anti-insurgency purposes, the third stage of the coop movement avoided these past mistakes with the government supporting the movement with emphasis on the principle of subsidiarity or non-interference on internal coop affairs.

Cooperatives during the third stage of the coop movement became more viable and productive. There were lesser coop failures. The operating coops grew rapidly since the total assets of the coop movement leaped from a measly P1.05 Billion in 1985 to P118.4 Billion in 1995, and to P176 Billion in 2009.

 

Table 3- Statistical Information of All Types of Cooperatives (1993 and 2009)

1993CDA 2009CDA/DOF %Inc/(Dec) 2009/1993
Total Registered 25,125 78,611 312.9%
No. of Reporting/Operating Coops 4,494 23,836 530.4%
  • Credit Coops
1,095   1,717 156.8%
  • Consumers
   290      462 159.3%
  • Producers
   118      373 316.1%
  • Marketing
   160      250 235.8%
  • Service
   180      807 448.3%
  • Multipurpose (agri & non-agri)
2,523 19,952 790.8%
  • Area Marketing
     16     –
  • Coop Bank
     29        52 179.3%
  • Coop Federation
     40      170  425  %
  • CoopUnion
     43        52 120.9%
  • Insurance
         1
  • Percentage of Operating vs Registered Coops
17.9% 30%
Sources of Data: 1993- CDA and 2009- CDA and Dept. of Finance

 

Table 4 shows that micro coops dominate the coop sector at 84 percent. If combined with small coops, their numbers reach up to 95 percent. Their assets however total only 14.5 percent compared to the large coops which number only 1 percent but own 64 percent of the total assets. The good thing about this is that micro coops, even with small capitalization, are able to provide more jobs to the poor. Large coops, on the other hand are able to engage in higher value production processes as shown in Tables 3 and 4.

 

Table 4. Total Assets of Operating Cooperatives (2009)

Category of Coop No. of Coops % to Total No. of Coops Assets % to Total Assets
Micro (up to P3 Million) 19,961   83.7% P    7.88 Billion   4.5%
Small (P3 to P15 Million)   2,594   10.9% P  17.59 Billion 10.0%
Medium (P15 to P100 Million)   1,015     4.4% P  37.83 Billion 21.5%
Large (Over P100 Million)      230     1.0% P112.71 Billion 64.0%
Totals 23,836 100.0% P176.02 Billion 100.0%
Source: CDA and DOF

 

The concept of “big brother, small brother” cooperation among cooperatives is necessary at the third stage of the coop movement. Federation and union work has now become very crucial in furthering the growth of the coop movement. Big coop primaries and federations need to merge or consolidate like the NATCCO-MASS-SPECC consolidation plan in 2012. The big coops, acting as big brothers, need to harness the capabilities of micro and small coops by technology transfers and joint cooperative business ventures like the MICOOP program of the NATCCO. Other new trends in coop business ventures include branding of coop products and services, franchising or networking arrangements, or even outsourcing.

Tables 5 and 6 show the performance of coops in the regions.Davao(Region XI) highlights the coop movement’s successes in the regions.Davaoregion leads in coop membership at 54.4 percent of the population of 19 years old and above. With 1.2 million members, it has an average coop membership of 523 per cooperative.Davaoregion contributed nine percent to the region’s GDP, following Socsargen (Region XII) at 12 percent contribution to the regional GDP andWestern Visayas(Region VI) at 4.5 percent contribution to the regional GDP.

Bicol (Region V) and Southern Tagalog (Region IV) are the least performers in coop membership and in regional contribution to GDP. It is understandable that coops has contributed less to the regional GDP since this region is among the fastest growing region in the country in terms of manufacturing and services. For the Bicol region, however, being a depressed region in terms of manufacturing, there is a need for more intense coop development to help empower the poor.

