Coops need strong regulation: KMC

Kathmandu, Feb. 6: A large number of saving and credit cooperatives (SACOS) in Kathmandu are deviated from the basic cooperative principles and legal rules which has created risks to the funds deposited and mobilised by the SACOS, a primary estimates of the Department of Cooperatives (DoC) at the Kathmandu Metropolitan City (KMC) concludes.

There are about 1,856 cooperatives in KMC of which 1,644 are SACOS. These cooperatives have mobilised shares amount of Rs. 7 billion, deposits of Rs. 52 billion and credits of Rs. 41 billion.

"In absence of strong regulation and adherence to the cooperative norms and principles, many cooperatives have financial anarchy which needs to be immediately addressed. Of the total cooperatives, only 450 have conducted their Annual General Assembly (AGM)," said Namaraj Dhakal, Head of the DoC.

The AGM is a mandatory annual meeting of a cooperative's shareholders where the management presents the financial and other information about the performance and strategy to the shareholders. Therefore, non-compliance to this provision means either the cooperative does not have financial discipline or there is the misappropriation of the fund or they do not have enough knowledge about the principles and norms of cooperatives.

Similarly, as this is the first year of the federalism implementation and the jurisdiction and regulation of the cooperatives has transferred to the local bodies, some of the co-ops are confused where to submit the report and information, said Dhakal.

According to the new provision, cooperatives operating in more than one district fall under the jurisdiction of the federal government, cooperatives functioning in more than one local units are regulated by the provincial government and those working in a local body come under the local government.

But the local units do not have regulatory framework to regulate cooperatives. They also lack capacity for the same.

"The KMC wants to formulate a policy for the regulation of cooperatives to create cooperation between the agricultural and consumer co-ops but the absence of federal laws in the area has forced to stay behind," said Dhakal.

The metropolis has created computer software – COPOMIS - to update the details of cooperatives and make the regulation effective. Information of all cooperatives in the city has been digitalised and more than 400 co-ops are submitting their reports and documents online.

The KMC was investigating about 400 cooperatives that have registered but haven't run professionally.

Dhakal also said that the number of cooperatives would be brought down.

"Cooperatives which were inactive for more than two years would be shut and those who are evading the AGM would be forced to hold it as soon as possible. Likewise, cooperatives of the same area would be motivated to go for the merger. We cannot force for the merger but can pave the way for it," he said.

The cooperatives are notorious for charging exorbitant interest rates, mobilising a large amount loan to the directors and investing the money in share market and land.

"Cooperatives should contribute in employment generation and livelihood support but there are very few such instances in the Kathmandu Valley," said Dhakal.

Published in The Rising Nepal daily on 7 February 2019.