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INTRODUCTION
The prevailing climate of challenges in the cooperative sector has a
dampening effect on the cooperative marketing growth rates we used to take for
granted. Perhaps, this led to an increasing demand for talented young
professionals able to help bring about the necessary changes and move
into senior managerial positions in the future. These individuals must have
sound specialist knowledge, analytical skills, an entrepreneurial mind-set,
leadership skills, and a highly developed orientation towards action. This module
in Cooperative Marketing is geared towards providing every student such kind of
profile.
Efficient and organized marketing is essential for the healthy growth of any
community. It benefits the producer as well as the consumer. Unregulated
markets involve a long chain of intermediaries before the commodity reaches the
final consumer, with the result that the cost of the commodity becomes
exorbitant. To eliminate the middlemen from the marketing activities and
provide better price for agricultural producers the cooperative marketing
societies were established even during the early 19th Century. Cooperative
marketing societies are organized by the farmers themselves and the profits are
distributed among the members based on the quantity of the produce marketed
by them. Agricultural marketing cooperatives have been facing several problems,
their performances were not up to the mark due to inadequate working capital,
traditional methods of marketing, lack of technical support, untrained personnel,
and lack of support from apex marketing societies. Therefore, it is necessary to
study on cooperative marketing.
Marketing efficiency can benefit all the key actors in a market chain.
Technically, an efficient marketing system is achieved when the resulting
marketing costs (including losses) are minimized and the profits or returns of
market intermediaries are reasonable – that is, the marketing margin is
just enough to cover the costs of marketing services and there are no
unreasonable profits generated by the market intermediaries (Pabuayon et al.
2013). In this case, the marketing margin should not be lower than the
marketing costs and to what the market actors would otherwise get from the
alternative use of their capital and labor. Otherwise, there will be no economic
incentives for them to provide the marketing services and instead, might just
shift to other economic activities. Some of the apparent indicators of an efficient
marketing system are the higher prices received by farmers, the affordable food
products or lower prices paid by consumers, and the profitable business
operations and more investments for market intermediaries.
In the Philippines, the marketing system of agricultural commodities faces
several issues and challenges that indicate inefficiencies, which are becoming
even more challenging as the economy approaches the ASEAN economic
integration this 2015. Some of the common issues are:

(i) the low prices received by farmers for their produce;

(ii) the multiple layers of market intermediaries in agricultural supply
chains; and
(iii) the limited access to profitable markets (e.g.,
institutional and export markets). Of all the market actors in the agricultural
marketing chain, the
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small farmers are often t he most affected by these problems.

UNIT I: NATURE OF COOPERATIVES

History of Cooperatives in the Philippines
 Filipinos who have traveled Europe in the later part of the 19th century must
have been impressed with the success of a new economic movement,
bringing about a gradual transformation in the economic and social life of
the people.
 At the turn of the century, Filipinos, in increasing number, traveled and
studied abroad and brought home with them new ideas.
 Two names worthy of note were Dr. Jose P. Rizal and Teodoro Sandiko.
Jose Rizal
 Rizal, after his side trip to Sandakan, Borneo in 1892, requested
Governor Despudol permission to move to that place and found a
colonyunder the cooperative plan of Robert Owen.
 Instead, he was arrested for treason and banished to Dapitan,
Zamboanga del Norte.
 In Dapitan, Rizal had his ideas in cooperation partially fulfilled.
 He put up a school for the poor community and a store with the help
of his pupils on a purely cooperative basis.
 One noteworthy group organized by Rizal was the La Sociedad de los
Abacaleros (Society of Abaca Producers). This functioned for only
one year. Rizal returned the members’ share capital without any
loss.
Teodoro Sandiko
 in his travels to Europe, must have had a close contact with the
cooperative movement in Germany where he came across with the
Raiffeisen movement.
 He was very much impressed by this type of cooperative that he
looked forward for an opportunity to introduce it in the Philippines.
 Finally, Sandiko had his chance when he was appointed one of the
early governors when Civil Government, under the Americans, was
established.

