Cooperatives as Tools for Poverty Alleviation and Welfare Enhancement: A Case Study of Developing Countries

Cooperatives as Tools for Poverty Alleviation and Welfare Enhancement: A Case Study of Developing Countries

Muhammad Ameer Fakhri^*, Doris Padmini Selvaratnam

Faculty of Economics and Management, University Kebangsaan Malaysia

^*Corresponding author

DOI: https://dx.doi.org/10.47772/IJRISS.2025.906000231

Received: 04 June 2025; Accepted: 05 June 2025; Published: 09 July 2025

ABSTRACT

There are many approaches to minimise poverty in developing countries, namely self-help groups and cooperatives. This study investigates the role of cooperatives in alleviating poverty and enhancing welfare in developing countries, through the dual lens of the Social and Solidarity Economy (SSE) and Amartya Sen’s Capability Approach (CA). Using an entirely qualitative approach grounded in secondary data, the paper synthesises peer-reviewed studies and selected case studies from Iran, Brazil, and India. The findings suggest that cooperatives enhance fundamental freedoms by expanding access to services, promoting inclusive economic opportunities, and fostering community empowerment. While cooperatives are effective instruments of poverty alleviation, their impact is contingent upon autonomy, human capital, and favourable policies by the government.

Keywords: Cooperatives, Social and Solidarity Economy, Poverty, Welfare Enhancement, Capability Approach

INTRODUCTION

Throughout history, humanity has demonstrated remarkable resilience in overcoming existential threats in various forms. The recent COVID-19 pandemic is a testament to global cooperation, scientific advancement, and institutional adaptation. Yet poverty remains one persistent crisis that humanity has not been able to resolve.

Unlike sudden outbreaks or geopolitical shocks, poverty is a structural condition, rooted in inequality, social exclusion, and systemic failure. Billions of people around the world continue to struggle to meet their basic needs despite centuries of economic growth and government interventions. This makes poverty one of the most enduring endemic challenges of modern civilisation.

The World Bank defines poverty as a condition in which individuals live below an acceptable standard of living, characterised primarily by the lack of access to essential resources (e.g., food, shelter, clean water, electricity, and so on) and opportunities necessary for a decent quality of life [1]. In order to eradicate this, many initiatives have been introduced all over the world by both governments and communities. Among these, one particularly resilient and community-driven approach that stands out is cooperatives. According to the International Cooperative Alliance [2], a cooperative is:

“… an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.”

The first known cooperative was the Frenwick Weaver’s Society, which was established in Scotland in the year 1761 [3]. This group of weavers purchased oatmeal in bulk and sold it to members at lower prices to ensure affordability and food security. By the 19th century, cooperatives mushroomed across many countries, including Western Europe, North America, and Japan. In the early years, cooperatives emerged to secure basic goods like food at affordable prices. However, due to entrepreneurial innovations, they have now given birth to cooperatives in various sectors, including finance, education, digital innovation and so on.

Cooperatives are increasingly recognised as agents of inclusive development, particularly in contexts where conventional market mechanisms and state interventions prove inadequate. Guided by principles of democratic ownership, collective agency, and the reinvestment of surplus into community needs, cooperatives offer a unique blend of economic participation and social protection.

This study investigates how cooperatives function as tools for poverty alleviation and welfare enhancement, particularly in developing countries. Guided by the social and solidarity economy and capability approach theoretical framework, this paper uses a qualitative approach grounded in secondary data and selected case studies from Iran, Brazil, and India. The main goal is to address a gap in the literature by presenting empirically grounded case studies that demonstrate how cooperatives can alleviate poverty across diverse sectors. In doing so, this paper offers a multidimensional understanding of how cooperatives expand real freedoms, reduce deprivation, and foster inclusive development.

In the following sections, the author will discuss the theoretical framework that guides this study, namely, the Social and Solidarity Economy and the Capability Approach. Section 3 summarises past studies on the effectiveness of cooperatives in alleviating poverty. This is followed by the research methodology outlined in Section 4. Section 5 presents the main analysis, comprising three case studies and a discussion of key factors influencing the effectiveness of cooperatives. Finally, Section 6 concludes the study by synthesising key findings and highlighting policy implications.

