The History of Cooperatives

All of humanity's most significant achievements have come from people joining forces and intellect.
A cooperative enterprise is the documented essence of the paradigm for human well-being: it's about combining strengths, resources, and minds to achieve goals and lead a safe, prosperous, and meaningful life.
Humans rose to the top of the food chain by uniting their strengths because only by forming communities do we become a force worthy of respect and benefit.
Millennia have passed... and nothing has changed.
A single person is still "not a warrior" on their own, and in modern life, they are simply a "victim" of those who are not alone—those who have united into communities, organizations, or at least a group of like-minded individuals.
If you want to avoid loneliness, find or create a social circle for yourself, like a club or interest groups.
If you want to live in prosperity and wealth, find or create your own economic community in the form of a consumer cooperative.

The Origin Story of Cooperatives

Humanity's most significant achievements have always come from people joining forces and intellect. A cooperative enterprise is the formalized essence of a thriving human existence: it's about combining strengths, resources, and minds to achieve goals and lead a safe, prosperous, and meaningful life. Humans ascended to the top of the food chain by uniting their strengths, because only by forming communities do we become a force worthy of respect and benefit.
Millennia have passed... and nothing has changed. A single person is still "not a warrior" on their own, and in modern life, they are simply a "victim" of those who are not alone—those who have united into communities, organizations, or at least a group of like-minded individuals.
If you want to avoid loneliness, find or create a social circle for yourself, like a club or interest groups. If you want to live in prosperity and wealth, find or create your own economic community in the form of a consumer cooperative.

How People Invented Cooperatives

The first cooperative enterprises were founded in Great Britain at the very beginning of the 19th century by philanthropists seeking to improve the conditions of workers. By the 1820s and 1830s, the workers themselves became the owners of cooperative stores, mills, and bakeries. Cooperatives allowed workers to buy goods at lower prices.
Initially, cooperatives emerged for several key reasons:

• Insufficient wages: There was a dire need to find ways to reduce the cost of living as daily expenses consumed most earnings.
• Desire for a dignified life: People aspired to live well, purchase quality food, travel, dress nicely, and provide their children with good education. However, an additional income source was essential, and starting an independent business was often impossible due to a lack of opportunity, startup capital, or experience. Moreover, ordinary workers feared losing their jobs, which, despite not providing everything they desired, at least offered a chance to avoid starvation (a very real threat for the unemployed at that time).
• Employer and philanthropic initiatives: Employers and philanthropists sought an effective method to create an additional resource for employee social welfare without increasing the burden on the company's budget.

In the 1860s-1880s, cooperatives in Great Britain and Germany became so successful that they began to form unions. During these same years, cooperative systems emerged and strengthened in Italy, France, Switzerland, Belgium, and the Scandinavian countries. By the 1890s, cooperation in Europe encompassed more than 2 million members.
At that time, Kazakhstan was part of the Russian Empire. By the early 20th century, Russia held the first place globally in the number of cooperatives and their members. No other country experienced such rapid growth in cooperation. By 1917, the total number of cooperatives of all types approached 50,000 (including about 25,000 consumer societies, 16,500 credit cooperatives, 6,000 agricultural societies, 2,400 agricultural partnerships, 3,000 butter-making artels, and 1,500-2,000 production and handicraft artels). These organizations included approximately 14 million people.
After the October Revolution of 1917, the existence of cooperation in the USSR was defined by its interaction not with private capital, as in other countries, but with the monopolistic state sector of the economy. Following the adoption of the New Economic Policy (NEP) in 1921, cooperatives became the primary creators of consumer goods and provided a crucial impetus for the economic development of the nascent Soviet state.
At the dawn of its independence, Kazakhstan also nurtured its first generations of successful businessmen, many of whom emerged from cooperatives.
Today, experts from international think tanks continue to highlight the vital role of cooperatives in combating poverty and ensuring population employment.
In its Resolution 64/136 of December 18, 2009, the UN General Assembly recognized the special role of cooperatives in poverty reduction, employment, and social integration.
By 2010, according to the International Co-operative Alliance, the cooperative movement encompassed 700,000,000 people.
2012 was proclaimed the International Year of Cooperatives by the UN (UN Resolution 64/136).

