Main Characteristics of the Present Co-operative Structure (1993)

    This document has been made available in electronic format
         by the International Co-operative Alliance ICA 
                         January 1993

               Main characteristics of the present
                    Co-operative structure

1.1  Brief historical background                              

In the mid 19th century the first Schulze Delitzsch-type
credit co-operatives were established in the territory of
today's Poland by small craftsmen and retail traders. 
Raiffeisen-type rural co-operatives followed shortly.  Until 
the outbreak of the First World War an important network of
savings and credit, agricultural supply and marketing, dairy
and consumer co-operatives was established.  It played an
important role in sustaining the Polish nation during more
than 120 years of foreign occupation until 1918, when Poland
was reinstated as an independent country.  In the period
between the two World Wars the co-operative movement
strengthened its economic and social position.  New forms of
co-operatives, such as housing and workers' co-operatives,

The outbreak of the Second World War, and the subsequent
occupation of Poland, destroyed the existing co-operative
structures, with the exception of consumer co-operatives in
the territory of the so-called General Government. These,
despite being under the close control of the occupational
German authorities, played an important part in the national
resistance movement.
 During the first two years after the war, active co-operative
members, with the support of non-Communist political parties,
succeeded in re-establishing a number of the liquidated
co-operatives, and in organizing many new ones which, taking
advantage of the pre-war legal forms and experiences, helped
in the process of economic recovery of the devastated country.
These endeavour came to an end with the seizure of political
power by the Communist Party.

Co-operatives were completely unprepared for this sudden
change of rules.  Having a heavy, bureaucratic organization,
very similar to State enterprises, they proved to be unable to
adjust their organization and business policy to the new
market conditions.

In addition, the Act of Parliament of 20th January 1990
ordered the liquidation of all co-operative unions (see
2.3.1). The old upper level co-operative structure collapsed;
the new one, after nearly two years of chaos, has only
recently started to emerge.

1.2  Models of co-operatives and their significance in
     quantitative terms

Co-operatives in Poland were traditionally classified,
according to their location, as either rural or urban.  With
few exceptions, only savings and credit co-operatives operated
both in the countryside and in urban areas. The strict
organizational division in urban and rural co-operatives was
gradually liberalized in the 1980s, and now any kind of
co-operative may be established in any area. The statistics
relating to the co-operative movement at the end of the
Communist era are presented in Table 1.

Because of the liquidation of all secondary and tertiary
co-operative organizations at the beginning of 1990 (which
will be discussed under 2.3.2 below), the most recent complete
statistical data available date from the end of 1988. Table 1
will serve, therefore, rather as a point of reference for the
analysis of later developments than as an illustration of the
actual dimensions of the movement.  This must be estimated on
the basis of partial and widely dispersed statistical
material, as well as on opinions expressed by leaders of the
new co-operative auditing unions.

1.2.1     Rural co-operatives

Of Poland's 38 million inhabitants, about 46% live in rural
areas and 27% earn their living from work in agriculture. In
the period after the Second World War individual farmers never
owned less than 75% of the total arable land. This land was
owned by between 3.2 (1948) and 2.8 (1990) million private
farms, with an average size of about 5 hectares each. This was
the reason why, unlike other post-Communist countries, there
are many types of co-operatives operating in rural areas of
Poland. The great  majority of them were, and still are,
service-orientated rather than production-orientated.   Peasant self-aid supply and marketing

With the official name of Communal Co-operatives of Peasant
Self-Aid, these were imposed by the Communist Party between
1945 and 1947 to take over the political control of
agricultural supply and marketing co-operatives and rural
consumer co-operatives.  The above two types of co-operatives
were merged to form an immense, monopolistic organization,
linking the private farms with the centrally-planned economy. 
Its main functions were: to supply private farms with
agricultural inputs; to market the agricultural products of
private farms; to process some agricultural products for
mainly local needs; to produce some consumer and production
goods; to supply the rural population with consumer
commodities and services, as well as productive services; to
run catering businesses.The Peasant Self-Aid supply and
marketing co-operatives created an important economic
infrastructure in rural areas, using for this purpose some of
the means accumulated in the process of their economic

They replaced the State in performing several social
functions. In 1988, 1,912 Peasant Self-Aid co-operatives had a
membership of over 3.5 million and employed 468 thousand
persons, of whom about 170 thousand were in retail trade and
catering, 68 thousand in the production of goods and services,
17 thousand in the purchasing of agricultural products and 64
thousand in administration.