THEORETICAL FRAMEWORK

Social and solidarity economy (SSE)

This study revolves around the Social and Solidarity Economy (SSE) framework, which provides a holistic lens of cooperatives’ role in poverty alleviation and welfare enhancement. Built on the social economy, SSE centres around the primacy of labour over capital. It can be traced back to the 18th century in Europe [4]. The solidarity economy is a “heterogeneous” set of theoretical and practical approaches that have been utilised to understand the economy differently [5, 6].

The solidarity economy is based on justice, cooperation, reciprocity and mutual aid [7]. The concept of SSE also emphasises on its service to the community rather than solely focusing on profit [8]. Case studies presented later in this paper illustrate these principles. As explained by Utting [9]:

“It emphasises issues of redistributive justice, so-called ‘deep’ sustainability, alternatives to capitalism and the debt-based monetary system, as well as participatory democracy and emancipatory politics driven by active citizenship and social movements activism.”

Cooperatives, one of the key elements within the SSE, aim to tackle both economic hardship and social marginalisation by fostering greater equity. This can be achieved by creating opportunities for the disadvantaged or marginalised communities in order to mobilise resources, strengthen networks of trust and cooperation, and gain access to essential services and markets that are often inaccessible through conventional economic channels [10]. In this way, the SSE framework underlines the role of cooperatives not only as an economic tool for social empowerment, but also local resilience and inclusive development [11].

Capability approach (CA)

Various metrics have been used to assess well-being, with income and consumption being the most common indicators. However, these traditional economic measures have been criticised for oversimplifying the concept of well-being, often equating it with wealth or individual satisfaction, otherwise known as utility. To challenge this view, Amartya Sen developed an alternative approach known as the Capability Approach (CA), a framework that shifts the focus from what people have to what they can do or be (known as functionings), and the real freedoms they have to achieve those functionings [12].

Sen argued that traditional approaches, such as utilitarianism and resourcism, fail to account for individual

differences in converting resources into meaningful outcomes [13]. What matters, he asserts, is not merely the possession of goods, but the real opportunity to achieve valued functionings, in other words the notion of what activities one is able to undertake (doings) and the kind of person he or she is able to be (beings) that constitute a person’s wellbeing. As Nussbaum and Sen elaborated, these range [14]:

“…from such elementary matters as being well nourished and disease-free to more complex doings or beings, such as having self-respect, preserving human dignity, taking part in the life of the community, and so on.”

Crucially, CA distinguishes between possessing resources and having the actual ability to use them in ways that enhance well-being. For instance, two people with identical income may differ in their capabilities if one is either handicapped, socially excluded or discriminated against. Thus, poverty is not simply a lack of income or deprivation from necessities, but it also extends to the deprivation of the real freedoms people need to live the lives they value [15].

It is important to note that the CA does not dismiss traditional poverty indicators such as income, consumption, or material deprivation. Rather, it reframes them within a broader evaluative space that focuses on what individuals are able to do and be. As Sen argues, defining poverty solely in terms of the deprivation of necessities is insufficient, since what counts as a “necessity” varies across societies and cultural contexts [13]. Thus, it highlights the need to evaluate poverty through the lens of capabilities, which emphasises the real freedoms to achieve functionings.

This approach resonates strongly with the values that underpin the SSE, which centres around human dignity, participation, and equity. Within this paradigm, cooperatives play a significant role in enhancing people’s capabilities by expanding access to education, decent work, and credit facilities, all of which are essential for achieving meaningful functionings. For example, while running a business may not traditionally be seen as a basic necessity, access to soft loans to individuals with innovative ideas by cooperatives can enable them to engage in productive work, gain financial independence, and contribute to their community. These outcomes are particularly impactful for marginalised groups, including women, informal sector workers, and rural populations [16]. Importantly, the impact of cooperatives goes beyond material benefits: they also foster agency, reduce precarity, and nurture a sense of empowerment.

