History of Cooperative

Filipinos traveling in Europe during the later part of the 19th century must have been impressed with the success of a new economic movement in effecting a gradual metamorphosis of the economic and social life of the people ion those countries. At the turn of the century, Filipinos, in increasing number, traveled and studied abroad and brought home with them new ideas. It was this group of Filipinos who were in close in contact with the new economic movement in Europe. Two names worthy of note were Dr. Jose P. Rizal and Teodoro Sandiko. Rizal, after his side trip to Sandakan, Borneo in 1892, requested Governor Despudol that he and some relatives and friends be permitted to move to that place and found a colony under the cooperative plan of Robert Owen. Instead, he was arrested for treason and banished to Dapitan, Zamboanga del Norte. In Dapitan, Rizal had his ideas in cooperation partially fulfilled. He put up a school for the poor community on a purely cooperative basis. He also established a cooperative store with the help of his pupils. One noteworthy group organized by Rizal was the La Sociedad de los Abacaleros (Society of Abaca Producers). This functioned for only one year. Rizal returned the members share capital without any loss. Teodoro Sandiko, in his travels in Europe, must have had a close contact with the cooperative movement in Germany where he came across with the Raiffeisen movement. He was very much impressed by this type of cooperative and he looked forward for an opportunity to have it introduced here in the Philippines. As destiny might have its choice, Sandiko had his chance when he was appointed one of the early governors when Civil Government, under the Americans, was established. The Rural Credit Law. As soon as Civil Government was established, Filipino participation in government was encouraged. Teodoro Sandiko, then governor of Bulacan, prepared a bill patterned after the Raiffeisen type of credit union and had Rep. Albert Barreto of Zambales sponsor the bill in the lower House of Congress.The principal aim of this bill was to protect and develop the agricultural interest of the country. When the Barreto sponsored bill was presented it readily obtained unanimous approval on January 20, 1908. The Philippine Commission however, turned it down. Undaunted by this defeat the sponsors of the bill again put it through in the Second Philippine Legislature. This time it was sponsored in the Lower House by Rep. Rafael Corpuz who succeeded Rep. Barreto from Zambales. The bill was ably presented in both Houses and it was finally passed into law on February 11, 1914 and became Act 2508. When this Act was finally made into law, Gov. Sandiko earned a title of Father of Cooperation in this country. The administration of the Rural Credit Law was entrusted to the Bureau of Agriculture. The first rural credit association that was organized under this Law was the Agricultural Credit Cooperative Association of Cabanatuan, Nueva Ecija. It was formed on October 18, 1916. With this initial organization farmers in the different provinces were organized. At the end of 1926 there were 544 rural credit cooperatives organized in the 42 provinces and by 1930 there were 571 associations formed all over the country. In 1935, however, about 90% of these cooperatives were inactive with no funds left in their treasury. The experiment on rural financing, through cooperatives was a failure.

Marketing Cooperatives. As soon as the organization of rural credit cooperatives was in full swing, The Cooperative Marketing Law (Act 2425) was enacted and approved on December 9, 1927. The rural credit associations were designed to help finance the productive efforts of the farmers. In order to provide incentives to the farmers to produce more an efficient machinery for the profitable marketing of their products should be provided. Wherever rural credit associations were organized cooperative marketing societies were also designed to be organized.The apparent weakness of the rural credit cooperatives, however, failed the enthusiasm of farmers to organize themselves into cooperative marketing associations. By 1939 only 164 societies were actually organized with a total membership of around 5,000 farmers.With this number only 35 reported their sale of products to the Bureau of Commerce. The number of associations reporting indicated that only 20% of the organized associations were active. Causes of the failure of early cooperatives in the Philippines. Filipino economists and students of cooperatives in this country have often attributed the failure of cooperative societies in this country to the following causes: 1. Incompetent management 2. Lack of proper understanding of the principles, practices true aims, and purposes of cooperative associations 3. Improper use of credits by the borrowers who, instead of using money borrowed for production, spent it for fiestas or luxuries. 4. Defective securities 5. Political interference particularly in the collection of overdue accounts 6. Lack of compensation of officers 7. Inadequate character and moral responsibility in handling the other fellows money 8. Lack of adequate safeguard against unscrupulous officers who took advantage of their position to grant loans to themselves and their compadres which later proved disastrous to the system. 9. The dominance of the individualistic attitude instead of the spirit of cooperation among the people. 10. Inability of cooperatives to secure adequate capital 11. Their dependence on alien suppliers and distributors 12. Ineffectiveness of the government and promotion of cooperative organizations 13. Inadequate marketing facilities Considering the experiences of similar societies in other countries, however, the fundamental cause of failure in a cooperative enterprise is the lack of proper understanding of the principles and true aims of cooperative associations, and the non-adherence to them in actual operation of cooperative enterprises. The ACCFA Financing Program. In recognition of the strategic position occupied by our farmers in the social structure and economic development of the country, the Congress of the Philippines in 1952 enacted Republic Act 821. This law established a system of liberal credit which is specially designed to meet the needs of the small farmer. It also created an administrative agency known as the Agricultural Credit and Cooperative Financing Administration (ACCFA). To implement the great task of rural financing, four general and interrelated objectives of the law are set forth as follows: 1. To assist small farmers in securing liberal credit 2. To promote the effective groupings of farmers into cooperative associations 3. To establish an orderly and systematic marketing machinery for, and controlled by, the small farmers 4. To place agriculture on a basis of economic equality with other industries

