Uttam Maharjan

Cooperatives are considered strong institutions designed to alleviate poverty in rural areas by uplifting the standards of living of the people living there. They are part of the economy and contribute to economic growth in their own way. Still, lack of an effective monitoring mechanism has made some cooperatives wayward. That is why the government has acted briskly on the monitoring front by introducing the COPOMIS (Cooperative and Poverty-related Management Information System) software in 2017. A large number of cooperatives have installed the system but not all of them are making use of it as required.

COPOMIS software
The COPOMIS software is an online financial reporting system. This web-based system enables the collection of day-to-day operations, transactions and other records in detail of a cooperative. Even members of a cooperative are able to view the financial records of their organisation. Although the brief financial condition of a cooperative is disclosed at its annual general meeting, many cooperative operators do not disclose information, financial or otherwise, on their organisations to their members.
The COPOMIS software makes it possible to connect all cooperatives electronically so that they can be monitored effectively. The software works in compliance with the PEARLS monitoring system, which basically analyses the financial condition of a cooperative through quantitative financial indicators. The software records information on the number of members of a cooperative, the share capital, loans, investments, the deposit-to-credit ratio, liquidity and other important aspects. The software also shows duplication of members, if any.
A cooperative is required to send its financial data online to the concerned Cooperative Division office every month. This system ensures transparency in the transactions of cooperatives, which will play a pivotal role in curbing defalcation of funds and other irregularities like manipulation of data.
There are around 35,000 cooperatives in the country. Some cooperatives are a blot on the escutcheon. They indulge in malpractices for personal interests. There are also cases of cooperative operators making off with depositors’ money. Other malpractices include, among others, transactions with non-members, disbursement of loans to directors, relatives, friends and others without collateral or with inadequate collateral and giving short shrift to the role of members in decision-making, making a mockery of democratic management of cooperatives. Such cooperatives have denigrated the whole cooperative sector, making cooperatives less creditable as a whole. Moreover, some cooperatives make haphazard investments in the real estate sector, which has landed them in the soup.
In 2011, a high-level taskforce was formed under the aegis of Nepal Rastra Bank. The taskforce recommended the enactment of a separate Cooperative Bank Law to monitor voluminous transactions carried on by cooperatives. In 2014 AD, a high-level probe commission was formed under the coordination of Gauri Karki, former Chairman of the Special Court. The commission received around 13,000 complaints against as many as 130 cooperatives. This picture should summarise what credentials cooperatives in the country hold. But it does not mean that all the cooperatives are untrustworthy.
At present, there is a provision that cooperatives with annual transactions of Rs. 500 million should be jointly supervised by Nepal Rastra Bank, the Department of Cooperatives and the central or subnational government. In the past, too, the Department of Cooperatives was required to keep tabs on large cooperatives in conjunction with Nepal Rastra Bank but the latter was not willing to help the former for lack of adequate manpower.
The Cooperative Act 2074 has a provision for the establishment of the Credit Information Centre, the Debt Recovery Tribunal and the Deposit and Credit Guarantee Fund. The National Cooperative Federation of Nepal has also drafted the procedures for the operation of the Credit Information Centre and the Deposit and Credit Guarantee Fund and sent them to the Ministry of Land Management, Cooperatives and Poverty Alleviation. The stakeholders are also clamouring for the prompt establishment of such mechanisms.
However, the government is not willing to establish such institutions separately for the cooperative sector; rather, it wants to incorporate such mechanisms into the existing arrangements for banks and financial institutions. The government reasons that the establishment of such separate mechanisms for the cooperative sector will entail a financial burden and when many of such mechanisms exist, their effectiveness may be watered down.
The problems seen in cooperatives differ from those witnessed in banks and financial institutions. Over two decades ago, the operators of as many as 110 cooperatives decamped with depositors’ money. The government has declared 12 cooperatives problematic in the Kathmandu Valley alone. The Problematic Cooperatives Asset Management Committee is working to liquidate the assets of these cooperatives so as to return funds to depositors.
The supervision of cooperatives has been handed over to subnational governments- state and local governments. But the subnational governments are yet to develop a regulatory and monitoring mechanism to look after cooperatives in their jurisdiction. To effectively monitor cooperatives, the subnational governments are required to have adequate and skilled manpower. It seems the government has handed over the task to the subnational governments without preparations.

Transparency
Cooperatives are associated with the lives of people. They can play a crucial role in rural uplift. They should, therefore, function transparently and in the interests of their members. Embezzlement of depositors’ money and haphazard disbursement of loans are a bane for society. So there should be a control and monitoring mechanism for cooperatives. The COPOMIS software and the Credit Information Centre are reporting systems that can keep cooperatives on track by strengthening the management information system.
Likewise, the provision of the Debt Recovery Tribunal and the Deposit and Credit Guarantee Fund will ensure the recovery of bad debt and guarantee depositors’ money in cooperatives. As the government is mulling incorporating the Credit Information Centre, the Debt Recovery Tribunal and the Deposit and Credit Guarantee Fund into the existing mechanism designed for banks and financial institutions, it would be better to have a separate mechanism for the cooperative sector for its robust growth.

(Former banker, Maharjan has been regularly writing on contemporary issues for this daily since 2000. uttam.maharjan1964@gmail.com)