History of Philippine Cooperative
Based on available sources, notably the Cooperative Development Authority, tracing the history of Philippine cooperative movement would not be complete without mentioning the name of Dr. Jose P. Rizal who, in his travels to Europe in the latter part of the 19th century, was impressed with the success of a new economic movement which transformed the economic and social life of the Europeans. After his side trip to Sandakan, Borneo in 1892, Rizal requested Governor General Despujol to allow him to move with some relatives and friends to that place and establish therein a colony under the cooperative production and marketing plan of Robert Owen, who is acknowledged as the father of world cooperation. Instead, he was arrested for treason and banished to Dapitan, Zamboanga del Norte. In Dapitan, Rizal had his ideas in cooperation partially fulfilled. He put up a school for the poor community on a purely cooperative basis. He also established a cooperative store with the help of his pupils. One noteworthy group organized by Rizal was the La Sociedad de los Abacaleros (Society of Abaca Producers). This functioned for only one year. Rizal returned the members share capital without any loss.
Another name worthy to mention is Teodoro Sandiko, who in his travels in Europe, must have had a close contact with the cooperative movement in Germany where he came across with the Raiffeisen movement. He was very much impressed by this type of cooperative and he looked forward for an opportunity to have it introduced here in the Philippines. As destiny might have its choice, Sandiko had his chance when he was appointed one of the early governors when Civil Government, under the Americans, was established.
As soon as Civil Government was established, Filipino participation in government was encouraged. Teodoro Sandiko, then governor of Bulacan, prepared a bill patterned after the Raiffeisen type of credit union and had Rep. Albert Barreto of Zambales sponsor it in the lower House of Congress. The principal aim of this bill was to protect and develop the agricultural interest of the country. When the Barreto sponsored bill was presented it readily obtained unanimous approval on January 20, 1908. The Philippine Commission however, turned it down.
Undaunted by this defeat the sponsors of the bill again put it through in the Second Philippine Legislature. This time it was sponsored in the Lower House by Rep. Rafael Corpuz who succeeded Rep. Barreto from Zambales. The bill was ably presented in both Houses and it was finally passed into law on February 11, 1914 and became Act 2508. When this Act was finally made into law, Gov. Sandiko earned the title of Father of Cooperation in this country.
The administration of the Rural Credit Law was entrusted to the Bureau of Agriculture. The first rural credit association that was organized under this Law was the Agricultural Credit Cooperative Association of Cabanatuan, Nueva Ecija. It was formed on October 18,1916. With this initial organization, farmers in the different provinces were organized. At the end of 1926 there were 544 rural credit cooperatives organized in the 42 provinces and by 1930 there were 571 associations formed all over the country. In 1935, however, about 90% of these cooperatives were inactive with no funds left in their treasury. The experiment on rural financing, through cooperatives was a failure. In the same year of 1916, the first Consumers Cooperative was organized at the College of Agriculture, Los Baños, Laguna.
As soon as the organization of rural credit cooperatives was in full swing, The Cooperative Marketing Law (Act 2425) was enacted and approved on December 9, 1927. The rural credit associations were designed to help finance the productive efforts of the farmers. In order to provide incentives to the farmers to produce more, an efficient machinery for the profitable marketing of their products should be provided. Wherever rural credit associations were organized cooperative marketing societies were also designed to be organized. In 1938, the first Credit Union was organized in Vigan, Ilocos, Sur. The apparent weakness of the rural credit cooperatives, however, failed the enthusiasm of farmers to organize themselves into cooperative marketing associations. By 1939 only 164 societies were actually organized with a total membership of around 5,000 farmers. With this number only 35 reported their sale of products to the Bureau of Commerce. The number of associations reporting indicated that only 20% of the organized associations were active. Amidst this situation, Commonwealth Act No. 565 or the Cooperative Law was passed in 1940 effecting legal sanction for the organization of Credit and Consumers Cooperative.In recognition of the strategic position occupied by our farmers in the social structure and economic development of the country, the Congress of the Philippines in 1952 enacted Republic Act 821. This law established a system of liberal credit which is specially designed to meet the needs of the small farmer. It also created an administrative agency known as the Agricultural Credit and Cooperative Financing Administration (ACCFA). Through ACCFA, the government organized and financed Farmers’ Cooperative Marketing Associations (FACOMAs) by providing collateral free loans funded by the US Agency for International Development (USAID). By 1957, there were 600 FACOMAS. Provincial as well as national federations of FACOMA were organized. To implement the great task of rural financing, four general and interrelated objectives of the law are set forth as follows: * To assist small farmers in securing liberal credit. * To promote the effective groupings of farmers into cooperative associations. * To establish an orderly and systematic marketing machinery for, and controlled by, the small farmers. * To place agriculture on a basis of economic equality with other industries.
