Cooperatives are important in reducing poverty. All cooperatives, social or economic, are mechanisms that ensure the growth and prosperity of communities. In developing and transitioning countries that lack access to capital, education, and training, cooperative structures allow communities to pool together their resources to solve problems, identify common goals and target the causes and symptoms of poverty.

What Are Cooperatives?

Cooperatives are organizations of all types that address a wide range of issues — from food producers and consumers in sub-Saharan Africa, to credit and hybrid cooperatives all around the globe.

Anytime people have common concerns, face similar struggles or are looking for solutions bigger than they alone can accomplish, cooperatives offer an answer via strength in numbers. This is why cooperatives are important to poverty reduction.

When Did Cooperatives Begin?

Cooperatives date back to the 1840s when the Rochdale Society of Equitable Partners came together after losing their jobs to industrialization. This group decided to band its resources together and open a store that provided goods they all needed, but couldn’t afford on their own.

Out of their individual experiences, we were left with the Rochdale Principles — a set of operations still in use today that helped the pioneering group manage the realities of poverty in an organized and productive manner.

What Are Cooperatives Core Principles?

The success of cooperatives depends upon seven core principles of cooperative development:

• Voluntary and open membership
• Democratic member control
• Member economic participation
• Autonomy and independence

• Education, training and information
• Cooperation among cooperative
• Concern for community

More than 760 million people around the world are a part of the cooperative movement. Here are seven reasons why cooperatives are important to successful poverty reduction.

7 Reasons Cooperatives are Important to Poverty Reduction

1. Cooperatives directly answer community needs, adjusted to local concerns. They are anchors that distribute, recycle and multiply local expertise, resources and capital. Autonomous cooperatives reach the poorest people in the community, offering upward mobility and basic infrastructure ignored by large businesses. Consumer Cooperatives, like Rochdale play a vital role in distributing food and basic resources in poor and rural areas. Profits and benefits also circulate within the same community.

2. Cooperatives help build peaceful societies. In the process of transforming poverty-ridden communities into vibrant economies, cooperatives contribute to skill-development and education. They bolster gender equality and improve the health and living standards of an entire community. Cooperatives have been instrumental in meeting the Millenium Development Goals, as nations are more likely to stay peaceful by escaping the poverty trap.

3. Cooperatives enable farmers to obtain higher returns. Agricultural and fishing cooperatives support its members by providing training, credit and resources. Rural cooperatives, dependant on agriculture, don’t have to look to international companies to grow. In impoverished communities with low inputs, it is unlikely they can produce the quality and quantity desired to make profitable margins. Combining supply purchases, sales and other expenses can help cooperatives operate at lower cost-per-unit than their individual farmer counterparts. This can allow for an entire community to re-market their product at a higher price.

4. Worker cooperatives promote collaborative entrepreneurship and economic growth. Cooperatives reduce individual risk in much-needed business ventures and create a culture of shared productivity, decision-making and creative problem-solving. Only 10 percent of cooperatives fail while 60 to 80 percent of businesses fail; in fact, cooperatives can revive communities by allocating funds to rising workers with vested interests. Credit cooperatives also supply money to start a new business or repair current ones. Profits from sales can then support larger community projects that help each member and the community as a whole to survive.

5. Cooperatives create competition within local markets. Since services come at a cost to members, pricing adjustments occur to benefit members and impact other organizations in order to compete at the same efficiency. Purchasing cooperatives, in particular, help businesses compete with large, national retailers. Cooperatives not only provide positive outcomes for its members, but also excite local markets as a whole.

6. Multi-purpose and credit cooperatives provide small loans to their members. These loans go to self-employment, offering an opportunity for better wages through retail shopkeeping, farming or livestock. This allocation of funds can go towards building needed community infrastructure projects and financing small businesses that help local economies grow.

7. Industrial and craft cooperatives help members produce marketable products. In addition to training, shared facilities allow members to access raw materials and technical machinery otherwise unavailable in rural areas. These cooperatives can provide an additional source of income for families and allow them to grow in their communities, rather than travel to urban centers at a high cost.

Empowerment and Collaboration

Cooperatives organize all over the world because they can help in almost every circumstance. Both developing and developed countries depend on cooperatives because they are an empowering model that promotes collaborative social change.

While foreign aid and investments drastically help impoverished communities, external remedies are only half the battle. Cooperatives provide a grassroots initiative and social structure to address all symptoms of poverty.

Cooperatives also make aid and assistance all the more powerful. With strong communities and the right foreign assistance, eradication of extreme poverty becomes all the more feasible.