How a Consumer Cooperative Works

Historically, cooperatives have emerged in a similar way across many countries.

People often struggle with money because daily expenses consume most of their income. The more astute among them noticed a significant difference between wholesale and retail prices in the market, with retail prices being considerably higher.

Seeing this obvious disparity, they began suggesting to their neighbors or colleagues that instead of buying items individually, they could pool their money and have one person buy goods in bulk as a wholesaler, thereby getting the associated discounts. Wholesale sellers lost nothing, and ordinary people, by buying in larger quantities, could save almost 30%.
Imagine, simply by creating a mechanism to buy at wholesale prices, they effectively boosted their own "salaries" by 30%!
After doing this a few times for one type of product, they started buying more and more items using the same scheme. Eventually, as they began purchasing a wide variety of goods, and the number of people involved grew too large for the initial organizer to store all the money and products, they decided to set up a warehouse to distribute goods to the cooperative buyers.
It's thought that people not initially part of this wholesale buying scheme would sometimes wander into this warehouse and ask to purchase goods. The organizer would explain something like, "I can't sell you at the wholesale price because each item already has an owner, but I can sell it to you at the retail price." These casual visitors, not wanting to go elsewhere, agreed, as the retail price was the same as in other stores.
The organizer sold the item at retail, then repurchased it at wholesale, returned it to its owner, and pocketed the difference as an unexpected profit from their idea.
Initially, these were sporadic sales, but gradually, the organizer built up a large base of regular customers and quickly became wealthy. They achieved this with minimal risk. This success didn't go unnoticed by their co-organizers of the discounted purchasing scheme. I imagine a heated discussion followed, with the co-organizers likely threatening to leave the venture.

However, as we've seen, the organizer of this cooperative purchasing initiative was smart. They understood that losing their co-organizers would mean losing their warehouse, their wholesale purchasing power, and a stable channel for their additional income. Most likely, they proposed that everyone stay in the cooperative and, in return, shared the extra profits with them.
To avoid future conflicts, they all collectively drafted a Charter.

Their enterprise quickly flourished, and more people began to join.
I believe they later realized they could do more than just buy goods for consumption. They could also use this model to open laundries, schools, hairdressers, and much, much more for their own use. In short, a true happy ending!
Subsequently, as many such cooperatives emerged, involving millions of people, laws were created to regulate the relationships among people within cooperatives.

Who is Interested?

Today, a full understanding of cooperatives and other forms of economic communities is most beneficial for:

• Salaried and Public Sector Employees

• Cooperatives are designed for you. You can buy goods and services at cost, gaining an extra source of income that benefits you regardless of your direct labor. Best of all, cooperative benefits are highly accessible, as you can acquire a share not only with money but also with existing property or even your labor outside of work hours.

• Budding Entrepreneurs

• Through cooperative entrepreneurship, you can secure the most favorable funding for your new venture. This funding for emerging businesses is significantly more beneficial and accessible than bank loans or investor capital, and crucially, it leads to far less stress.

• Business Owners

• Cooperatives offer three interesting advantages for you:

1. Effective Employee Retention Tool: Cooperatives are one of the most effective social packages for retaining valuable employees. When employees know their company has a consumer cooperative, they gain the opportunity, beyond their salary, to buy goods and services at cost price and receive additional material bonuses. Employers can materially and emotionally incentivize staff without increasing business costs.
2. Ecosystem for Bulk Purchasing: Cooperative entrepreneurship creates an entire ecosystem for large-volume procurement. A cooperative is the largest aggregation of clients and buyers. A cooperative buys not just once, but constantly, and always in large quantities. It's truly a business dream!
3. Building a Cooperative on an Existing Business: It's even more beneficial to build a cooperative on an existing business base. This allows you to inject additional financial and labor resources that will propel your business to the next level of profitability. At the same time, you retain the right to receive the largest share of the cooperative community's profits.

