1.

1 INTRODUCTION
People are social animal and they should leave together as group in their daily life. Traditionally
people used to leave together in a village centered life to their problems. Today the current
constitution in Kenya gives the citizen freedom of associations chapter four, part, section 36.
This implies that today’s co-operation is legal entity recognized by the sovereignty. This chapter
explore deeply on informal and formal co-operations.

1.2 WHAT IS CO-OPERATION?

Co-operation simply means working together for a common purpose. This is a joint effort to
help one another so as to accomplish certain tasks that would benefit members of the group.

In any community, co-operation exists in different forms of association of people who have
voluntarily come together as a group of driven by their social and economic needs. Through
these associations members are able to cope with their problems and challenges of life in an
attempt to improve their living standards and conditions.

1.3 INFORMAL FORMS OF CO-OPERATION

Example
 A Group of people who come together to weed their crops of harvest their crops for one
another in turn until everybody is assisted.
 Villagers brought their resources to their contract on access road/ dam/ cattle dip e.t.c.

In conclusion people carried out these tasks without being forced or demanding any payment.
They supply joined together in order to perform some work with the hope that the following day
they would also benefit from the group activities, this is the informal / traditional
co-operation. Remember that nothing was written rules/ duties everything was verbal and
everybody adhere to it since it was voluntary. It's based on mutual trust

Today’s informal co-operation practices

 People joining hand to clean the validly parts of the town they work and hire in.
 People coming together for a harambee to build more classrooms for their children in
school and colleges.
 People conducting a fund rising drive to build a church
 Merry – go – round in which members of the group agree to contribute a certain amount
of money every month to each other in turn vital everybody benefits.

N.B the harambee spirit is Kenya which has been done in promoting our social and economic
development has its roots in this type of informal co-operation.

In conclusion you notice that the need for co-operation among traditional communities was
important for their survival. They never had money to employ labourers, build shelter e.t.c and
therefore the case today. All the people have the basic needs for food, shelter, security and sense
of belonging, hence requires a combined effort.
The idea of co-operation therefore is not new, since as we have seen it has been practiced for a
long time where those people co-operated as a result of people fighting for survival against
nature. They co-operated in order to solve problems caused by physical environment wild animal
and drought.

1.4 MODERN FORM OF CO-OPERATION

Due to development of science and technology problems caused by nature have reduced but still
we find ourselves coming into problems with other members of society. This problem is because
of social and economic inequality being most solutions to these problems lies in
Co-operative action hence need for formal co-operation

Characteristics of formal co-operation

 Formed out of felt needs of members
 Self – help.
 voluntarism
 membership supremacy in decision making
 common objectives
 common bond
 Concept of mutuality/ reciprocity.
 Self reliance.

1.5 SIMILARITIES
 Both aims at assisting their members to up rift their standard of living by
voluntarily joining together to work are to.
 In both there is the aspect of common objective
 They are both based on mutuality
 They both aim in providing services to members
 In both, it is self help organization

1.6 DIFFERENCES
 Traditional was mainly practiced in respect to natural or environmental problems while
modern are formed primarily as a solution to exploitation and as a collective action to
solve particular social and economic problems.
 Traditional co-operation was a way of life with a loose kind f association of people who
are bound together by their sense of social duties and desires to help one another.
Modern co-operations are formed consciously and regulated by the laws of a country and
the co-operation principles.
 In informal co-operation the rules and duties were verbal while the former have written
rules and duties.

1.7 CO-OPERATION IN MODERN SET UP

Cooperative society is an autonomous association of persons united voluntary to meet their
common economic, social cultural need and aspiration through a jointly owned and
democratically controlled enterprise.
Therefore
 It is formed after a felt need
 Slid be a free organization where people may join or eave whatever they want.
 All decisions to run it are made democratically.

Activities for which co-operatives can be found in rural areas are;

 Marketing
 Fishing
 Saving and credit
 Handicrafts
 Agricultural production
 Small scale industries
 A combination of many activities in one society
 Urban
 Consumers
 Small scale industry
 Housing
 Transport
 SACOO
 Federations / union