To perform their economic functions they possessed 71,500
shops, 5,500 restaurants, cafes etc., 36,000 purchasing
facilities, 2,100 bakeries, 1,090 butchers' shops, 59 mineral
water factories, 226 animal fodder production plants, and
14,300 servicing facilities.

To perform their social functions they ran 340 sports grounds,
2,456 kindergartens, 4,300 rural clubs, and 1,400 libraries. 
Primary co-operatives enjoyed a monopolistic position in rural
retail trade, catering and services (the State sector of
economy was absent and the private sector covered not more
than 2% of the retail turnover). Peasant Self-Aid
co-operatives possessed the monopoly of purchasing the
majority of agricultural products from private farms. Their
share in the total purchase of agricultural products amounted
to 58%. At the end of 1988, an average communal co-operative
of Peasant Self-Aid had 1,941 members, each of whom owned a
one thousand zloty co-operative share. Such a co-operative
employed 256 persons and normally covered the area of one
commune (in Poland at that time there were about 2,500
communes): it ran 39 shops; 22 facilities for the purchase of
agricultural products; eight service shops; three industrial
plants, mainly bakeries, slaughter houses and mineral water
production units; and three cultural units, be it peasants'
clubs, libraries, kindergartens or artistic ensembles.  With
the introduction of economic reform in 1990 the position of
Peasant Self-Aid co-operatives started to diminish

As previously mentioned, there are no statistical data
available from any source, including the Main Statistical
Office, which would cover even the basic information about the
state of any co-operative branch as a whole. The data
presented below are based on a questionnaire sent in April
1992 by the Agricultural Trade Business Chamber of Peasant
Self-Aid Co-operatives (see 2.4) to over 1,600 primary
co-operatives, of which 370 answered.  

The analysis of data received indicates that, at the end of
1991, the average Peasant Self-Aid co-operative had 731
members, which equals 40% of the average membership in 1987
and 75.8% of that in 1990. It employed 118 persons, in
comparison with 256 in 1987: a decrease of 54%.  At the end of
1991 an average co-operative ran 26 retail outlets, three
purchasing facilities, two processing plants, two catering
units and two servicing shops which, compared with 1987, means
a reduction of the number of retail outlets, industrial plants
and catering units by one third, of purchasing facilities by
87%, and of servicing shops by 75%.  

The above statistical estimate hides a great diversity of
developments in individual primary co-operatives. Of six
co-operatives in the branch which I visited at the end of May
1992 only one noted an increase in membership. One of them
reduced its retail trade to virtually zero; others reported
this as their most profitable activity; all of them were
developing processing; all reduced both supply of agricultural
inputs and marketing of agricultural products to 10 - 20% of
their volume in 1987.  

It may be stated with certainty that the monopolistic position
of these co-operatives within the rural market belongs to the
past. They have to fight for survival. It is estimated that at
the end of June 1992 about 2,000 Peasant Self-Aid primary
co-operatives were in operation, which exceeds the number
existing in 1987.  The main reason for this increase was the
division of some co-operatives which covered an area exceeding
the territory of one commune.  About 40 primary Peasant
Self-Aid co-operatives have either been liquidated or have
entered the process of liquidation.  Between two and three
hundred co-operatives are facing bankruptcy.  Their
liquidation is imminent.
The comparison between the end of 1991 and the end of 1990
proves that the erosion of the economic and social position of
the co-operatives in question has not yet stopped. The
decrease in members during this one year period amounted to
24.2%, that of employees to 22%.  

