- This is an incorporated form of business.
- Such a business has a separate legal entity from that of the owners
- A co-operative society is a form of business organization that is owned by and run for the economic welfare of its members
- It is a body of persons who have joined together to do collectively what they were previously doing individually for mutual benefit.

• Open and voluntary membership - Membership is open and voluntary to any person who has attained the age of 18 years.
• Democratic Administration - The principle is one man one vote.
• Dividend or repayment - profits should be distributed to the members in relations to their contribution.
• Limited interest on share capital - A little or no interest is paid on share capital contributed.
• Promotion of Education - Co-operative societies should endeavor to educate their members and staff on the ideas of the society.
• Co-operation with other co-operatives - endeavour to learn from each other's experience because of the many commonalities.

• Membership is open to all persons so long as they have a common interest. Members are also free to discontinue their membership when they desire so
• Co-operative societies have a perpetual existence; death, bankruptcy or retirement of a member does not affect its operations
• They are managed in a democratic manner. Every member has one vote when electing the managerial committee irrespective of the number of shares held.
• The main aim is to serve the interest of the members where profit is not the overriding factor.
• Co-operative societies have limited liabilities
• There must be a minimum of 10 people with no maximum membership.
• Co-operatives have a separate legal entity from the members who formed it i.e they can own property sue and be sued
• Any profit made by the society is distributed to the members on the basis of the services rendered by each member but not according to the capital contributed.

• Co-operative societies can be formed by people who are over eighteen years regardless of their economic, political or social background.
• There must be a minimum of 10 persons and no maximum no.
• The members draft rules and regulations to govern the operations of the proposed society i.e. by-laws, which are then submitted to the commissioner of co-operatives for approval.
• The registrar then approves the by-laws and issues a certificate of registration.
• If the members are unable to draw up their own by-laws, the co-operative societies Act of 1966 can be adopted in part or whole.

• A co-operative society is composed/run by a committee usually of nine members elected by the members in a general meeting.
• The management committee elects the chairman, secretary and treasurer as the executive committee members, who act on behalf of all the members and can enter into contracts borrow money institute and depend suits and other legal proceedings for the society.
• The committee members can be voted out in an A.G.M if they don't perform as expected.

Co-operatives may be grouped as follows;

• Nature of their activities - Producer cooperatives, consumer cooperatives, savings and credit cooperatives (SACCOs)
• Level of operations - Primary cooperatives, secondary cooperatives

This is an association of producers who have come together to improve the production and marketing of their products.
Examples of producer cooperatives include; KCC-Kenya Co-operative Creameries, K.P.C.U-Kenya Planters Co-operatives Union, K.G.G.C.U-Kenya Grain Growers Co-operative Union
It's functions are as follows;

• Obtaining better prices for their members products
• Providing better storage facilities for their products
• Providing better and reliable transport means for moving the products from the sources to the market and building feeder roads
• Providing loans to members
• Providing services of grading, packing and processing to the members
• Providing farm inputs e.g. fertilizers, seeds, insecticides e.t.c on credit to members
• Educating and advising members on better methods of farming through seminars, field trips, films and demonstration

- These are formed by a group of consumers to buy goods on wholesome and sell them to the members at existing market prices.
- Their aim is to eliminate the wholesalers and retailers and hence obtain goods more cheaply
- The co-operatives allow their members to buy goods on credit or in cash
- Members of the public are also allowed to buy from the society at normal prices thereby enabling the society to make more profits
- The profits realized is shared among the members in proportion to their purchases i.e the more a member buys, the buyer his/her share of profit

Advantages of Consumer Cooperatives

- Sell goods of high quality
- Sell goods to members at fair prices
- Sell goods to other people at normal prices thereby making more profit
- Buy goods directly from the producers thereby eliminating middlemen.
- Can give credit facilities to the members
- Can pay interest on capital to the members
- Sell a variety of goods to the members at a place where they can easily get them
Disadvantages of Consumer Cooperatives

- They face stiff competition from large scale retailers such as supermarkets
- Cannot offer to employ qualified staff
- Majority of their members have low income, so raising off capital is a problem
- Kenya, being an agricultural country, produces enough subsistence goods for itself.
- Reluctance of non-members to buy from the shops lowers the turn-over
- Mismanagement of the shops is rampant

- They are usually formed by employed persons who save part of their monthly salary with their co-operative society, through check-off system
- Their money earns goods interest and when one has a significant amount saved, he/she become entitled to borrow money from the society for any personal project e.g. improving their farms, constructing houses, paying school fees e.t.c
- The SACCOS charge lower interest on loans given to members than ordinary banks and other financial institutions.
- The societies have few formalities or requirements to be completed before giving a loan. These are:

• Membership
• Members salary
• Members saving
• Guarantee from fellow members

- Profits earned by the SACCO'S maybe shared among the members inform of dividends.
- Most SACCO'S have insured their members savings and loans with co-operative insurance services (CIS).
- This means if a member dies his/her beneficiaries are not called upon to repay the loan and the members savings/shares is given to the beneficiaries.
- They are the main institutions that provide loans to most people who do not qualify for loans from commercial banks because they do not ask for securities such as title deeds required by the bank.

• Since the properties of co-operatives are owned collectively, they are able to serve the interest of the members affectively
• They have limited liability
• Membership is free and voluntary
• Members share profits of a co-operative through dividend that are given
• They have improved the standards of living of their members through increased income from their produce and through savings from incomes.
• Co-operatives benefit their members through giving them credit facilities and financial loans which they could not have got from local banks
• They are run on a democratic basis i.e. all members have an equal chance of being elected to the management committee.
• Many co-operatives are large scale organizations hence able to get the benefits of large scale organizations e.g low production costs leading to low prices of products
• Co-operative enjoy a lot of support from the government and when they are in financial and managerial problems, the government steps in to assist them

• Majority of the co-operatives are small in size and therefore cannot benefit from economies of scale.
• Members have a right to withdraw from the society and when they do, co-operatives refunds the capital back which might create financial problems to the society.
• Corruption and embezzlement of funds is a problem for many co-operatives.
• Most co-operatives are not able to attract qualified managerial staff hence leading to mismanagement.
• Many suffer from political interference. Sometimes; the election of the management committee is interceded with by some people with personal interest in certain candidates hence the best person may not be elected to run the affairs of the society.
• Members may not take keen interest in the affairs of a co-operative society because their capital contribution is small.

A co-operative society may be dissolved under any of the following circumstances.

• Order from commissioner of co-operatives
• Voluntary dissolution by members
• Withdrawal of members from the society leaving less than ten members
• If the society is declared bankrupt