Cooperatives for prosperity

ON Aug 25, the Cooperatives (Amendment) Bill 2020 (the Bill) was tabled for first reading in Parliament. However, it did not garner much public attention compared to the Covid-19 (Temporary Measures for Reducing the Impact of Coronavirus Disease 2019) Bill, which passed the third reading on the same day.

This is unfortunate because the cooperatives sector has potential to generate economic growth while also doing good. It is part of the third sector of the economy, comprising social enterprises, community-based organisations, voluntary organisations and charities.

The cooperatives sector in Malaysia is quite diversified with over 14,000 organisations holding assets worth more than RM140bil as of June 2019, according to the International Cooperative Alliance Asia and Pacific report (

Cooperatives could be a driving force for economic progress especially in areas often considered not attractive enough for private sector investment or where public sector investment is lacking due to, among others, politics or lack of funds.

In challenging times when governments and the private sector are facing liquidity and funding issues, cooperatives can enable community members to work together to generate income, meet their economic and social needs and provide employment.

According to the International Labour Organisation (ILO), which has been championing the role of cooperatives and their contribution to promoting decent work and advancing sustainable development goals, this sector has created and sustained at least 279 million jobs worldwide.

Cooperatives operate on the basis of democracy, equality and solidarity. These features make the sector suitable for contributing towards aligning profits with people and the planet, one of the aims of the Sustainable Development Goals.

The Covid-19 pandemic has seen how cooperatives of fishermen in Malaysia have been able to supply seafood produce direct to consumers, providing their members with income while serving the needs of their community.

Despite its potential to do good, not all is rosy in the cooperatives sector, however. As reported by the Consumers Association of Penang, there have been scandals in the past caused by conflicts of interest, fraud and mismanagement.

Some of these occurred before the Co-operatives Societies Act 1993 (Act 1993) was introduced. A more recent case was reported in June 2019 with the Cooperative Societies Commission of Malaysia (SKM) stating that it would investigate incidents of syndicated loan scams in the sector.

At present, the main law governing cooperatives in Malaysia is Act 1993, which is administered by SKM. Since its inception, the Act has been amended twice. The amendment Bill deals with two issues:

> Lowering the number of members required to establish a cooperative from 50 to 20 persons; and

> Reducing the number of board members from a minimum of three persons to only two.

The proposal to reduce the number of members is aimed at making it easier for cooperatives to be formed. However, lowering the number of board members does not seem to fit in with good governance practices.

Reforms in the Bill should be taken as the start towards a holistic review of the legal and regulatory framework for cooperatives in Malaysia. It is time we consider a legislative framework for cooperatives societies that will foster the use of cooperatives as a means to ensure inclusive and shared prosperity.

At the same time, the legislative framework must also address governance and conflict of interests issues. This requires a review of the governance and decision-making process of the board and decision-making structure among members.



Ahmad Ibrahim Kulliyyah of Laws,

International Islamic University Malaysia

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