1.8 BENEFITS DERIVED FROM CO-OPERATIVES

 Co-operatives encourage the benefits of economies of scale to accrue to the members,
facilitates and services, which would be out of reach due to financial constraints due to
individual farmers, could be availed to them in co-operation.
 Through co-operatives, small scale farmers should be in a better position to combat
problems that appear in the wake of “green revolution” they would be better place and
equipped to meet the higher cost of migration and fertilizers which new seed require.
They would be in a position to resist the offer of the rich farmers who are anxious to
extend sizes of their farms. The dangers of social destruction becoming wider could be
reduces with the aid of co-operatives.
 Participation in co-operative groups enables the members to make a contribution in the
interest of the group to articulate their needs and ambitions and more importantly, receive
feedback and provide a meeting point for ideas and actions. Co-operatives help to bring
together under one umbrella sources of scattered and diverse impulses therefore making
meaningful growth possible.
 Co-operatives encourage marketing policies to become familiarized. Instead of
competing against each other their by encouraging victimization by the buyers. Farmers
are in a better position to embark on a joint aggressive policy of a “push marketing
strategy”.
 With the aid of co-operatives, farmers can become more competitive and stronger and be
better able to make their presence be felt as partners in development and demand their
rightful due and place.
 Through co-operatives, two way communication channels can be opened and links
strengthened with the government. From the government point of view it would be able
to explain its plans for development, to the farming communities. From the farming
 point of view, through co-operatives as their mouth piece, they can hope to fund the
earning of those who are responsible for planning, who are capable of giving help and
those who establish a list of priorities allocating resources. It is through this channel of
communication that the co-operations can hope for stabilization of prizes, special fiscal
relief.
 Co-operative encourages the pooling of skills of management and improvement of skills
already present. Group action encourages those who have leadership qualities to carry
forward and take initiative. Qualities which are dormant, will have the possibility of
coming to the surface though they dynamism of group action. Such leaders will be able
to participate in the political life of the country with fuller awareness of the needs of rural
sectors.
 Co-operatives farming can provide the best of individual title on the one hand and group
title on the other hand. It encourages the habit of saving among their members and act as
a means of access to social benefits and education to the people in the rural areas.
 Co-operatives help to advance economic development to its members by Collecting,
transporting, processing, and marketing agricultural products effectively.
 Mobilizing saving in co-operative and challenging the funds to understand members for
specific development project.
 Purchasing in bulk and distribution from inputs such as seeds, fertilizers which helps in
boosting farm production.
 Sharing technology such as tractors and packaging technique.
 Providing credit to members at a reasonable interest rate for urgent expenses like school
fees, hospital bills and funerals.
 Distributing National Income through participation in income generating activities.
 Certain jobs opportunities for self employment in the case of formers and artisan besides
employment staff to work for the co-operatives
 Reducing poverty by offering people a chance to carry out income generating activities
jointly.
 Training members on issues relating to business economic and social aspects of life.

1.9 SUMMARY
People in the traditional society benefited from co-operation in various ways. This includes
solving problem caused by nature and other social problems. Today, although the problems
caused by nature have reduced, we still need co-operation due to other problems caused by
unequal distribution of resources, unemployment, technology, etc.

1.10 SELF-ASSESSMENT QUESTIONS

1) What is co-operation?
2) Explain why the traditional people required co-operation?
3) Describe the importance of co-operation in our modern society
4) Differentiate between formal and informal co-operation
5) Identify the main characteristics of a true co-operative
CO-OPERATIVE PRINCIPLES

Learning objectives for the lesson

At the end of the lesson, the learners should be able to;
a) Describe the Rochdale pioneers
b) Explain original Rochdale pioneer’s principles
c) Understand the International Co-operative Alliance (ICA)
d) Describe ICA principles adopted in 1966
e) Describe ICA principles adopted in 1995
f) Apply co-operative principles in operation of co-operative organization

3.1 INTRODUCTION
Co-operative principles are guidelines by which co-operatives put their values into practices. Co-
operatives are the base of self-help, responsibilities, democracy, equality, equity and solidarity.
In traditions of their founders, co-operatives members believed in the ethical value of honesty,
openness, social responsibility and caring for others.

3.2 THE ROCHDALE PIONEERS

They were 28 weavers who lived in a village in England. They were followers of Robert Owen
who in 1844 tried to start there own store to end exploitation by retailers. They formed the first
successful consumer co-operative society. Their efforts initially were a failure due to;
 Credit sales
 They sold below market rate and prices
 Unhealthy competition

Later they improved their operation and increased in;

 Membership
 Activities
 Share capital
 Payment in dividend

Objectives of Rochdale society

 To establish self-supporting needs
 To provide housing for members
 To create employment through management in the society
 To purchase land for cultivation by members
 To open hotel for members
 To open the community library

3.3 THE ORIGINAL ROCHDALE PRINCIPLES

The society was formed when Britain was undergoing industrial revolution. As a result of
revolution, a lot of people lost their jobs in the factories as machines were introduced to replace
them. In addition to this, there was a general lack of credit and supply of essential commodities
like salt, sugar, flour and cooking fat. Businessmen took advantage of this situation and started
selling impure products at very high prices.

It is against this background that the Rochdale Pioneer decided to draw up some sort of
principles which would guide their operations as a co-operative society. These pioneers
therefore decided on the following principles.

