Cooperatives Could be Your Roman Empire

Are you a seasoned investor who have been reviewing your investment portfolio and looking for other profitable ventures? Or, are you new to financial planning and still searching for the right instrument to start your investment and savings journey with? Here are reasons why a cooperative or two should be in your list:

Higher Deposit Interest Rates than Most Banks

Regular savings offered by cooperatives generally have higher interest rates than traditional commercial banks. Although, not as high as with digital banks, some billionaire cooperatives offer special savings at competitive rates. Oro Integrated Cooperative, for example, has a product called Dream Savings with 7% interest rate per annum (p.a.), compounded quarterly at Php1,000 starting deposit for the minimum plan and up to Php25,000 monthly deposit for the maximum plan. This product has a 5-year contract term. They also offer a product called Pearls Savings, a pension or retirement savings with 9-10% interest rate p.a., a lock-in and a waiting period. They accept member applicants from anywhere in the country and overseas. Providers Multi-Purpose Cooperative, on the other hand, offers time deposit with up to 8% interest rate p.a. for Php1M and above. They accept members within Luzon.

Safer, More Predictable Returns on Investment 

Opening an account with cooperatives is equivalent to "joining" their organization. You are not just a depositor, but a member. You must have paid at least the minimum share capital requirement to take advantage of their products (e.g. savings) and services, which are mostly provided to their members only. You can earn interest on your share capital every year, apart from the interest on your savings deposit. These shares are not market-dependent and are usually less volatile. You don’t have to stress out from market swings. For instance, members of Tagum Cooperative claimed their dividend rate was 12.75% from 2022 and 12.93% from 2023. The 2024 rate only dropped by 1.07% and, with their 14.85% increase in net surplus, it could be just due to increase in membership. This consistency is because cooperative returns are more dependent on their internal business and performance. 

Refunds from Patronized Products and Services

Members who also take advantage of the loan products of a cooperative, can get patronage refund (PR) on top of the interest on share capital (ISC) every year as declared during annual assembly meetings. These meetings are usually held every March, after finalizing the audited financial statements and determining the distribution of net surplus, or within 90 days after the close of each fiscal year (per RA 9520). You can get the amount of your PR by multiplying its rate to your total income contribution, mainly, the interests from loans that you have paid for the year plus service and filing fees. If the cooperative has other products and services, say a rental home or commercial space, and you are one of the tenants, you can also get refund from rents you have paid. Most of the times PR rates are higher than ISC rates because the number of patronizing members are fewer than the total number of members with share capital. 

Democratic Governance and Equitable Business Model

Cooperatives distribute profits, not only according to their share capital contributions (ISC), but also based on how much members patronize their products (PR). This model prioritizes equitable returns rather than maximizing profits for a few shareholders. Cooperatives also follow the principle of  "one member, one vote," regardless of the amount of their share capital contributions. You, as a member (or investor) have plenty of control to how a cooperative would run and perform, provided you do your responsibilities because there are criteria that could disqualify you as a member entitled to vote (MEV). If you are a regular member who maintains your good standing, no default loan payments, attends annual general assembly meeting and continuously patronize your cooperative's products and services, you can even run for a position. The cooperative model also promotes higher standards of accountability and transparency and reduces the risk of exploitative practices.

Values-based Social Enterprise

If you are looking for ethical and sustainable investment, cooperatives are perfect for you. Cooperatives around the globe are values-driven and are guided by the seven (7) principles taken from The Rochdale Pioneers. Cooperatives are people-centered enterprises that operate based on democracy, equality, shared ownership, education, cooperation, and community care. They are generally community-based and thus, stimulate local economies, create jobs, and provide essential services. Every cooperative in the Philippines are mandated to allocate at least 3% of their net surplus (income) every year for community development fund (CDF) and utilize such fund for social and community development projects including, but not limited to, medical and health assistance, livelihood programs and scholarships, donations to local government's disaster fund, environment-friendly and sustainable projects such as plastic bottle segregation and recycling, tree planting and urban gardening, etc.

Cooperatives in a nutshell, offer distinct advantages over other investment funds in terms of ownership, purpose, risk and control. Of course there are drawbacks such as difficulty in exiting or selling your shares and capital constraints, where no member should hold more than 10% of the cooperative's total share capital (per RA 9520) or as stated in their by-laws but, if the goal is long-term, cooperatives are often more resilient in crises because decisions are focused on sustainability and not short-term gains leading to steady performance during economic downturns e.g. global financial crisis, COVID-19. Plus, all your income are tax-free and their financial products are very affordable too.