These conclusions can be justified if the basis of the above
analysis (370 co-operatives out of almost 2,000) is reliable
enough to suggest the possible situation of the whole branch.
It is probable that those co-operatives which answered the
questionnaire are in a better economic condition than those
which did not. If so, the general picture may be still worse. 
The reasons for the above-described worsening of the economic
and social position of primary Peasant Self-Aid co-operatives
are: an economic crisis of catastrophic dimensions; the
increasing poverty of the population, especially that in rural
areas; lack of advisory services, as the higher-level
co-operative organizations are wound up; unexpected and
enormous increase in interest rates (in January 1990 44%
monthly); competition from private enterprises, which enjoy
privileged taxation; competition from imported Western
commodities, especially foodstuffs; closing of Eastern markets
resulting from the changes within the former Soviet Union and
in the resultant new countries; and co-operative management
bodies' lack of knowledge about rules governing the free
market economy.  The above also apply to other co-operative
branches.   Dairy co-operatives  

In 1988 there were 383 dairy co-operatives with 1.2 million
members and 113 thousand employees. At 9.8 thousand milk
assembly points, over 95% of all milk produced in Poland for
market purposes by private, State and co-operative farms was
purchased. It was then processed by 712 dairies to produce
homogenized milk, cream, cheese, yoghurt, casein, powdered
milk etc.  

Dairy co-operatives supply the retail trade with their
products, run a few retail shops of their own and deliver
dairy products to recognized foreign trading companies for
export. Beside economic functions, dairy co-operatives have
played an important role in improving the quality of cattle
and of milk by providing producers with consultation services,
carrying out research and organizing training courses and
exhibitions. Such socio-educational activities have been
subject to severe limitation in the last two years as a result
of cost reduction methods.  

It is estimated that the numbers of co-operatives, and
co-operative members, as well as the economic and technical
infrastructure of dairy co-operatives, have not changed very
much over the period in question.  This is due to the fact
that the division of big dairy co-operatives into several
smaller ones does not seem to have good prospects because this
would entail sizeable new investments which would be difficult
to finance and which do not usually promise economic success. 
Generally speaking, from 1990 on, new investments in existing
co-operatives have been postponed, with the exception of a few
dairy co-operatives which set up joint ventures with foreign

Those dairy co-operatives which took investment credits in the
1980s, and did not manage to carry out the investments
planned, got into serious financial difficulties.  Because of
the dramatic reduction in demand for dairy products on the
home market (amounting to 50%), and the high interest rates
which they had to meet, they could not pay adequate prices to
their members. This resulted in vigourous and widespread
protests by farmers. The nomination of the Plenipotentiary of
the Minister of Agriculture for Dairy Co-operatives was one of
the results of these protests. His task was to elaborate a
policy which would save dairy co-operatives from bankruptcy
and the Government from the social and political troubles
which would be unavoidable in case of further reduction in
demand for milk.  The financial situation of the vast majority
of dairy co-operatives is estimated to be bad or very bad. 
They have, however, maintained their monopoly regarding the
purchase of milk produced by individual farms.    

The main problems facing dairy co-operatives are the scarcity
of credit, the decrease in milk production, the shrinking of
the home market for milk products and the tough competition
from Western milk products, which are of better quality and
greater diversity. The latter are also much more attractive,
because of the quality of packaging.   Horticultural and apicultural co-operatives  

There were 140 horticultural and apicultural co-operatives in
1988. They affiliated 372,600 individual owners of farms
producing fruit, vegetables and honey.  Some State and
co-operative farms were members of these co-operatives, too. 
Their main function is to market fruit, vegetables and honey
produced by their members, and to
supply member farms with inputs and special services.  