Taken together, the SSE and CA offer a comprehensive framework for analysing the role of cooperatives in poverty alleviation. While SSE highlights institutional structures and collective organisation, the CA adds depth by evaluating how these structures affect real-life human development. This integrated perspective allows for a nuanced understanding of how cooperatives can both empower individuals and reshape communities.

LITERATURE REVIEW

Cooperatives function as vital instruments for mobilising resources, generating employment, and improving livelihoods, particularly for marginalised communities and women, thus promoting social cohesion and integration [17, 18]. One significant challenge lies in the need for cooperatives to adopt sustainable practices that encompass social, economic, and environmental dimensions. While cooperatives globally are recognised as key players in achieving Sustainable Development Goals, many studies neglect critical sustainability issues, such as climate change, economic uncertainties, and social inclusivity [19]. In order to effectively address the well-being of their members, cooperatives must embrace innovation, technology adoption, and diversification of their activities [20]. They need to adapt to the changing needs and aspirations of younger generations, who may have different expectations and preferences than older members. This requires a shift towards more modern and professional management practices, including enhanced financial literacy, risk management, and strategic planning.

The success and failure of cooperatives often hinge on internal organisational factors such as leadership, the pursuit of diverse income-generating activities, and the efficient use of resources, as demonstrated by studies in conflict-affected areas [21]. External factors such as the regulatory environment and government support, also play a crucial role in shaping the cooperative landscape. Cooperatives can contribute to economic growth, job creation, and social development, underscoring their potential as agents of sustainable community development [22].

In light of these challenges, a multi-faceted approach is required to improve the well-being of cooperative members in Malaysia. This includes strengthening governance structures, improving access to finance and markets, promoting education and training, and fostering collaboration and networking among cooperatives.

The capacity of cooperatives to promote inclusion through economic control, voice, and agency is influenced by the wider context in which they are constituted, making them part of an ongoing and often contradictory process of change [23]. Government support is vital for improving cooperative performance, particularly through facilitating access to support services and promoting human resource development [24]. The cooperative model’s emphasis on self-help, self-responsibility, democracy, equality, equity, and solidarity aligns well with social work aims, suggesting its potential as a powerful intervention strategy in social work. Moreover, the digital era presents both opportunities and challenges for cooperatives. Cooperatives must leverage digital technologies to enhance their competitiveness, improve efficiency, and reach new markets [25].

Building and developing the economic potential and capabilities of members to improve their economic and social welfare is one of the primary functions of cooperatives [26]. Strengthening the economy of the people as the foundation of the national economy and also developing the national economy as a joint effort based on the principles of kinship and economic democracy are some of the other crucial functions [25]. Ultimately, the wellbeing of cooperative members is intrinsically linked to the overall sustainability and success of the cooperative movement.

Numerous studies have been conducted using various methods to examine the impact cooperatives have on poverty, particularly within the context of developing countries. One such study is by [27]. They conducted a localised study on cooperative credit services in Ezeagu Local Government Area, Nigeria. Using regression analysis, they found a strong positive relationship between cooperative credit and poverty alleviation. Their study highlights cooperatives’ role as facilitators of grassroots development. However, the research was limited in scope and scale, and its findings may not be able to be generalised beyond the region studied.

Liu et al. analysed data of 1,622 smallholder households from the year 2021 across four rural provinces (Yunnan, Guizhou, Sichuan, and Chongqing) in Western China [28]. By employing Ordinary Least Squares (OLS) and Propensity Score Matching (PSM) models, the authors evaluate the effect of cooperative membership on poverty. The paper found that the impact of cooperatives in reducing vulnerability among members is statistically significant, especially for the cooperatives with higher levels of human and social capital. However, they also find that the poorest households tend to gain the least benefit, highlighting the need to address issues of inclusiveness and access for more marginalised groups.