The Rural Credit Law

 As soon as Civil Government was established, Filipino participation in
government was encouraged.
 Teodoro Sandiko, then governor of Bulacan, prepared a bill patterned after
the Raiffeisen type of credit union and had Rep.
 Albert Barreto of Zambales sponsored the bill in the lower House of
Congress.
 The principal aim of this bill was to protect and develop the agricultural
interest of the country.
 When the Barreto sponsored bill was presented it readily obtained
unanimous approval on January 20, 1908.
 The Philippine Commission however, turned it down.
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 Undaunted by this defeat, the sponsors of the bill again put it through in the
Second Philippine Legislature. This time it was sponsored in the Lower
House by Rep. Rafael Corpuz who succeeded Rep. Barreto.
 The bill was ably presented in both Houses and it was finally passed into law
on February 11, 1914 and became Act 2508.
 When this Act was finally made into law, Gov. Sandiko earned the title,
Father of Cooperation in this country.
 The administration of the Rural Credit Law was entrusted to the Bureau of
Agriculture.
 The first rural credit association that was organized under this Law was the
Agricultural Credit Cooperative Association of Cabanatuan, Nueva Ecija. It
was formed on October 18, 1916. With this initial organization farmers in
different provinces were organized.
 At the end of 1926 there were 544 rural credit cooperatives organized in 42
provinces and by 1930 there were 571 associations formed all over the
country.
 In 1935, however, about 90% of these cooperatives were inactive with no
funds left in their treasury.
 The experiment on rural financing, through cooperatives was a failure.

Marketing Cooperatives
 As soon as the organization of rural credit cooperatives was in full swing,
The Cooperative Marketing Law (Act 2425) was enacted and approved on
December 9, 1927.
 The rural credit associations were designed to help finance the efforts of the
farmers for more production.
 Wherever rural credit associations were, cooperative marketing societies
were also designed to be present.
 The apparent weakness of the rural credit cooperatives, however, failed the
enthusiasm of farmers to organize themselves into cooperative marketing
associations.
 By 1939 only 164 societies were actually organized with a total membership
of around 5,000 farmers.
 With this number only 35 reported their sale of products to the Bureau of
Commerce.
 The number of associations reporting indicated that only 20% of the
organized associations were active.

The ACCFA Financing Program

 In recognition of the strategic position occupied by our farmers in the social
structure and economic development of the country, the Philippine Congress
enacted Republic Act 821 in 1952.
 This law established a system of liberal credit, which is specially designed to
meet the needs of the small farmers.
 It also created an administrative agency known as the Agricultural Credit
and Cooperative Financing Administration (ACCFA).
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 To implement the great task of rural financing, four general and interrelated
objectives of the law were set forth as follows:
1. To assist small farmers in securing liberal credit.
2. To promote the effective groupings of farmers into cooperative
associations.
3. To establish an orderly and systematic marketing machinery for,
and controlled by, the small farmers.
4. To place agriculture on a basis of economic equality with other
industries.

