What is a Co-operative?
In the Co-operative Law of Mongolia Section 3.1: A Co-operative is a legal person established by individuals on a voluntary basis for the purpose of satisfaction of their social, economic, and cultural needs, governed and supervised in a democratic manner and conducting its business based on common ownership of its members
In the Civil Code of Mongolia, Article 36.4: Co-operative shall be a legal person, established jointly on voluntary basis by several persons to carry out activities aimed at satisfying common economic and social needs of its members, based on assets with corporate governance and control over joint assets.
Co-operatives are people-centred enterprises owned, controlled and run by and for their members to realise their common economic, social, and cultural needs and aspirations. (ICA)
| Co-operative Business Model | Traditional Business Model | |
|---|---|---|
| Members share control, at least one vote per member | Ownership | Individual, small group of partners, votes dependant on shares |
| Democratic | Management | Hierarchical |
| Control by members | Control | Control by shareholders |
| Provides goods and services to members, surplus is retained or distributed to members | Benefits | Maximizing shareholders’ wealth |
| 60% after 5 years, 40% after 10 years | Survival | 35% after 5 years, 20% after 10 years |
The International Co-operative Alliance defines co-operative principles as follows:
- Voluntary and Open Membership
- Democratic Member Control
- Member Economic Participation
- Autonomy and Independence
- Education, Training, and Information
- Cooperation among Co-operatives
- Concern for Community
There are different types of co-operatives:
Worker Co-operatives
In worker co-operatives, the creativity and commitment of employees can be utilized in ways they cannot be in many other businesses. In this type of co-op, employees are the members and owners of the enterprise.
Why and How to Start a Co-operative?
A co-operative is a business, so setting up a co-operative is like setting up any other business — you need a market, products/services, labour force, financing and (usually) premises.
A Brief History of the Mongolian Co-operative Legal Framework
The regulatory system of co-operatives has passed through many hands and forms. In 1989, the first law on co-operative was enacted; however, due to the political changes of 1990 this law only lasted one year. In 1990, co-operatives were mentioned in the more general business entity law which existed for companies, co-operatives, and partnerships. In 1995 the Co-operative Law of Mongolia was approved which encompassed all co-operatives of Mongolia; in 1998, the minimum number of members was raised from 3 to 9 and a mention of secondary co-operatives was added; in 2002, a section about credit and savings activities was added; in 2006, revisions were made; and in 2011, the section on savings and credit activities was removed and transferred into a new, separate law, Credit and Savings Co-operative Law. All this while, the regulatory body of co-operatives was also changing between the Ministry of Labor, the Ministry of Food, Agriculture and Light Industry and the Government Implementing Agency of Small and Medium Sized Enterprises. Now, co-operatives are regulated under the Ministry of Food and Agriculture and Light Industry and the Financial Regulatory Commission is responsible for policy coordination of the Savings and Credit Co-operative.