• Those Who Want to Preserve Their Accumulated Wealth

• In our country, some people have already accumulated wealth. They face a different challenge: control. While assets sit idle, according to the second law of thermodynamics, they only incur losses. Renting them out is an option, but it yields much less profit than organizing a business, considering comparable wear and tear on your property. However, organizing a business again means expenses and constant oversight, which means the idea of passive income doesn't quite work as desired for those who've already earned something. Cooperation allows you to not only use your property with maximum profitability but also attract additional resources for co-financing your income source. This way, you reduce the risks and financial burden of starting a business and maintaining your assets. Plus, you gain an entire army of controllers to ensure that both their interests and yours are protected from fraud, and that the property is properly maintained. After all, in a cooperative, it's a source of their income too. Practice also shows that economic communities typically attract intelligent individuals with good ideas and pleasant company who can advise you on how to make the most profitable use of your existing assets.

• Pensioners, Pre-retirees, and Unemployed Individuals

• The reality is that the number of jobs in the labor market isn't limitless. And the harsh truth is that employers often seek to hire young, well-educated, and energetic individuals. Many HR managers also believe that new technologies are developing at an explosive pace, leading to almost daily breakthroughs in nearly all fields of human activity worldwide. These new discoveries quickly become global knowledge, transforming labor processes and human resource requirements. In such conditions, experience can sometimes hinder rapid adaptation rather than being an advantage.
• This is also happening as robots enter the labor market, adding to human competition.
• According to 2017 data from a new PwC report, 38% of jobs in the USA are at risk of being replaced by robots and artificial intelligence within the next 15 years. Similarly, about 30% of jobs in the UK are also threatened. Japan's risk level is 21%. However, PwC found significant differences in the nature of work within these sectors, explaining why more US jobs are at risk. For example, in financial services, 61% of US jobs in the sector are at high risk of being taken over by robots, compared to 32% in the UK.
• Research from the first half of 2018 indicates that all these figures have virtually doubled. We are practically the last generation to witness many professions primarily performed by humans.
• However daunting this may seem, we must contribute to human progress. This service to humanity will unlock new horizons of opportunities for our descendants. Given today's and tomorrow's realities, to avoid being left without a livelihood—and even better, to be materially and intellectually ready to enjoy the benefits and opportunities offered by modern globalized life—pensioners, pre-retirees, and unemployed individuals must change their entire job search paradigm. Instead of chasing jobs, they should focus on creating jobs themselves. In this endeavor, cooperatives and other forms of economic communities offer the greatest assistance.
• A cooperative can create numerous jobs, and most importantly, it can establish an additional income source that you gain by holding a share in the cooperative.
• A cooperative share can generate profit on its own; you can use it as collateral for bank financing, lease it out, or even sell it at market value for a good return.
• You can acquire a share in one cooperative, then sell it at a higher price, move to a newly forming cooperative, and once its share price increases again, repeat this process until you acquire a share that fully satisfies your desired annual profitability.

How to Learn More?

In the Republic of Kazakhstan, the Union of Legal Entities "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan" promotes methodologies for improving the well-being of the population through cooperatives and other economic communities.
This organization is registered with the justice authorities of the Republic of Kazakhstan. The Association is accredited with the "ATAMEKEN" National Chamber of Entrepreneurs of the Republic of Kazakhstan as a Republican association.
The mission of the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan" is to enhance the well-being of Kazakhstan's population through a culture of active public involvement in economic communities.
Economic communities are voluntary associations of citizens operating on principles of self-organization, mutual assistance, joint problem-solving, and the coordinated pooling of efforts, resources, and ideas. Their goal is to create economic benefits and improve the quality of life at their place of residence, leisure, and work.
Economic communities are registered with the justice authorities of the Republic of Kazakhstan as consumer cooperatives.
The objectives of the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan" are:

