Presentation: DEVELOPING NEIGHBOURHOOD COOPERATIVES TO SERVE MEMBERS

Download (52 kb)

International Cooperative Alliance, Asia and Pacific

Presentation to Standing Committee Meeting,
Manila 27-28 March 2008

DEVELOPING NEIGHBOURHOOD COOPERATIVES TO SERVE MEMBERS

Presentation by Tan Kin Lian
Former Chief Executive, NTUC Income

1. Introduction

I am honoured to be invited to make this presentation to the Standing Committee of ICA Asia and Pacific.

I understand that ICA Asia and Pacific are committed to:

• Protect the cooperative identity and image
• Create enabling policies and legislation on cooperatives in member countries
• Develop leadership and value-based professional management
• Utilise information, communication and technology for development.

I hope that my presentation will help you in your deliberations towards these important goals.

2. My Background

I worked as chief executive of NTUC Income, a large insurance cooperative in Singapore for 30 years prior to my retirement in 2007.

During my tenure, I served as board member of the International Cooperative and Mutual Insurance Federation for a period of about 25 years, including 5 years as chairman. The Federation is a specialised body of ICA.

I also served as chairman of the Singapore National Cooperative Federation for a period of 6 years.

I have deep involvement with the cooperative movements in Singapore and in the international sphere.

Through the years, I have observed the great challenges faced by the cooperative movement in a globalised world and fast changing environment.

I wish to share some of my views on this matter.

3. Globalised world

During the past two decades, the world has gone through a period of rapid economic growth.

Globalisation has given ample job opportunities for many people, including working in countries with rapid economic growth, compared to the stagnant economy in their home country.

However, the quality of life for many people has not really improved, due to several factors:

• Jobs are less secure and wages are depressed due to global competition
• The cost of living has increased
• People have to work longer hours to earn enough to make ends meet
• Ordinary people are being exploited by profit-oriented businesses
• There is wider disparity in the distribution of income

In this environment, there is the opportunity for the cooperative movements to work effectively to improve the living conditions of the masses of ordinary people.

However, many cooperative societies are also struggling to survive in this competitive environment. Some large and successful cooperatives have been converted into commercial enterprises and will eventually lose their cooperative and social values.

What actions are needed to make a change, and give cooperatives a new strategic to succeed in this new environment?

4. Successful cooperatives

There are examples of successful cooperatives around the world, including the countries in the Asia and Pacific region, such as:

(a) The agriculture-based cooperatives in Japan, Korea and India
(b) The consumer and insurance cooperatives in Singapore and Japan

On the surface, the success of these cooperatives appears to be mainly attributed to the following:

(a) Large scale of their business
(b) Ability to compete with commercial enterprises
(c) Efficient and modern management
(d) Use of information and other technology
(e) Ability to market their cooperative difference

Looking deeper, some of the successes are due to special legislation that gives tax or other advantages to cooperatives. If these advantages are taken away, there may be less reason for these enterprises to continue as in the cooperative structure. For this reason, some large cooperatives around the world have been converted into commercial businesses in recent years.

5. Smaller Cooperatives

Smaller cooperatives face the challenge of surviving in a competitive and difficult business environment. They lack economy of scale and business efficiency. If they do not make a breakthrough, they will gradually lose their market share and become less relevant to their members with the passing years.

I wish to give some suggestion on how to get these smaller cooperatives to make a bigger impact on their members.

6. Lessons from Agriculture Cooperatives

I wish to draw some lessons from the agriculture cooperatives in Japan and Korea. Apart from being successful and efficient businesses, these cooperatives make a significant impact on the lives of their members.

Some examples are:

(a) Educate their members on farming
(b) Organise social activities
(c) Provide financial and other services
(d) Handle the marketing of the agriculture products
(e) Look after their health
(f) Have a democratic structure in the election of their leadership

These cooperatives are meaningful to their members, if they are able to touch and make a significant impact on the lives of their members.