 That the society would not interfere with the various religions or political difference
which existed in the community but would allow anybody with similar interests to these
of the society, to join it (religious and political neutrality).
 That the capital would be raised from the members and would bear a fixed rate of
interest.
 That only the purest products should be supplied to members.
 That full weight and measure of each product should be given.
 That market prices should be charged and no credit.
 That profit should be shared according to the amount of purchases made by each
member.
 That each member should have one vote regardless of the shares he holds. (Democratic
control).
 That the management should be in the hands of officers and committee members elected
periodically.
 That a definite percentage for profits should be used in education.
 That frequent statements of society’s transactions and balance sheets should be presented
to members.

These principles were intended for the regulation of a co-operative society as indicated by the
great stress on the sale of pure products and sale of goods for cash only. It was therefore found
necessary to reformulate the principles for adaptation by other types of Co-operatives.

3.4 INTERNATIONAL CO-OPERATIVE ALLIANCES (ICA)

It was formed in 1895. It is a world wide organization and draws its membership from all
countries. It is an umbrella body for all co-operative organizations all over the world. It is an
apex body for all crops. It acts on an advisory agent and policy formulation body which
represents the interest of co-operatives in international forums.

Objectives of ICA
 Custodian of co-operative principles and promotes to look where it is for world
level.
 Represent a co-operative in other forums such as government, UNO, ILO,
 Substitute profit making institution with one of such service to whole community
based on mutual self-help
 To preach and propagate co-operative idea throughout the world
 To promote economic relation among co-operatives throughout the world by
encouraging inter-co-operative trade.
 To provide a forum for discussions between members of co-operative movements.
  To keep members aware of one another progress and experiences all over the world.
 Promote co-operative development throughout the world along co-operative
principles.
N/B co-operative organization in the lower level are linked to ICA by becoming members
directly through national organization that becomes member on behalf of all the other in the
nation

3.5 CO-OPERATIVE PRINCIPLES ADOPTED BY THE ICA COMMISION OF 1966.

The ICA Commission adopted the following principles which are necessary for the running of a
genuine co-operative society.

 Open and voluntary membership

 Democratic administration (one man one vote)
 Limited interest on share capital
 Payment of dividends and bonuses to members.
 Promotion of education
 Co-operation with other co-operatives at local, national and international levels.

3.5.1 OPEN AND VOLUNTARY MEMBERSHIP

This principle represents the right of anybody who fulfils the conditions set out in the by-laws of
a cooperative society to become it’s members, regardless of his colour, religion, sex, tribe or
political affiliation. A member of a o-operative can also withdraw his membership from a co-
operative if he is not benefiting from it to for an other valid reasons.

1.1.1 DEMOCTRATIC ADMINISTRATION

All members of a co-operative organization have an equal say in the running of its affairs. Each
member has one vote regardless of how many shares he as. Every paid –up member has a right
to vote in a general meeting as we as stand for elections if he so wishes.

3.5.3 LIMITED INTEREST ON SHARE CAPITAL.

Co-operatives are allowed to pay interest on share capital to their members up to a maximum of
10% of the fully paid share per year. This rate is regulated to discourage the societies from
trading with the members share. The limitation of the interest paid on share capital also
discourages the members from buying the shares solely for the purpose f trading with them or
using them for speculative purposes.

3.5.4 PAYMENT OF DIVIDENDS AND BONUSES TO MEMBERS

If a society has made some surplus at the end of a financial year, it should be paid out to
members in accordance with how much each has contributed to the surplus. The law however
requires the society to set aside 25% of that surplus before distributing it to the members. This
amount is put in the statutory reserve fund which is used in expanding the society’s capital.

A dividend is paid to a member of a co-operative organization if the surplus in question comes

about as a result of the interest that the co-operative earns from many shares a member holds

A bonus on the other hand is paid from the surplus arising directly from the business the
members have conducted with their co-operative organization. For example a member of a
marketing society will be paid a bonuses proportion to how much produce he has delivered to his
society. In a saving and credit society, a ember would be paid a bonus in relation to how much
he has borrowed from his society.

3.5.5 PROMOTION OF EDUCATION

This principle requires all co-operatives to make provision for the education of their members,
committee members, the employees and the general public on the principle and operation of co-
operation

3.5.6 CO-OPERTION WITH OTHER CO-OPERATIVES

This principle expresses the need for co-operative institutions to firmly support each other in
fulfilling their objectives either within each country or internationally.

The co-operative principle form a system under which all co-operative organizations operate.
The principles are therefore inseparable and they support and reinforce one another. Thy

3.6 ICA CO-OPERATIVE SOCIETY PRINCIPLES OF 1995

3.6.1 VOLUNTARY AND OPEN MEMBERSHIP.
Co-operatives are voluntary organization open to all persons who are able to use their services
and willingly to accept the responsibility of membership, without gender, social, racial, political
or relational discrimination.

