Cooperatives Allowed to Collect Compensation up to Only 5% of Outstanding Interest from Debtors

The government has proposed a bill in parliament to amend the Cooperative Act, which includes a provision that limits the amount of compensation charged to debtor members to no more than 5 percent of the outstanding interest. Accordingly, the dividend distribution limit for cooperative organizations has been reduced from 18 percent to 15 percent. Additionally, the bill prohibits cooperative unions from engaging in savings and loan transactions.

Cooperative institutions engaged in savings and loan activities are allowed to collect compensation from debtor members up to a maximum of 5 percent of the outstanding interest. The government has pushed a bill in the Federal Parliament’s House of Representatives to amend the Cooperative Act 2074, setting the compensation limit at 5 percent.

Under the bill, cooperative unions will be completely banned from conducting savings and loan operations and must cease such activities within three years. Furthermore, cooperative institutions are not permitted to distribute dividends exceeding 15 percent. The National Cooperative Regulatory Authority is also empowered to freeze the assets of directors and managers before declaring any cooperative institution as problematic.

The bill broadens the definition of family to include relatives such as paternal and maternal uncles and aunts, nephews, nieces, grandchildren, sons-in-law, nephews by marriage, brothers-in-law, sisters-in-law, and other relatives. Additionally, it explicitly includes employees working within cooperative institutions.