Indivisible Reserves: unallocated equity as a way co-ops can help fortify their future

Year: 
2013
Author(s): 
Bruce Reynolds
Affiliated Organization: 
USDA Rural Development
Description: 
One practice in particular deserves more attention in the United States cooperative community: the use of indivisible reserves (IR). The International Co-operative Alliance (ICA) specifies IR as a component of its 3rd cooperative principle: “member economic participation.” This co-op principle addresses several financial policies, including allocation of surpluses or residual earnings. A few alternative uses of surpluses are recommended, such as distribution of member dividends and “….setting up reserves, part of which, at least, would be indivisible” (ICA). Several western European cooperatives have used IR to sustain the economic well-being of both present and future members. This type of unallocated equity is not available for distribution to members, even if a cooperative were to be dissolved. Apart from IR, European worker cooperatives allocate some of their earnings to member capital accounts to be distributed to members for their retirement.
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Resource Format: 
PDF
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