Service cooperative system: A new dimension to rural development

By G.R.M. Gamlath

Many developing nations' rural areas continue to struggle with issues like unemployment, poverty, poor infrastructure, and restricted access to basic services. Although helpful, traditional development interventions frequently focus on discrete problems rather than encouraging comprehensive, community-led solutions. A promising model that unifies various services under a single, community-based framework and empowers rural populations to jointly manage their socioeconomic development is the service cooperative system. This essay examines the idea of service cooperatives as a novel approach to rural development, going over their composition, methods of operation, and possible roles in inclusive and sustainable rural development. With an eye towards policy integration and community empowerment, particular attention is paid to the system's applicability in post-conflict and developing areas like Sri Lanka.

For many countries, especially in the Global South, where a sizable section of the population lives in rural areas reliant on agriculture and unorganised economic activity, rural development is still a key policy goal. When it comes to meeting the complex needs of rural communities, traditional development models which are frequently defined by top-down interventions and sector-specific initiatives have produced a range of results.  In response to these limitations, cooperative-based development models have gained attention for their participatory governance structures and ability to mobilise local resources. Among these, the service cooperative system offers a unique and comprehensive approach by providing a range of services from agricultural input supply and marketing to healthcare, education, financial services, and infrastructure support under a single institutional framework. This paper aims to examine how service cooperatives can serve as an effective instrument for rural development, presenting a conceptual analysis and contextual relevance to contemporary rural economies.

Cooperatives are member-owned, democratically controlled enterprises that operate for the benefit of their members and communities. Rooted in principles of voluntary membership, democratic governance, and equitable benefit-sharing, cooperatives have historically played a pivotal role in promoting economic resilience and social solidarity in rural areas. While credit and agricultural cooperatives have traditionally focused on specific economic functions, the evolution of service cooperatives broadens this scope, integrating various social and economic services to holistically improve the livelihoods of rural residents.

By encouraging group participation, shared ownership, and mutual benefit among rural populations, the service cooperative system is an inventive and community-focused strategy for advancing rural development. Service cooperatives offer a wide range of vital services under a single organisational structure, in contrast to traditional agricultural or credit cooperatives that frequently concentrate on a single function. These services include the supply of agricultural inputs, marketing assistance, financial services, health care, education, infrastructure development, and social welfare. This system is very flexible to the socioeconomic realities of rural communities because it is based on the ideas of democratic control, voluntary membership, and fair benefit distribution. By empowering rural residents to jointly address their economic and social needs, lessen their reliance on outside parties, and maintain control over local resources and decision-making procedures, service cooperatives serve as a catalyst for local empowerment. Service cooperatives integrate multiple services within a single platform, generating economies of scale and operational efficiency and providing a safety net against market fluctuations and rural poverty. They contribute to rural financial inclusion, entrepreneurship promotion, employment generation, and social capital formation. In developing regions like Sri Lanka, the service cooperative system fosters inclusive growth, reduces inequalities, and builds resilient rural economies, aligning with national development goals and global agendas like the Sustainable Development Goals (SDGs) for poverty alleviation, gender equality, decent work, and sustainable communities.

Concentrating on the importance of having essentiality in the context of an economic perspective, a service cooperative system refers to an institutional arrangement in which a cooperative society offers a bundle of essential services, including but not limited to agricultural input and output marketing, microfinance and savings mobilisation, health and social welfare services, educational and vocational training programmes, infrastructure development (roads, irrigation, water supply), consumer services and retail outlets, etc. By consolidating these functions, service cooperatives act as multi-purpose service hubs, facilitating inclusive growth and socio-economic stability in rural areas.

With integrated service delivery, community empowerment, economic resilience, financial inclusion, and job creation, service cooperatives represent a new dimension in rural economic environments. They challenge a number of issues related to rural livelihoods, including enhancing social welfare through healthcare and education services, stabilising farmer incomes through market access and agricultural inputs, and functioning according to democratic governance principles. These cooperatives support local accountability and ownership while customising services to meet the needs and preferences of their members. Additionally, they offer financial services like insurance, microcredit, and savings plans, which promote financial inclusion and lessen susceptibility to shocks to the economy. The cooperative structure increases economic resilience by facilitating risk-sharing and collective bargaining. Through business development services, market connections, and credit availability, service cooperatives indirectly encourage rural entrepreneurship and directly generate job opportunities.

Further, the implementation of a service cooperative mechanism for the countries (in the contexts of post-conflict and developing contexts) would be most relevant because, in countries like Sri Lanka, where rural communities continue to recover from the impacts of prolonged conflict and economic instability, service cooperatives offer a viable model for inclusive and sustainable development. They can help bridge the service delivery gaps left by state and private sector actors, promote social cohesion, and empower marginalised groups, including women and youth. Moreover, service cooperatives can also align with national rural development policies and global frameworks such as the United Nations Sustainable Development Goals (SDGs), particularly SDG 1 (No Poverty), SDG 8 (Decent Work and Economic Growth), and SDG 11 (Sustainable Communities).

However, service cooperatives often face challenges such as limited managerial ability, regulatory restrictions, insufficient funding, and politicisation, despite their potential. To improve operational efficiency and cooperative governance, effective policy support, capacity-building initiatives, and financial incentives are necessary. Cooperatives must be incorporated into national planning procedures and acknowledged as strategic partners in rural development by governments and development organisations.

The author concludes by suggesting that the service cooperative system, which provides integrated, community-managed services that cater to the various needs of rural populations, represents a fresh and exciting aspect of rural development. Service cooperatives have the power to revolutionise rural economies by promoting social empowerment, economic resilience, and inclusive growth, especially in developing and post-conflict environments like Sri Lanka. To fully realise their potential in promoting sustainable rural development, future research and policy interventions should concentrate on scaling effective service cooperative models, improving their governance capabilities, and creating institutional and legal environments that are supportive.

(The writer is a Senior Lecturer (Grade 1) in Accounting and Finance, University of Vavuniya, Sri Lanka. He can be contacted at methikalak@gmail.com; muthugamlath@vau.ac.lk)