Several business establishments closed and still some are closing leading to unemployment and diminished economic activities. In our previous write ups I touched on certain strategies to sustain cooperative operations. This was before the COVID-19 pandemic hit the world with the alarming increase of infected people in various corners of the globe. As we struggle to cope with the challenges of the ongoing pandemonium, let us look at some possible strategies that can lead to survival of cooperatives under the new normal.
The challenge right now is how cooperatives can sustain operations especially micro and small categories that rely on manual system of bookkeeping and recording. As more cooperatives belong under these categories, how can they become competitive in as much as they don’t have the resources like computerized accounting system, bookkeeping, transport facilities and capital to beef up operations.
I believe these cooperatives should explore the potentials of merger and consolidation rather than cease operation to the detriment of the members. Our experiences in the field point to the need of sustaining micro and small cooperatives that cater to people with small means. Often, these cooperatives provide consumer goods and credit facilities to its members. When not arrested, the closure of these institutions can greatly affect the lives of people as they may revert to the usual practice of patronizing the services of private lenders.
Just to given an idea, merger and consolidation of cooperative is provided under Article 21 and 22 of Republic Act 9520 or the Philippine Cooperative Code. The guidelines governing the procedure for merger and consolidation contained under Rule V of the Revised Implementing Rules and Regulations.
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Merger happens when two or more constituent cooperatives decide to become one with the surviving cooperative to carry the name. Usually, under merger, the cooperative with the best financial position carries the name as the surviving cooperative. Under consolidation, the different constituent cooperatives will form a single cooperative and may register a different name. The possibility of having the cooperative with the best financial position as the surviving cooperative can happen.
What benefits can be derived from merger or consolidation of cooperatives? Here are some tips on the advantages of merger and consolidation based on certain information derived from literatures, sharing of those with experiences and personal reflections.
a) Merger and consolidation can help increase capital of the cooperative. Pooling of
resources of two or more cooperatives to merge or consolidate can provide higher
capital. This may also result in the increase of market share. b) Diversification of business. Increase in volume of business can occur when merged or consolidated cooperative provide different services to benefit members. c) Expansion in area of coverage and membership can happen when different cooperatives operating at barangay or municipal level merge or consolidate to expand to provincial and regional level. Business activities can expand to new areas. d) Reduction in cost of operations. Merger and consolidation of cooperatives can help in spreading the cost. As more members and consumers patronize the cooperative, it can lead to bulk buying for consumer goods and reduced interest rates on credit operations with faster turn-over or cycle of transactions. Merged or consolidated cooperatives can benefit when books of accounts and cost of paying regulatory fees are consolidated under one name. e) Merger and consolidation can help save ailing cooperatives from bankruptcy or business closure. As cooperatives need to be compliant with social and legislative laws, merger and consolidation may help reduce the burden of transactions and possible business closure due to limited funds. f) It can create more employment when the organization engages horizontal and vertical integration.
Some of the disadvantages could include the following: a) Replacement of personnel with poor performance leading to unemployment. c) Increase in budget allotted to salaries and wages of staff as more positions will be created and supervisory positions will require higher rates. c) Challenges on communication may occur as a new work environment will exist. D) The period for adjustment of employees that came from various backgrounds need to establish another kind of organizational culture based on new structure; d) Possibility of increase in prices as the competition can be reduced and the possibility of monopoly can occur.
As merger and consolidation have pros and cons, I would say, the pros are more acceptable than seeing cooperatives close shop and cease as entities. It would be more advantageous to arrest the situation wherein cooperative members are given the chance to work under new environment, new leadership and new organizational structure.
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