Nature of Philippine Cooperatives

 As stated in Article 23 of the Republic Act 9250, otherwise known as the
“PHILIPPINE COOPERATIVE CODE OF 2008”, the types and categories of
cooperatives in the country may fall under the following types:
a) Credit Cooperative is one that promotes and undertakes savings and
lending services among its members. It generates a common pool of
funds in order to provide financial assistance to its members for
productive and provident purposes;
b) Consumers Cooperative is one of the primary purpose of which is to
procure and distribute commodities to members and non-members;
c) Producers Cooperative is one that undertakes joint production
whether agricultural or industrial. It is formed and operated by its
members to undertake the production and processing of raw
materials or goods produced by its members into finished or
processed products for sale by the cooperative to its members and
non members. Any end product or its derivative arising from the
raw materials produced by its members sold in the name and for the
account of the cooperative, shall be deemed a product of the
cooperatives and its members;
d) Marketing Cooperative is one, which engages in the supply of
production inputs to members and market their products;
e) Service Cooperative is one, which engages in medical and dental
care, hospitalization, transportation, insurance, housing, labor,
electric light and power, communication, professional and other
services;
f) Multipurpose Cooperative is one, which combines two (2) or more
of the business activities of these different types of cooperatives;
g) Advocacy Cooperative is a primary cooperative, which promotes and
advocates cooperation among its members and the public through
socially oriented projects, education and training, research and
communication, and other similar activities to reach out to its
intended beneficiaries;
h) Agrarian Reform Cooperative is one organized by marginal farmers
majority of which are agrarian reform beneficiaries for the purpose
of developing an appropriate system of land tenure, land
development, land consolidation or land management in areas
covered by agrarian reform;
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i) Cooperative Bank is one organized for the primary purpose of
providing a wide range of financial services to cooperatives and
their members;
j) Dairy Cooperative is one whose members are engaged in the
production of fresh milk, which may be processed and/or marketed
as dairy products;
k) Education Cooperative is one organized for the primary purpose of
owning and operating licensed educational institutions
notwithstanding the provisions of Republic Act No. 9155, otherwise
known as the Governance of Basic Education Act of 2001;
l) Electric Cooperative is one organized for the primary purposed of
undertaking power generations, utilizing renewable energy sources,
including hybrid systems, acquisition and operation of sub
transmission or distribution to its household members;
m) Financial Service Cooperative is one organized for the primary
purpose of engaging in savings and credit services and other
financial services;
n) Fishermen Cooperative is one organized by marginalized fishermen
in localities whose products are marketed either as fresh or
processed products;
o) Health Services Cooperative is one organized for the primary
purpose of providing medical, dental and other health services;
p) Housing Cooperative is one organized to assist or provide access to
housing for the benefit of its regular members who actively
participate in the savings program for housing. It is co-owned and
controlled by its members;
q) Insurance Cooperative is one engaged in the business of insuring life
and poverty of cooperatives and their members;
r) Transport Cooperative is one, which includes land and sea
transportation, limited to small vessels, as defined or classified
under the Philippine maritime laws, organized under the provisions
of this Code;
s) Water Service Cooperative is one organized to own, operate and
manage waters systems for the provision and distribution of potable
water for its members and their households;
t) Workers Cooperative is one organized by workers, including the
self-employed, who are at same time the members and owners of the
enterprise. Its principal purpose is to provide employment and
business opportunities to its members and manage it in accordance
with cooperative principles; and
u) Other types of cooperative as may be determined by the Authority

Categories of Cooperative Cooperatives shall be categorized according to

membership and territorial considerations as follows:
(a) In terms of membership, cooperative shall be categorized into:
(i) Primary The members of which are natural persons;
(ii) Secondary The members of which are primaries; and
(iii) Tertiary The members of which are secondary cooperatives; and
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(b) In terms of territory, cooperatives shall be categorized according to areas
of operations, which may or may not coincide with the political
subdivisions of the country.

Principles of Cooperation
 The purpose of enacting of Republic Act 6938 and 9250 as amended,
also known as the Cooperative Code of the Philippines is to promote the
creation and growth of cooperatives as a practical vehicle for promoting self-
reliance and harnessing people power towards the attainment of economic
development and social justice.
 The law provides important benefits to the cooperative and its empowered
members, based on our experience in handling client-cooperatives.
 Cooperative has been a policy instrument by the government in stimulating
efficiency of agriculture in the Philippines.
 The choice of the policy instrument stems from the potentials of cooperative
in promoting efficiency in production, marketing, and risk management.
 Efficiency is traditionally viewed in terms of reduction in cost of production,
increase in price of farm outputs, improvement of farmers’ income, and
spreading the risk of production and marketing through resource pooling,
and group marketing.
 Clear steps by the government towards the use of cooperative in stimulating
efficiency in agriculture were the passages of
 Republic Act (RA) 821,
 Agricultural Credit and Cooperative Financing Administration
(1951) Law,
 Presidential Decree (PD) 175 and Letter of Instruction (LOI)
Number 23 (1973).
 Constitution of 1987; RA 6938,
 Cooperative Code (1990; and RA 6939, An Act Creating the
Cooperative Development Authority (1990).
 Other legal frameworks which cited the importance of cooperative in
government development programs include
 RA 6657, Comprehensive Agrarian Reform Program (1987);
 RA 7160, Local Government Code (1991);
 Republic Act 7607, Magna Carta of Small Farmers (1992); and
 RA 8 435, Agriculture and Fisheries Modernization Act (1997).
 RA 6938, and RA 6939, provide for the current legal bases of registration,
regulation, administration, and development of cooperatives in the
Philippines.
 Executive Order 95 and 96 Series of 1993 provide for the creation and
strengthening of cooperative development councils at the municipal and
provincial, regional and national levels in the Philippines.

