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established in Germany, Italy, France and Japan. To save the farmers from exploitation
of the money lenders, in 1850 AD, Suji established the first cooperative organization in
Germany and Refisen established loan cooperative into the rural areas of Germany to
provide loan to the farmers at lower rate of interest. A Cooperative Bank was established
in 1866 with the active participation of Lujati and a Rural Development Bank was
established in 1883 AD with the active participation of Olemberg in Italy. As a result, in
1895, International Cooperative Alliance was established in England.
According to Prof. Heney Calvert, “Cooperative is form of organization wherein persons
voluntarily associate together as human being on the basis of equality for the promotion of economic
interests of themselves.”
According to Talmaki, “A cooperative is an association of the weak who gather together for a
common economic need and try to lift themselves from weakness into strength through business
organizations.”
Cooperative organizations are involved in financial activities. These organizations are
called financial cooperatives. They collect savings of their members and provide loan
at lower rate of interest. As Nepal is developing country and most of the parts do not
have access to bank, so financial cooperative is very popular in Nepal. Many such
financial cooperatives have been established in Nepal and National Cooperative Bank is
established in the centre.

Key Point Financial co-operatives are the financial institutions established for the economic
and social development of general people having low financial conditions.

Functions of Financial Cooperatives
i. It collects deposit from members daily, weekly, monthly basis or any time and
provides certain interest on such deposits.
ii. It provides loan to the members for income generating activities to uplift their
economic condition at lower rate of interest and reasonable terms.
iii, It develops good relation among the members.
iv. It performs banking activities with the permission of Central Bank.
v. It encourages saving habits of the members.
vi. It provides cooperative education to the members.
vii. It performs various social reform activities.
viii. It encourages the local people to become members of the society.
ix. It promotes small scale industry, cottage industry and agriculture sector for rural
areas with financial and technical assistance for its members.

Glossary

Securities : shares, debentures, bonds, etc.
Underlying : act of selling securities of a corporate body
Risk : threat/danger
Credit control : controlling over and underflow of currency
Credit creation : providing loan by the banks to their customers
Bearer : holder/carrier
Marine : sea/ocean

96 Aakar’s Office Practice and Accountancy - 10 Financial Institutions 97