Overview of Corporate Governance Issues for Co-operatives - IFC

include measures to promote greater participation by members. Education and trainingwill be restructured to meet the needs of members so as to encourage them to becomemore involved in the process of promoting good governance in their co-operativesocieties. Active and empowered members will participate in the running of theirsocieties in terms of decision-making, planning and control (CRMP 2005).AsiaAs in the case of Africa, studies relevant to corporate governance and co-operatives inthe region remain limited and focus mainly on South Asia. However the majority ofco-operatives in Asia share a similar legacy of government intervention and colonialism.The co-operative model developed by the British within India has received the mostattention. This derives in part from the fact this co-operative model was then replicatedin other British colonies and was based on unified system with strong central control.The latter feature was not modelled on the UK experience of an autonomousco-operative sector and indeed the Indian co-operative system was, in importantrespects, modelled on the German system.This was because the British colonial authorities identified indebtedness as mainproblem holding back rural development in India. The 1904 Co-operative CreditSocieties Act was passed to set up credit unions along Raiffeisen principles. This hasbeen characterised as an “interpretation of a British Colonial Office of a GermanInstitution that presented organizational characteristics that were strange even to Britishbusiness” (Cuevas and Fischer 2006:27).In 1912 a second Act allowed for the establishment of other types of co-operatives. Thistradition was later exported to other colonies and characterised as mentioned above bytight control from a central government department for co-operatives whose registrarhad considerable powers of intervention (Johnson 1997).The co-operative tradition inSouth Asia was not fundamentally altered after independence with the state retaining alarge degree of control over the co-operative sector. The law was meant to serve as aninstrument for achieving economic and social development in rural areas.Unlike Africa, the co-operative sector in South Asia has been noticeably less affected bythe impact of Structural Adjustment Programmes and until recently by liberalisationpackages. In India, the co-operative regime in the majority of the states remainscharacterised by high levels of government control and intervention. Ramesha reportsthat “dormant membership, lack of active participation of members in management, lackof professionalism (and absence of corporate governance) undue political andbureaucratic intervention have made majority of the cooperatives at the primary levelalmost moribund” (Ramesha 2003:3). There has been much criticism of levels of stateintervention at district and regional levels and there is an extensive literature discussingthe negative economic and social impacts of the current regime.Page 25