 

Table 5- Membership of Operating Cooperatives by Region, 2009

(Top 5 and Bottom 3)

Region Membership Membership/ Coop (Ave.) % of Coop Membership vs Population* Rank –Highest/ (lowest)
Top 5        
XI- Davao 1,201,830 523 54.5% 1
IX- Zamboanga    321,917 321 20.6% 2
II- Cagayan    245,640 283 14.64% 3
CAR    124,130 166 14.61% 4
NCR    780,555 297 13.95% 5
Lowest 3
V- Bicol 145,440 195   5.55% (1)
VII- Western Visayas 238,770 124   6.37%
IV- Southern Tagalog 497,085 234   6.80%
Philippines 5,856,074 246 13.04%
Source: CDA and DOF
* Population of 19 years old and above

 

Table 6- Cooperative Contribution to the GDP, 2007 using the income approach

Region Percent contribution to regional GDP Rank
Top 5 Regions
XII- Socsargen 11.91% 1
VI- Western Visayas 11.49% 2
XI- Davao   9.07% 3
X- NorthernMindanao   8.89% 4
CARAGA   7.45% 5
Lowest 3 Regions
V- Bicol   1.43% 1
IV- Southern Tagalog   1.55% 2
Cordillera Administrative Region (CAR)   1.84% 3
Philippines   5.14%
Source: CDA and DOF

Problems of the Coop Movement

The main reasons for coop failures are as follows:

  1. Lack of education and training
  2. Lack of capital
  3. Inadequate volume of business
  4. Lack of loyal membership support
  5. Vested interest and graft and corruption among coop leaders
  6. Weak leadership and mismanagement
  7. Lack of government support

According to NATCCO’s assessment in 2007, coop failures are caused by the following: (1) poor/unprofessional leaders and managers (lack of proper education); (2) overexposure to loans; (3) poor systems and procedures; (4) organizing for wrong reasons; (5) no development plans; and (6) mismanaged projects. NATCCO added that cooperatives are here to stay, but they have to grow as a sector (inter-dependence) and their distinct contribution to society has to be felt. The second generation leaders and managers will play a key role in meeting the challenges that include: (1) competence and business skills; (2) solid social commitment (value-driven); and (3) strategic thinking.

 

NATCCO listed down the following challenges for the coop movement:

  1. Quality growth
  2. Consolidation
  3. Differentiation
  4. Social relevance
  5. National, market presence
  6. Poor image- The image of coops is small, inefficient, individual performers with low standard of service, or an image of a jeepney.

At present, the major problems and prospects of the cooperative movement are summarized as follows:

1. A large number of cooperatives remain unviable as shown in Table 3 that only 23,836 or 30 percent of the 78,611 registered coops in 2009 are still reporting/operating. Operating coops are those that have complied with the reporting requirements of the CDA and have submitted audited financial statements. There is a need to further strengthen coop education and training through the coop federations, councils and unions, NGO training centers, state colleges and universities, etc.

Under RA 9520, all officers (including directors) are required to undergo training conducted by cooperatives, federations and/or other trainers or training institutions duly accredited by CDA. Among the training modules/curricula prescribed by CDA are: Basic Cooperative Course; Cooperative Management and Governance; Policy Development; Financial Management; Parliamentary Procedure; Leadership and Values Re-Orientation; Strategic Planning; and Labor and Other Related Laws.

2. Globalization and liberalization have resulted to more competitive business environments. Several small, medium and big coops like those in the electric, producers (or manufacturing), multi-purpose (both agricultural and non-agricultural), coop rural bank, consumers and trading industries are exposed to strong competition.  Electric coops are threatened by private electric utility distributors for possible buy-ins or joint venture. Coop rural banks have not grown with some in difficult situations and have not coped up with the trends in the banking industry where consolidation, mergers and international tie-ups are the call of the times.

Consumers’ coops which are mostly university and institution-based are caught in a competitive squeeze since their markets are being siphoned by the big franchise operators like Jollibee, Chowking, McDonalds, etc. on the one hand and by the family-owned canteens and restaurants whose organizational structures are much leaner and informal than the coops.

3. Unionization and threats in unionization in some medium and big size coops continue despite the Supreme Court ruling that employee-coop members are not allowed to join trade unions. This implies that the coop management practices in some cooperatives are still very reactive and less participative. This is very true in electric coops in some regions particularly in the Bicol and Samar provinces and in large producer coops like Lincoma inLipaCityin Batangas. This is the reason why RA 9520 mandated additional committees of Mediation and Conciliation, and Ethics.

