History of cooperative in Nepal

Nepalese people have a long tradition in co-operation taking many forms of labour sharing in villages, informal mutual aid groups and rotating savings and credit associations.

Agriculture is the mainstay of the Nepalese economy. It is the source of livelihood of 80 to 90 % of the population, accounts for 53% of the GDP and is the main contributor to export earnings.

It is therefore logical that most of the co-operatives in Nepal are related to agriculture, to farming and to farm products. Subsistence farming is still widely spread. Land distribution is uneven. The overall average size of operational land holding is slightly above one hectare.

The small and marginal farmers, who constitute the majority, operate between 0.28 and 1.03 hectares. The Agricultural Census 1991/92 reveals that nearly 70 percent of the total number of holdings is of less than 1 hectare size and account for about 31 percent of the total crop area.

Similarly, the top 5 percent of owners control about 40 percent of cultivated land while the bottom 60 percent controls about 20 percent. It is estimated that 10.4 percent of the households are landless; Terai constitutes the highest with 18.3 percent followed by Mountain and Hills with 3.7 percent and 2.2 percent respectively. However, another estimate based on holdings of cultivated lands by rural households reveals that 19.01 percent are landless; 35.0 percent in Terai, 11.3 percent in Mountains and 7.3 percent in the Hills. Limited availability of arable land makes off-farm activities increasingly important. Although the country is rich in water resources, its agriculture depends primarily on monsoon rains. Only 25 % of the total potential area is covered by irrigation. Accordingly the main common problems that farmers are facing in Nepal and which could possibly be solved by working together the co-operative way, are:

* Poor supply and frequent shortages of essential agricultural inputs,

* Unreliable and insufficient supply of water,

* Irregular and thinly distributed extension services,

* Limited access to credit facilities,

* lack of markets and price guarantees for their produce and erratic provision of minimum support price to the farmers and

* lack of insurance services for animals and crops.

Furthermore co-operatives would be the most appropriate organisation of farmers to pool their resources, their demand and their produce and to represent their interests vis-à-vis the government and commercial firms.

2. Introduction of “modern” co-operatives

Modern co-operatives began in Nepal in 1954 when a Department of Co-operatives (DOC) was established within the Ministry of Agriculture to promote and assist development of co-operatives.

The first co-operatives formed in Nepal were co-operative credit societies with unlimited liability created in the Chitwan District as part of a flood relief and resettlement programme. They had to be provisionally registered under an Executive Order of HMG and were legally recognised after the first Co-operative Societies Act of 1959 was enacted.

The history of co-operatives in Nepal is closely related to Government’s initiatives to use co-operatives as part of its development programmes. Therefore, the development of co-operatives will be described in eight phases corresponding to eight plan periods.

3. Development of co-operatives by plan periods

During the First Five-Year-Plan (1956/7-1960/1) Government embarked on an ambitious programme to organise 4,500 agricultural multipurpose co-operatives. In fact only 378 co-operatives were organised. The important achievement during this period was that the co-operative development programme was integrated into the overall rural development programme.

During 1961/62 the country was without a Plan. As far as co-operatives are concerned, 203 new societies were organised. In the course of the following years a government machinery for co-operative development was established: Co-operative Societies Rules were framed in 1961, a Co-operative Training Centre was created in 1962 and in the same year a Co-operative Development Fund was set up within the DOC. The total number at the end of this period stood at 581.

During the Second Three-Year-Plan (1962/63-1964/1965) a Land Reform Act came into force in 1964 including a compulsory savings scheme, according to which farmers had to save a portion of their crop. The co-operative programme was integrated into the land reform programme. A total of 542 societies were organised during the Plan period. A Land Reform Savings Corporation was established in 1967 to accept compulsory savings and advance loans to farmers. This led to a rapid numerical growth of co-operative societies of which, however, two thirds were soon defunct. A Co-operative Bank was established under the Co-operative Bank Act of 1963 to finance the reorganisation of agriculture and to provide credit facilities to various small scale production, marketing and other societies organised in co-operative form. This bank was converted into the Agricultural Development Bank/Nepal (ADB/N) in 1968, in order to meet the overall credit requirements of agriculture and to provide credit to co-operatives and to individual farmers.

During the Third Five-Year Plan (1965/66-1969/1970) the total number of co-operatives reached 1,489 operating in 56 out of 75 districts.

Many of these co-operatives were formed in a hurry without taking economic feasibility and social viability into consideration. By the end of the Third Plan most of these co-operatives were defunct. A Co-operative Review Committee assessed the viability of the existing co-operatives and presented a report, grading the co-operatives as follows:

* 17 % good (Class A)
* 18 % with potential to develop (Class B)
* 65 % in poor condition (Class C)

The Committee reported among other things that the co-operative system had failed to perform in accordance with the expectations outlined.