• Training and consulting the population, entrepreneurs, government bodies, media, and NGOs on the methodology of a self-organizing system for improving individual, family, and regional well-being through economic communities.
• Developing regulatory legal documents and creating a partner network of organizations and other association bodies that will protect the economic interests of people participating in economic communities and cooperatives.
• Performing self-regulating organization functions for cooperatives and other economic communities. This includes developing standards and requirements, conducting certification, attestation, examinations, and other forms of qualification determination for participants in cooperative activities and economic communities, as well as service providers. It also involves resolving disputes among participants.
• Interacting with government bodies, representative authorities, and NGOs to represent and protect the interests of cooperatives and other economic communities, and to create favorable conditions for their development in the Republic of Kazakhstan.
• Providing information support for the mission of the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan."

Participants in Economic Communities

As categorized by the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan":

1. State Bodies: Represented by the justice authorities of the Republic of Kazakhstan, they carry out the state registration of cooperatives.
2. Bodies of the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan":

• Certification Center under the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan." It verifies documents submitted for certification, conducts examinations for compliance of individuals and legal entities with approved requirements, and issues, registers, and informs the public about certificate holders in the following categories:

1. Chairman of the Cooperative or a management company serving as chairman of the cooperative.
2. Cooperative Agent or Cooperative Agency.
3. Cooperative Business Accelerator or Cooperative Business Acceleration Agency.
4. Certified Supplier.

• LLP "Unified National Register of Cooperative Shares" is an organization that registers, accounts for, stores, and informs the public about cooperative share owners. This is done based on a written request from the head of the cooperative's executive body (for the cooperative under their management at the time of request) or from the share owner. The Register provides an extract confirming information about the share owner registered in the Unified National Register of Cooperative Shares. This helps prevent fraud by unscrupulous cooperative chairmen who might re-register high-yield cooperative shares to a third party without the owner's knowledge. It also helps maintain orderly share circulation during sales or transfers to third parties.
• Information Bulletin of the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan." It provides subscribers via email newsletters with information on new cooperatives across Kazakhstan, standards for protecting the rights of share owners of the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan," and other relevant materials.

1. Bodies for Organizing Work and Managing Cooperatives in accordance with the interest protection requirements for cooperative members of the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan":
2. Cooperative Chairman. The head of the cooperative's executive body. They undergo training with a cooperative business accelerator or at a cooperative business acceleration agency. Certification is obtained through the Certification Center at the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan" by passing an examination with a commission appointed by the President of the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan." If the general meeting of the cooperative appoints a management company as the executive body, its head must hold a "Cooperative Chairman" certificate from the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan."
3. Cooperative Agent or Cooperative Agency. A person responsible, based on a concluded agreement, for preparing documentation needed for cooperative organization and state registration, attracting cooperative members, correctly formalizing their rights to cooperative shares, registering cooperative shares and their owners in the "Unified National Register of Cooperative Shares," and selling and transferring cooperative shares to third parties. They undergo training with a cooperative business accelerator or at a cooperative business acceleration agency. Certification is obtained through the Certification Center at the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan" by passing an examination with a commission appointed by the President of the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan." They must have an agreement and an annually issued power of attorney from LLP "Unified National Register of Cooperative Shares" for preparing documentation necessary for the registration/re-registration of share owners in the register.
4. Cooperative Business Accelerator or Cooperative Business Acceleration Agency. A person who, based on a certificate and an agreement with the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan," has the right to perform the following:

• Training in the following qualifications of the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan": Cooperative Chairman; Cooperative Agent; Cooperative Business Accelerator. A course completion certificate is issued, which is mandatory for taking the qualification examination at the Certification Center.
• Certify "Certified Suppliers" of the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan."
• Arrange subscriptions to the Information Bulletin of the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan." The Cooperative Business Accelerator independently determines the pricing for these services. They undergo training with a cooperative business accelerator or at a cooperative business acceleration agency. Certification is obtained through the Certification Center at the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan" by passing an examination with a commission appointed by the President of the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan."

