It is a voluntary association formed for the mutual benefit of all the members, working towards their common cause. The Co-operative Societies are formed with an idea of supporting each other to achieve a common economic objective.
For example, the farmers may come together and form a co-operative society to work jointly and take advantage of economies of scale. When they work together they will have a better bargaining power for buying raw materials. They will also enjoy a better bargaining power while selling their agricultural output.
Basically, co-operatives work towards directly answering community needs, promote collaborative entrepreneurship and economic growth, provide small loans to their members amongst others. Asides from contributing to societal growth, one other purpose a co-operative society has is to make a profit. Co-operative societies go through a lot of planning, financing, and preparation to start-up. Therefore, they expect to get good and encouraging returns. Traditionally, co-operatives make the investment rather easy for members. When members join an existing co-operative, they may be required to invest a nominal amount and then agree to invest over time by allowing the co-operative to keep or retain a portion of each year’s co-operative earnings as equity capital.
Members must thus invest in their co-operative and not merely use or patronize it. In other words, members who do business with other firms can just do buying or selling, but in order to do business with their co-operative, they must invest as well.