Currently, the cooperative sector seems to be focused solely on the issue of returning savings. If cooperative members themselves take initiative to ensure timely repayment from borrowers, there would be no crisis in the cooperative system. To dispel the misconceptions surrounding cooperatives, there must be a proactive effort from the state level. If cooperative workers also become active, cooperatives can indeed become a pillar of the national economy.

In recent times, the hard-earned billions of ordinary citizens invested in cooperatives appear unsafe. There is no certainty about when or by whom these funds will be returned. People are taking to the streets in protest. Cooperative operators are being forced to flee, while many borrowers are making excuses to avoid repayment. Despite the evident problems in the cooperative sector, state policies, periodic plans, programs, and budgets fail to acknowledge the crisis.

Many believe that recognizing cooperatives as profit-driven ventures rather than principle-based institutions has contributed to the current crisis. Cooperatives are businesses run according to legal frameworks grounded in cooperative principles and aimed at the welfare of the masses. Although cooperatives were established to replace exploitative moneylenders in society, there is now a lack of voices defending them during times of trouble. The fundamental legal principle that “the innocent should not be punished” has also not been applied in this sector.

While society moves toward digital transactions and central banks embrace digital currency, cooperatives have been excluded from these advancements. However, community-based cooperatives operated with good governance are still making significant contributions to economic and social transformation.

Although the cooperative movement in Nepal is said to have begun in 1950 (2007 B.S.), the Department of Cooperatives was only established in 1953 (2010 B.S.), and the first cooperative is believed to have been formed in 1956 (2013 B.S.) in Chitwan’s Bakhan village. The first Cooperative Act was enacted in 1959 (2016 B.S.). According to the Department of Cooperatives, there are around 45,000 cooperatives across the country, including district-level unions, subject-specific associations, central federations, and a national federation.

Cooperatives have contributed not only to expanding financial access but also to leadership development, social integration, entrepreneurship promotion, community empowerment, and poverty alleviation. Their operational areas are often small and specific, with members typically drawn from local communities. The Cooperative Act of 2017 (2074 B.S.) has classified cooperatives based on their nature of business. To make the cooperative movement — one of the three pillars of Nepal’s economy along with the public and private sectors — a success, the state and stakeholders must take responsibility for resolving the crisis.

Since cooperatives operate with active participation from their members, strengthening their institutional capacity, ensuring good governance, and promoting professionalism requires educating members not only about cooperative values but also about entrepreneurship. Members play a critical role in not only improving cooperatives but also safeguarding them during times of crisis.

The current problems in cooperatives are also due to economic contraction, interest rate caps, and the failure to implement supportive legal provisions. About half of Nepal’s population has access to cooperatives. But cooperatives that operate without adhering to core principles cannot be considered true cooperatives. Academic research and studies on cooperative economics should be conducted at universities — something that has yet to happen.

Although cooperatives are considered one of the pillars of the national economy, there have been no concrete programs for their development. Liquidity shortages have caused banks, financial institutions, and cooperatives to halt new investments. Despite this, cooperatives remain an excellent mechanism for providing small, collateral-free loans to members to help expand their capital.

Because cooperatives operate directly with members, the trust and confidence members place in them is often higher than that placed in banks and other financial institutions. Whether during the COVID-19 crisis, liquidity shortages, or other emergencies, cooperatives have stood by their members. They have gone door to door promoting savings habits among households. When members take out loans, they are also responsible for securing their own savings. Even amid the current liquidity crunch, the cooperative sector is expected to recover.

Since loans are disbursed from the savings of fellow members, these same members form the backbone of the cooperative’s long-term sustainability. Therefore, members must engage in regular transactions with their cooperatives. Through daily financial transactions, promotion of saving habits, interest calculation knowledge, financial literacy, and cooperative education, cooperatives have become increasingly attractive to members. Some members even report that by making daily loan repayments, they barely feel the burden of debt.

Despite the current liquidity crisis in the market, many cooperatives maintain liquidity through daily savings and loan repayments from members. As transactions happen among members, it is important that members stay informed and cautious. While COVID-19 may have rendered many businesspeople homeless and bankrupt, at the local level, it is cooperatives that open doors to small-scale businesses. Thus, the current crisis in cooperatives is likely temporary and will soon be resolved.

If borrowers, like depositors, take the initiative to repay their loans and interest on time, there will be no issue in the cooperative sector. Focusing solely on refunding savers while ignoring timely loan recovery is one-sided. This is why the state includes cooperatives as one of the pillars of its three-pillar economic policy — and everyone should understand this.

Every crisis holds the potential for a solution. Relevant stakeholders must work to find it. To protect cooperatives, local, provincial, and federal governments must act and provide necessary support. Misconceptions about cooperatives must be cleared through state-level efforts. If cooperative workers and stakeholders commit themselves, cooperatives can truly become a pillar of Nepal’s economy.