Economic Implication of Cooperative movement in Nepal


cooperative is an autonomous association of persons who voluntarily cooperate for their mutual, social, economic, and cultural benefit.Cooperatives include non-profit community organizations and businesses that are owned and managed by the people who use its services (a consumer cooperative) or by the people who work there (a worker cooperative) or by the people who live there (a housing cooperative). Cooperation dates back as far as human beings have been organizing for mutual benefit. Tribes were organized as cooperative structures, allocating jobs and resources among each other, only trading with the external communities.

Cooperatives are established under following principles.

  • The user ownership principle: Co -operative is owned by people who use it.
  • The user control principle: Cooperative is controlled by people who use it.
  • The user benefit principle: Benefit is distributed in proportionate among the members of cooperatives.

 In agriculture, farmers’ cooperative is important and present in Nepal. Basically there are following types of farmers’ cooperatives in Nepal.

  1. 1.    Marketing Cooperatives

These include commodities or commodity groups such as cotton, dairy, fruit and vegetables, poultry, and livestock marketing cooperatives. Marketing cooperatives’ primary objective is marketing the farm produce of its members. Most of the market volume of this cooperative comes from the farm produce of its members. As marketing is a very difficult task for farmers, establishing a marketing cooperative is very important for commercialized agricultural development and to maintain the farm profit.

  1. 2.    Farm Supply Cooperatives

Farm supply cooperatives are vital for the dependable supply of farm inputs such as farm machinery, equipment, fertilizers, housing materials, livestock feed, seed, and petroleum products. They may also handle items such as lawn equipment, food items, or necessary items for gardening. Farm supply cooperatives may be established at the local, regional, or the national level depending on the nature of farm supply needs. Cooperative endeavors such as feed mills, farm machinery, and fertilizer plants can be established at the regional or national level, whereas the farm supply depot can be established at the local level.

  1. 3.    Service Cooperatives

Service Cooperatives are set up for special services such as credit services, telephone/electric service, insurance services, irrigation services, grain banks, trucking, artificial insemination, cotton ginning, ginger drying, rice drying, etc. Service Cooperatives may also provide items such as chemicals, diesel, oil, gas, feed, seedlings, and seeds to its members. Soil testing, crop scouting, and land leveling are other services a service cooperative may provide to its members.

  1. 4.    Production Cooperatives

Farmer Cooperatives for agricultural production such as milk, fruits and vegetables, poultry, etc., fall into this category. In a true sense, it appears that the French Worker Cooperatives, which are based on the principle of collective entrepreneurship, are the prime example of Production Cooperatives (Batille-Chedotel and Huntzinger, 2004).

  1. 5.    Processing Cooperatives

Farmer cooperatives for processing agricultural commodities such as fruits, vegetables, flowers, etc., are important to minimize losses from perishable commodities and increase income from these commodities.

History of cooperative movement in Nepal

Modern co-operatives began in Nepal in 1954 when a Department of Co-operatives (DOC) was established within the Ministry of Agriculture to promote and assist development of co-operatives. The first co-operatives formed in Nepal were co-operative credit societies with unlimited liability created in the Chitwan district as part of a flood relief and resettlement programme. They had to be provisionally registered under an Executive Order of HMG and were legally recognised after the first Co-operative Societies Act of 1959 was enacted. The history of co-operatives in Nepal is closely related to Government’s initiatives to use co-operatives as part of its development programmes. Therefore, the development of co-operatives will be described in eight phases corresponding to eight plan periods.

During the First Five-Year-Plan (1956/7-1960/1) Government embarked on an ambitious programme to organise 4,500 agricultural multipurpose co-operatives.

During the Second Three-Year-Plan (1962/63-1964/1965) a Land Reform Act came into force in 1964 including a compulsory savings scheme, according to which farmers had to save a portion of their crop.

During the Third Five-Year Plan (1965/66-1969/1970) the total number of co-operatives reached 1,489 operating in 56 out of 75 districts.