Credit without collateral. One unique, almost radical, innovation, provided by the law is the extension of credit to farmers without collateral except their productive capacity. It provides (Sec.18), credit extended to small farmers, either with titles or no titles over their lands, whether tenants or part owners, should be based upon the anticipated productive capacity of farmers in so far as the repayment probabilities are concerned. The ability of such borrower to provide securities in the form of land or other tangible securities should not be the primary deciding factor in approving or disapproving loan. The ACCFA credit and financing program is carried out through various types of loan. Each type is designed to serve a specific need of the farmer or of a cooperative. The management of loans is tied up with the promotion of farmers cooperatives. As a matter of policy ACCFA extends loans only to member of farmers cooperative marketing associations (FACOMAS). The ACCFA is given broad powers to promote and organize farmers cooperative societies. It does not only extend credit o small farmers but also promotes and gives financing assistance to farmers cooperative associations for the purpose of developing a producer-controlled marketing system and building th4e bargaining position of the farmers in relation both to production and marketing. All marketing cooperatives organized under the old law (Act 2425) were rigidly screened and 22 old associations were reconstructed under the new law ( Rep.Act 821). At the end of 1954 there were 169 farmers cooperative associations in operation, and in 1956 there were a total of 319 FACOMAS organized and supervised by ACCFA. At the end of 1957 there were about 600 FACOMAS scattered all over the country. Cooperative Federations. Provincial federations or FACOMAS have been organized in provinces where FACOMAS are organized. A provincial federation serves its cooperative members in the same manner as a FACOMA serves its farmer members. It centralizes the marketing activities of the cooperatives composing the federation, thus giving the farmers a stronger bargaining position, greater economy and efficiency and more uniform standard of management and policies for common advantage.The provincial federation facilitates the exchange and marketing of commodities among the FACOMAS which would be very uneconomical and inefficient if the same were handled by them individually. The operation of certain facilities, refrigeration plants, etc., is too complicated for any individual FACOMA to handle. These enterprises can be handled most efficiently, more economically, and more profitably by a federation. On the national level the Central Cooperative Exchange (CCE) was the National Federation. The CCE undertook the effective merchandising of distribution of agricultural produce. It aimed to operate terminal markets which would serve as clearing houses for FACOMAS and other procedures. It also aimed to conduct the business of dealing in all kinds of grain and other farmer produce, livestock and poultry and other kinds of goods, to do a general brokerage, commission, import and export business dealing with agricultural machinery, tools and implements, seed grains, fertilizer, sacks and other farm supplies; and to maintain warehouses for the storage and deposit of all kinds of goods and merchandise. Non Agricultural Cooperatives Credit Unions. The first credit union under the Raiffeisen type was organized in Vigan, Ilocos Sur in August 1938. With the enactment of Commonwealth Act No. 565, known as the Cooperative Law by the Congress of the Philippines in 1940, legal sanction to credit and consumers cooperatives was effected. It also provided exemption for such cooperatives for five years from all kinds of taxes. By 1941 thirty credit unions were organized with some 2,000 members. The intervention of World War II prevented further the growth of cooperatives in this country.