4. Agri-based cooperatives, particularly those in the agrarian reform communities and in plantations are not showing improvement in productivity and some are encountering mismanagement and failures. Strong support services in these coops have to be in place in order to preserve the gains of the coop movement under the Comprehensive Agrarian Reform Law (CARL). These coops are asset-based or land-based coops and their low productivity or state of uncompetitiveness would be a big dent to the cooperative movement.

5. The mentality of relying too much on state protectionism, parochialism and close-doorism is still prevalent among many cooperatives. They feel that coops should be continuously protected and subsidized by the government. However, the present policies of the state have changed and government subsidies are being done away with by the government especially during these times of government fiscal deficits and global financial crisis. Those that will be affected are the electric, transport, water and irrigation coops.

 

Another wrong concept is parochialism or the idea that coops do business only with their members. They are turning their backs on the potential markets among the non-members, the larger community and the international markets. By catering to the larger markets in addition to members, the coop is able to achieve economies of scale and more viable operations. Another wrong concept is that coops are non-political and not part of the civil society movement. What is correct is that a coop is non-government or non-private business enterprise and it is not part of the political parties of the traditional political elites in the country. The coop movement is represented by its own political parties or coalitions which come from the marginalized sectors of the Philippine society.

 

Prospects

1. The government of President PNoy Aquino is cooperative friendly considering that some key players in the said administration are known advocates of cooperativism and the civil society. President PNoy Aquino pledged to “continue the revolution that my mother (President Cory Aquino) and others started in making entrepreneurship among the poor a strategy for poverty alleviation”. Planning Secretary Cayetano Paderanga recognizes that strengthening cooperative development would mean creating jobs and spreading wealth. Secretary Dinky Soliman of Department of Social Welfare and Development, a coop and NGO advocate, is on top of the anti-poverty program of the government. One of the best prospects of the cooperative movement is the current boom in the microfinancing business.

 

2. Looking at Tables 2 and 3, the number of operating coops increased by 4 times or from 1,142 coops in 1985 to 4,494 in 1993, and by 53 times from 1993-2009  A significant feature in this increase is that those coops which were engaged in higher value added operations increased higher compared to credit coops. These high value added coops include multi-purpose coops which increased by 8 folds, service coops by 4.5 folds, and coop federation by 4 folds. Marketing coops increased by 3 folds and producers coops by 2 folds. What is outstanding and inspiring in this performance is the increase in the total assets of the coop movement by 78 times in 9 years from P1 Billion in 1985 to P118 Billion in 1993, and 117 times in 2009 at P176 Billion (Table 1). It is hoped that this trend continue and be further enhanced by researches and documentation of the cooperative success stories or “good practices”. These documented researches should be disseminated to other coops for their guidance and inspiration.

 

3. Coop membership has grown by almost 10 times from 337,000 in 1985 to 3.2 million in 1993, and 17 times to 5.8 million in 2007 (Table 1). It is estimated that the family beneficiaries of the coop movement are around 19.2 million in 1993. InDavaoregion (Region XI), coop members account for more than half (54.5%) of the regions population of 19 years and older (Table 5).Davaoregion’s contribution to the regionalGDPaccounted for 9 percent. Socsargen (Region XII) andWestern Visayas(Region VI) contributed to their respective regional GDP at 12 percent and 11.5 percent respectively.

These numbers, aside from being an economic and socio-cultural power center, can also be transformed into a political power center. During the first party list elections of 1998, 6 out 13 sectoral seats in Congress were won by coop or coop-based parties. At present, the coop sector has 5 party list representatives in Congress coming from APEC. ATINGCOOP, BUTIL andCOOPNATCCO. The coop movement is still capable of stronger showing in future political exercises.

 

4. The concept of “big brother, small brother” cooperation among cooperatives is an important ingredient in furthering the growth of the coop sector. This means more intensive Federation and union work and advocacy that will not compete but will strengthen the operations of the primary coops. Big coop primaries and federations need to merge or consolidate like the NATCCO-MASS-SPECC consolidation plan in 2012. The big coops can also act as big brothers in order to harness the capabilities of micro and small coops through technology transfers and joint business ventures like the MICOOP program of the NATCCO. Other new trends in coop business ventures include branding of coop products and services, franchising or networking arrangements, or even outsourcing.

