Current Developments

     This document has been made available in electronic 
    format by the International Co-operative Alliance ICA 
                         November 1995

                    ICA Studies and Reports
           Co-operatives in Eastern & Central Europe

               by Professor Dinonysos Mavrogiannis

3     Current Developments

Following clarification of the co-operative identity and
definition of the nature and role of the co-operative sector
by Government policy and legislation, the task of
restructuring the old co-operatives could be entered into
whilst new co-operatives emerged in various areas of economic
and social activity.

3.1   Intensification of co-operative restructuring

It was left to the co-operatives themselves to carry out the
in-depth restructuring and transformation proposed by the
legislation. The changes may be divided into two main
categories: co-operative property and organisational and
developmental issues.

3.1.1       Co-operative property

Questions related to co-operative property during the period
of transition to the market economy, became crucial as far as
the process was concerned, and were delicate from a political
point of view. The whole problem had two facets. One was
concerned with the distribution of accumulated co-operative
property. The other was connected to the privatisation
strategy, dismantling of State enterprises and restitution of
confiscated properties. Among the latter, a considerable
number of properties and small and medium sized industries
were taken away from the co-operatives when the State decided
to nationalize the means of production. The co-operatives most
affected by this were consumer societies and workers'
production co-operatives.

As already mentioned, in compliance with additional clauses 2
and 3 of the Law on Co-operatives, consumer co-operative
societies undertook thorough internal discussions and
agreements adopted by decisions of their General Assemblies at
all levels, from the apex CCU to the primary societies, to
redistribute all of the property held by the CCU and the

The volume of property distributed since 1991 was calculated
by estimation of the share capital, transactions and profits
realised in the past. The value of the redistributed property
was approximately 25 million US dollars. The Unions and
primary societies received their share of the co-operative
property in the form of shares, which will enable them to
increase their activities and also to take a higher percentage
of the Unions' annual profits.

On the other hand, since 1991 the consumers societies have
begun to regain their properties, industries and agricultural
land. According to additional clause 1 of the Law on
Co-operatives, "the rights of existing and restored
co-operatives over any property confiscated or nationalised
after 10 September 1944, are reinstated". The procedure for
such reinstatement was established by the Council of
Ministers. Co-operative property should be returned within six
months of the date on which the Co-operative Law was adopted.
An extension to 18 months was awarded to co-operatives by
Article 1 of Ordinance 192 of 1991, which laid down the rules
for implementation. The procedure to be followed, and
particularly evidence of previous co-operative ownership, were
difficult and time-consuming. However, the co-operatives did
not have to pay any stamp duty or expenses in respect of their

Article 29 of the 1991 Law on Land Reform states that "any
title to any agricultural land seized from ... co-operatives
or any other such organisations shall be restored at the
request of the said ... co-operatives", unless the confiscated
land was used for other non-agricultural purposes or allocated
to landless citizens. In such a case, co-operatives can agree
to receive other land from the State or municipality in the
same, or another, part of the country, or financial
compensation. In addition, by the end of 1993 a significant
number of medium sized industries and factories had been
returned to the consumer co-operatives. These consist of 36
dairies, 24 wine production plants, 24 canneries and a tobacco
business representing 50% of the country's former State
tobacco monopoly. The value of this property is estimated to
be 12 billion levas (400 million US dollars at late 1993
exchange rates). As the restitution procedure is not yet
complete, additional property is expected to be received as a
result of the deadline's extension.

Workers' production co-operatives also reclaimed property
previously confiscated by the State and other bodies. Of 350
enterprises and workshops reclaimed they had received 170 by
late 1993. Proof of ownership is particularly difficult. All
co-operatives complain that the State and State officials are
reluctant to return confiscated co-operative property.

