Our article from MoneySense today talks about borrowing money from credit cooperatives. Here’s an excerpt:

You join voluntarily. There are five kinds of coops: credit promotes thriftiness and creates funds to grant productivity loans; consumer procures for and distributes commodities to member and non-members; producer undertakes agricultural or industrial joint production; service engages in medical and/or dental care, hospitalization, transportation, insurance, housing, labor, electric and light power, communication, among other services; and multipurpose, combines two or more of the business activities of different coop types.

Your share is limited. As per coop principles reformulated in 1966 in Vienna, by the 23rd Congress of the International Cooperative Alliance, a member’s share is limited to prevent domination of the coop’s affairs by affluent members.

You share in the surplus or savings. The coop is designed to distribute surplus equally, again, so no member will gain at the expense of another. Surplus, upon agreement, are used to develop the coop’s business interest and provide common services to members. This will also help a coop avoid bad debts to stabilize its operations and assure its growth.

You can get training. It trains members to avoid lack of understanding of the principles, aims, and purposes of the coop; improper credit use (borrowers in rural areas are known to spend borrowed money for fiestas or luxuries). It also educates those who are interested in the principles and techniques of a coop.

You can get loans – and help an organization grow. A coop is touted to be founded for a noble purpose – even Jose Rizal, while exiled in Dapitan, established a community school and a coop store. Proponents of cooperatives hope to attract members with loans, as well as the mental and emotional rewards of supporting a helping organization’s existence or preventing its failure.

Let me add two points:

Know the management. The Philippines is a cemetery of many failed cooperatives. Most of the failures were caused by fraud. People running away with other people’s money. But that’s true also of banks and other financial companies, right? And even for banks and investment companies, knowing the management is still recommended.

Participate. If possible, participate in management. If not, be active in decision-making. Stay updated. Joining a cooperative means you want to be part of that community. That’s the only way these things can work.

Good luck guys! Have a great day ahead.