Brief notes on co-operative society and Self help groups (SHG)

A co-operative society is a voluntary association of persons started with the objective serving its members. It is primarily designed for promotion of economic interest of its members with co-operation principles. It is based on an important philosophy known as “all for each and each for all”.

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A close analysis of different definitions on co-operative society reveals the following essential characteristics which are sometimes called as Principles of co-operative society. These are:

  • The membership of a co-operative organization is voluntary and open to all adult persons.
  • It is a self governing institution.
  • Capital is raised from members in the form of share capital.
  • It managed democratically.
  • These are subject to government control as these are registered under Co-operative Societies Act, 1919.
  • Each member has one vote irrespective of shareholdings.


Co-operative society as a form of business organization has the following advantages:

  • It is easy to form as no legal formalities are required for formation.
  • It is managed democratically as it is based on the principles of “one man one vote”.
  • Its membership is open to each and every person irrespective of caste and creed.
  • It has economical operation and as such management cost is less.
  • The liability of members is limited up to the extent of shares purchased.
  • It generally caters the needs of poor people.



Despite of a number of advantages, co-operative form of business suffer from the following limitations:

  • Lack of adequate capital as capital is collected from members.
  • It is operated on cash trading basis.
  • There is a lot of political interference.
  • It is difficult to maintain business secrecy.
  • Every body’s responsibility becomes no one’s responsibility.
  • Lack of unity among the members.

Types of co-operative:

Co-operative societies are classified in to different categories on the basis of objectives and purposes. The followings are major classification of co-operative societies:

  • Consumer co-operatives formed with the objective of fulfilling needs and requirements of member consumers.
  • Producers co-operatives are formed to assist producers in setting up industrial units, production and marketing of their products.
  • Marketing societies are formed by small producers for marketing products produced by them.
  • Housing co-operatives acquire land from general public, develop it, construct house and provide members.
  • Credit co-operatives provide soft loan or easy loan at a concessional rate of interest.

Basis of selection of Ownership Structure:

Among different terms of business organization, the following points are taken into account for selecting a particular form of organization:

  • Easy formation
  • Limited liability and the provisions of raising required capital
  • Democratic control and management
  • Stability and continuity in operation
  • Flexibility in operation.

Self help groups (SHG):

It denotes an association of small group of self employed rural or urban women entrepreneurs for welfare of its members. The primary objective of this group is to provide financial assistance to its members. It provides financial assistance to its members in the form of loan or raw materials for production.

  • It is a voluntary association of women.
  • It consists of 10-20 members.
  • Groups come together for redressed of common problems.
  • It functions through regular meeting of its members.
  • Its objective is economic empowerment and poverty alleviation.
  • It facilitates co-operative, participative and empowerment culture.
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