The redistribution of workers' production co-operatives'
accumulated property is more radical, and more beneficial to
the physical members. According to the 'personalization' plan,
the co-operative property, which had until then been
considered the collective and indivisible property of the
system, is to be distributed as follows: 60% of it is
distributed among members of the primary organisations
according to criteria relating to shares held and labour
invested in the co-operative concerned. The remaining 40%
remains the indivisible property of the co-operative.
'Personalized' property remains in the co-operative in the
form of shares which give holders the right to dividends on
the realised annual profits. The plan is still in its initial
stages of implementation: only 30 of the 287 old primary
co-operatives have achieved it. In this respect, it should be
understood that the technical problems which each co-operative
must settle regarding the valuation of the property and of
each member's labour are very difficult. Furthermore, settling
them harmoniously and democratically by decision of the
General Assemblies is a time-consuming process.

In conclusion, it could be said that the restructuring and
privatisation process has had a considerable economic and
moral impact on co-operatives and co-operators. With the
exception of the redistribution of consumer co-operatives'
property, its implementation is not yet completed.
Nevertheless, the redistribution of property, even in its
initial stage, is already rendering social justice to the
primary co-operatives and their members, who had felt
repressed by the higher-level organisations and the State
during the Socialist regime. It can rightly be said that the
accumulated co-operative property now being redistributed was
the product of their labour, which had been withheld from them
for several decades. Furthermore, in the case of workers'
co-operatives,  tools and equipment belonging to the members
were progressively confiscated by the Socialist co-operative

From an economic point of view, the redistributed property
will enhance the working and trading capacity of primary
co-operatives by allowing workers and consumers to better
participate in the distribution of the profits.  With regard
to the properties and enterprises returned to co-operatives
since 1991: these are valuable assets, but in many cases they
are a poisonous gift. Most of the equipment, premises and
factories are old and un-productive, they need substantial
capital for their renewal and reconstruction, and
responsibility for the employees of the reinstated factories
and enterprises is also transferred. A solu-tion must
therefore be found to the labour problems of the restituted
enterprises. This solution is unavoidably found at the expense
of the receiving co-operatives.

3.1.2        Membership relations

In the present co-operative movement membership relations are
observed both as regards duties and obligations. The
co-operative principles are followed and have been included in
the 1991 Co-operative Law.

Voluntary association and open membership
This principle is laid down in Article 1 of the Law. The
membership of a co-operator approved by the Managing Council
has to be confirmed by the General Assembly. Any individual
may be a member of  several co-operatives.

Democratic management and control
The co-operative is managed and controlled by its members
through legally and democratically elected bodies of
management (the General Assembly, the Managing Council and the
President) and of supervision (the Supervisory Board). All
decisions are made in accordance with the co-operative
principle "one member - one vote".

Property rights
Members are all co-proprietors.

Non-profit character
Co-operatives' main aim is the provision of economic, social
and cultural services to their members. The profit from
co-operative activities is given back in the form of a limited
return on capital, i.e. a dividend (on share capital and on

Political, racial and religious neutrality
Any person, regardless of his or her political, racial or
religious affiliation may belong to a co-operative. All
co-operators enjoy equal rights and duties.

A Co-operative Department has been established at the
University of National and International Economy. There are
also two big training centres attached to the CCU, and 14
training centres attached to the regional co-operative unions.

Co-operation between co-operatives
This principle is fully applied. As already mentioned, the
CCU, the 37 regional co-operative unions and the
inter-co-operative enterprises provide legal, advisory,
organisational, financial and economic services to their
associated co-operatives.

Democratic control
Democratic control takes several forms. Firstly, in the
co-operatives themselves there are two types of control: 
management, which is responsible for the implementation of
their resolutions and Supervisory Councils. The Supervisory
Council has total control over the activities of a
co-operative and its Managing Council.

The second part of the system of control is through
inspections, assistance in organisational, legal, financial
and methodological matters, and inter-departmental control. On
their part, the Supervisory Councils of the CCU and the
co-operative unions provide methodological assistance to the
Supervisory Boards of the co-operatives.

The Law on Co-operatives provides all co-operative
establishments (co-operatives, co-operative unions and
inter-co-operative enterprises) with a common legal safeguard
over all the resolutions and actions of their managerial and
supervisory bodies.

