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Workplace Cooperatives: a sound way to save

Recently, we featured the pioneering work of iCare Benefits, a zero interest cost employee benefits program. This scheme now serves over 3.1 million workers in more than 1,300 factories in an increasing number of countries, including Thailand. However, even before iCare Benefits reached Thailand, there were already worker cooperatives undertaking savings schemes. These worker cooperatives now have the opportunity to work together with iCare Benefits, joining alongside factory managements and trade union local branches to provide cost-effective benefits for workers.

To understand the roles of worker cooperatives, we asked Roisai WongSuban ( and Pawel Gorski ( to explain how they help workers in savings and credit schemes.

What are workers' cooperatives?

There are now 540 workers cooperatives in Thailand, officially known as "workplace cooperatives". These are under the supervision of the Ministry of Agriculture and Agricultural Cooperatives, in a category designated as Savings and Credit Cooperatives.

The cooperatives enable members to deposit savings and obtain credit facilities for authorized purposes. Cooperative funds are from several sources, including membership fees (refundable when a member leaves the cooperative), regular savings deposits, voluntary donations, and profits from cooperative services. Some workers cooperatives are registered as both consumer cooperatives selling goods, as well as credit cooperatives.

Cooperatives are managed by members, who elect the cooperative management committee. The elected committee may select permanent staff to provide member services.

What services do worker cooperatives provide and how do they benefit workers and their families?

Cooperatives must ensure that there are adequate funds to cover operating costs and credit provided to members. Savings can be withdrawn by members at any time, and emergency credit can be offered, usually for a 2 month period. General, non-emergency credits must be repaid over a 24 month period, with an interest rate of 10% per annum charged on the diminishing outstanding amount. Credits must be approved by the directors and secured by two guarantors in each case. Cooperatives are normally expected to generate a surplus over operating expenses, and can distribute an annual dividend to members out of such surpluses. The most common reason why members borrow funds from worker cooperatives is to repay already committed borrowings, often at high interest rates from "loan shark" lenders. Worker cooperatives are self-governing and free to determine whatever goods, services and funding that they choose to offer to members.

Such cooperatives are often provided with office space at company locations, and are therefore conveniently accessible to individual workforce members. The concept provides an opportunity for individual members to gain management experience in running an enterprise. The cooperative can, as a result, promote and instil the virtues of self-help, social responsibility, and ethical values.

How can cooperatives be made more effective?

It is exceptional for cooperative members to have had substantial past experience in managing social enterprises, so training using outside advisers and instructors may be needed for development of management, lending and credit  recovery, as well as guidance on prudent financial practices. In addition, there is a need for employers or government to provide accounting systems, computer and software facilities. There is certainly a need for worker representatives to cooperate with employers and gain their active encouragement. It may be necessary to provide expert advice to explain the advantages for all parties to develop the worker cooperative system at workplace level.

What are the differences between worker cooperatives and agricultural cooperatives?

All cooperatives are supervised by the Ministry of Agriculture and Agricultural Cooperatives. However the Ministry of Labour also seeks to promote the development of industrial workplace cooperatives as a part of their initiatives to develop worker welfare programs.

Although administered officially by the same Ministry, worker cooperatives and agricultural cooperatives are fundamentally different in objectives and activities. Worker cooperatives operate as support organisations for mainly social benefits within profit-making commercial organisations, of which cooperative members are employees.

On the other hand, agricultural cooperatives are groupings of mainly self-employed, family farming units. They exist to promote both the social needs of members but also their work needs and benefits. These can extend into purchasing and sale of agricultural inputs and product marketing as well as becoming involved in various government schemes to support and promote agricultural communities.

The concepts of both kinds of cooperative are similar, but role and extent of activities are very different.

What problems can arise with the operation of worker cooperatives?

Worker cooperatives can face many challenges, both internal and external. Lack of knowledge and experience of cooperative management can be a major problem, especially in the early days of newly established cooperatives. The basic idea of a cooperative is that members should contribute savings into the cooperative fund, and then be able to obtain credits from these funds when needed. However workers frequently do not have any savings, only debts, so they cannot deposit much with the cooperative of which they are members.  If the cooperative is large enough to employ at least one full-time member of staff, this can help, but with smaller cooperatives this may not be feasible.

There are also many external problems facing worker cooperatives. Employers often consider the cooperatives as an extension of trade union activities, and therefore as a device for collective bargaining. They may be reluctant to give support to the cooperative or its board of management. There are also many "loan sharks" within a factory, even among factory management. These people will not want to tolerate competition for their own activities. In many cases, workers fall into indebtedness and be unable to service the credits that they have received from the worker cooperatives. Such indebtedness may be to "loan sharks" who may use violent measures to demand repayment. Inevitably repayment of such loan shark debts will take precedence over repayments to the worker cooperative.

Hitherto there have been no sustainable measures enacted to resolve worker indebtedness. The role of government has tended to restrict functions to regulatory affairs, audit procedures, but not social objectives or policies to resolve the problems faced by disadvantaged groups.

There is also criticism that worker cooperatives may try to compete with financial institutions rather than serve as self-help enterprises to improve the living and working conditions of workers. However financial institutions in Thailand have tended either to demand unattainable levels of security and guarantee, or else lend on an unsecured basis but at usurious rates of interest that still further handicap worker ambitions to free themselves from burdens of servicing indebtedness.

Cooperative between iCare Benefits and cooperatives can resolve many of these problems and promise a bright future for the eradication of worker indebtedness.

Christopher F. Bruton, over 46 years in Thailand, is Executive Director of Dataconsult Ltd, a local consultancy. He can be reached at Dataconsult's Thailand Regional Forum provides meetings, seminars and extensive documentation to update business on present and future trends in Thailand and in the Mekong Region.