In 1957, RA No. 2023, otherwise known as the Philippine Non-Agricultural Cooperative Act, was passed by Congress which enabled the people in developing their enterprises on a cooperative basis.
In 1960, the Agricultural Credit Cooperative Institute (ACCI) was then established.
Three years later, RA No. 3844 or the Agricultural Land Reform Code was enacted. ACCFA was organized into Agricultural Credit Administration (ACA).The Land Bank of the Philippines was also established during the same year. In 1969, the Agrarian Reform Code was passed, mandating that coops be utilized as primary conduits for credit, supply and marketing services to agrarian reform beneficiaries.
During the Martial Law, Presidential Decree No. 2 or the Agrarian Reform Decree declared the entire country as an agrarian reform area. Under the Land Reform Program, the tenant-farmers were obliged to compulsory join a pre-cooperative organization called Samahang Nayon. Benefits would include the right to borrow funds from government banks and the assurance of being supplied with farm inputs. Subsequently, fully fledged cooperatives of at least ten Samahang Nayons called Kilusang Bayan were organized. Federations of cooperatives were then formed.
In 1973, PD No. 175, L.O.I. 23 was promulgated. This was an Act to strengthen the Cooperative Movement, consolidated the different Cooperative laws, provided a sound basis for a truly systematic cooperative program and placed the responsibility of initiating, promoting organizing, supervising and developing the cooperatives under one government agency, the Bureau of Cooperatives Development under the Department of Local Government and Community Development.
In May 1980, under EO 595, the Bureau of Cooperatives Development under the Ministry of Local Government and Community Development was transferred to the Ministry of Agriculture.
Executive Order No. 116 dated January 30, 1987 established the Bureau of Agricultural Cooperatives Development in the Ministry of Agriculture and Food, the function of which was to formulate an integrated system for development and evaluation of agricultural cooperatives; provide assistance in the establishment of agricultural cooperatives in the rural communities and; evolve a program to promote the economic viability of agricultural cooperatives.
In 1990, Republic Act No. 6938, the Cooperative Code of the Philippines and RA 6939 creating the Cooperative Development Authority (CDA) were signed into law on March 10, 1990. RA 6938 rationalizes and unifies all cooperative laws while the CDA is created to promote the viability and growth of Cooperatives.
In 1993, the National Cooperative Movement (NCM) was organized and then the organization of the Philippine Cooperative Center (PCC) the following year. In 1998, the Cooperative-National Confederation of Cooperatives (COOP-NATCCO) Network Party formed by members of NATTCO landed a seat in the House of Representatives after garnering over 2% of the votes of partylist elections. The partylist also won another seat in the 2001, 2004 and 2007 elections thereby enabling the cooperative movement to have a voice in the halls of Congress, particularly in the efforts to amend the cooperative code. In 2009, the partlylist was accorded another slot in Congress with the decision of the Supreme Court. In recent May 10, 2010 elections, the partylist is poised to win two seats and still awaiting for the final canvass and still hoping to get a third seat.
Republic Act No. 9520 or the Philippine Cooperative Code of 2008 was signed into law last February 17, 2009. The new law amending RA 6938 was passed to meet the challenges of the global economic situation and the advent of the age of information technology. Moreover, the new cooperative code is expected to strengthen the thousands of cooperatives in the country and enable the system to contribute better to the country’s economic growth.
Despite the various laws passed and government interventions being implemented, early cooperatives in the Philippines was generally a failure. Filipino economists and students of cooperatives in this country have often attributed the failure of cooperative societies in this country to the following causes:

* Incompetent management. * Lack of proper understanding of the principles, practices, true aims, and purposes of cooperative associations. * Improper use of credits by the borrowers, who, instead of using money borrowed for production, spent it for fiestas or luxuries. * Defective securities. * Political interference particularly in the collection of overdue accounts. * Lack of compensation of officers. * Inadequate character and moral responsibility in handling the other fellow’s money. * Lack of adequate safeguard against unscrupulous officers who took advantage of their position to grant loans to themselves and their compadres which later proved disastrous to the system. * The dominance of the individualistic attitude instead of the spirit of cooperation among the people. * Inability of cooperatives to secure adequate capital. * Their dependence on alien suppliers and distributors. * Ineffectiveness of the government in the promotion of cooperative organizations. * Inadequate marketing facilities.