Members' property rights
The property of the co-operative belongs to its members.
However, this property can be distributed among the members
only on the termination of a co-operative's activities and its
declaration of "insolvency". Each co-operative member has the
right to receive part of its assets, in proportion to his
share capital. However, if a co-operative member leaves the
co-operative he/she will receive only the sum of his or her
share contribution and the appropriate dividend (annual
profit). The heirs of a deceased co-operative member have a
similar entitlement.

In those cases where a co-operative member has contributed
land to the co-operative he/she will retain rights over that
land, and is entitled to receive rent (which may take the form
of payment in kind) for its use. The share contributions of
co-operative members are not subject to distrain and forced

Members' financial contribution
Co-operative members make the following contributions to the

-      a joining fee (not refundable), the amount of which is
determined by the By-laws;

-      a share contribution, as determined by the By-laws.
This is given  back to the co-operative member (or to the
heirs of a deceased co-operative member), together with his or
her share of the dividend, upon leaving the co-operative or in
case of its liquidation;

-      additional contributions (earmarked for a particular
purpose) by resolution of the General Assembly. These are to
be returned after a term set by the General Assembly, and are
not reflected in the share contribution of the co-operative;

-      money in the form of a loan, as determined by the
General Assembly, which also decides upon the terms of its
repayment and the interest rate payable. Such money is not
reflected in the share contribution of the co-operative.

Division of power in making resolutions
The General Assembly, Managing Council, President and
Supervisory Council have separate and different powers. They
are reflected in the Co-operative Law and each co-operative,
in accordance with its specific activity, records these in its

The General Assembly usually has the widest and greatest
powers as regards all the matters concerning the co-operative,
including the cancellation of any resolutions and actions
which are in opposition to the Law or By-laws. It is the
exclusive power of the General Assembly to make resolutions on
the following issues: election of the President, Managing
Council and Supervisory Council; elaborating, changing and
supplementing the By-laws; remission, deferment and extended
payment of money due to the co-operative; disposal of the
co-operative's real estate; dismissal of members; financial
reorganisation of the co-operative; reconstruction and
liquidation of the co-operative, or the declaration of its

The Managing Council carries out the resolutions of the
General Assembly and directs the activities of the
co-operative, for which it is responsible to the General

The President of the co-operative is also the President of the
Managing Council. He represents the co-operative, supervises
the performance of the General Assembly and Managing Council's
resolutions and manages the everyday activities of the

The Supervisory Council inspects the activities of the
co-operative and is accountable to the General Assembly. It is
empowered to convene the General Assembly when it finds
significant infringements of the Co-operative Law or By-laws.
-     the responsibility of the directors, presidents and
elected officials is determined by Bulgarian legislation. When
such officials have been elected they are fully responsible
under the Law on Co-operatives, i.e. for any infringement of
their obligations as members.

Members have the following advantages not available to
employees or users who are not members of the co-operatives:

-    a dividend on share contribution;
-    a consumer dividend (paid on purchases from co-operative 
     retail outlets);
-    dividends for economic participation (provision or 
     processing of produce, participation in other areas of
     the co-operative's economic life);
-    the opportunity to purchase some goods at reduced prices;
-    co-operative education and training as well as some 
     social, health and other services are reserved only to
     members and employees.

3.1.3     Organisational changes and developmental trends

Since the adoption of the Co-operative Law of 1991, both
consumer societies and workers' co-operatives have embarked
upon the reshaping of their respective structures, and planned
to develop the volume and types of their activities.    Consumer co-operatives

Consumer co-operatives adopted new bylaws, adapted to the new
co-operative policy, values, principles and practices laid
down by the law of 1991. The election of new managing boards
and supervisory councils also took place at all levels,
without any interference from the State. The number of
administrative personnel working at the CCU was then radically
reduced with a view to decreasing costs. Its 538 employees
were reduced to 277 in 1989, then cut to their present level
of 121. Redundant staff are entitled to receive redundancy
payments as prescribed by the Labour Code of 1992, and also to
retain membership of the consumer societies.

