It’s time they moved from service to production to play a larger role in nation building
Social media has been abuzz with strongly-worded campaigns against Kerala’s all-pervasive, immensely popular cooperative banks, which many in the political rightwing accuse of having become havens to safely park and launder black money in the state. Evidently, cooperative banks play a crucial and pivotal role in Kerala’s economy for the sheer fact that they have been lending money to the poor and unbanked (by mainstream banking), especially small farmers and coolie workers in the state.
The history of cooperatives in Kerala goes back to the pre-Independence era. In fact, in 1946 the State had more than 1,600 functional cooperative societies. They reportedly commanded a share capital of Rs 32 lakh to Rs 90 lakh. After the state of Kerala came into being in 1956, the Kerala Co-operative Societies Act of 1969 was enacted to represent cooperatives. After the Communist Government that came to power in 1957 introduced land reforms in Kerala, the cooperatives found a new meaning as they helped the petite proprietors of farmland (small-scale farmers) go about farming without relying on the feudal class and money lenders. To be fair, the level-playing field that Kerala’s working class enjoys today is owed to the creative social interventions of the cooperative movement especially in the first few decades of the land reforms.
Today, nearly 14,000 cooperative societies are registered under the Act. Of these, official estimates suggest more than 80% are alive and kicking. This flock include the State Co-operative Bank, the State Agricultural and Rural Development Bank, District Co-operative Banks in the state’s 14 districts, 60 Urban Banks, about 50 Primary Agricultural and Rural Development Banks and more than 1,600 Primary Lending Societies. Together, these institutions command a a deposit chest of nearly Rs 1 lakh crore, according to official data. Of this corpus, nearly 75% goes back into the system as loans.
These loans cover a wide spectrum of public need: assisting farmers (this includes offering succour to cushion crop loss), funding education of poor children, offering monetary assistance to rural entrepreneurs, helping lower-middle class households set-up and enhance livelihood means, and so on. This explains the stunning popularity of cooperative lending in Kerala. Granted, other states have similar lending organisations. Madhya Pradesh, Maharashtra, Gujarat and even Tamil Nadu have similar lending bodies. Critics charge that these organisations are controlled by politicians who use them to launder black money. This may have some truth in States such as Maharashtra where feudal elements are still at play. In Madhya Pradesh, however, nearly 7 million farmers hold accounts in cooperative banks and societies and they benefit immensely from the system. In Gujarat, the cooperatives in the dairy sector command significant influence on the state’s economy.
The campaign against cooperatives, mostly, by rightwing organisations and a section of big companies that eye the rural kitty turns a blind eye towards their social emancipatory role and treat them as mere financial instruments. These campaigns, for obvious reasons, are powered by feudal nostalgia masquerading as social good (such as fighting corruption and checking black money). A section of the private banking industry too backs this sinister design. The demands for RBI audit for cooperative banks is one of the many such arguments. This presupposes that the banks are not audited. The fact: they are. Most cooperatives in Kerala have supremely transparent bylaws and are run by bodies consisting people of myriad political hues. Elections to these societies are fought with the same vigour that is seen during local body elections. This process ensures public audit of their operations.
The Centre has been trying to impose what the Left parties have been calling the “policies of globalisation” on cooperatives, which it seems as a relic of the Nehruvian model of social change. Also, it believes that by breaking apart the financial muscle of the cooperatives, it can facilitate the entry of fanaticism-scented private (micro) finance into rural belts. This plan goes in sync with the larger socio-political interests of the Hindutva.
Checking this is important for the survival of the cooperative movements, but doing that will take a pivotal shift in their current strategy. Of course, checking campaigns politically is a must, but what is needed is to reform the movement in sync with the times — which is to focus more on production. Keeping the focus on service (loans, etc.), the movement should move to collective farming and production of agri products. This includes direct farm products and value-added products. There are some trends towards this direction which should be enhanced. Such a shift will help the sector play a larger and more creative role in the economy and it can pose serious challenges to private finance, while ensuring general social welfare as it will help the rural mass significantly improve their income. The cooperative sector must find that lucrative opportunity in this challenging times.