3.6.2 DEMOCRATIC MEMBERS CONTROL

Co-operatives are democratic organizations controlled by their members who actively
predicate in setting policies and making decisions. Men and women serving as elected
representatives are accountable to the members. In primary, co-operative members have equal
rights (one member one vote) and in secondary, tertiary and apex societies are organized in
democratic members’ participations.

3.6.3 MEMBERS ECONOMIC PARTICIPATION

Members contribute equitable to and democratically control the capital of the co-operative
society. A least part of that capital is usually a common property of the co-operative. Members
usually receive limited compensation in any on the capital subscribed as a condition of
membership. Members allocate supplies for any of the following purpose:
 Developing their co-operative society ,possibly by setting up reserve part of which at
list would be indivisible
  Benefiting members in proportions to their transactions with the co-operative society
 Supporting other activities approved by members

3.6.4 AUTONOMY AND INDEPENDENCE

Co-operatives are autonomous, self help organization, controlled by the members. If they enter
into the agreement with other organizations including government or raise capital from external
sources, they do so on terms that ensure democratic control by members and maintain their co-
operative autonomy.

3.6.5 EDUCATION, TRAINING, AND INFORMATION.

Co-operatives provide education and training for their members, elected representatives,
managers and employees so that they can contribute effectively to the development of their co-
operatives. They inform the general public particularly young people and opinion leaders about
the benefits of co-operation.

3.6.6 CO-OPERATION AMONG THE CO-OPERATIVES

Co-operative societies serve their members more effectively and strengthen the co-operative
movement by working together through local, national, regional and international structure.

3.6.7 CONCERN FOR COMMUNITY.

Co-operative societies work for the sustainable development of their community through policies
approved by their members.

3.7 SUMMARY
The principles of 1995 are the current principles that co-operative societies applies. They give
the characteristics of a true co-operative society and differentiate co-operatives from other forms
of business organizations.

3.8 SELF – ASSESSMENT QUESTIONS

1) Explain the objectives behind the formation of Rochdale pioneers

2) Explain the objective of international co-operative alliance.
3) Describe the co-operative principles of 1995 highliting their importance in co-operative
society
4) Explain the limitations of principle of voluntary and open membership.
5) Describe how decision passed by members can be over ruled by the CCD

HISTORICAL DEVELOPMENT OF CO-OPERATIVES IN KENYA

Learning objectives for the lesson

At the end of the lesson, the learners should be able to;
 a) Understand why co-operative organization was introduced in Kenya
b) Describe the co-operative development in Kenya during;
=Early colonial period
=Late colonial period
=Post Independent period
c) Explain the role of donor community in development of co-operative in
Kenya
d) Identify the role of politicians in development of co-operatives after
Independent
e) Identify the impact of co-operative organization Kenya

4.1 INTRODUCTION
Development is a change process characterized by increased productivity in the distribution of
social product and the emergence of indigenous institutions whose relations with the outside
world are characterized by equality rather than by dependence
In co-operative sector we look at the role of co-operatives in national development in Kenya. We
shall ourselves to what extent has co-operatives contributed to the reduction/elimination of
poverty, unemployment and in inequality among its members and its Kenyans in general.

The history in co-operative development may be divided in to three main phases.

 Early colonial period-1908-0945
 Late colonial period-1945-1963
 Post colonial period-1963-date.

4.2 EARLY CO-OPERATIVES DURING COLONIAL PERIOD 1908-1945

The modern co-operative movement in Kenya dates back to the year 1908, when the first co-
operative society by European farmers in the white was formed. The name of the society was
Lumbwa farmer’s co-operative society and later was renamed as Kipkelion co-operative society.
It was situated at Kericho district. The objectives of the society were to market cereals crops,
fruits and dairy products belonging to white setters. It also brought fertilizers, chemicals, seeds
and other agricultural inputs in collective efforts for its members. European setters hence
benefited from farming, marketing of products its and the economy of scales.

In 1931, KFA was registered as a co-operative society to take over the role of Kepkelion
Co-operative society. It was an association of European farmers and was based on some basic
co-operative ideas. They didn’t observe co-operative principles like voluntary and open
membership because colonial government did allow African to participant in the early co-
operatives until the mid 1940s.

Reasons why British colonial government did not allow the indigenous Africans to
participate in co-operative at that time
 The colonial government felt that it was too early to allow African engage in
 Co-operatives. It was believed that it would be impossible to find people who could
command the trust of their fellow African in keeping business operation.
 The European setters wanted to maximize their profit by trading under the pretext of
  Co-operative organization, thereby enjoying the privileges provided by co-operative s
alone
 The colonial government policy generally did not encourage equal political, economic
and social participation of African with their Europeans masters and generally
regarded as a source of cheap labors.
 The colonial policy encouraged political suppression towards the colonized, based on the
fear that if African were permitted to participate in co-operative, they would realize the
socio-economic disparities that existed between African and whites.