During the Fourth Five-Year Plan (1970/71-1974/75) a massive reorganisation programme launched already in 1969 was pursued, placing emphasis on the quality rather than on the quantity of co-operatives.

Under the Fifth Five-Year Plan (1975/76-1979/80) a massive Co-operative Expansion Programme was launched, the “Sajha Programme”.

During the Sixth Five-Year Plan (1980/81-1984/85) an “Intensive Sajha Programme” was launched in 1981 focusing more on and made more responsive to the needs and problems of small farmers.

During the Seventh Five-Year Plan (1985/86-1989/90) efforts were made to reshape the co-operative movement.

It appears that until 1990 most cooperative ventures were limited to credit and finance and were controlled by the government. The Cooperative Act of 1992 provided freedom for the farmers themselves to organize and establish cooperative societies. As of 2004, it is reported that a total of 7,598 cooperatives exist in Nepal, and of the total 2,979 were multipurpose cooperatives, 2,345 credit unions, 1,410 milk producer cooperatives, 154 consumer cooperatives, and 710 other types of cooperatives (Mali, 2005). It is reported that consumer cooperatives are failing mainly due to the opening of department stores nationwide. Cooperatives are also found in the areas of transportation, vegetable production, coffee and tea production, wood carving, furniture, the cottage industry, carpet industry, and  ginger  production.

Present status of cooperative in Nepal

            At present context, there are 3500000 shareholders of cooperative. There are 24000 primary cooperative, 15 central cooperative organizations and national cooperative bank in the country. At national level, more than 200000 people are engaged, out of which 80% are working on voluntary basis. Today we have Agriculture cooperative central committee, Bee cooperative central committee, Vegetable and fruits cooperative central committee, Sugar cooperative committee, Coffee cooperative central committee, Dairy cooperative central committee, Seed cooperative central committee, Medicinal plants central committee at national level. Including all, a total of 10 agriculture related cooperative central committees are present.


Benefits obtained from cooperative movement in Nepal

Through farmer cooperatives, important agricultural developmental objectives such as enhancing agricultural production, adding value to agricultural produce, enhancing marketing of agricultural commodities, and developing technologies and practices related to agricultural production can be achieved. Farmers will derive income from multiple sources including production and marketing co-ops, value-added commodities, and trade. Trade profits will go directly to the farming communities rather than to a few intermediaries in the cities. The bargaining power of farmers will increase and they can get good market as well as good price for their products. Moreover, because of low market margin, consumers will get the products at lower price and hence efficient mobilization of product will be done. Due to the decentralized grassroots level of production, marketing, and processing of agro-commodities in the cooperative mode of nation building, farmers and the rural population will feel that villages and rural areas are as good as cities for living. This will help to stop rural to urban migration. Governmental subsidies and support systems will directly help rural communities and the rural infrastructural development. People will generate income through various sources including farmer cooperatives, employment at farmer cooperatives, and other agricultural production activities. Through the formation of farmer cooperatives across the nation, farmers, ethnic groups, women, rural youth, and the suppressed classes will feel that they are part of nation building and are sharing in the fruits of economic growth. It will bring them a sense of pride and dignity. Similarly, to cope with the natural misfortune like drought, flood, landslides etc and search alternatives for them, collective effort through cooperative is necessary in our context. The average landholding of a farmer in Nepal is less than 1ha, by collective farming, mass production in commercial scale is possible for the commodity desired. The ultimate benefit is food security for the farmers and good income through agriculture.