In contrast, an effort is under way to restructure the
regional unions and upgrade their role and activities as
intermediate organisations by maintaining links with the apex
organisation and primary co-operatives. Currently there are 36
regional unions engaged in mixed activities, and one union
which specialises in the production of soft drinks. The
General Assemblies of the unions are composed of delegates
proposed by, and representing, the member societies. 

The adoption of new bylaws was an occasion for consumer
organisations to increase the value of the share from 100 to
1,000 levas. Members who refused to subscribe to the new
shares, left the co-operatives, or were dismissed by the
General Assemblies. As a consequence, the amount of share
capital was increased whilst the number of members decreased,
both considerably. The number of primary co-operatives was
also subject to fluctuations. Division of the old and large
primary societies, as well as the emergence of new ones, has
increased their number.

Table 8 indicates the organisational situation of the consumer
societies at three levels. On the top, a strong apex
organisation to which are affiliated the co-operative
organisations and co-operative enterprises. The CCU also
undertakes its own economic and social activities. In the
middle are regional unions, which have their own production
networks, trading points and educational/training schemes. At
the bottom of the structure there are around 1,000 primary
societies, 22 of which specialise in the production of
carbonated soft drinks. Primary co-operatives also own their
production enterprises. Membership is currently reduced to
some 859,000 individuals, 30% of whom are women. Some 120,000
persons are employed by the consumer societies. Most of them
are also members and are, therefore, entitled to receive both
wages for their labour and dividends on their share capital.

Table  8:  Vertical Structure of Consumer Societies

Central  Co-operative  Union (CCU)
Apex Organisation

Regional  Co-operative Unions  (37)

Primary Societies (about 1,000)

(859,000 physical persons 30% of whom are women)

Employees and Workers (120,000)

Consumer societies undertake most of the economic activities
and retail trade. The corresponding turnover is significant
according to the various areas of activity as shown in Table

Table 9:  Co-operative participation in national production
and sales for the years 1990 and 1991

Categories               1990  (%)         1991  (%)

- retail shops            27.00               26.60

- catering                34.48               31.48

- confection                _                 57.00

- sugar products            _                 10.00

- bakery                    _                 52.00

- soft drinks               _                 95.00

Inflation and lack of credit have worsened the current
conditions for production and trade within consumer societies.
This is why the consumer system introduced saving and credit
services (more than 500 such schemes now operate at the level
of the consumer organisations). Deposits received by these
societies (300 million levas of deposits from 100,000
depositors) led the consumer co-operative system to decide to
promote a separate Co-operative Bank in 1991.

Table 10 explains the fluctuations of turnover within
co-operative retail trade between 1970 and September 1993, as
compared with the national retail trade.

Table 10: Turnover of consumer societies' retail trade (% of
          national turnover)

Years          % of retail turnover     increase/decrease over
                                             previous year

1970                 35.7                      --
1982                 30.4                    - 5.3
1987                 28.4                    - 2.0
1989                 27.8                    - 0.6
1990                 28.2                    + 0.4
1991                 26.6                    - 1.6
1992                 22.3                    - 4.3
1993                 20.0                    - 2.3

Source : Central Co-operative Union   Workers' production co-operatives

.c.These have also undertaken structural changes, adjustments
and improvements since 1990. New bylaws were adopted by
General Assemblies at all levels. New elected bodies (managing
boards and supervisory councils) took responsibility for the
destiny of workers' organisations with the objective of
achieving independence from the State and municipal councils,
and further restructuring them so as to be ready for the
conditions of the market economy.

Table 11 reproduces the organisational chart of the apex
organisation (the Central Union of Workers' Production
Co-operatives) set-up following the last Congress.

Some 612 delegates, representing both regional unions and
primary organisations, constitute the General Assembly of the
Central Union. They elect the  Board of Directors (31 members)
plus the Supervisory Council (11 members). There is a small
technical and administrative staff of 29.