In 1923 the colonial government allowed African to grow coffee under control outside the
European setters Ares. This was made possible through the pressure from the African farmers
which the Devonshire white paper report of 1923 highlighted. By 1930 African were planting
coffee in Kiambu ,Kisii, Meru, Muranga and Nyeri districts.

In 1931, the colonial government enacted the first co-operative ordinance in order to regularize
the operations of co-operative which were mushrooming.

The problem of participation by African resulted to inequality in development between the two
groups. This led to uprising of the African who demanded their as human being to be recognized
by colonial government.

Therefore the Kenyan co-operative society did not emerge as a result of poor man defense
weapon against the exploitative by the European farmers but was due to the realization on the
part of colonist that if African were allowed to participate in co-operative, the returns fro the
agricultural industries w have increase.

Objectives behind the establishment of the co-operative society by white setters

 To provide high quality of raw materials.
 To create market for the agricultural produce
 To enable the Processing their farm produce
 To check the exploitation tread of monopolistic
 To create employment
 To provide inputs at low cost
 To improve their living standards
 To create unity and corporation among settlers
 To form a Forum for discussion among the European farmers

4.3 CO-OPERATIVE DEVELOPMENT IN THE PERIOD 1946-1963

During this period the colonial government allowed African to form co-operatives.
Reasons
a) Necessity to improve African in re-building of economy
The colonial government allowed African to participate in co-operatives as away of ensuring:
 Provision of raw materials to the colonial home
 Payment of taxes by Africans to finance industries of the colonial administration
 Facilitation of socio –economic activities in the rural areas in Kenya
Therefore the reason why the colonial government allowed African to form co-operative was to
enable the government to have total control over African .small-scale coffee and pyrethrum
growers. Therefore, on-members of co-operative were not allowed to grow these cash crops.
The implementation of the sivynnerton plan removed the barriers on African participation in
agriculture .this paved way for the great participation of the indigenous African in commercial
farming.

b) Enactment of co-operative ordinance of 1945

The first Co-operative society ordinance (law) in Kenya was introduced by colonial government
in 1931 and was later amended in 1932.
The co-operative society ordinance was to regulate the operation of co-operative s
By 1944, 21 co-operative societies had been registered and out of these7 have been deregistered
leaving only 14 in operation. The cause was poor management by the officials and inadequate
legal provision. Due to the causes, the government invited effects to make proposals for
organizing small-scale management farmers in to co-operatives. They came up with the co-
operative ordinance of 1945 which was to improve to co-operatives in the years that followed. It
was this ordinance that created the department of co-operative under a registrar for co-operative
in 1946
The responsibility of the department was:
 Promoting
 Controlling
 Educating members and public on the need and usefulness of co-operative efforts

Powers of registrar of societies as stated in the co-operative ordinance of 1945.

The ordinance gave guideline on:
 Registration of co-operatives societies
 Right and liabilities of registered co-operative societies
 Matters regarding the funds and properties of registered societies
 Settlement of disputes.

c) Struggle for African nationalism

From 1946 African nationalism (struggle for independence) began putting pressure on the British
colonial government in Kenya to allow more participation by Africans in the economy. The
colonial government therefore allowed the formation and registration of more African co-
operative societies under the management of African although under strict control. Between
1945 and 1980, most of co-operative societies formed were as a result of this. By 1950 the co-
operative registrar contained 75 viable societies majorities such were found in coffee growing
areas like kiambu, kisii, nyeri, e.t.c. during the same period 183 societies had been deregistered
for the following reasons: the co-operative society
  Some registered co-operative societies did not start operation after registration.
 Non payment of debts by co-operative and creditors demanded for cancellation.
 Voluntary liquidation at the request of members.
 Liquidation by the registrar owning to non-camphene with the permissions of the
ordinance by the co-operatives.
 Most societies were liquidated either for not being economically value or for lack of
proper management.

Effects of Mau Mau upraising to co-operative movement

African nationalism eventually developed in to Mau Mau war of independence. The declaration
of state of emergency in 1952 brought adverse efforts to the co-operative movement. The
officials of co-operative s who had direct interference with colonial administrators in to lie of co-
operative administration were termed by their fellow Africans as collaborators and traitors. This
affected co-operative societies because they feared to be killed by the Mau Mau.
However, many co-operative in Kenya summed the upheavals Mau Mau when the state of
emergency ended in 1958.
A place like nyanza, registration of co-operatives had continued to grow during the emergency.

Land consolidation and demarcation

This began in late 1950 in some parts o the country. During early 1960’s the population of
central Kenya areas which had been badly affected by state of emergency started to settle in
already demarcated land.
Effects on co-operative societies of Kenya included:
 Agricultural production all over the country intensified.
 Small- holders farmers planted more cash crops
 Dairy farmers improved the quality of their animals
 Poultry farmers used better method of production.
 Horticultural farmers increased production.
This led to registration of more co-operatives improved efficiency and better returns to Africa.

