Coops Make 1.6 Times More Profits Than Banks And 1.2 Times The Profits Of 158 Listed Companies In 9 Months

The sales of the cooperative societies in Kuwait are very high and in terms of accounting, it can be said it is sufficient to note that the 68 cooperative societies and 270 branches in just 9 months made profits equivalent to 1.6 times the profitability of banks and 1.2 times the profits of 158 listed companies and are known to sell goods worth billions of dinars annually.

Al-Rai has learned at a time when a majority of companies around the world suffered great losses due to the repercussions of the Corona virus, cooperative societies, and of course, food and consumer central markets in general, benefited from the crisis by achieving profits and creating unexpected levels of cash liquidity.

The 158 listed companies (out of 167), have announced their results for the same period profits of about 800 million dinars, excluding the profits of ‘Agility’.

The annual sales of cooperative societies approach one billion dinars, and their cash flow at some times reaches about 400 million, which makes them one of the main financial and investment centers but the question is do these entities apply the rules of governance to protect their system and the interests of their shareholders?

In principle, it is noteworthy to make a mention that the first attempt to establish a cooperative movement was a school — the Mubarakiya School in 1941 — followed by the establishment of a private consumer association for the employees of the Social Affairs Department in 1955, and a cooperative association for the employees of the Department of Education.

As for consumer cooperation in its current form, it began with the issuance of Law No. 20 of 1961 in the Keifan region, then the establishment of cooperative societies followed, and the Federation of Consumer Cooperative Societies was formed in 1971, as a kind of coordination between the various cooperative societies, and in 1979 a decree Law No. 24 of 1979 was issued regarding cooperative societies, which was amended by Law No. 118 of 2013.

Thus, the definition of cooperative societies is an independent group of people united voluntarily to meet their economic, social and cultural needs and common aspirations through collective ownership of a project in which management and control is of democratic nature.

The total number of unions and cooperative societies reached 75 divided into 68 consumer societies, 3 agricultural production societies, the Al-Sadu craft cooperatives, the Kuwaiti government employees’ cooperative society as well as the Federation of Consumer Cooperative Societies and the Federation of Agricultural Societies.

According to the closest official financial reviews, it turns out that the most prominent total financial items for unions and cooperative societies can be distributed into 9 main items, including sales that approach one billion dinars, then revenues, including rents of the invested branches, subsidies, free merchandise, office discount, deposit revenues, advertisements and offers, which bring in approximately 150 million.

As for the third item, it includes the profit of stores, which is approximately 90 million, followed by other expenses and overheads of about 175 million, and a net profit of about 60 million, while the financial statements show that cooperative societies pay annually about 17 million dinars in fees to state properties, and about 3.8 million dinars in electricity and water costs, and about 600,000 subsidies and approximate 2.5 million for zakat.

In terms of accounting, these items, quality and financial value wise, show the importance of these commercial entities, which enjoy high levels of cash, whether in the fund or in banks in the form of deposits and current accounts, which, according to a review of the figures before official bodies, amounted to about 400 million dinars, about half of which was net cash flow.

But the paradox is that the cash flow rates differ from one cooperative society to another. While it is recorded 20 million by one association, it can be offset by another, and this has already been monitored, and it was attributed in official records to the decline in sales and the rise in general and administrative expenses of those associations. This is in addition to construction projects carried out without appropriate financial allocation, in addition to the low revenues and fixed financial commitments to government institutions such as the Ministry of Finance, the Ministry of Electricity and Water, governorate support and zakat.

It should be noted that according to the laws and ministerial decisions regulating cooperative work, cooperative societies may not borrow from banks or from each other.

Returning to the main questions which have been raised, it is clear that the laws regulating the management of cooperative societies’ funds need to be amended, as a result of the many financial loopholes that currently exist in the system, which may be exploited by some.

If the door to membership is optional and open to everyone who meets the conditions stipulated in the law and the statutes of associations, there are no special criteria among these conditions that a member of a cooperative such as a member of the board of directors of banks must enjoy, although both are considered a policy and strategy maker aimed at ensuring stability and achieving profitability.

This is what the cooperative societies lack from the governing rules:

1 – Separation of the executive management from the board of directors provided that the general manager’s contract is for the term of the board of directors unless there is a need to terminate his services, unlike the current mechanism in which the general manager is appointed for a one-year period renewed by a decision of the board of directors.

2 – Re-drafting the role of the board of directors.

3 – Injecting cooperative societies with independent members with expertise.

4 – Establishing a central mechanism for pricing and estimating sites designated for investment, renting, etc., so that the mechanism achieves justice and reduces corruption committed during contracting and renewal.

5 – The Ministry of Social Affairs launch a monthly price index that helps consumers compare prices between shopping centers and coops for the most important basic and necessary commodities and products.

6 – Digitizing all operations of cooperative societies, whether they fall within the processes of sales, expenses, consumption and revenues, most notably the free offers and earned discounts.

7 – Restructuring the role of cooperative societies in managing the affairs of the region in the rehabilitation and hygiene aspects, supporting the educational process, etc., and removing keeping the state away from managing some of these services.

8 – Encouraging the privatization of some of the services of the cooperatives, such as leasing the central market, branches, and others to the private sector.

 

SOURCE  :   TIMES KUWAIT

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