The Department of Cooperatives has for the first time prepared a regulation that paves the way for those living below the national poverty line to establish multi-purpose cooperatives to cater exclusively to the poor.
The introduction of the regulation has provided legal means for bodies like the Poverty Alleviation Fund (PAF) to convert self-regulated community organisations into institutions called the cooperatives.
The PAF — a body formed under the prime minister to reduce absolute poverty in the country — had long been lobbying for the introduction of a guideline to convert community organisations into cooperatives to make them financially self-sustainable and ensure their existence, even if the PAF ceases to exist.
“Since the PAF’s establishment, it has been focusing on building the capacity of the poor and economically empowering them. At the same time, we have also been looking for a right exit strategy so that the support we have extended till date continues to generate ripple effects in the years to come. We hope the new regulation will serve that purpose,” PAF Vice Chairman Yuba Raj Pandey told The Himalayan Times.
Currently, PAF has been supporting the poor in different communities by establishing community organisations, which are made up of members of at least 30 poor households.
The PAF extends a grant of up to Rs 5,500 to each of these members, which is used to create revolving funds.
In this sense, community organisations generally work as microfinance institutions and focus more on extending credit to the poor so that they can engage themselves in various income-generating activities and develop physical infrastructure at the community level.
Currently, PAF is overseeing the operation of over 23,700 community organisations, which cover over 663,000 poor households in various parts of the country.
“We now want each of these organisations or a group of such organisations to convert themselves into multi-purpose cooperatives so that they can mobilise resources on their own and become independent. This will eventually help in institutionalisation of community organisations,” Pandey said, noting that the establishment of these cooperative units will provide another avenue for banks and financial institutions to channel funds allocated under the central bank’s provision on deprived sector lending.
As of now, one such community organisation in Gajuri of Dhading district has converted into a multi-purpose cooperative and legally registered itself as Sadbhav Poverty Alleviation Multi-purpose Cooperative.
The unit can now start mobilising deposits from the poor and extend credit to those living below the poverty line, like any other multi-purpose cooperative. It can also help farmers embrace commercial farming techniques, help them gain access to markets, facilitate dairy farmers
and their businesses, and operate schools.
However, the cooperatives can neither accept membership of those who do not fall in the category of the poor nor conduct business with such people.
“We will strictly monitor whether community organisations that have transformed into cooperatives are catering strictly to the poor as we do not want the elite to capture resources, which will further marginalise the poor,” Pandey said.
PAF has divided the poor into four categories. Those with food security of less than three months fall under the category of ‘hardcore poor’; those with food security of over three months but less than six months are categorised as the ‘medium poor’; those with food security of over six months but less than a year fall under the ‘poor’ category; and those with food security of over a year fall under the ‘marginal non-poor’ category.
The PAF’s latest annual report shows that 65.3 per cent of community organisation members fall under the ‘hardcore poor’ category and another 25.6 per cent fall under the ‘medium poor’. This means most of the beneficiaries of community organisations are very poor people.
According to the economic survey of last fiscal year, 23.8 per cent of the population of 26.49 million are currently living below the national poverty line.
Loopholes
> The regulation that has paved the way for opening of poverty alleviation multi-purpose cooperatives states that a member can acquire up to 20 per cent stake in such units. However, it has not mentioned how to prevent backdoor entry of those who do not fall in the category of the poor, as non-poor can always buy shares of cooperatives by creating a proxy.
> The regulation has not fixed a ceiling on deposit mobilisation and credit extension vis-à-vis the share capital.
> Also, the capacity of members of the cooperatives, especially board members, needs to be enhanced, as they will have to deal with a huge amount if such units are created upon merger of several community organisations.
source: the himalayan times,3 june 2014
LINK
The introduction of the regulation has provided legal means for bodies like the Poverty Alleviation Fund (PAF) to convert self-regulated community organisations into institutions called the cooperatives.
The PAF — a body formed under the prime minister to reduce absolute poverty in the country — had long been lobbying for the introduction of a guideline to convert community organisations into cooperatives to make them financially self-sustainable and ensure their existence, even if the PAF ceases to exist.
“Since the PAF’s establishment, it has been focusing on building the capacity of the poor and economically empowering them. At the same time, we have also been looking for a right exit strategy so that the support we have extended till date continues to generate ripple effects in the years to come. We hope the new regulation will serve that purpose,” PAF Vice Chairman Yuba Raj Pandey told The Himalayan Times.
Currently, PAF has been supporting the poor in different communities by establishing community organisations, which are made up of members of at least 30 poor households.
The PAF extends a grant of up to Rs 5,500 to each of these members, which is used to create revolving funds.
In this sense, community organisations generally work as microfinance institutions and focus more on extending credit to the poor so that they can engage themselves in various income-generating activities and develop physical infrastructure at the community level.
Currently, PAF is overseeing the operation of over 23,700 community organisations, which cover over 663,000 poor households in various parts of the country.
“We now want each of these organisations or a group of such organisations to convert themselves into multi-purpose cooperatives so that they can mobilise resources on their own and become independent. This will eventually help in institutionalisation of community organisations,” Pandey said, noting that the establishment of these cooperative units will provide another avenue for banks and financial institutions to channel funds allocated under the central bank’s provision on deprived sector lending.
As of now, one such community organisation in Gajuri of Dhading district has converted into a multi-purpose cooperative and legally registered itself as Sadbhav Poverty Alleviation Multi-purpose Cooperative.
The unit can now start mobilising deposits from the poor and extend credit to those living below the poverty line, like any other multi-purpose cooperative. It can also help farmers embrace commercial farming techniques, help them gain access to markets, facilitate dairy farmers
and their businesses, and operate schools.
However, the cooperatives can neither accept membership of those who do not fall in the category of the poor nor conduct business with such people.
“We will strictly monitor whether community organisations that have transformed into cooperatives are catering strictly to the poor as we do not want the elite to capture resources, which will further marginalise the poor,” Pandey said.
PAF has divided the poor into four categories. Those with food security of less than three months fall under the category of ‘hardcore poor’; those with food security of over three months but less than six months are categorised as the ‘medium poor’; those with food security of over six months but less than a year fall under the ‘poor’ category; and those with food security of over a year fall under the ‘marginal non-poor’ category.
The PAF’s latest annual report shows that 65.3 per cent of community organisation members fall under the ‘hardcore poor’ category and another 25.6 per cent fall under the ‘medium poor’. This means most of the beneficiaries of community organisations are very poor people.
According to the economic survey of last fiscal year, 23.8 per cent of the population of 26.49 million are currently living below the national poverty line.
Loopholes
> The regulation that has paved the way for opening of poverty alleviation multi-purpose cooperatives states that a member can acquire up to 20 per cent stake in such units. However, it has not mentioned how to prevent backdoor entry of those who do not fall in the category of the poor, as non-poor can always buy shares of cooperatives by creating a proxy.
> The regulation has not fixed a ceiling on deposit mobilisation and credit extension vis-à-vis the share capital.
> Also, the capacity of members of the cooperatives, especially board members, needs to be enhanced, as they will have to deal with a huge amount if such units are created upon merger of several community organisations.
source: the himalayan times,3 june 2014
LINK
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