They also render consulting services, and organize training
courses for members and employees, as well as exhibitions.  In
1988, horticultural co-operatives employed 55,500 persons, and
owned and ran 6,500 shops, over 1,100 fruit and vegetable
collection points and 210 processing plants.  They made a
significant contribution to the improvement of the quality of
fruit, vegetables and honey produced by member farms.  They
had a very strong position on the home market (about 50% of
the total turnover) and their specialized foreign trade
enterprise had a virtual monopoly of the export of fruit,
vegetables and honey.  Unlike the multipurpose co-operatives
of Peasant Self-Aid, horticultural co-operatives did not
establish a national organisation to take over the advisory
and other functions from the Central Union which, like all
other national co-operative unions, went into liquidation by
order of the Law of 20th January, 1990.  There is, therefore,
no global statistical information about their situation in
1992.   My talks with the managers of a few co-operatives of
the type discussed indicate, however, that their economic
situation has become critical. In some cases, where new
processing facilities started before 1990 have not been
completed, co-operatives, if not already declared bankrupt,
are on the verge of bankruptcy. Between half and two thirds of
their shops have been closed and partly taken over by private
shopkeepers. Retail turnover has shrunk to about 33% of its
1989 level. Membership has also decreased, not as critically,
however, as in the case of the Peasant Self-Aid co-operatives.

The main reasons for this decline are: lack of advisory
services, high interest rates, reduction of demand by the home
market, lack of market opportunities abroad and rather a low
level of processing technology.   Agricultural production co-operatives  

This kind of co-operative organization was not known in Poland
until 1949, when they began to be imposed on farmers by the
Communist Party and the State authorities.  The idea of
socialization of private agriculture through agricultural
production co-operatives (APCs) collapsed in 1956. 
Nevertheless, in 1988 there were 2,089 APCs with over 190,000
members, who belonged to over 155,000 families.  They
cultivated 3.6% of the country's arable land.  

In 1990 there was a decrease in land cultivated by APCs to
about 662,000 hectares, i.e. to 3.52% of arable land.  The
number of employees dropped to 155,500, the number of members
to 146,000.  Just over half of these co-operatives act only in
the sphere of agricultural production.  Most of the land they
cultivate was assigned to them by the State; about 90% of
members were formerly agricultural workers with no land of
their own. A negligible part of the land is legally the
property of co-operative members who were, in the past,
compelled to give it up for co-operative use.  The remaining
APCs are specialized co-operatives which started to operate in

They affiliate individual farmers, who remain private owners
of their land and cultivate it individually, only producing a
minority of products collectively.  Since the liberalization
of legal regulations in the mid-1970s, several economic
activities, not necessarily connected with agriculture, have
been performed by both types of APC.  This made it possible to
use most of the work time which could not otherwise be
utilized for productive purposes, thus improving the
co-operatives" profitability.  In the period between the end
of 1989 and the end of 1991 about 200 APCs went into
liquidation.  At the end of June, 1992 165 co-operatives lost
their credit rating.  So far, however, this seems to be
connected less with the poor economic viability of this type
of co-operative (which is suggested by some agricultural
economists) than with the critical situation of Polish
agriculture as such.  

Increasing levels of collaboration between co-operative
members and management, with the aim of sustaining their
co-operatives, was noted.  The main reason seems to be the
fear of losing jobs in case of liquidation. In spite of some
pessimism among APC leadership (40% of existing APCs declared
their economic situation as bad, and 30% think that bankruptcy
is imminent) it seems that agricultural production
co-operatives will not disappear from Polish agriculture in
the foreseeable future.   Agricultural circles' co-operatives  

The concept of Agricultural Circles' co-operatives derived
from the idea of finding another way to socialize agriculture.

The first step in this direction was the use of collectively
-owned agricultural machinery to perform the most arduous
tasks connected with land cultivation.  This started with the
introduction of agricultural machine stations, owned by
agricultural circles (a traditional social organization of
farmers living in one village) and financed from a special
Agricultural Development Fund introduced in 1959.  The main
task of these co-operatives during the 1970s was to take over
cultivation of the land turned over to the State by elderly
farmers, who could no longer cultivate their farms, in
exchange for a State pension.  In 1988 there were 1,908
co-operatives of this type, employing 158,000 persons.  Their
membership, mainly agricultural circles, amounted to 30,757. 
The co-operatives  rendered services such as ploughing,
transportation, construction of buildings and the repair of
agricultural and horticultural machinery to individual farms. 
They had 4,360 mechanization plants, 621 repair shops and
plants producing building materials, some 1,570 workshops and
350 agricultural farms. The agricultural circles'
co-operatives have proved to be the least stable branch of the
co-operative movement. Between 1989 and 1992 about 400 of them
entered into liquidation. In 1990 they cultivated about 54,000
hectares of arable land which, in comparison with 273,000
hectares in 1980, means a decrease of more than 80%. 
Mechanization services rendered to individual farms diminished
by about 50%, mainly because of the abolition of State
subsidies. Employment dropped from about 220,000 in 1980 to
about 100,000 in 1991. According to research carried out in
April 1992, based on a questionnaire sent to these
co-operatives, 55% of them consider their situation as
critical and 40% anticipate imminent liquidation.  As
agricultural circles' co-operatives are co-operatives of
corporate bodies, there is a trend to divide the agricultural
machinery which they own and to transfer it to individual
agricultural circles: the members of the co-operative.  Some
cases of illegal distribution of this machinery among farmers
were noted. It seems likely that this kind of co-operative
will gradually disappear, its functions being taken over by
the agricultural circles themselves, by private enterprise and
by simple forms of co-operation.   Other types of co-operatives  

