Starting your own cooperative group is one of the smartest things to do in business and in life.
I’ve written a previous article about the power of partnerships and the many benefits it could bring, especially in business.
But a cooperative is one of the smartest ways to leverage partnerships and other people’s money for business and investment.
And here is the good news. A cooperative is very easy to set up. In fact, anyone anywhere could decide to set up their own cooperative in a matter of days.
A cooperative could be formal and registered or informal and unregistered. More than half of the cooperative societies in Nigeria are informal and unregistered.
A Case in Point
I recently spoke with a particular business owner who is currently active in more than three cooperatives.
According to him, a cooperative society is founded on trust, no matter whether it is registered or not.
As a matter of fact, out of the three cooperatives he belongs to, two are unregistered.
According to him, the most important criteria to become a member of his cooperative is to have a reasonably paying job or business, and to be responsible.
After probing him on what makes a member responsible, he pointed out that they could either be married persons with a business or job, or someone under a boss. Ideally, someone who can be called to order if they default.
Advantages of a Cooperative
From the outside, it looks like a cooperative is just a gathering of people saving and putting money together.
But there are many benefits that come with being a member of a cooperative. You wouldn’t see much of it until you’re inside as a member.
Ease of Raising Capital
For most people who decide to join a cooperative, the biggest draw was the ease of raising capital for emergencies, business or investment.
A cooperative gives you access to funds that no bank or lending company could give you.
Take for example, a cooperative of 20 members with the aim of supporting themselves via monthly contribution.
The contribution cycle would last for 20 months before restarting after each member would have been paid.
Each month, all members would contribute a particular sum of money and give it to one member according to the agreed sharing hierarchy.
The sharing hierarchy is mostly designed based on trust and need. That is, the most trusted members would be first in line to receive.
Also, the members who are mostly in need of funds will be pushed forward while those who just want to save their money will be pushed backwards.
Assuming that the agreed monthly contribution is 10k Naira, one designated member of the cooperative would take home 200k Naira each month.
This is a huge leverage.
No bank anywhere would give you a 200k advance to pay back in 20 months just for having a deposit of 10k.
And even if they do, they’d slap you with a hefty loan fee that’s more than 50% of the cash advance.
Think cooperatives, think ease of access to funds.
Partnership Investment Opportunities
In a previous article, I shared a story of someone who started a cooperative investment after several failed businesses.
After trying to navigate the world of business all one and failing at it repeatedly, he decided to leverage partnership from his group of friends.
He successfully raised more than 2 million Naira from 20 friends to buy out a local booming restaurant/hangout spot, and they are making good money today.
There are cooperatives today that have a different objective other than saving and supporting members.
Some cooperatives have the aim to pull funds together towards investing in big cash flow projects.
This is wealth creation on steroids.
Cultivate Saving Habit
Apart from raising capital and partnerships, a cooperative could help you develop a saving habit.
Money saved in a cooperative is different from money saved in a bank.
When you save money in a bank, you could decide to withdraw it at any time and spend it towards any expense.
But when you save with a cooperative, that money is spent immediately towards paying a receiving member of that cooperative.
In other words, your savings with a cooperative is well-documented but not accessible until it is your turn to get paid.
So, if you want to cultivate the habit of long-term saving towards projects, a cooperative would help you do that better than a bank.