Considering the experiences of similar societies in other countries, however, the fundamental cause of failure in a cooperative enterprise is the lack of proper understanding of the principles and true aims of cooperative associations, and the non-adherence to them in actual operation of cooperative enterprises.
Despite the sad experience of the Philippine cooperative movement, there are a number of Philippine cooperatives who flourished and succeeded in their endeavors and their stories provide inspiration to the starting and growing cooperatives in the country.
On the surface, credit unions look a lot like banks. They both hold deposits, make loans, issue checks and ATM cards, and offer investment services. But the real difference between banks and credit unions has less to do with the services they offer and more with how each institution is run.
Banks are for-profit companies. They make money by charginginterest on loans, collecting account fees and reinvesting all that money to earn more profit. But as for-profit companies, they also pay state and federal taxes.
Credit unions, on the other hand, are not-for-profit institutions. Technically, credit unions are owned by their account holders, known as members. Any profit earned by a credit union is either invested back into the organization or paid out to members as a dividend [source: Federal Reserve]. As a not-for-profit institution, credit unions pay no state or federal taxes, meaning they can charge lower interest rates than banks for most financial services.
Credit unions were designed to becooperative financial institutionsfor people who share a common bond. Members of a credit union may work for the same company or organization, attend the same college, serve in the armed forces, belong to the same church or live in the same community. Credit unions have become more popular in recent years. Nearly 90 million Americans are members of a credit union, and credit unions hold more than $615 billion in savings. Worldwide, there are more than 46,000 credit unions with about 172 million members [source: WOCCU].
But the growth of credit unions has met strong resistance from the banking industry, which sees these not-for-profit agencies as unfair competition. In 1998, the U.S. Supreme Court handed a victory to the banks, saying that some credit unions had signed on members with no common bonds in an attempt to increase their size and power [source: New York Times].
How did credit unions evolve into such powerful entities? Why does the banking industry want credit unions to pay taxes like everybody else? And with perks like free checking and low interest rates on credit cards, how do you join a credit union?
Membership in Credit Unions
According to the Federal Credit Union Act, anyone can apply to join a credit union if he or she shares a common bond of employer, educational institution, branch of the military or government, church or community. Over the years, the growth of the credit union movement has resulted in nearly everyone being eligible for membership through some connection.
There are several ways to find out if you qualify for membership in a credit union: * Ask your human resources representative at work. Your employer may sponsor or have access to a credit union. * Ask family members (both immediate and extended) if their employers sponsor a credit union. Many credit unions allow family members, even cousins, to become members. * Ask friends and neighbors if they've heard of any community credit unions, either for your local neighborhood, county or city. * Call your state credit union league or use the online search tools provided by CUNA.
To become a member of a credit union, you need to fill out an application, many of which are available online. The first step on all credit union applications is to prove your eligibility, so be ready to provide the name of a relative, employer or organization through which you're affiliated. You'll then fill out some standard personal information questions about where you live and work and how much you get paid. After that, you can choose which financial services you want.
As we've mentioned, credit unions offer many of the same financial services as a bank: * Checking accounts and ATM cards * Savings, money market and IRA accounts * Credit cards * Secured or unsecured personal loans * Mortgages and home equity loans * Auto and recreational vehicle loans * Travelers cheques, money orders, certified checks and currency exchange
For many people, the main advantage of credit unions is that they charge lower interest rates for credit. The average credit union credit card charges 12.15% interest annually compared with 15.08% for the average bank credit card [source: MSN]. Plus, most credit unions charge no annual fee for credit cards and offer free checking accounts. Another advantage of credit unions is that they require very little money to open an account.
One disadvantage of smaller credit unions is that they may have fewer branch offices and less access to ATMs. Another disadvantage of smaller credit unions is that they may not offer as many services as banks. * There are two major types of credit unions: natural-person credit unions and corporate credit unions. Natural-person credit unions are the ones that serve individual customers like you and me. Corporate credit unions help manage the finances of natural-person credit unions by providing loans and liquidity to the institutions. Even corporate credit unions are non-profit.