Table 11: Organisational Chart of Workers' Productive
Co-operatives (The Central Union)

                         Central Union

               General Assembly  (612 delegates)
            (Representing Regional Unions (10) and 
                Primary Co-operatives (306)) 

Board of Directors (31)                 Supervisory Council

                         President      President of the
                       of the Union     Supervisory Council 

          Vice-President                Vice-President

Accountancy (3)      Legal advice (3)       Marketing (7)

Personnel (2)        Organisation           Financial 
                     Bylaws (1)             Control (8)

International        Administration (3)
Collaboration (2)

Total:    42 elected persons
          29  employees

At the local level, there are 306 co-operatives, half of which
were created after 1989. The membership of each primary
co-operative ranges from seven to 1,500 physical persons.
Members specialise in one type of work, and many of them are
involved in large production operations.

For the time being, ten reshaped regional unions function in
the middle of the vertical structure. These support primary

The Central Union plays a leading role not only in the process
of restructuring, but also, and primarily, in the various
fields of economic and social activity. In this respect it
attempts to attract foreign investments for joint ventures
with partners from neighbouring counties (mostly from Greece,
Germany and the Russian Federation at present). Low labour
costs favour the production and export of clothing.

The most crucial problem currently facing  workers'
co-operatives are: low productivity due mainly to the
insufficient qualification of  member-workers; lack of
external markets lost during recent dismantling of the
centrally-planned economies of the countries in the region;
the burden, in some cases, of the size of the administrative
staff; and the most important in the  long run, bad employment
conditions and wages. Some of the administrative staff are
relocated in other areas of work, and others leave. Only a few
have to be made redundant, and these receive redundancy pay as
prescribed by the Labour Code of 1992. For the time being, the
restructuring of labour has not affected the members-workers.
They have, however, begun to be subject to a reduction in
wages and profits, due partially to the lack of favourable
working conditions. The wages of many members are decided
according to the country's minimum salary level, and others
have to be laid off. In case of lay-off, no wages are paid to
the members concerned, but they continue to receive the social
benefits recognised by the Labour Code. Adverse conditions of
employment and rising prices force workers' co-operatives to
resist any reduction of labour, acting, for the time being, in
favour of group solidarity rather than improved productivity.

Members' wages are fixed according to the quality and quantity
of work performed by individuals or teams, following
consultations between the boards of directors and the working

The workers' co-operative system has another important
objective related to the social services for its members. In
the past, a large number of health, cultural, sporting and
educational properties and establishments financed by both
State and co-operatives, provided basic services to
co-operators. These have now been reclaimed by workers'
co-operatives. One such establishment (the Co-operative 

Polyclinic in the city of Pleven) was visited by the author of
this Report in late September 1993.

Producers' co-operatives of handicapped persons affiliate
themselves to local units, which are in turn affiliated to
their own Central Union. These co-operatives were separated
from the Workers' production co-operatives in 1991. They
continue to operate according to their rules and capacity.
Their activities aim to supplement their members' incomes, so
as to ensure for them a decent standard of living.

3.2      Emergence of new co-operative institutions

Three main factors explain the emergence of new co-operatives
and co-operative institutions: the impact of the privatisation
of land, the enormous need of the population and the desire of
established co-operatives to prepare the market conditions for
the co-operative sector.

3.2.1 Agricultural co-operatives of primary farmers

An important section of the population, estimated at 900,000,
is entitled to claim for private land ownership and start
farming and cattle breeding. This is a result of the
dismantling of collective farms and agro-industrial complexes.
Private farming would have been almost impossible without the
organisation of group action and common services for
production, processing and marketing activities.

Co-operatives have also been seen as a possible solution to
the problem of privatised farming. Article 8 of the 1991 Law
on Land Reform enshrined the right of individual farmers to
unite within co-operatives for the joint cultivation of land.
Conditions regarding the constitution and functioning of such
co-operatives are established in the Co-operative Law of 1991.

