A group of angry people – men and women – shouting abuse in the streets of the capital were pictured on the front page of a local daily newspaper the other day. The caption said that they and many others not pictured are being defrauded by a co-op society who swindled their hard-earned money. Although the image is poignant, news of similar incidents is largely ignored as it is considered too mundane to create new value.
Co-operative societies, despite their long heritage and valuable work, under public and private patronage, now seem stripped of much of the fine characteristics they are meant to espouse and work. The key objective of poverty alleviation through income generation among the poor and needy is largely negated during the rapid growth of so-called cooperatives all over the country, especially in rural areas. Commonly known as Samities, many groups have emerged over the past few decades whose main goal is to get people, especially the poor, to get a quick return on their money. These Samitis, known to many for their money-multiplying skills by investing people’s money in ‘highly profit-generating’ ventures, operate under the noses of the authorities in their seemingly laudable efforts to stimulate investment. , even from the most unlikely investors.
The operation of these so-called cooperative societies can be traced back to the last two decades, although they came into existence slowly making their way into the financial arena of the country much earlier. One of the main reasons that led these companies to thrive is the lack of control over their activities. Their customers, it has been found, are often too reluctant to trade with the companies unless they are taken for a ride. The central bank, too, has not been given sufficient powers to closely monitor and take punitive action in the event of wrongdoing. This was well reflected in an IMF report which stated that the central bank’s limited powers and lack of clarity regarding the division of responsibilities between the Bangladesh Bank and the Registrar of Cooperatives exposed the former to criticism. so as not to address a large audience. the range of concerns raised by the activities of cooperative societies. On the other hand, the authority of the Registrar has also not been sufficiently strengthened to deal with critical situations requiring immediate intervention.
For some time, the government has been trying to bring about positive change by enacting laws to thwart abuses. To begin with, the law on cooperative societies was amended in 2013, which, among other things, brought about a change in the way they operate by prohibiting them from using the word “bank” in their names. However, exceptions will be allowed for companies such as Registered Cooperative Land Development Bank, Central Cooperative Land Development Bank, Central Cooperative Bank and Bangladesh Cooperative Bank. The law aimed primarily at restricting such companies from banking activities, states that no cooperative society may conduct banking activities or collect deposits from any individual or institution without the prior approval of the central bank. Deposits must be kept in a particular account but the money cannot be withdrawn without the joint signatures of the custodian and the cooperative society concerned.
While the amendment of the law on cooperative societies is a welcome decision, the implementation of the guidelines undoubtedly calls for effective vigilance. Strengthening the role of the Registrar should be one of the priorities the government should address. Following the amendment of the Cooperative Societies Act, it was expected that organized crime in the name of cooperatives would be significantly curbed. Unfortunately, many bogus “companies” are said to still be in business, especially in rural areas, where customers are least concerned about government laws and regulations. The prosperity of companies is facilitated by their customers in the absence of effective education and enforcement measures.
Monitoring the activities of these companies, in the strict sense of the term, is not possible due to the lack of transparency. It is said that regular monitoring of the operations of these companies is often hampered by lack of skilled manpower, non-application of available technology, etc. In addition, it is alleged by experts that inactivity on the part of the designated agency contributes to not stemming the situation.
They suggest that the preparation of a comprehensive database of all cooperative societies in the country would have been a starting point to facilitate enforcement on the one hand and to discourage unscrupulous activities on the other. There are, of course, other measures followed by neighboring countries that can be considered for replication. Authorities may also wish to design monitoring and control mechanisms tailored to the needs of the country.