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Wednesday , December 7 2022

Yearly sales of co-ops touch billions of dinars … profits more than banks

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‘Cash flow rates differ from one cooperative society to another’

KUWAIT CITY, Dec 7: In terms of accounting, it can be said the sale of 68 cooperative societies and 270 branches in just 9 months was equivalent to 1.6 times profit made by the banks and 1.2 times the profits of 158 listed companies, reports Al-Rai daily. These cooperative societies are known to sell goods worth billions of dinars annually at a time when a majority of companies around the world suffered great losses due to the repercussions of the coronavirus, 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 annual sales of cooperative societies approach one billion dinars, and their cash flow at some times reaches about 400 million dinars, 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? 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 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.

The third item, 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.

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