History of Philippine Cooperatives

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.