The way forward: The Merlion statue at Marina Bay waterfront in Singapore. The registrar will assess whether the dividend and honorarium rates proposed are reasonable and whether co-ops are maintaining a sufficient capital buffer for their long-term viability. — AFP
SINGAPORE: Singapore’s cooperatives will be able to use their reserves to pay dividends and honoraria under proposed changes to an act that governs their operations.
Currently, they are not allowed to touch the reserves. If the changes are passed, co-ops will be permitted to use their reserves to distribute dividends to members or pay an honorarium to members of the committee of management.
These payments will be subject to the Registrar of Co-operative Societies’ approval.
The registrar will, for example, assess whether the dividend and honorarium rates proposed are reasonable and whether co-ops are maintaining a sufficient capital buffer for their long-term viability.
The amendments to the Co-operative Societies Act are likely to be read a second time in Parliament in early April.
Worldwide, the cooperative model as a way of doing business has been around for more than a century.
In the Netherlands, Rabobank, which was founded by farmers, says being a co-op allows it “to exert a more positive influence on people, nature and society”.
Sunkist is an agricultural co-op entirely owned by and operated for the California and Arizona citrus growers who make up its membership.
In Singapore, there are 79 co-ops serving some 900,000 members, according to the co-op collective body, the Singapore National Co-operative Federation (SNCF).
The most familiar among them would be NTUC FairPrice Co-operative, which operates the supermarkets that dot the island.
SNCF chief executive Ang Hin Kee noted that being able to tap the reserves is a welcome amendment.
“With the markets being more volatile, in a certain year, revenue earned by co-ops may be lower, which limits how much they can pay out to members. With this change, payouts to members will be more stable and will also be useful as costs of living rise.”
Sanjeev Tiwari, chief executive office of AUPE Credit Co-operative (ACC), said: “For example, during Covid-19, things might have been slower for a particular cooperative.
“However, they may have built up good reserves over the years but are not allowed to pay out any dividends. This means they can’t help their members even though they have the funds.”
Being able to pay an honorarium and allowance is another positive move, said Tiwari.
An honorarium is paid for services rendered, whereas an allowance is meant to cover expenses incurred.
“Sometimes you want to pay for the additional work that staff had to do, but we could not make that gesture of recognition.”
Industry players welcome the proposed flexibility, but some would like even more leeway in how they manage their finances as they face the challenge of remaining relevant amid competition.
Ang said: “The new legislation states that any request for the use of the reserves requires the approval of the registrar.
“This oversight is still useful, but there should be recognition for co-ops with better fiduciary governance. A one-size-fits-all approach to the co-ops may not be the most appropriate, as it could be just as restrictive.” — The Straits Times/ANN