Similarly, Shen et al. investigated the role cooperatives play in integrating small farmers into modern agriculture by analysing survey data of 7,200 farmers collected in 2015 in Sichuan, Yunnan, Jiangxi, and Chongqing City [29]. This study also employs an OLS regression model. The finding indicates that the cooperative indeed plays a significant role in enhancing farmers’ business by providing financing, technological application, improving market sales, and decision-making. Cooperative participation reduces multidimensional poverty by 12.3%. However, the degree of its effectiveness in poverty alleviation among farmers hinges on its organisational service capacity, meaning how many facilities or incentives it can provide to them. The authors also raised concerns about unequal benefits favouring core members over others. Neither Liu et al. [28] nor Shen et al. [29] included case studies, as both adopted purely quantitative approaches.

The issue of inclusivity was also highlighted by Boadu et al. when analysing the role of farming cooperatives in promoting social inclusion within Ghana’s Assin Fosu Municipality using the SSE framework [30]. While the authors found that cooperatives do promote social inclusion, particularly through improved access to credit and productive assets, shortcomings in governance and unequal representation in decision-making processes led to inequitable benefits for members.

A similar trend was captured in Ethiopia by Bernard and Spielman when they analysed the producer organisations’ effectiveness in reaching the rural poor [31]. They found that cooperatives contributed positively to market participation and income generation through services like credit access, free or subsidised inputs, and training. But, often they fell short in terms of inclusiveness. The study highlighted that poorer farmers were less likely to join or benefit from these groups, pointing to a trade-off between commercial performance and equity. Non-members could also be a beneficiary indirectly, for example, through access to training sessions and improved market prices resulting from cooperative activities. The authors conclude that while cooperatives have the potential to support rural development, their inclusivity and impact on the poorest farmers remain limited.

A fresh perspective through a case study is presented by Yadoo and Cruickshank [32]. The paper covers the case study of Nepal’s rural electrification efforts. Authors argued that cooperatives can be effective in extending essential services like electricity to underserved areas. The study showed that with adequate institutional and financial support, cooperatives can outperform private actors in delivering public goods, in terms of quality, transparency and cost. By 2009, cooperatives in Nepal had extended electricity access to almost 80,000 households in the rural areas, and were expected to ramp up to 180,000 households in the following two years.

Nonetheless, the authors caution that the success of such models hinges on scalable support mechanisms and long-term financial sustainability. This is in line with the capability approach mentioned in the theoretical framework, as electricity has now become an essential need for humans, thus, this paper shows that while the employment through the short projects can be limited, in essence, the electrification provided to the rural community has improved their overall well-being.

Together, these studies offer robust evidence of the positive impact cooperatives can have on poverty alleviation and welfare improvement. They also illustrate that while cooperatives are powerful vehicles for inclusive development, their success is contingent upon other factors, which will be covered briefly in the discussion part.

METHODOLOGY

This study adopts a qualitative approach, drawing entirely on secondary data to explore the effectiveness of cooperatives in poverty alleviation and welfare enhancement in developing countries. The qualitative approach is particularly suitable given the multidimensional and context-specific nature of poverty, which often escapes simple measurement or econometric modelling. A qualitative framework enables a more nuanced understanding of how cooperatives operate within varied socio-economic environments and how their structures and practices align with theoretical concepts such as the SSE and CA.

The data sources include peer-reviewed academic articles, institutional reports by international organisations (e.g., ICA, ILO, World Bank), and other grey literature. For case studies, however, acquiring comprehensive secondary data posed challenges. Many cooperatives are under-documented in academic literature. As a result, the study supplemented academic and institutional sources with reputable news reports and direct information from official websites. For example, information on Unimed’s health services was drawn from the cooperative’s website, given the lack of detailed third-party evaluations. In other cases, such as SEWA’s pandemic response, triangulation was conducted using both ILO reports and field-based accounts published online.

Documents were selected based on their academic rigour, relevance to the research questions, and recognition

by major indexing platforms such as Scopus. In total, the paper covers empirical studies and case reports from regions including China, Brazil, India, Ghana, Ethiopia, Iran, and Nigeria. These were reviewed and thematically coded to identify common patterns related to economic empowerment, institutional inclusivity, and service delivery models.