Principles of Cooperative
 Cooperatives around the world operate according to the same set of core
principles and values, adopted by the International Co-operative Alliance.
 Cooperatives trace the roots of these principles to the first modern
cooperative founded in Rochdale, England in 1844.
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 These principles are a key reason that America’s electric cooperatives
operate differently from other electric utilities, putting the needs of their
members first.

Cooperative Principles
1. Open and Voluntary Membership
 Membership in a cooperative is open to all persons who can reasonably use
its services and stand willing to accept the responsibilities of membership,
regardless of race, religion, gender, or economic circumstances.

2. Democratic Member Control

 Cooperatives are democratic organizations controlled by their members,
who actively participate in setting policies and making decisions.
 Elected representatives (directors/trustees) are elected from among the
membership and are accountable to the membership.
 In primary cooperatives, members have equal voting rights (one member,
one vote); cooperatives at other levels are organized in a democratic
manner.

3. Members’ Economic Participation

 Members contribute equitably to, and democratically control, the capital of
their cooperative.
 At least part of that capital remains the common property of the cooperative.
 Members allocate surpluses for any or all of the following purposes:
 developing the cooperative;
 setting up reserves;
 benefiting members in proportion to their transactions with the
cooperative; and
 supporting other activities approved by the membership.

4. Autonomy and Independence

 Cooperatives are autonomous, self-help organizations controlled by their
members.
 If they enter into agreements with other organizations, including
governments, or raise capital from external sources, they do so on terms that
ensure democratic control as well as their unique identity.

5. Education, Training, and Information

 Education and training for members, elected representatives
(directors/trustees), CEOs, and employees help them effectively contribute
to the development of their cooperatives.
 Communications about the nature and benefits of cooperatives, particularly
with the general public and opinion leaders, helps boost cooperative
understanding.

6. Cooperation Among Cooperatives

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 By working together through local, national, regional, and international
structures, cooperatives improve services, bolster local economies, and deal
more effectively with social and community needs.

7. Concern for Community
 Cooperatives work for the sustainable development of their communities
through policies supported by the membership.

Cooperative Development Authority (CDA)

 The CDA was created under Republic Act 6939 otherwise known as “an
act creating the cooperative development authority to promote the viability
and growth of cooperatives as instruments of equity, social justice and
economic development, defining its powers, functions and responsibilities,
rationalizing government policies and agencies with cooperative functions,
supporting cooperative development, transferring the registration and
regulation functions of existing government agencies on cooperatives as
such and consolidating the same with the authority, appropriating funds
therefor, and for other purposes.”

 According to Dr. Eulogio T. Castillo – CDA Officer-in-Charge and

Administrator, “the main function of the CDA is development”.
 Dr. Castillo further explains why development is their main focus. “Because
cooperatives basically focus on the less-privileged members of the
society. So the target of cooperatives is to uplift the livelihood, welfare,
economic, and social status of the less-privileged members of our society
that’s why we have to develop them. We are pro poor. We are tasked to
put them in the socio economic mainstream so that instead of becoming
a burden to society, they will become an active player in nation building.
In order to do that, we have our technical assistance program, which is
primarily composed of capacitating the human resources in the
development world, particularly those who are belonging in the micro
and small cooperatives, the capacity building is in terms of training. We
have to train them on what cooperatives is all about, it is very awkward
to put them in the cooperatives world if they do not understand it. They
have to at least understand what the cooperative

CAUSES OF THE FAILURE OF THE EARLY COOPERATIVES IN THE

PHILIPPINES
1. Incompetent management
2. Lack of proper understanding of the principles, practices true aims, and
purposes of cooperative associations.
3. Improper use of credits by the borrowers who, instead of using money
borrowed for production, spend it for fiestas or luxuries.
4. Defective securities
5. Political interference particularly in the collection of overdue accounts
6. Lack of compensation of officers
7. Inadequate character and moral responsibility
8. The dominance of individualistic attitude instead of the spirit of
cooperation among the people
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9. Inability of cooperatives to secure adequate capital
10. Their dependence on alien suppliers and distributors
11. Ineffectiveness of the government and promotion of cooperative
organizations
12. Inadequate marketing facilities