The creation of new agricultural co-operatives began in 1989.
The first 15 participated in the Congress of  Collective Farms
organised in Plovdiv in 1990. However, the situation had
changed by the Congress of 1991. 650 new co-operatives decided
upon the establishment of the National Union of Agricultural
Co-operatives, based on private land ownership. An
extraordinary General Assembly of the Union held in Sofia in
June 1993 was only attended by 450 new primary co-operatives
affiliated to the Union (i.e. no collective farms). The
reduction in their number is explained by the fact that one
third of the new co-operatives created since 1989 were
disbanded or liquidated as a result of the restructuring
imposed by transitional clauses 7 to 9 of the Co-operative
Law. The object of such restructuring was the new registration
of recent co-operatives and the arrangement, by decision of
their General Assemblies, of all matters related to members',
employees' and non-members' rights to receive shares, rent and
dividends for land used by the co-operatives.

Between the apex organisation and the primary co-operatives
are four local and 18 regional unions at the district level.
It is planned that such regional unions should be established
in all 28 districts of the country. Model bylaws have been
adopted by organisations at all levels.

On an experimental basis, the EU PHARE project and the USA
organisation, Volunteers in Overseas Co-operative Assistance
(VOCA), are providing support for setting up the organisation
of the young movement and consolidation of the co-operatives
as self-managed organisations of individual land owners.
Details of the objectives of, and problems currently
experienced by, these emerging co-operatives are to be found
in the Basic Guidelines adopted by the National Union in June
1993, and in the Reports of Bulgarian specialists to a recent
Seminar of the FAO.

The Union's first concern is related to the splitting-up of
the collectivised land into many tiny individual plots: it
hopes to create various types of agricultural co-operatives
aiming to represent the interests of their members. Such
co-operatives should respect both the basic co-operative
principles and the existing co-operative and general
legislation as well. Co-operatives are, therefore, a key
alternative for agricultural development. The Union claims all
means of production (land, plant, other material resources)
collectivised or confiscated in the past for return to the
members of the new co-operatives without excessive
formalities. The management and administration of
co-operatives' internal affairs should be the exclusive
responsibility of their General Assemblies and other elected
bodies. This implies separation from the State and State
bodies. However, it was felt that during the transition to the
market economy, the State should assume functions beneficial
to co-operative development, such as minimum prices for the
purchase of agricultural produce; the granting of loans at
preferential rates of interest for production and investment
purposes; taxes not exceeding 20% of their income, but varying
between zero and 40% according to each household's revenue.
Those earning less than the "social minimum" should be exempt
from taxation, and loans granted to new farming organisations
should be interest-free for an initial period of five years;
extension services, plant protection and modernisation of the
existing infrastructure; a special insurance fund against
natural disasters; assistance with export and protection
against imported agricultural products. Proposed guidelines
insist on co-operatives' engaging in further collaboration
with the State, the Ministry of Agriculture and the regional
and local authorities during the initial organisational

During his visit to the region of Pleven, in October 1993,
representatives of primary agricultural co-operatives
expressed similar views and concerns to the author. New
co-operatives should function separately from the State, but
should still be assisted by the latter. Co-operatives should
accept as members all those involved in farming and in
production, processing and merchandising activities.

On the other hand, co-operatives should be allowed to
participate in the privatisation of agricultural and food
enterprises. A number of the businesses, therefore, should be
handed over to the agricultural co-operatives (which produce
their raw materials) under favourable conditions, e.g.
long-term, low-rate bank loans. In other words, the conditions
should be equal to those arranged for industrial workers
wishing to bid in the auction of State enterprises (Article 31
of the 1992 Law on the Transformation and Privatisation of
State and municipally-owned enterprises). If this was accepted
by the Government, the co-operatives' members could undertake
to provide those enterprises with the necessary raw
agricultural materials. In this connection, co-operatives
should also proceed with the creation of their own industrial

The Union Guidelines emphasise the importance of collaboration
with scientific and educational institutions in order to
support productivity and to enhance the managerial skills and
professional qualifications of managers and technicians.

It is planned that links with international organisations such
as the ICA will be established, as well as working relations
and the exchange of information and experiences with other
co-operative organisations, at home and abroad.