Problems in cooperatives in Nepal

Although the benefits that could be obtained from cooperatives are numerous, yet the development of cooperatives is not satisfactory in Nepal. Government has declared cooperative as one of the three pillars of Nepalese economy and interim constitution has focused on same, but practically, implementation as per the declaration is weak and the speed of development need to be accelerated but yet it is not done. Even though governmental agencies, international institutions, Non-Governmental Organizations, and other stakeholders have put some effort into the cooperative movement in Nepal, the results are far from satisfactory. There is no remarkable progress in major cereal crops production. About 1760 dairy cooperative are established primarily but both liquid and powdered milk needs to be imported. The reasons behind the unsatisfactory development of cooperatives in Nepal could possibly be the following;

i. Most profitable cooperatives are urban-based, and except for finance, credit, and dairy cooperatives, the rural sector has not felt the presence of the cooperative movement in the country.

ii. Cooperative movements have to strive for the inclusion of women, dalits, poor people, and other oppressed classes of society. Lack of inclusion of every sector for the cooperative movement is a cause for its unsuccess.

iii. Lack of clarity about mission, national vision and adequate monitoring on the part of government with respect to cooperative movement

iv. Lack of managerial skills and professionalism, sound planning and implementation

v. Lack of working capital, appropriate research, extension and education about cooperative movement

vii. Lack of technological support and development

viii. Lack of creditability.


      To lend full support to the cooperative movement, governmental agencies must be able to provide full research support for farmer cooperatives on various issues including agriculture and food, plants and plant products, biotechnology, business, natural resources conservation, engineering, animals, processing, pest management, cropping systems, and economics. Building partnerships, strategic planning, record keeping, accountability, and policy dialogues are other areas where appropriate venues at the central, regional, and local levels for farmer cooperatives must be ensured. Initiatives should be taken for scientific land reform and land policies formulation. Land reform policies should be formulated considering the economies of scale, land productivity, land use types, and geography. Special attention should be given to Scientific land policies are critical for the overall agricultural development of the country. In Nepal, immediate the implementation of land reform policies. A farmer cooperative will not be successful without having land rights.

Appropriate governmental policies and programs, rules and regulations, credit availability, insurance policies, and governmental support systems should be in place for a successful farmer cooperative movement.



Past initiatives for the cooperative movement in Nepal have not shown much impact on the overall food self-sufficiency, agricultural commercialization, and socio-economic transformation of the nation. A scientific farmer cooperative movement that empowers farmers, commercializes agriculture, enhances food security, transforms socio-economic conditions, and contributes to rural development in Nepal is necessary. A renewed and revitalized cooperative movement should be all inclusive, fully managed at the
grassroots level, and must have strong governmental support in terms of cooperative formation and safeguarding. Appropriate educational, research, and extension support programs are essential for a successful cooperative movement. Farmers’ income and quality of life must be the yardstick of success of the cooperative movement in Nepal.


Bataille-Chedotel, F. and F. Huntzinger. 2004. Faces of governance of production cooperatives. Annals of Public & Cooperative Economics, Vol. 75, pp. 89-111. Available at SSRN

Chitrakar, P.L. 1997. Balancing food and population in Nepal in the next millennium. Nepal Popul Dev J. (Spec No.):58-65.

NCFN, 2007. Important events of cooperative movement in Nepal. National Cooperative Federation of Nepal. File://E:\ncfnepal_com_np National Cooperative Federation of Nepal.htm

Shrestha,Dr B.P.1981.An introduction to Nepalese economy. Ratna Pustak Bhandar,  Ktm, Nepal.94-95p

USDA, 2007. Farmer Cooperative Statistcis, 2005. USDA RD Service Report

(Click here to find original term paper)

Economic implication of cooperative movement in Nepal

10 thoughts on “Economic Implication of Cooperative movement in Nepal

  1. Good article. But the types you’re mentioned in your article does not exist formally in Nepal, except producers’ cooperative. Also correct the year of the establishment of the Department of Cooperatives. It was established in the year 1953, not in the year 1954. I do appreciate for your efforts and interest in cooperatives.


    1. I am sorry to say that this blog post is to make my colleagues easier to find some term papers that we submitted during our Under Graduate period. Thank you for helping me to find original article from where it is copied from.


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