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Member-funds and cooperative performance

This paper reports on some research into the role of member-funds in multi-purpose cooperatives in the state of Andhra Pradesh, India. The central thesis is that member-funds, both in terms of quantity and quality, can enhance the control members exert on the cooperative. The involvement of members through their capital stake could be at various levels – by the provision of permanent capital, long or short term capital. The researchers expected that each of these would have differing effects on control and on the culture and systems of the cooperative.

The effect on control was expected to directly drive cooperative performance, and indirectly to enhance cooperative performance through greater usage of the cooperative by the members. Enhanced cooperative performance would in turn satisfy members, and the loop would hopefully be completed when satisfied members would place more funds with the cooperative.

The research used data collected from 923 individuals and 30 multi-purpose cooperatives, as well as case-studies of four successful multi-purpose cooperatives. The conclusion was that member-funds have a central role in enhancing cooperative performance. Funds provided voluntarily, either as an outcome of collective cooperative level decision making or of individual level decisions are of particular significance. Externally compelled member funds are less useful, as are short-term member funds.

Rajesh Agrawal is a faculty member in the Finance and Accounting Area of the Indian Institute of Management, Ahmedabad (IIMA); KV Raju is a faculty member and K Prathap Reddy is the Director of the Institute of Rural Management Anand (IRMA). R Srinivasan is Dean (Academics) and Professor of Finance and Control at the Indian Institute of Management Bangalore (IIMB). M S Sriram is a faculty member at the Centre for Management in Agriculture at IIMA.

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