Most co-ops found not issuing dividends from preserved fund

KATHMANDU, MAR 04 -

Most cooperatives have not been distributing dividends from their preserved fund which is the sum remaining after deducting profits. As per the Cooperative Act 1992, the money remaining after 25 percent of the profit is put in the reserve fund should be distributed.

The Cooperative Rule has categorised six types of funds to be created from the remaining money—share dividend fund, preserved fund, employees’ bonus fund, cooperative education fund, cooperative development fund and loss recovery fund.

“Although almost all the cooperatives have been distributing dividends from the share dividend fund, most of them have not been distributing dividends from the preserved fund,” said Namaraj Sapkota, a monitoring officer at the Department of Cooperatives (DoC). “Only a tiny number of cooperatives have issued dividends from their preserved fund.”

The Cooperative Act has stated that members are entitled to get dividends which should not be more than 15 percent of their respective share capital. However, both the act and regulation are silent over how the benefits should be distributed from the preserved fund, and how much members should get.

Sapkota said that cooperatives should issue dividends to their members who carry out transactions with them. “Whoever does more transactions are generally entitled to get more benefits from the preserved fund,” he added. Out of the six categories of funds, the share dividend fund and the preserved fund have been created for the direct benefit of the members.

Meanwhile, cooperatives have admitted that the Cooperative Act has not been followed properly when it comes to distributing benefits from the preserved fund. “A few older agriculture cooperatives have provided this benefit, but a majority of newer cooperatives have not been doing so,” said Bijay Raj Ghimire, vice-president of the National Cooperative Federation. He added that the benefits must be distributed to the members, but the provision is not being implemented properly due to the DoC’s weak supervision.

According to the DoC, a majority of cooperative members are not aware about the benefits they are entitled to get from the preserved fund. As a result, the DoC is planning to ensure that cooperatives follow the act and distribute dividends from the preserved fund. “We will ensure that this provision is strictly followed in the new standard to be set by the department,” said Sapkota. “We will also carry out awareness campaigns so that members can claim benefits from the fund.”

Meanwhile, the DoC has found shortcomings in the management of cooperatives in a recent inspection. DoC teams have also found out that most cooperatives have not been following Cooperative Standard 2011 with regard to the fees charged from their members.

According to the Cooperative Standard, a savings and credit cooperative must have at least 500 members to expand its working area. Similarly, members have to pay at least 0.5 percent of the share capital as the membership fee. However, most cooperatives have been charging a flat Rs 100 with the intention of attracting new members.

Meanwhile, the DoC said that it had crossed-checked the transactions of 32 cooperatives with dealings of more than Rs 140 million annually. The inspection found that most of the cooperatives had been operating with the sole objective of earning profits.

Source: The Kathmandu Post