Reports from Bulgarian specialists on rural development
highlighted most of the current problems experienced in the
process of land reform and the perspectives of the agriculture
to be organised in new privatised forms, including

According to the information collected during the on the spot
investigation of late 1993, in June 1993 1,205 new
agricultural co-operatives were formed with a membership of
329,000 and 750,000 hectares of cultivated land. Applications
from another 695 with 95,000 members and 290,000 hectares of
land are awaiting registration. These co-operatives, of which
450 are affiliated to the Union, cultivate 20.45% of the
nation's land, while another 1.53% of the country's arable
land is cultivated by 10,489 individual farmers. The land
cultivated by new co-operatives and individual farmers is
equal to the amount of land returned to the previous owners by
June 1993 (less than 25% of the collectivised land).

On the other hand, the reported data about significant
increases of productivity within the privatised farming sector
by the end of 1992, in comparison with the national output in
this field, are conclusive. This constitutes an early proof of
the capacity of the privatised farming system, both
co-operative and individual, to maximise the productivity of
the agricultural sector despite the lack of inputs and
weakness of the existing technical infrastructure.

Agricultural co-operatives in the process of creation and
organisation are a promising wide economic and social
experiment. Their success depends on farmer-co-operators
adhering to a genuine co-operative constitution, and
functioning according to the well-established co-operative
principles and democratic practices. Any reproduction of the
collective system of farming crushed by a heavy administration
and members who are not personally and directly involved in
the land's cultivation should be avoided. Beyond this, support
from the State and assistance from the national and
international co-operative movements will determine the
successful implementation of the current co-operative

3.2.2   The Central Co-operative Bank

Resumption of the country's long tradition in the field of
rural credit co-operatives and urban popular banks, as well as
the current financial and monetary situation of Bulgaria, have
precipitated the establishment of an independent co-operative
banking institution.

The Central Co-operative Bank was created and registered at
the Sofia Court in April 1991 as a shareholding limited
company foreseen by the banking legislation in force since
1991 (Law on Banking and Credit). This law applies only to
Banks owned by companies or co-operatives. Its original
founders were various individuals and consumer societies. The
social capital in 1991 was 220 million levas. In 1992 the Bank
was transformed into a joint-stock company, and increased its
capital to 500 million levas. Some (20%) shares, at a value of
1,000 levas each, were issued as 'bearer shares' and sold
directly to the public over the Bank's counters or on the
stock exchange. The remaining 80% of shares were issued in the
name of the member-co-operative societies. The second category
of shares gives members the right to vote (one share-one
vote), while the first does not. For the time being, members
take up around 12% of the loans granted annually by the Bank,
the other 88% going to various firms, organisations and

At the end of 1993, 17 Branch Offices were in existence in the
larger urban centres of the country. It is planned that other
Branch Offices will open throughout the country in order to
bring the services of the institution closer to the members
and to the public.

The Central Co-operative Bank network develops its activities,
as do all other privatised commercial banks, in the internal
financial and monetary market. However, it also provides for
all kinds of operations concerning foreign exchange. The Bank
hopes to create a working relationship with foreign banks and
to facilitate Bulgarian trade activities abroad. For this
purpose it looks forward to entering the international
financial market and establishing working relations through
co-operation and collaboration with other co-operatives.

The staff of the Bank is well qualified, drawing its
experience from the State banks and using fourth generation
IBM computers. Relationships have been established and
exchanges of visits and consultations have already taken place
with European banking institutions. In 1993 the Bank was
accepted as a corresponding member of the Association of
Co-operative Banks of the European Union. Exchange visits for
organisational purposes have also been inaugurated with the
co-operative credit system of France, while English
institutions provide expertise for improving the managerial
qualifications of the Bank's key workers through the Plunkett
Foundation. Rabobank (Netherlands) is also sought for
assistance in organising training courses for the bank's

Currently, the rate of interest paid on the 'bearer shares' is
higher than that paid on the members' nominal shares (by 45%
on average). The rate of interest received by the Bank for
loans granted ranges from 52% to 54% for members and from 56%
to 58% for the non-members. With respect to loans given to
farmers, two thirds of the interest is paid by the State.