Perhaps this is the strategy to make cooperatives more relevant in the globalised environment.

7. Current structure of cooperatives

The current structure of many business oriented cooperatives does not allow it to touch the lives of its members.

Many cooperative societies claim to have members, but their members do not share the feeling of belonging to the cooperative. The members treat the cooperative as another source of business transaction.

This is made worse by the current structure of cooperatives. A person has to join several cooperative societies that access different services that take only a small part of the attention of the member.

For example, some members put a small part of their total savings in credit cooperatives and keep most of their savings and investments with non-cooperative financial institutions. The cooperative society cannot really claim to own the attention or loyalty of their members.

I wish to suggest a new strategy to change this situation.

8. Neigbourhood Cooperatives

We can find a way to emulate the success of the agricultural cooperatives in making a significant impact of the lives of their members. We can find a way to transfer the lessons of their success to urban or non-agricultural environment.

We can set up new type of cooperative societies that can provide a wide range of services that are needed by ordinary people. These cooperative societies should be based in the neighbourhood of the members, in a similar manner as the agricultural cooperatives. I shall call them as “neighbourhood cooperatives”.

Some of the services that can be provided by the neighbourhood cooperatives are:

(a) Financial services
(b) Education on health, nutrition and livelihood issues
(c) Social activities
(d) Help from neighbours
(e) Errands
(j) Joint purchasing

At present, most people have to handle these activities on their own. If a neighbourhood cooperative can provide these services to the members more effectively and at a lower cost, and give more time to the members to pursue other activities, the cooperative society will be more relevant to the members.

The cooperative society does not have to provide these services directly. It only needs to organise the members as a consumer group to source for the best deal for their members.

For example,

(a) It can aggregate the savings to get the best terms for members
(b) It can organise the joint buying of products that are needed by the members
(c) It can access services provided by contractors
(d) It can create local employment for people to provide some of these services
(e) It can help members to access government resources
(f) It can arrange local services to take care of babies, children and the elderly

The neighbourhood cooperatives can earn its revenue from the following sources:

(a) A modest membership fee paid by members
(b) A modest free for the specific services provided to the members
(c) A modest commission or introducer fee from the service providers

The revenue can be used to meet the expenses of running the services.

9. Use of Modern Technology

Modern technology, such as the Internet, website and mobile phone make it possible for the new style neighbourhood cooperatives to deliver these services to members effectively and at low cost.

As a specific example, the website can be the source of educational materials and consumer information. They can be collated by a central body and made available to the affiliated cooperatives.

10. Back to the roots

In the early days of the industrial society, many working people join a friendly society or association to use the social, social and other services provided by the organisation.

The proposed neighbourhood cooperative will bring back the spirit of self help and mutual help among the members of the society. This will be going back to the roots of the cooperative movement.

10. Conclusion

The globalised world brings challenges to ordinary people. They have to struggle to cope with their livelihood.

Cooperative societies have the opportunity to serve members more effectively in this new environment.

A new structure, and a new style of neighbourhood cooperatives, can make an impact on the lives of its members.

Tan Kin Lian

RESUME OF TAN KIN LIAN

Mr Tan Kin Lian started his insurance career in 1966 in a local life insurance company. He has also worked in various positions as a computer programmer, organisation and methods officer and consulting actuary. Mr Tan qualified as a Fellow of the Institute of Actuaries in 1975.

He joined NTUC Income in 1977 as the chief executive officer. For the past 29 years, he has built up the business, assets and sphere of influence. From a base of $28 million, the total assets increased to over $16 billion as at end 2005. NTUC Income is today, a leading life and general insurance co-operative in Singapore.

During this period, Mr Tan has served on many boards and committees in Singapore and internationally.

From 1992 to 1997, he was Chairman of the International Co-operative and Mutual Insurance Federation (ICMIF), an international organisation representing 123 insurance groups in 65 countries.