There are four main types of credit unions, with each different type classified by the nature of the customers (aka the members) that it serves. Unique membership requirements exist for each type.
1.) Employer: An employer credit union is meant to serve a particular occupation, trade or business. This often includes professions with established employee unions, such as postal workers, educators, members of the press, and law enforcement.
2.) Federal: This credit union serves a much broader membership base on a national scale. You don’t have to meet as many qualifications as the other types of credit unions; age (18) and country citizenship are usually the only two things they ask for.
3.) Group: As the name implies, you must be a member of a group in order to join this type of credit union. Examples include alumni associations, non-profit groups and advocacy organizations. In most cases, the qualifications required to become a member of the initial group are the only ones you have to meet to belong to the associated credit union.
4.) Local/Community: These types of credit unions are geared towards occupants of a particular area, usually on a small scale (i.e. within a certain town, city, zip code etc.) Membership is granted to those who reside within the designated area; there may be other stipulations to join but residency is the main requirement. * Lower banking fees: Most credit unions offer lower fees on basic transactions, from ATM withdrawals to overdraft charges. Many offer free checking as well. * Lower balance requirement: Many credit unions require an account balance of only $5 to $10. * More competitive credit card, loan and savings rates: A typical credit card commands an interest rate of 11.61 percent through a credit union, according to the National Association of Federal Credit Unions, while a for-profit bank would most likely charge at least 13.25 percent. Over time, such a variance makes a significant difference in payments and interest charged. * Less-stringent loan qualifications: If you have a good credit history, you may have a better chance of securing a personal loan at a credit union, as they are in a better position to lend. Some credit unions also may be willing to work with you if you have a low credit score or extenuating circumstances, such as being self-employed or having a bankruptcy on your record. * Better customer service: Credit unions often outperform banks in customer service, giving members more time at the counter and more individual attention. This is particularly important in lending, where tough, impersonal lenders and aggressive actions can lead to a lot of stress and fear on the part of the borrower
What Products do Credit Unions Offer?
In its simplest form, a credit union gets money from its customers and loans that money out to other customers.
Credit unions will typically offer the same products and services as larger banks. However, some credit unions will choose not to offer every product and service out there. The reason is that these credit unions do not do the same amount of volume that larger banks do. Banks can afford to have “loss-leaders” or products that get customers in the door. Credit unions will more likely only offer the products and services that a large portion of the membership is likely to use.
Remember how we talked about the members owning the credit union? Some credit union products have different names than their banking counterparts. Your deposits are called shares because they represent ownership (like shares of stock) in the institution. in credit unions, service may be more personalized, and it’s easier to get to know people; there are fewer employees and fewer customers. However, they may also be less formal - especially small credit unions. If you like your bankers in pinstripes, stick to a large bank or credit union.
Banks are more likely to offer robust websites and 24-hour customer service lines. These may be valuable if you have a rigid schedule. However, some credit unions have excellent websites, and you may not need anything more than a page to view your account balance and pay some bills
"Not for credit, not for charity, but for service" is a credit union motto. Owned by its members, a credit union provides a form of saving and borrowing money similar to traditional financial institutions, yet it works as a nonprofit cooperative organization charted by the federal government. The National Credit Union Association (NCUA) says that members pool their funds to make loans to one another, while surplus income is returned to the members in the form of dividends.
General Purpose
Credit unions serve people in a particular community, group or groups of employees, or members of an organization or association. They encourage prudent borrowing for big-purchase items, emergencies or educational needs by developing a regular habit for savings. Members build economic security for themselves and their families.
Standard Services
Credit unions offer share draft (checking) accounts, share accounts (savings), share certificates (certificates of deposit), credit and debit cards, retirement accounts and lending programs, including for real estate, member business loans and guaranteed student loans. A credit union fairly prices products and services while competitively pricing rates on savings and loans.
Insured Accounts
Federal credit unions insure members' accounts through the National Credit Union Share Insurance Fund (NCUSIF), operated by the NCUA and backed with the faith and credit of the U.S. government. The NCUSIF protects members against losses if a federally insured credit union should fail.
Provisions in the Federal Credit Union Act and bylaws provide additional protection by requiring all persons handling custody of credit to be bonded, having the supervisory committee or a contracted, licensed CPA to audit the affairs of the credit union and the records of the treasurer, requiring fund reserves for noncollectable loans and restricting credit unions to invest surplus funds only in specified investments.