According to the rules governing the National Bank, a
percentage of the Co-operative Bank's deposits has to be
transferred to the National Bank without interest. The
Co-operative Bank, however, is entitled to take out loans from
the National Bank at an affordable rate of interest. The
repayment of loans is considered to be satisfactory, since the
interest rate it is kept below 15%.

It has been reported that the annual turnover of the Bank
represents more than 50% of the total turnover realised
annually by the private banks.

A visit paid by the author to the Pleven Branch Office, 180
kilometres North-East of Sofia, allowed him to become
acquainted with the various operations at the regional level.
The daily receipts of the member-co-operatives and other
users, amounting to between three and five million levas, are
collected by a special itinerant service of the branch office.

Three types of loans are granted: short (up to one year),
medium (between one and five years) and long-term. A
commission of between 3% and 12% is levied by the Bank for its
operations. In the case of member-societies the above
percentage is reduced to 5%-6%. The annual turnover of the
Pleven Branch Office was reported to be 800 million levas. Of
this, 1.6 million is paid out in salaries, 22 million are net
profits and 65% of these are paid to the State budget in
taxes. An amount of ten million levas is distributed among
members. In addition to agreements signed by the borrowers,
loans are secured against goods and real estate (land is
exempt), thus protecting the Bank against losses. Disputes and
recovery problems are reduced due to the flexible conditions
for the allocation and repayment of loans. The overall system
is much better than that operated by other private banks,
especially when the users are member-co-operatives.

The Central Co-operative Bank is governed by the Board of
Directors. Its President is Ms Katarina Zarkova, assisted by
two Deputy-Directors and members of the Board of Directors.
The Deputies are responsible for the domestic market and the
Board for the international affairs. At the regional level of
Pleven, the Branch Office is governed by a Director appointed
by the Central Co-operative Bank. He is assisted by a Credit
Committee of five specialists.

3.2.3  Department of Co-operative Management and Business

During the academic year 1990/1991 the University of National
and International Economy in Sofia, created a specialised
Department of Co-operative Management and Business. Students
are able to avail themselves of full-time basic economic
education for a period of four years, including curricula on
co-operative economy, management, finance, history and law.
Distance learning is also possible by means of a five-year
correspondence course.

Entrance to the Department is by examination. Enrolment levels
(50% boys, 50% girls) for the first four years have been as

-    1990/91:  68 students
-    1991/92:  32 students
-    1992/93:  14 students
-    1993/94:  29 students

Students receive maintenance grants and free tuition. For the
time being, all expenses related to their education are paid
by the Central Co-operative Union, which also guarantees
employment for the graduates. To this end, binding contracts
are drawn up between the CCU, which finances the educational
programmes, the student beneficiaries, and the co-operative
organisation which is to employ the graduate.

The students acquire practical experience through regular
periods of work within the consumer society which will
eventually employ them.

During the academic year 1991/92 a Co-operative College was
also created in Sofia under the auspices of the above
Department. Education provided by the College is full-time.
Correspondence courses are also provided by four other
Sections of the College, operating in four urban centres:
Plovdiv, Pleven, Berkovitsa and Haskovo. Existing CCU Training
Centres located in these cities receive students for
examinations. Usually, such students are employees who are
periodically given time of study leave. They continue to
receive their salary during this period.

Both the Department and College of Co-operative Management and
Business were set-up at an early stage, with the object of
reproducing, improving and developing the human resources
needed by the old and new private co-operatives. This major
educational attempt was mainly planned by and realised thanks
to the contribution of the Central Co-operative Union of
consumer societies in close collaboration with University
professors and highly-educated Bulgarian personalities. The
CCU, by sponsoring this social and educational endeavour, has
achieved a major goal at which all co-operative movements
around the world are looking: the integration of a basic
curriculum of co-operative economy, theory, law and history
into the national educational system with a view to
reproducing human resources for future co-operative membership
and management.