In addition to the above-described co-operatives there were:  

*    39 construction co-operatives with 859 affiliated
     corporate bodies (co-operatives and agricultural
     circles). They performed construction work, mainly
     investments in the economic infrastructure of affiliated

*    42 co-operative farming enterprises with over 3,200
     members, including 320 corporate bodies. Their aim was to
     cultivate land formerly belonging to co-operatives of
     agricultural circles. Their number decreased by half; 

*    two regional co-operatives to supply raw materials,
     having 58 corporate bodies in membership;

*    the National Union of Regional Co-operatives of Small    

     Livestock Breeders, with a membership of over 9,000.I did
     not succeed in collecting any reliable information about
     the present state of these co-operatives.   Financial co-operatives

Co-operative Banks

Until the mid-eighties co-operatives were banned from
operating on the financial market.  Agricultural banks were an
exception, but even these had very limited independence.  They
transferred 60 - 70% of deposits to a central body, the Bank
of Food Economy (BGZ), with the remaining 30 - 40% available
for loans to members.  Following the law of 20 January 1990,
the BGZ lost its competence as sui generis central
co-operative union, but it continues to exist as a central
bank for rural banks.  There are 1,660 banking co-operatives
with 459 branches and 2,693 cashiers' offices throughout the
country.  Co-operative banks have 2.5 million members, mainly
farmers and small-scale producers of commodities and services,
and employ 32,000 persons.  Co-operative banks collected 18.5%
of the population's total savings in 1988.  They grant short-
and medium-term credit for production and consumer needs.  The
structure of loans granted in 1988 indicates that the main
task of these co-operatives was to promote agricultural
production (67.3% of the total credit granted).  In 1988 only
14.9% of loans were granted to handicraft and small private
trade and industrial enterprises, 15.4% for housing and only
2.2% for consumption needs. In 1990 the rural banks started to
form regional unions.  The first was created by 9 co-operative
banks in the region of Greater Poland, which has a strong
tradition of co-operative financial institutions.  

The Economic Bank of Greater Poland, taking advantage of
financial and institutional help from the French Credit Mutuel
has quickly developed into a viable alternative to the former
apex body, BGZ.  In April, 1991, 130 co-operative banks in 5
regional unions set up the National Co-operative Bank Union
(KZBS) with headquarters in Poznan.  KZBS organizes funding to
support its members' credit facilities, provides training of
personnel and represents the interests of its members in
negotiations with the central authorities.  In 1990, under the
auspices of the Independent Autonomous Trade Union of
Individual Farmers  Solidarnosc  - a joint-stock company, the
Bank Unia Gospodarcza (Economic Union Bank) was created by
about 100 co-operative banks.  In June 1992 117 co-operative
banks were affiliated.  These owned all its shares.  The
majority of existing primary co-operative banks did not cut
their economic connections with their former central union. 
On the other hand the idea of establishing a national union of
bank co-operatives is promoted by the World Bank mission and
seems to be in the final stage of discussion.  Because of
controversial interests and ambitions of the institutions
involved, it is difficult to predict the final result of these
discussions.  After the liquidation of the central
co-operative unions two banks were formed out of their assets:
 Spolem  for consumer societies (in December 1990) and
 Samopomoc Chlopska  for agricultural co-operatives.  