4.4 DEVELOPMENT OF CO-OPERATIVE AFTER INDEPENDENT

Reasons that led to rapid development of co-operative during the post independence period
a) Political reasons.
Before independence, co-operative were regarded merely as a vehicle for introducing limited
cash crops to the Africa small-holders. However after independence, the objectives changed
many new type of co-operative being formed. Majority of these societies involved the marketing
of agricultural crops such as coffee, maize, beans, pyrethrum, cotton and daily products through
their co-operatives societies .this was noticed between 1963 and 1964.
The expansion took place at the following areas.
 Settlement areas
 White highlands
 Traditional small- holders sectors

i) Settlement areas
Also many multi-purpose marketing co-operative societies were registered to the new African
settlers in the provision of farm-inputs, marketing farm produce and transportation.
ii) White highland areas
Many co-operatives were formed with the objectives of purchasing European farms. They were
encouraged to pool financial resources among landless Kenyan to purchase Europeans farmers.

iii) Traditional small-holder areas

This involves the expansion cash crop growing e.g. sugarcane societies in kisumu, coffee and
dairy societies in parts of central and eastern provinces.

The role that politics played in the development of co-operatives

After independence, the effort to form co-operative s were primarily politically motivated as
away of building the nature” settlement” co-operatives were politically inspired as well as land
purchase (farm) co-operative societies. Wanted African to acquire lands and other properties left
by white setters hence they were motivated politically and given assistance. Many societies
formed in small-holder sector had been created to demonstrate their interest in developing this
Government

Therefore the co-operative movement was seen by the government as a vehicle for the
introduction of African socialism and strengthen rational integration.
This was contained in the seasonal papers no.10 of 1965 on African socialism and its application
to planning in Kenya.

In 1963 there were 1930 co-operative societies out of which 655 were active. There was a rapid
growth of co-operative with a registration of 200 societies per year. By the end of 1966, there
were 1744 co-operative .registered out of which most were still agricultural oriented. However
during this time some co-operative societies failed due to:
 Poor management
 Inadequate cop-operative education and training
 Lack of economic appraisal before registration

b) Economic reasons
After independence, the recognized co-operative as a tool for economic development
consequently the government enacted the co-operative society’s act of 1966.

Effects of the enactment of co-operative society act on co-operative development.

Although the co-operative society ordinance of 1945 s received the co-operative ct provided for
strict regulation for organizing new co-operatives were registered, which satisfied technical and
economic consideration. the achievements of success of in agricultural sector after independence
formed as catalyst in the expansion of co-operative in witan areas .the new societies were
involved in the following activities;
 Agro-processing
 Building and constructions
 Saving and credit
 Housing
 External trade
 Banking
  Insurance.
The new act also enabled the cooperative movement to receive donor support

Role of donor community in development of co-operatives

Between the year 1967 to 1975 co-operative movement expanded at a faster pace do of the donor
finds channeled to the co-operatives from Nordic countries .this continued upto1993 when the
Nordic counties decided to withdraw its direct financial and technical assistance through
government to government collaboration. From this time the Nordic preferred movement to
movement support aimed at dealing with individual co-operative organization directly guts being
the intermediaries. This arrangement did not go a well as in 1997; the Kenya Nordic
development program was discontinued.

Impacts of co-operatives on the Kenyan economy

Since independent co-operative movement has grow from strength to strength. Today co-
operatives movement plays a major role in national economy. This can be traced from the nature
of its diversified activities.
By 1987,co-operatives movement was known to have given direct employment to over 60,000
people .Also an estimation of one out of two Kenyans were either directly or indirectly deriving
his or her livelihood from co-operatives
The major services provided by co-operative movements include:
 Banking
 Loan and credit
 Transportation
 Centralized accounting
 Bulk procurement
 Agro-processing
 Educational and training of committee, staff, member of public at large
The growth of co-operative movement resulted in a number o important co-operative
organizations being formed to give technical and specialized services in agricultural and
financial sectors. These includes
 KPCU
 Co-operative bank of Kenya
 KUSCCO
 Co-operative insurance company
 National co-operative housing union
 Kenya rural sacco union

4.5 SUMMARY
The co-operative movement gained roots in Europe earlier than Africa. In Europe the co-
operative were formed by poor members of the society as a way of shielding themselves against
exploitation from middle class members. Position in Kenya is different because in Kenya middle
class members formed the first modern types of co-operative during the colonial era. The settlers
formed the co-operatives to market their agricultural produce so as to get strong bargaining
power and terms. The idea was to take advantage of the economy of scale obtained in large
operation.
During the formative years members of co-operative did not bother about legal status of their
association. Some co-operatives which wanted to seek legal existence, sought registration under
the company act.