When the ACCFA law was enacted in 1957 the organization and supervision of agricultural cooperatives were given to ACCFA. The promotion and supervision of non-agricultural cooperatives was placed in a newly created office, the Cooperative Administration Office (CAO). This office took charge of the promotion and supervision of non-agricultural cooperatives.Under the CAO there were by 1972 around 2,000 actually organized credit unions all over the country. Consumers Cooperatives. Consumers cooperatives started to be organized after the enactment of Act 2508 in 1916, with the organization of the first consumers society at the College of Agriculture in Los Baos in 1916.There are no reliable data on the number of cooperative stores actually organized and operated up to the period of the Japanese occupation. Most of these societies however, met a natural death. After liberation there was a rush of for the organization of consumers cooperatives, inspired by the policy of the government to distribute relief goods through cooperatives. As fast as these associations were organized, as fast as they went down to failure which resulted in the sad experience that gave a blotted page to the history of the consumers movement in this country. Cooperatives were organized without even an attempt to indoctrinate members on the principles and practices of cooperation. In January 1946 there were 747 consumers cooperative associations duly registered with the Securities and Exchange Commission (SEC). In June 1949 the number increased to a total of 1,367 with an authorized capital of P3,387,213.29, and a total membership of 260,134. By 1952 most of those associations became inactive. Promotion of non-agricultural cooperatives. For the promotion of of non-agricultural cooperatives, the Philippine Legislature enacted early in 1957 Rep. Act. No. 2023, otherwise known as the Philippine NonAgricultural Cooperative Act.This law declared a definite policy to assist the people to develop their enterprises on a cooperative basis, to strengthen their economic independenceby the promotion of organized methods of industrial production, marketing,distribution and credit, the improvement of processes and other activities, and the removal of conditions which hampered the growth of a rising standard of living with a view to promote the general well being of the people and expand the national economy. To further encourage the growth of cooperation the government is going to promote the organization of a system of cooperative banks all over the country to facilitate liberal credit to non-agricultural cooperatives in the same manner as the ACCFA is extending liberal credit to FACOMAS and also the establishment of a system of cooperative wholesale societies for the effective distribution of consumer goods through cooperatives. The law created the Cooperative Administration Office (CAO) under the Department of Commerce, which is charged with the administration, promotion, organization and supervision of cooperatives falling under this Act. Rep. Act 821, creating ACCFA, takes charge in the promotion of agricultural cooperatives while this law, Rep. Act No. 2023, creating CAO, takes charge in the promotion of non-agricultural cooperatives. The enactment of Rep. ACT No. 3844, otherwise known as the Agricultural Land Reform Code in 1963 gave a further boost to the promotion and development of cooperatives in the country. As a pre-requisite to the transfer of land titles to thousands of farmers they (farmers) are required to become members in good standing in their local cooperatives. To this end, the promotional functions of ACCFA were transferred to the Agricultural Productivity Commission, created under the code, and ACCFA retaining the

functions of financing and education to organized cooperatives. The declaration of martial law stagnated the growth of the private-initiated cooperatives. Presidential Decree 175, L0123 provided the framework for the massive efforts of government to organize cooperatives, through the Samahang Nayon Program and the related organizations, despite of such herculean efforts the effect in the people was largely negative. The private sector-initiated cooperatives stand in their own, adhering to the concept of self-reliance. When the government initiatives failed, the private sector took up the challenge and today much headway has been gained. Four national organizations, namely the National Confederation of Cooperatives, Philippine Federation of Credit Cooperatives, Federation of Free Farmers Cooperatives, and the National Market Vendor Association have shown what private efforts anchored in self-reliance and other cooperative principles can do. During the martial law regime, President Marcos issued several decrees that dealt with cooperatives. The decree abolished CAO and organized the Bureau of Cooperative Development (BCOD) under the Department of Local Government and Community Development (DLGCD). A month later, the Agrarian Reform Decree (PD 27) was issued declaring the entire country as an agrarian reform area. PD 175 and Letter of Implementation No. 23 were issued in support of the agrarian reform program. With government sponsorships, cooperatives were organized overnight. At the barrio level, precooperatives called Samahang Nayons were organized and grouped in tens to form Kilusang Bayans (KBs) or full-pledged coops. Marketing and financial services were provided by the Area Marketing Coops and the Cooperative Rural Banks respectively in support of the SNs and KBs. The Cooperative Development Loan Fund was also set up. However, the pre cooperatives and KBs did not last. Of the 22,000 SNs, only 5% remained active as of 1986. The failures were attributed from the heightened conflicts between the cooperative movement and the government and the investment of coops savings called guarantee funds in capitalizing various CRBs. Apparently, the external threats to coops survival led to their consolidation into national networks. One such network is the National Confederation of Cooperatives (NATCCO) which has five regional development centers spread throughout the country. With the recreation of democratic space in 1986, the cooperative leaders lobbied aggressively for the adoption of a cooperative-friendly legislation. They got all out support of Senators Aquilino Pimentel, Jr. and Agapito Aquino in having the Bill passed and signed as law (R.A. No. 6938) by President Corazon C. Aquino on March 10, 1990. A companion law was also passed creating the Cooperative Development Authority (RA NO. 6939) which provided the abolition of the Bureau of Agricultural Cooperatives Development (BACOD). With the passage of the Code, a powerful instrument for economic progress and development has been placed in the hands of the people. www.koopbiz.com/coopHistory.php