Financial Independence
For those people unserviced by traditional banking institutions in distressed and financially underserved areas, low-income designated credit unions provide technical assistance grants and revolving loan funds managed by the National Credit Union Association. A revolving loan fund provides loans in which the person or small business makes repayments, then those repaid funds are available for new loans to other businesses, the money revolving from one person to another. In this manner, entrepreneurs form financial independence and eligibility for commercial bank loans.
Control and Management
Members have full democratic control of the credit unions. They participate in regular and special membership meetings, with every person entitled to one vote regardless of the number of owned shares and with no member allowed to vote by proxy. Members elect the board of directors, whose main responsibility lies with directing and controlling of the credit union and providing efficient management of operations.
The board of directors has the authority to set loan limits and interest rates within the statutory limits of the NCUA rules and regulations, with the full disclosure of finance charges in compliance with the Truth in Lending Act: a regulation to promote informed uses of consumer credit by requiring the disclosure of terms and costs, according to the Federal Deposit Insurance Corporation.
Credit unions were created with the idea that people should help people. For that reason, personal touch and interaction is a key differentiator for credit unions when compared to banks. Some might fear that as online and mobile banking become more and more popular, the personalized nature of credit union business will disappear. However, quite the opposite is true.
When used correctly, active analytics programs provide the opportunity to customize those interactions and increase the relationship – personalizing things to create the same level of individualized attention customers receive at a branch office.
Active Analytics Deepen Member Relationships
Using customer data to aggregate information and gain insight into member behavior may seem contradictory to the collective, personal character of credit union business. But when you consider the benefits active analytics bring to a credit union as well as its members, you can see how easily the positives fit with the credit union ethos.
Active analytics allows a credit union to:
More effectively target customers – You can find the members who most need a service or product you can provide and reach out to them at the most effective time.
Develop deeper, more personal relationships with members – By customizing the way a member relates to you, you increase loyalty and create a more satisfied member.
Better compete against large banks – Analytics programs allow you to tap into new revenue streams while also increasing loyalty among members, making your credit union a stronger competitor against larger banks.
The power of this insight is that the data can predict customer behavior, allowing you to increase the effectiveness and personalization of marketing offers to members – and present those offers in a manner and at a time when they are most likely to use them.
Here are three areas where active analytics can be most effective:
Segmentation driven marketing – By tracking and measuring important indicators in a member’s life – age, gender, marital status, income and many more – you can segment members into easily targeted groups. From there, you can develop targeted marketing campaigns that create relevant, personalized experiences that improve customer engagement and provide cross-selling opportunities.
Merchant offers – Based on transaction data and other relevant information, you can provide personalized, yet anonymous, incentives that compel customers to make purchases, thus driving transaction volume and revenue.
Price optimization – Using collected data, financial institutions can review pricing strategies and optimize them to account for when, where and how customers use a service or bank credit or debit card in order to improve profitability.
At its most basic level, a merchant-funded offer could encourage a member to use his or her credit union-issued credit or debit card more often by rewarding him or her with points or other rewards to stores, hotels or things of interest.
Analytics can go even farther, tracking where and how your members use their cards, access your online or mobile banking application and more in order to determine their habits and predict their financial needs. For example, members buying new baby items with their card could be targeted for home and car loan offers as they may need more space for their growing family.
How Members Benefit
In addition to personalized, timely offers that encourage them to take advantage of opportunities that directly pertain to them and their interests, your members can benefit from a greater bond with you. Studies have shown that customers place a large amount of trust in their financial institutions; personalized experiences can further develop that trust and loyalty.
In addition, because opportunities can be made available across platforms, members benefit from the convenience and the ability to receive and use offers and rewards when and where they see fit.
Where to Start
Most financial institutions want to be more data-driven in their decision making, but many struggle with where to start and how to act on the data they collect. And, until recently, deep analytical review of customers was available only in retail environments.
While there are numerous data tracking and marketing companies available to provide you insight into a member’s behavior and lifestyle, it’s important that a credit union finds a provider who understands it and the unique nature of credit union business.
In many cases, your technology provider can help you translate data already collected into actionable insight. In addition, if your provider’s scope is broad enough, it can turn ideas from other businesses’ analytics programs into plans you can use as well.
Ultimately, active analytics is key to improved, dynamic marketing campaigns that better serve your members, while also tapping into new revenue streams through customer segmentation, optimized pricing and cross-selling opportunities that deliver targeted, relevant and timely offers across multiple delivery channels.