A manual thematic coding process was undertaken to analyse the selected literature and case studies. The authors first reviewed each document and highlighted its key findings or observations relevant to the research questions. As recurring topics emerged, such as economic empowerment, institutional inclusivity, service delivery, and governance were grouped under provisional thematic categories.

As additional studies were examined, the categories were refined to reflect the most prominent and consistent patterns identified across different contexts and cases. This method enabled the authors to efficiently organise and retrieve sets of references relevant to each subtopic during the writing process.  This iterative process ensured that both commonalities and context-specific insights were captured. Overall, this approach also allowed for the systematic identification of shared findings across the literature, providing a clear framework for subsequent discussion and analysis.

This mixed-source approach combining academic, institutional, and field-reported evidence reflects both the depth and the practical limits of secondary research in this area, while maintaining credibility and analytical coherence.

DISCUSSIONS

There are three million cooperatives globally, employing 10% of the world’s population, equivalent to 280 million people [33, 34]. According to the World Cooperative Monitor 2023 report, the top 300 cooperatives in the world jointly generated USD 2.409 trillion worth of turnover (revenue) in the year 2021 [33]. The composition of the top 300 cooperatives’ turnovers can be seen from Fig 1.

Fig. 1: Distribution of Turnover Among the World’s Top 300 Cooperatives by Economic Sector

Source: World Cooperative Monitor, 2024

Of the top 300 cooperatives, 105 (35%) operate in the agriculture sector, 96 (32%) in insurance, 57 (19%) in wholesale and retail trade, 27 (9%) in financial services, 9 (3%) in industry and utilities, and 1% each in education, health and social work, and other services including housing.

In terms of turnover over GDP per capita, four out of five of the largest cooperatives are located in developing countries, where two of them are from India and two from Brazil. IFFCO and the Gujarat Cooperative Milk Marketing Federation Ltd, both based in India, recorded turnover-over-GDP per capita values of 3.32 million and 2.8 million, respectively, while Brazil’s Unimed and Copersucar S.A. reported figures of 2.02 million and 1.80 million in 2021.

The turnover-over-GDP per capita value reflects how much average citizens’ economic productivity, as measured by GDP per capita, would be needed to generate the same level of output as the cooperative’s annual turnover. It also highlights the substantial role that cooperatives in developing economies can play in national economic performance, despite operating in contexts with lower per capita income and often weaker institutional support compared to their counterparts in high-income countries.

In ASEAN, there are 300,000 cooperatives with 65.7 million members. Its significance can be seen from the fact that it contributes 10% of the region’s Gross Domestic Product (GDP) [35]. This shows the vital role played by cooperatives all over the world, particularly in developing countries.  It exemplifies the magnitude of the collective enterprise role in economic growth, especially in emerging economies where informal labour and rural communities are prevalent.

As discussed in many previous studies compiled in the literature review, cooperatives often thrive in sectors underserved by traditional markets, such as agriculture, by enabling pooled resources, democratic ownership, and reinvestment into local needs. Their ability to scale social protection, create employment, and empower marginalised groups, particularly women and rural workers, is well documented. Against this backdrop, it becomes essential to explore how cooperatives contribute to poverty alleviation and welfare enhancement in specific national contexts through case studies presented below.

Case Study

Innovation Accelerator Cooperative in Iran

Accelerator Noaavary Pishgaman (ANP), established in 2016 by the largest ICT cooperative in Iran – Pishgaman Cooperative Group, incorporates hybrid ownership structures that accommodate both member and non-member shareholders. This enables broader participation and flexibility. Unlike most dissected sectors of cooperatives (i.e, agriculture), this one revolves around the digital and innovation economy.

ANP is a start-up accelerator that supports early-stage entrepreneurs, otherwise known as start-ups, through structured pre-acceleration and acceleration cycles. The main objective is to support a start-up company for commercialisation. The cooperative’s team comprises academicians and consultants from diverse backgrounds, including information technology, engineering, management, and more [36].