4.6 SELF-ASSESSMENT QUESTIONS

1) Describe the development of co-operative in Kenya in the following periods; Early colonial
period, Late colonial period and After independent
2) give reasons why British colonial government did not allow the indigenous African farmers
to participate in co-operative before 1940’s
3) explain the objectives behind the establishment of co-operative societies by white settlers
4) explain the reason that led the colonial government to allow African to form co-operatives in
1946`
5) describe the effects of mau-mau appraising to co-operative movement
6) give reasons that led to the rapid development of co-operatives during the post-independence
period

TYPES OF CO-OPERATIVE SOCIETIES IN KENYA

Learning objectives for the lesson

At the end of the lesson, the learners should be able to;
a) Understand various types of co-operative societies in Kenya
b) Explain reasons for the success of marketing co-operatives in Kenya
c) Identify problems and challenges faced by marketing co-operative societies
d) Describe functions of various types of co-operative in Kenya
e) Differentiate between rural and urban SACCOs
f) Explain reasons for steady success of urban SACCOs

5.1 INTRODUCTION
Activities carried out by co-operatives.
a) Collection the member produce e.g. coffee, cotton, tobacco milk etc processing
it ,packaging, storing and marketing it or them
b) Collect money in form of shares /deposits from members, saving or investing it for them
and giving back to them as loan and erodent and interest on the deposits.
c) Contracting living houses bringing constructed one and sell them to the members at a
reasonable term and consideration.
d) Buying consumers and household goods and selling them to members at a reasonable
price and distributing the surplus realistic to members
e) Undertaking construction work o living and commercial building.
f) Transportation f people and goods
g) Marketing word and store carrying or undertaking work in basketry or other craft such as
mining, engineering and tailoring.
 h) Growing vegetable an fruits for local and overseas market
i) Undertaking two or more activities.
N/B different activities give different type of co-operative societies in Kenya.

5.2 MARKETING CO-OPERATIVE SOCIETIES

They are formed to collect members produce, process grade, pack and market it. They sell the
produce on behalf of members.
They are among most important in Kenya because
They deal with agricultural produce, livestock, fish etc hence they collect, process, grade and
package the members produce and market it on their behave
They include:
1) Fisheries co-operative
2) Multi –purpose co-operatives
3) Timber dealers co-operative
4) Hide and skin co-operatives
5) Ranching farmer’s co-operatives
6) Pig farmers co-operatives
7) Poultry farmer’s co-operatives
8) Dairy farmer’s co-operatives
9) Sugarcane farmer’s co-operatives
10) Sisal co-operatives
11) Pyrethrum farmer’s co-operatives
12) Fruit farmer’s co-operatives
13) Cotton farmer’s co-operatives
14) Coffee farmers co-operative
15) Grain farmers co-operatives

5.2.1 Reason for their success

a) Through co-operative members have success in marketing their product at favorable price
and cost effectively?
b) Through collective production and processing of farm produce. These societies ensure
very low cost hence high returns.
c) There is ready market due to existence of national agriculture, co-operative and
marketing union like KPCU, KCC etc
d) They offer credit facility to farmers with more income which is paid off after selling.
e) Grants from government and foreign country like Canada
f) Advice from extension officer offered by the government who carry demonstration on
best way of farming
g) Education to members organized by society and union in way farming, important of early
payment of loan.
h) Members are assisted in proper management of finances by regulating the earning
relevant by farmer to ensure flow.
i) Members are able to acquire farm inputs at cheap price
Through the society is able to carry out resource most effective way of farming

5.2.2 Problem and challenges

  Dishonesty of junior members who are entrusted in running of the society
 Price fluctuation of produce
 Competition from private traders
 Varying weather conditions
 Members are not ensured of steady flow of income
 Inadequate resources that makes operation costly and have forced society
acquire loan leading to liquidation
 Disease and pest
 Lack of qualified man power at management level and operational level
 Transportation problems due to impassable roads
 Lack of storage facilities
 None or late payment.
 Government legislation which force them to operate in a narrow edge.
 Traditional /culture
 Political influences and interferences
 Poor storage facilities
 Lack modern technology
 Member ignorant.

5.2.3 Functions
Collecting, processing, storing, selling, transport, payment of farmers produce and assist in
provision of farm inputs arrange for credit facility.

5.3 SAVING AND CREDIT CO-OPERATIVE ORGANIZATION (SACCO)

Saccos collect/accept money from members, saving it on their behalf and give back to them
inform of loan, bonus, dividend or interest on deposits
They mainly deal with one activity mainly mobilization of funds/saving and giving loan facilities
to members.

