February 14: The Department of Co-operatives has tightened the investment of cooperatives in private sectors.

Issuing a unified directive on Sunday, the department has made it mandatory for the cooperatives to have provision in their organisation’s statute and regulation if they want to invest in private sector organisations such as hydropower projects, hospitals, schools, campuses, hotels, petrol pumps etc.

Even though the organision’s statute has such provision, it is necessary that the investment in such sectors should be under full ownership of the cooperative and only five percent external loan can be taken while the savings of the members of cooperatives cannot be invested.

Also, the general assembly of the cooperative must endorse the decision to invest in private companies.

The department has tightened the investment after the operators of cooperatives started mobilizing the funds arbitrarily by setting up their own companies. Cooperatives have been investing in housing, schools and even colleges. Similarly, the department has directed the cooperatives to invest 51 percent of their total investment in productive sector such as agriculture and forestry, water resources, education, health, labor and skill development programmes.

The department issued the unified directive for the first time on Sunday after issuing the Cooperatives Act 2074.

The directive has also instructed that the cooperatives will not be allowed to distribute dividends without allocating certain amount for the risk management and a minimum of 10 percent for liquidity management.

There is also a provision that only 49 percent of the board members of the cooperatives can take loan and the monthly details of the loan investment have to be submitted to the department. Similarly, the members will not be allowed to charge more than 0.50 percent while renewing loan. Cooperatives have been charging the same fees as new loan investments when renewing loans.

According to the directive, the cooperatives are not allowed to buy and sell shares of private companies as well as invest in real estate. In addition, they are also not allowed to advertise different offers for collecting savings through social media.

Moreover, the cooperatives are not allowed to get involved in inter-cooperative transaction. In addition, cooperatives are allowed to collect savings only from non-profit organisations, local guthi clubs, community schools and government agencies.

Similarly, it is mentioned in the directive that the cooperatives are not allowed to invest by keeping gold, silver and shares as collateral and cannot invest the loan even with the pledge of a third party.