During the pre-acceleration period, start-ups are provided with basic support, including co-working spaces equipped with internet access, consulting, mentoring, and training. They will later be evaluated, which, if chosen, will subsequently be put under the acceleration period. During the acceleration period, support comes in the form of capital, legal, and infrastructure resources, depending on their operational plan. Once ready, their product will be presented to venture capitalists. Upon completing the cycles, the start-up will register its company and transfer up to 20% of the company’s shares to Pishgaman Accelerator [36].

With over 5,000 hours of training and hundreds of community-building events conducted, the cooperative plays a significant role in empowering youth, professionals, and aspiring entrepreneurs, many of whom may not otherwise have access to such support systems. As of 2024, Accelerator Noaavary Pishgaman (ANP) has registered more than 1,300 idea-stage teams, with over 300 admitted into pre-acceleration cycles. From these, 40 start-ups have completed the acceleration program and launched ventures across diverse sectors.

This model directly contributes to welfare enhancement by reducing barriers to market entry, facilitating innovation-led employment, and embedding income-sharing mechanisms through cooperative equity participation. The Pishgaman model highlights a promising direction for extending the reach of cooperative enterprise into digital services, smart logistics, education platforms, and more. It reinforces the idea that cooperatives, when adapted to new economic realities, can serve not only as tools of income generation but as engines of structural inclusion, long-term empowerment, and drivers of innovation.

Health Cooperative in Brazil

In many countries with universal healthcare systems, common challenges such as prolonged waiting periods, poor quality of care, and low remuneration for health professionals remain unresolved. This is particularly true in a country that ranked 7th in the most populous countries in the world, Brazil. In response to such shortcomings in Brazil’s public system (SUS), Dr. José Luiz Camargo Barbosa and a collective of physicians founded a medical cooperative in Santos, São Paulo, in 1967, now widely known as Unimed [37].

As stated on their website [37], among the core services provided by Unimed are health plans, Unimed Insurance, and occupational health. It covers a wide range of services, including checkups and consultations, diagnostic checkups, hospitalisation, procedures, and even beyond health services like voluntary pension plans, professional liability insurance and home insurance [37].

Unimed has grown into the largest medical cooperative network globally, encompassing over 339 local cooperatives, with more than 117,000 affiliated doctors, providing services to an estimated 20 million beneficiaries. The cooperative provides services across over 90% of Brazilian municipalities, managing its own hospitals, clinics, and laboratories, while partnering with tens of thousands of health facilities nationwide [38].

Functioning under a worker cooperative model, Unimed is both governed and owned by its member physicians. This structure allows doctors to collectively manage service delivery, strategic investments, and institutional decision-making. The autonomy afforded by the model is regarded as a key driver of improved care quality and professional satisfaction.

Furthermore, the cooperative framework promotes the reinvestment of operating surpluses into healthcare infrastructure and the ongoing development of the cooperative itself. This is a clear departure from the profit-oriented approach of corporate healthcare providers. In practice, this means the emphasis is placed on enhancing medical facilities and expanding service capacity rather than maximising shareholder returns.

Unimed’s health services are delivered through subscription-based plans, mostly used by middle and upper-income groups who seek faster access and enhanced service compared to the often-overburdened SUS (public healthcare). With annual revenues exceeding USD 15 billion, the network illustrates how cooperatives can thrive at scale while remaining mission-driven [33]. This would also indirectly ease the burden on public healthcare.

Ultimately, Unimed demonstrates that cooperative models can complement public healthcare systems, addressing gaps in service delivery while offering sustainable livelihoods for health professionals. Its structure not only mitigates reliance on state-funded care but also acts as a collective safety net for workers within the system.