Most of these co-operatives failed to mobilise the desired member participation and to open up new business opportunities.

During the Fourth Five-Year Plan (1970/71-1974/75) a massive reorganisation programme launched already in 1969 was pursued, placing emphasis on the quality rather than on the quantity of co-operatives. The Plan gave priority to 28 districts where the Intensive Agricultural Development Plan was to be implemented. This “Guided Co-operative Programme”, which was later turned into the “Programme for Strengthening Co-operatives” stressed the need for business efficiency (but still ignored social viability).

The 1,489 co-operatives merged or were liquidated so that at the end of the process only about 250 societies survived. The management of the co-operatives was handed over to ADB/N. The Bank provided loans amounting to more than Rs 110 Million. However, small farmers secured only 32% of these loans whereas 68% were given to medium and big farmers. As a result of these measures the business of the co-operatives increased but the loan recovery ratio reached a low of only 49.3 % (down from 90.3 % under the First Plan and 73.4 % under the Third Plan). Under the Fifth Five-Year Plan (1975/76-1979/80) a massive Co-operative Expansion Programme was launched, the “Sajha Programme”, which initially aimed at running 1,163 co-operatives in 1,827 village panchayats (now VDCs) of 30 districts, with some 808,000 members reaching 4.4 million people. Under this programme guided co-operatives and village committees were converted into Sajha societies, co-operatives were organised to cover almost all villagers. The compulsory savings raised under the Land Reform Programme were converted into shares of co-operatives societies. In this way persons became members of co-operatives against their will Under the Sajha programme local politicians were made ex-officio members of the boards of co-operatives, a measure that alienated ordinary members from “their” society.

Within a year the number of co-operatives increased from 293 to 1,053 and the number of members from 93,000 to 802,000. Many of these co-operatives became inactive after some time and their number decreased by 40 %.

The main objectives of the Sajha societies were to increase production and farmers’ income through improved farming systems, institutional loans (subdividing co-operatives into small groups at village level), supply of inputs, savings and marketing.

In 1978 the management of co-operative societies was withdrawn from ADB/N and handed over to their respective management committees. But the concerned people were not properly informed of the decisions. Besides they were not prepared for the take over. This led the Sajha societies to wilderness.

During the Sixth Five-Year Plan (1980/81-1984/85) an “Intensive Sajha Programme” was launched in 1981 focusing more on and made more responsive to the needs and problems of small farmers. This programme started in 20 districts of the Terai.

The ex-officio representation on the boards of co-operative societies was replaced by election of office-bearers from among the members.

The basic guidelines of the programme were as follows:

(a) more emphasis on effectiveness of co-operatives rather than numerical growth;
(b) concentration on areas where integrated rural development programmes are applied, formation of co-operatives only after a thorough feasibility study;
(c) major orientation on the interests of small farmers.

During the Seventh Five-Year Plan (1985/86-1989/90) efforts were made to reshape the co-operative movement. It was planned to extend co-operative services to the people through newly established service centres. Existing co-operatives were placed at service centres and where no co-operatives existed. A total of 144 new societies were formed mainly in the remote parts of the country.
By the end of this plan period there were:

* 830 agricultural co-operatives in 72 districts,
* 33 districts unions and
* 54 non-agricultural co-operatives.

During this plan period structural adjustment programmes were introduced and co-operatives lost their monopoly in fertiliser trading.

4. Revitalising co-operatives after 1990

With the restoration of democracy in 1990 and under the Eighth Plan (1992-1997) efforts are made to revitalise existing co-operatives.

A National Co-operative Federation Advisory Committee was appointed and submitted its first report in 1991.

In the same year a National Co-ojperative Development Board was constituted and in 1992 a new Co-operatives Societies Act promulgated which recognises the democratic character of co-operatives and ensures their operational autonomy.

4.1. The National Co-op. Development Board (NCDB)

The NCDB is a high powered body established under the NCDB Act of 1992 and composed of Government representatives from different ministries appointed and people having experience and knowledge about the co-operative movement nominated by HMG. The Board is chaired by the Minister of Agriculture.

The responsibilities of the NCDB included:

(a) To work out suitable policy guidelines and new legislation relating to the co- operative movement,

(b) To create organisational structures of the co-operative movement from village to national level, and

In this way we can say that the condition of co-operative is not still so efficient and so effective due to many kind of problems of our country so ,to uplift the co-operative sectors not only government everyone should get together so that the future of cooperative can be seen very good n good.

Present situation:

Cooperatives are now very much popular among all sections of the society especially in farming and retailing. Nearly about 8000 cooperatives are already been established in Nepal and several others are under process. They are providing real time services to the related groups of people. Government is also enforcing policies for their healthy growth and their protection and promotion.

Hence presence situation of cooperative is satisfactory. Still they require reforms to assist economically deprived citizens.