Putting your money in a cooperative is a good way of diversifying your investment portfolio. In its true essence, cooperatives are established to unite a group of people who share the same vision or goal. They share their money, make financial and investment decisions together, and share the profits they earn. The primary goal of every cooperative is to help improve the quality of life of its members.
Like with any form of investment, it’s important to research the pros and cons of your options. We listed some of the things you need to consider and look into before investing your money in a cooperative.
1. Legitimacy
The first thing you want to do is check if the coop is registered with the Philippine Cooperative Development Authority (CDA). A cooperative master list is available online but the last update was in 2018. You can also check a 2020 coop list during the pandemic. Better yet, visit the CDA extension or regional office near you to inquire. You can also request to see a copy of the CDA registration records from the cooperative itself.
2. Number of members & total assets
According to CDA, only members are allowed to invest in a coop. Thus, when comparing coops, look for one that has a large number of members because it could indicate financial stability, good reputation and credibility. “Billionaire coops” or coops worth billions in total assets have around 100,000 to 350,000 members. You also want to look at the financial performance and total assets of a coop to ensure it’s stable and less risky.
3. Interest rate
According to the CDA, the interest rate of coops shouldn’t exceed the normal rate of investment. Typically, interest rates in coops range between 4% and 8%, which is higher than the bank rates. Plus, deposits and transactions made by members with their coops are tax-exempt.
4. Extra charges & deductions
Many Filipinos prefer investing in cooperatives over banks because the requirements are less stringent and the processes are simpler. However, you have to be wary of added service charges and deductions. Remember that any transactions made by a member within a coop are free from withholding tax. So, take the time to ask what the deductions are for and how much will be left in your total investment. Compare which coops have the lowest charges and weigh your options well.
5. Benefits & privileges
Coop members enjoy a number of benefits and privileges, so take the time to research which suits your lifestyle and financial goals. Coops could also be a money source if you’re planning a business. Here are some typical perks & benefits coops offer:
- Discounts on the coop’s products & services
- Avail low-interest loans
- Death benefits
- Medical benefits
Like any investment, there are pros and cons to investing in a cooperative. Gather as much information as you can and find one that suits your goals. Good luck!
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