 

5. The coop group within the party list bloc in Congress should know how to play its cards well. Although in the minority bloc, the coop legislators are actually representatives of the marginalized sectors of society which comprise the majority of the country’s population. The coop representatives in Congress, aside from their legislative work, should also be active in further uniting and consolidating the coop movement. They should lead the coop movement nationwide together with other coop legislator-advocates:

 

a. to strengthen all LGU Development Councils and exhort strong coop participation;

b. to work for the creation of Cooperative Development Offices in all LGUs that have not yet created said office and the corresponding appointments of the LGU Cooperative Development Officers ideally coming from the coop sector;

c. to strengthen the Cooperative Development Councils at the national, regional, provincial, municipal and barangay levels;

d. to participate in LGU affairs through involvement in the LGU Pre-Bids and Awards Committees (PBAC), the Local Health and School Boards, to participate in future elections of sectoral representatives for workers, women and other sectors in the LGU councils, and to lobby for the creation of  committees on cooperatives  in said councils if not yet created.

 

 

References:

 

Barce, Jo Anne, 1995, “The Effects of Education in Membership Participation in Cooperative Activities”, QC: UP SOLAIR (unpublished paper).

Borja, Ignacio, 1996, “Cooperative Education: Problem or Answer”,  paper presented at the first National Convention of the National Association for Cooperative Education (NACE), August 8-9, 1996, Hotel Danarra and Resort, QC.

Braid, Rosario (Ed), 1993, “Political Parties, Programs and Platforms for Cooperatives as a Third Sector”, Sustainable Development Through Cooperatives,Manila: Asian Institute of Journalism, p. 136.

COOP NATCCO, 2007, website- : http://www.natcco.coop , (openedAugust 4, 2011)

Coloma, Teresita, 1996 “The Cooperative Development Framework: A Blueprint for People Empowerment and Global Competitiveness”, paper presented at the National Conference Workshop on Strengthening Cooperative Banks, February 21-22, 1996 at Great Eastern Hotel, QC.

Cooperatives Philippines, 2011, http://cooperatives-society.blogspot.com/2011/03/p-noys-govts-development-plan-lists.html

Gonzales, Araceli, “The NGOs, their Impact to the IR Environment”, UPSOLAIR,QC(unpublished paper).

ILO, 2010, Overcoming the jobs crisis and shaping an inclusive recovery: thePhilippinesin the aftermath of the global economic turmoil (forthcoming).

Moralez, Horacio, “Strategies and Mechanisms for Empowerment of People in the Rural Sector”, Lambatlaya,QC: UP ISWD, p. 2.

Ong, Jose, 1997, “Market Projects Financed by Municipal Development Fund: An Evaluation”, Philippine Women’sUniversity-QuezonCity, September 1997 (masteral thesis).

Paderanga, Cayetano, 2011, Keynote Speech, PICPA’s “Cooperative Forum Day,”July 22, 2011, Hotel Intercontinental,MakatiCity,

Remo, Amy, 2011, “NEA, DBP to finance co-ops’ fund requirements”, Philippine Daily Inquirer, July 11, 2011.

Rola, Leandro, 1989 “Cooperative Education and Training Issues/Problems and Recommendations”, The State of Cooperative Development in the Philippines, QC: Cooperative Foundation of the Philippines, Inc.

Santiaguel, Mannie, 2011, “The Role of Cooperative in Poverty Reduction”, cooperativeunionofcavite.com/…/The%20Role%20of%20Cooperatives%20In%20Global%20Poverty… (opned Aug. 201)

Scott, William, 1992, The Union Obrera Democratica: The First Filipino Labor Union, QC:New Day Publishers.

Sibal, Jorge, 1991, “The Self-managed Enterprises and the Vision of a Mixed Economy”, paper read at the PEDF Seminar-Workshop on Issues in Community Enterprise Management, August 16-18, 1991, Pansol, Laguna sponsored by People’s Enterprise Development Council.

Sibal, Jorge, 2001, “A Century of the Philippine Cooperative Movement”, Co-op News from UWCC, University of Wisconsin Center for Cooperatives, August 2001, http://www.wisc.edu/uwcc

Wikipedia, 2011, “Fiscal Policy in the Philippines”, http://en.wikipedia.org/wiki/Fiscal_policy_of_the_Philippines (Opened Aug. 2011)

 

UP Diliman, Quezon City, Philippines< jvsibal@up.edu.ph >
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