1. Certified Supplier. Rules for certification and assignment of "Certified Supplier" status. A certified supplier is a legal entity or individual entrepreneur meeting the following requirements:

• No outstanding debts to government bodies.
• Not involved in ongoing legal disputes with third parties (legal or physical).
• Be a subscriber to information newsletters from the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan."
• Have an employee on staff who has completed training and is certified by the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan" as a "Cooperative Chairman," "Cooperative Agent," or "Cooperative Business Accelerator."
• If necessary, possess a license for licensed activities, a franchise license, a license for the use of necessary software, and other forms of intellectual property.
• Possess the necessary base and equipment for providing services, either owned or under a rental agreement for the entire period of service provision by the certified supplier to the cooperative.

1. Procedure for Obtaining "Certified Supplier" Status: To obtain "Certified Supplier" status, a legal entity or individual entrepreneur applies to a "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan" certified Cooperative Business Accelerator with an application for inclusion in the register of certified suppliers. The application must be accompanied by:

• A certificate of no tax arrears.
• A concluded agreement for news subscription from the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan."
• A copy of the employment contract (ITD) with a person who has completed training and is certified as a "Cooperative Chairman," "Cooperative Agent," or "Cooperative Business Accelerator" by the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan."
• A copy of the license (with mandatory presentation of the original) for licensed activities, or an agreement for the acquisition of a franchise license, a license for the use of necessary software, and other forms of intellectual property.
• An agreement concluded with a cooperative business accelerator for supplier certification as a "Certified Supplier" in the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan."
• A copy of the payment receipt for the services of the Cooperative Business Accelerator.
• Copies of documents confirming the company's possession of the necessary base and equipment for providing services, either owned or under a rental agreement for the entire period of service provision by the certified supplier to the cooperative.

1. Based on the provided documents, the Cooperative Business Accelerator must establish a commission and visit the location of the potential Certified Supplier to visually confirm the presence of the necessary infrastructure and equipment. Following the commission's work, a protocol is drawn up, accompanied by video or photo materials. The Cooperative Business Accelerator is obligated to review the materials within 5 business days. If a positive decision is made to grant "Certified Supplier" status, all documents are electronically forwarded to the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan" for publication on their website in the "Certified Suppliers register", including the name of the legal entity or individual entrepreneur, and the issuance of the required certificate.
2. The "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan" has the right to conduct independent verification of the documents of Certified Suppliers already included in the Register of Certified Suppliers to ensure compliance with the association's requirements. If any discrepancy is found between the submitted documents and the requirements, the issued certificate may be revoked. In such a case, the organization will be excluded from the Certified Suppliers register on the website of the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan," and an official directive will be issued to surrender the certificate within three business days. The Cooperative Business Accelerator will also lose their certificate for conducting Cooperative Business Accelerator activities issued by the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan." Companies previously certified by cooperative business accelerators will be audited to determine if their "Certified Supplier" status is maintained.

Legal Basis

The legal framework for consumer cooperatives and other forms of economic communities in the Republic of Kazakhstan, within the organizational system developed by the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan," is regulated by the following normative legal documents:

• The Constitution of the Republic of Kazakhstan;
• The Civil Code of the Republic of Kazakhstan (General Part) dated December 27, 1994;
• The Law "On Consumer Cooperatives";
• Normative documents adopted at the meeting of the supreme governing body of the Union of Legal Entities "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan" for all forms of cooperatives and other economic communities in the Republic that recognize this association as a self-regulating organization;
• The Model Charter recommended by the "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan."

© 2018 "National Association of Cooperatives and Other Forms of Economic Communities of the Republic of Kazakhstan"

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