5.3.1 Rural saccos

Rural SACCOs are SACCOs formed by farmers and traders. They are affected by seasonality
and hence do not have steady income. Majorities were transformed from the Union Banking
Section (UBS). They are affiliated to KERUSSO

5.3.2 Urban saccos

These are SACCOs which are formed by salaried workers. They have steady income because
workers are paid every month. They are the most successfully types of co-operative societies in
Kenya. They are affiliated to KUSCCO.

5.3.3 Reasons for steady growth of urban saccos

 Steady income because they are formed by employed people
 Co-operation between members and employers where their deductions as deducted
through check off.
 They (members) are loaned and this contribute effectively towards development of
society in AGM
  Members(majority) have high salary hence strong capital base
 They are able to hire experienced and qualified personnel.
 They are not affiliated by the seasonality
 Have representation widespread and not locally. This gave them an edge over other
societies when it comes to contributing of ideas.
 Payment of dividend motivates people to participate
 Large investment due to good capital base
 High turn over of meeting because they are educated/
 Lange loan
 Centralized services like auditing, accounting supervision
 Qualified staff (they ensure)

5.4 CONSUMER CO-OPERATIVES

They deal in buying household and consumer goods and sell them to its members at reasonable
prices. Any profit occurring from their operation is distributed to members .they are faced with
poor management, competition from supermarket and lack of enough from members. E.g.
KUSCCO supermarket, Ismalia co-operative store (Mombasa)

5.4.1 Reasons for their decline

Problem (reasons for decline)
Dishonesty
Lack of effective management
Lack of trained personnel
Competition
Lack of patronage of members
Such co-operative assist in reducing the net price paid for consumer goods and in maintaining
standard of quality. They help to reduce the need for it to their members by encouraging them to
save through deposits or patronage bonuses .consumers co-operatives help to provide outlets
from farmers marketing co-operatives. Kenya and east Africa countries in not so much
developed in consumer co-operatives like Sweden, Denmark and Norway.

5.5 HOUSING CO-OPERATIVES

This type of co-operative construct or buy the already built house and sell them to members on
favorable terms .they built houses for each other. They are affiliated to NACHU. Their aims are
to provide houses to members. The organization expert’s builders, who built and later sell to
outsiders.

5.6 BUILDING AND CONSTRUCTION CO-OPERATIVES

They undertake construction work involving living and commercial building. The members
are the actual builders. They join together, contributes to the society daily/weekly/or
monthly. They even help each other to look for casual work or contract. When one gets a
contract, they employ their colleagues in co-operative, they share the profit together.
However this type of co-operative in Kenya is not common because of the mushrooming of
Construction Company.

5.7 TRANSPORT CO-OPERATIVES

These types of co-operatives are formed by members who bring their resources together,
purchase vehicles and use them for transportation of people and goods. Mostly the members
initially have their own personnel vehicle for transportation hence they know the importance of
the transport business. Their growth have picked up recently through slow due to various
challenges and problems. However Transport co-operatives present a potential area of
exploitation by co-operatives.

5.8 ART AND CRAFT CO-OPERATIVES

The co-operatives may be the undertaking of the craft like wood or stones curving,
basketry, tailoring, engineering or mining. This are fairly distributed throughout the
country of late they have ventured in to export for Kenyan product handcraft an out craft.
Hence they bring foreign exchange through trade.
E.g. Akamba art craft co-operative in Mombassa.

5.9 HORTICULTURAL CO-OPERATIVES

These co-operatives may be growing of vegetables and fruits for local consumption and
overseas export. They are found in areas with good climate for horticultural cultivation.
However these are many problems that have hindered their prosperities .this includes:
 Poor organization
 Back of marketing facilities
 Storage problems
 Exploitation by middlemen
 Liquidation of national horticulture co-operative union
 Pest and disease
 High production cost
 Transportation.

5.10 SERVICES CO-OPERATIVES

These are co-operatives societies which are formed to provide services to the co-operative
movement. An example is the co-operative insurance company (the former CIS). Other area can
be Auditing merchandise

5.11 MULTIPURPOSE CO-OPERATIVES

This kind of co-operatives may be undertaking two or more functions .This is why they are
multipurpose co-operatives
Problems
 Conflict of interest
 Complexity of management
 Competition
 Mismanagement.

5.12 SUMMARY
The various types of co-operatives in Kenya are grouped according to activities carried out.
These are the major economic activity in which the co-operative was registered to perform.
5.13 SELF-ASSESSMENT QUESTIONS
1) Explain why marketing co-operative societies are successful from independence
to date
2) Identify problems that hinder the development of marketing co-operative societies
3) Urban saccos are the most successful co-operative societies in Kenya. Explain
4) Consumer co-operative societies are not common in Kenya. Explain
5) Identify problems and challenges that hinder the development of horticultural co-
operative societies in Kenya.
Explain various types of co-operatives in Kenya