The role of cooperatives in the transition towards the formal economy

The document ’Cooperatives are key to the transition from the informal to the formal economy’ to be distributed among delegates and elaborated by CICOPA argues that the cooperative entrepreneurial model is particularly adapted to lifting people out of poverty and carrying out the transition to the formal economy. Over the last the two centuries, cooperatives have been ensuring such transitions: for example, rural credit and agricultural cooperatives in the 19th century in Germany and France lifted the majority of farmers out of informality and indebtedness: this process then extended itself to most of what has become the industrialized world and more recently, the emerging countries. Nowadays worker and social cooperatives are among the main types of cooperatives that can ensure this transition.

Based on ten weeks of fieldwork in regions of ten different countries, three of which with a high concentration of informal economy – Ahmedabad district in Gujerat, India, Gauteng province in South Africa and Paraiba State in Brazil-, the study ’Cooperatives and Employment – a Global Report’, published by CICOPA in 2014, argues that employment in cooperatives tends to be more secure than the average. Why? Since cooperatives are stakeholder-based enterprises established for the long-term, it is logical that their producer-members, their worker-members and their employees also benefit from stable employment or production conditions. The fieldwork has also highlighted a particularly strong sense of identification with the cooperative among members and staff, and employees and managers alike often perceive that the ultimate employer is the surrounding community, a factor which tends to improve job stability. Cooperatives do so effectively and efficiently because they provide people with a voice, representation and empowerment, while also generating an array of instruments for entrepreneurial development.

“The contribution of cooperatives to the generation of quality jobs is even clearer in the case of persons who are excluded from the formal economy such as undocumented people, immigrants and low-income women”, says Bruno Roelants, Secretary General of CICOPA. Indeed, cooperative principles (voluntary and open membership; democratic member control; member economic participation; autonomy and independence; Education, training and information; intercooperation and concern for community) which appear in Promotion of Cooperatives Recommendation n°193 (2002), interact with each other to form a business model that provide the necessary learning space, economies of scale and organizational practice to enable individuals to work together and carry out their transition towards the formal economy, while being permeated by the cooperative underlying values which make the cooperative enterprise one of the most natural options for informal economy groups and workers.

“It is highly recommended that cooperatives be explicitly mentioned in the proposed Recommendation concerning the Transition from the Informal to the Formal Economy. A clearer acknowledgement of cooperatives’ actual and potential contribution will clarify the role of cooperatives in the formalization process and will guide the policy framework of the new instrument”, insists Roelants.

Background

Following the discussion in the framework of the 103 International Labour Conference held from 28 May to 12 June in Geneva, the ILO already included cooperatives in the Recommendation on tackling the informal Economy. This was the first step and this item will be dealt with at the 104th Session of the Conference to be held next week, hopefully with the publication of a Recommendation.