The inspiration and help of the French Caisse Centrale de
Credit Cooperatif assisted the creation of the Bank of
Socio-Economic Initiatives (BISE).  The Bank registered in
March 1990 and became operational in July of the same year. 
After two years of operation it is recognized as being one of
the most dynamic and successful financial institutions in
Poland.  Since its creation, the BISE has granted 462 loans,
with a total value of 95,059 million zlotys.  Almost all of
these were granted for investment purposes and more than 2,000
new jobs were created.The BISE works closely with two sister
institutions: the Foundation for Socio-Economic Initiatives
(FISE) and the Society for Socio-Economic Investment
(TISE).The FISE's objective is to provide financial advice to
small- and medium-sized enterprises and to assist societies in
obtaining credit.  The TISE supports the development of small
and medium enterprises by contributing to their initial
capital.  The TISE invests its funds into carefully chosen
enterprises, the main criterium being economic viability and
relevance to the local economy. The BISE offers a large choice
of services to foreign investors: legal advice, consultation,
representation etc.  Credit unions  Credit unions were
reintroduced to Poland in 1989, through the initiative of the
trade union NSZZ  Solidarnosc  leaders.  The Foundation for
Polish Credit Unions was established in August 1990, with
technical help from World Council of Credit Unions.  The
Foundation works by transforming the loan and savings
associations present in every enterprise into credit unions. 
Ten societies have been registered during 1991/1992 and the
first credit union started operation on 30 July 1992.  The new
movement represents 23,000 members and savings amount to US$
3,500,000.  The Foundation is also becoming active in the
insurance sector.   

Co-operative insurance societies  

Under communist rule, the insurance sector was the monopoly of
the State.  In 1987, the Government authorised the formation
of co-operative insurance societies and later joint-stock
companies.  Foreign companies can form joint ventures with
Polish societies but are not yet allowed to operate directly
on the domestic market.  However, the sector is in full
expansion, with new companies appearing daily.  The minimum
capital requirement for starting an insurance company is US$ 2
million.  Szczecin has seen the birth of Filar AG, joint-stock
insurance company of housing co-operatives.  The share capital
is PLZ 6.6 billion, and operation is scheduled to start by the
end of 1992.  The company will be catering for the insurance
needs of housing societies and their members.  Benefit Sa,
Gdynia, is a joint venture life insurance company founded in
1992 by the Foundation of Polish Credit Unions, CUNA Mutual
Insurance Society (USA) and CUMIS Insurance Society (Canada). 
The share capital is US$ 1 million, of which the Foundation
has a 10% initial holding, with an option to use its yearly
surpluses to buy the remainder in stages.  The company will
offer loan protection and life savings insurance to the
members of credit unions.  

EURESA, a consortium formed by Macif of France, Unipol of
Italy, PS of Belgium, Folksam of Sweden is at the source of
one of the most promising insurance projects.  Towarzystwo
Ubezpieczen Wzajemnych (TUW) is a mutual insurance company
registered in 1991, which became operational in March 1992. 
Its share capital is PLZ 5.7 billion, half owned by EURESA and
half by institutional members from Poland.  TUW offers the
same range of products as the State company PZU.  Besides the
bank Samopomoc Chlopska an insurance society was created on
the basis of former Central Union of Agricultural
Co-operatives in 1991. The society has a premium income of
PLZ 120 billion. The company offers general insurance to
agricultural co-operatives, providing about 90% of
agricultural societies with theft, fire, transport and vehicle
insurance services.  

1.2.2     Urban co-operatives  

Co-operatives in urban areas may be divided into service and
producers' co-operatives.  Consumer co-operatives belong to
the first category and have the longest history, of about one
hundred years.  Housing and handicraft supply and marketing
co-operatives are also service co-operatives.  Until the end
of 1989 producers' co-operatives, also called industrial or
workers' production co-operatives were regarded as the most
important part of the small-scale industrial and service
sector of the national economy.