Co-ops and you!

Contact Us

University of Wisconsin
Center for Cooperatives
230 Taylor Hall
427 Lorch Street
Madison, WI 53706
Phone: 608-262-3981
Email: reynolds@aae.wisc.edu

 

Why form a cooperative?

Cooperatives were formed to gain access to goods/services otherwise not easily accessible. Rural Electric Cooperatives were started by farmers in the 1930s to obtain electric services when private utility companies refused to serve rural areas. Cooperative Insurance Societies were formed in America in the late 1700s, enabling working people to obtain fire insurance at prices they could afford. Credit Unions, or financial cooperatives, were organized in the early 1900s to provide access for working people to saving accounts and credit. Agricultural Marketing Cooperatives (milk, cattle and hogs) were organized in the early 1800s to improve access to farmers.
The same idea exists even today. Below, are some other reasons why cooperatives are formed:

  • Achieving economy of size
  • Increasing bargaining power
  • Sharing costs of new technology
  • Adding value to agricultural products
  • Gaining access to new markets
  • Reducing risks associated with new enterprises
  • Obtaining new services
  • Purchasing in bulk to achieve lower prices
  • Providing credit under reasonable terms.


Benefits to the community: In addition to the direct benefits they provide to members, co-ops strengthen the communities in which they operate. Many co-ops provide jobs and pay local taxes because they operate in specific geographical regions. The co-op’s financial benefits to members, including patronage refunds, provide an economic boost to the community as well.

Patronage refunds: In a cooperative, the net earnings at the end of the fiscal year are distributed to the co-op’s member. These distributed earnings are called patronage refunds. It is paid based on the amount of business the member did with the cooperative that year. Because there are many types of cooperatives, there are many processes for paying patronage.