What are the objectives of a cooperative form of organisation? Explain its Merits and limitations

Cooperative Form of Organization:

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  1. Mutual Help: The primary objective of a cooperative is to provide mutual assistance to its members. Members come together to fulfill common needs or interests, such as obtaining goods, services, or financial assistance at reasonable terms.
  • Economic Welfare: Cooperatives aim to improve the economic well-being of their members. They do this by collectively purchasing inputs, marketing products, or providing financial services, often at better rates than what individual members could achieve on their own.
  • Voluntary Membership: Cooperatives are open to all who can benefit from their services, and membership is usually voluntary. They promote democratic membership and participation.
  • Democratic Control: Members of a cooperative typically have an equal say in the decision-making process. Each member usually has one vote, regardless of their investment or contribution.
  • Limited Return on Capital: Cooperatives aim to provide benefits to their members rather than generate profits for external shareholders. Therefore, the return on capital is usually limited.


  1. Democratic Management: Cooperatives encourage active member participation and decision-making, ensuring a democratic management structure.
  • Economic Benefits: Members often enjoy better prices and services due to collective bargaining power.
  • Social Welfare: Cooperatives can uplift the economic well-being of their members and support local communities.
  • Limited Liability: Members’ liability is often limited, providing protection for their personal assets.
  • Stability: Cooperatives tend to be stable entities, as they prioritize member interests over maximizing profits.


  1. Limited Capital: Raising capital can be a challenge, as cooperatives often rely on member contributions and loans.
  • Slow Decision-Making: The democratic decision-making process can be time-consuming, making it difficult to respond quickly to market changes.
  • Limited Professional Management: Member participation in management may result in a lack of professional expertise.
  • Limited Growth: Expanding and competing in broader markets can be difficult for cooperatives.
  • Conflict among Members: Differences in goals and interests among members can lead to conflicts within the cooperative.

In summary, cooperatives aim to provide mutual benefits to their members by promoting democratic control, economic welfare, and limited returns on capital. While they have advantages such as social welfare and democratic management, they also face limitations like capital constraints and potential conflicts among members. The success of a cooperative depends on effective management and a commitment to member interests.

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