Hello guys! Yes, I'm back at it again!
This time I will be discussing about the different investment vehicles in different posts to be able to give a closer look about each of them.
Disclaimer: All of the following topics/discussion are all based on my personal study through reading and/or personal experience with them. If ever you have better approach or knowledge or even corrections on them that would make my posts more understandable, please feel free to mention them in the comments section. It would be highly appreciated in order to improve my posts.
Before we move on to have further discussions, it is essential that we reach agreement on the meaning of key words. In that way, we could have a uniform understanding about each of them which I will be using throughout the different posts and also for us to receive maximum value from the contents.
Investment
It is an item/asset purchased with the hope that it will generate income or will appreciate in the future.
Assets
It is a resource that possesses an economic value. It can be anything that an individual, corporation or country owns or controls with the expectation that it will provide future benefit/give income or appreciate in the future. Basically, it is a resource that would put money in your pockets.
Liabilities
It is anything that takes money from your pockets. It is primarily brought by the individual's debts and obligations and are considered as a person's payable.
Income
It is the money received or earned, can be on a regular basis from job/work or can be collected through the individual's investments.
Expenses
It is the cost required for something. It can be considered as the money used in the purchase of goods or services. Simply, the money spent on something.
Inflation
Generally, it is the increase of the price of goods and the fall or decrease of the purchasing power of our money. Ever wonder why the things you could buy with your One Hundred Pesos (Php100.00) are no longer the same after how many years? -- that's because of inflation.
Risk
In relation to investing, let's define risk as the amount of possibility of losing money.
Today, I will be sharing and elaborating one of the investment vehicles in the Philippines 🇵🇭 -- the Cooperatives.
So why did I choose to tackle Cooperative?
Cooperatives have been existing in the Philippines since 1914, maybe some of you were not that familiar because most of the Coops are small scale and not the usual thing you could imagine when you hear about investments. Here in the Philippines, Cooperatives are governed by the law RA 9520 - of Cooperative Code of the Philippines. It is also regulated by the (CDA) - Cooperative Development Authority.
What is a Cooperative?
Cooperative also known as Coop is a firm/business/organization owned, controlled, and operated by a group of users for their own benefit. Each member contributes equity capital & shares in the control of the firm on the basis of one-member, one-vote principle and not in proportion to his/her equity contribution.
Cooperative is an autonomous association of people who unite voluntarily to meet their common, economic, social and cultural needs and aspirations through a jointly-owned and a democratically-managed enterprise.
So, that's how Cooperative is being defined. I guess we all get it, right? From the word itself, cooperative signifies cooperation among members towards a common goal depending on the mission/vision of the said coop.
So, that does mean that each coop have different mission/vision?
Basically, yes. Since a lot of people have different outlooks in life, cooperative are also created according to the dreams or goals of its members. Since all cooperative are not created the same, there are various types of Cooperatives that have sprung as products of those different goals/mission.
Types of Cooperatives
The following types that I will mention below are the common types of cooperatives present in the Philippines. There could be a lot of types that I may fail to share. If you happen to know some that I haven't mentioned, please feel free to add them in the comments.
Credit Cooperative
It promotes savings or lending services among members. Maybe some of you are familiar with this since it is one of the common types of Cooperatives that exist even before. If you could think of a Coop that encourages its members to lend from them, that's an example.
Producer Cooperative
It aims to produce finished products to sell among its members and non members. Its members undertake the processing the raw materials in order to produce the goods to sell. Any end product from the raw materials produced by its members/the cooperative itself, sold in the name of and for the account of the cooperative, shall be considered a product of the cooperative and its members.
Consumer Cooperative
It aims to distribute/provide commodities to the members and non members through procurement.
Multi-Purpose Cooperative
It combines two (2) or more business activities defined by the types of Cooperatives. Most of Coops nowadays are multi-purpose, wherein you could enjoy two or more services offered to its members.
Cooperative Bank
Its one of the primary purposes is to provide wide range of financial services to Cooperatives.
Other Types of Cooperatives:
- Marketing Cooperative
- Service Cooperative
- Advocacy Cooperative
- Agrarian Reform Cooperative
- Dairy Cooperative
- Education Cooperative
- Electric Cooperative
- Financial Service Cooperative
- Fishermen Cooperative
- Health Service Cooperative
- Housing Cooperative
- Insurance Cooperative
- Transport Cooperative
- Water Sevice Cooperative
- Workers Cooperative
- and a lot more other Cooperatives as determined by authority.
Why Cooperative is an Investment?
Before answering that question, let us tackle first the basic information we need to know to get involve in a Coop.
To be able to know what a certain Coop has to offer, we must become members first. To become members, we need...
Membership Fee
The fee that you pay to get yourself as a member of the coop. It may also vary from coop to coop. Some cooperatives provide equivalent products according to the membership fee inclusions.
However, there are two types of members in a cooperative:
Associate Members
These members have no right to vote and be voted upon. They are entitled only to such rights and privileges provided by the cooperative's by law.
Regular Members
They are the ones who have complied with all the membership requirements. They are entitled to all the rights and privileges of membership as stated in the RA 9520 - Cooperative Code of the Philippines and the cooperative's by laws.
Share Capital
It is an amount of money that serves as your contribution to the pooled capital of the coop. It also represents the commitment to the cooperative form of business and identifies the individual's financial stake with respect to the whole cooperative. When you withdraw this money, it signifies that you are leaving the coop. The amount may vary from coop to coop according to their respective by laws.
Now, let's get back to the question. Primarily, your share capital is the investment because it generates dividends according to the performance of the coop.
Dividends
It is a sum of money that the cooperative pay its members regularly out of its profits. It commonly paid annually to its members but may vary depending on the cooperative's by laws.
So, yeah, the higher the amount of share capital you contribute to the coop, the bigger the amount that you'd receive since it will be given in percentage. Consequently, your share capital could be considered as an asset.
Aside from the dividends, you can earn also through availing the services provided by the coop such as, savings or insurance depending on the offers of the coop.
What are the Risks?
Like any other investments, cooperatives have its corresponding risk. That's why it is so important to get to know more of the background of the cooperative you are planning to join.
Anyhow Vince Rapisura, a known Filipino wealth expert who is also the author of (L)earning Wealth Successful Stategies in Money Management - A Personal Finance Guide Book have come up of guide that we may also refer to minimize the risk before we invest our money to a Cooperative.
COOP-PESOS is an acronym that has the following meaning:
C - Compliance with administrative and legal requirements.
See if the certain cooperative follows the rules set by CDA (Cooperative Development Authority), BIR (Bureau of Internal Revenue), LGU (Local Government Unit) and DOLE (Department of Labor and Employment)
O - Organizational structure and linkages
O - Operation and Management
P - Plans and Programs
P - Portfolio Quality
E - Efficiency
S - Stability
O - Operations
S - Structure of Assets
To read more about COOP - PESOS, you can refer here.
