Cooperatives and How They Reduce Poverty

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Starting your own company is a great way to improve your finances and overall quality of life, but this is a lot more difficult for people in lower income sectors. By forming cooperatives, however, they are able to run their own organizations and improve their community. Here is how.

Directly addressing community needs

Cooperatives address the needs of their communities directly, and in a manner that is adjusted to local concerns. They serve as anchors in the community that recycle, distribute, and expand local resources, expertise, and capital.

They are aware of the specific nuances of their community, so they reach even the poorest people, and offer basic infrastructure and upward mobility that are often overlooked by large businesses. They are able to distribute food and basic resources in their areas, while the profits and benefits circulate within the community.

In developing countries, the effect of cooperatives in the development of low-income communities are extremely apparent. Some national governments even recognize these benefits, and encourage the formation of cooperatives. Philippine cooperatives, for example, are given tax exemptions, as part of the national government’s effort to foster the creation and growth of cooperatives.

Higher returns for farmers

Fishing and agricultural cooperatives provide resources, training, and credit to their members. So, rural cooperatives that depend on agriculture need not look to bigger companies for growth. This means a lot, especially for impoverished communities with low inputs where it is unlikely to produce the quantity and quality that large companies require when buying agricultural products.

Compared to individual farmers, cooperatives can operate at lower costs per unit by combining sales, supply purchases, and other expenses, which lets the entire community to re-market products at higher prices.

Promoting collaborative entrepreneurship

Cooperatives minimize individual risk in business ventures and foster a culture of shared decision making, productivity, and creative problem solving. Cooperatives have a much lower rate of failure than traditional businesses, and they can provide funds to rising workers to revive their communities.

Credit cooperatives supply funds to community members who are starting their own businesses or repairing existing ones. Most of the time, the loan goes to farming, livestock, or retail shopkeeping. Part of the profits are then used to support bigger community projects that help the entire community to thrive.

Promoting peace in the community

While transforming poverty-ridden communities into dynamic economies, cooperatives also boost skill-development and education. They provide equal opportunities for everyone, regardless of gender or background, and improve the health and living standards of their whole community.

Creating competition on the local market

Business competition

Cooperatives adjust their prices to benefit their members and improve the efficiency of their services, and this can encourage other enterprises to compete at the same cost-efficiency. In particular, purchasing cooperatives lets businesses compete with bigger national retailers. This way, cooperatives can provide positive outcomes for their members, while stimulating entire local markets.

Cooperatives are an empowering model promoting cooperative social change. All over the world, people who belong to poverty-stricken communities organize cooperatives to help themselves. Cooperatives empower the underprivileged and allow them and their entire communities to be free from poverty.