Women’s Cooperatives in India

The Self-Employed Women’s Association (SEWA), founded in 1972 in Gujarat by Ela Bhatt, emerged as a response to the exclusion of female informal workers from the protections typically afforded to those in the formal economy. SEWA aimed to bridge this gap by extending access to social security, labour protections, and economic stability to India’s vast population of informal women workers [39]. According to the ILO-SEWA report, India is home to approximately 450 million informal workers, of whom 23% are self-employed women. Recognising that secure employment alone was insufficient to uplift this demographic, SEWA adopted a dual strategy: unionising informal women workers while also building their economic agency through cooperative enterprises.

In 1992, SEWA established the SEWA Cooperative Federation to coordinate and support its expanding network of women-led cooperatives across diverse sectors, including agriculture, education, finance, health, childcare, and handicrafts. The Federation now consists of more than 100 cooperatives, functioning as a model of gender-responsive, community-based economic governance. Hence, there are many SEWA success stories that can be discussed. However, the one that will be focused on for this paper is its response to the COVID-19 pandemic.

The COVID-19 pandemic severely impacted India’s informal workforce, and women were hit the hardest, where around 47% of women failed to be employed again after the post-first lockdown recovery, compared to only 7% of men [40]. Income disruptions were compounded by increased caregiving burdens and reduced mobility. In response, SEWA mobilised its cooperative federation to deliver a multi-dimensional recovery strategy.

One of the earliest responses was a video training for women on how to stitch face masks, amid the surge in demand during the pandemic. The face masks produced were not only distributed to their members as a COVID-19 preventive measure, but were also sold to the government and other outlets to generate revenue [39]. This allows members to continue earning amid lockdown restrictions, thus preventing more unemployment.

The pandemic underscored the urgent need to enhance digital competencies among informal workers. Recognising this gap, SEWA initiated digital training through platforms such as Google Meet, Zoom, and WhatsApp. These sessions were designed not only for health awareness and COVID-19 safety but also to build skills in marketing, online business management, and remote cooperative coordination. This shift enabled members to continue conducting essential cooperative functions, such as financial reporting and governance, despite restrictions on physical meetings.

In addition, the VimoSEWA cooperative under SEWA also introduced a COVID-specific insurance product, providing coverage of up to 25,000 rupees (USD 315) for women between the ages of 18 and 65 [41]. This was a critical innovation in a context where many women had limited access to formal health insurance.

Beyond health and livelihood preservation, SEWA also responded to the pandemic’s psychosocial impact. A network of 185 trained women leaders delivered mental health support to over 270,000 members across Gujarat. Simultaneously, SEWA engaged in widespread relief distribution, delivering more than 200,000 food and health kits, particularly during the devastating second wave. Importantly, these distributions were facilitated through SEWA’s deeply embedded local leadership, which enabled swift and targeted outreach to the most vulnerable households [39].

Throughout the pandemic, SEWA’s federated cooperative structure not only absorbed the immediate shocks but also strengthened the long-term capabilities of its members. SEWA’s pandemic response offers a compelling example of how women-led cooperatives can serve as inclusive institutional mechanisms for recovery in the informal economy, in efforts to narrow down the gender gap in India.

All three of the case studies provided demonstrate how cooperatives can act as mechanisms for expanding human capabilities, particularly for groups typically marginalised by market or state structures. The ANP in Iran empowers young entrepreneurs by enhancing their capability to pursue (doings) valued economic opportunities in the digital economy, allowing them to become entrepreneurs (beings).

Unimed, Brazil’s medical cooperative, improves the quality and accessibility of healthcare while also preserving the autonomy and professional satisfaction of health workers. These are key aspects of well-being often overlooked in corporate and even public health systems.

Meanwhile, SEWA’s women-led cooperatives in India illustrate how the expansion of functionings, such as being economically self-reliant, accessing health security, and maintaining dignity in times of crisis, is possible even within severely constrained environments like the COVID-19 pandemic.

These cooperatives do not merely distribute resources, they cultivate agency, ensure community participation, and strengthen the real freedoms individuals need in order to achieve meaningful functionings as explained by CA. Thus, these examples affirm that poverty alleviation is not just about increasing income, but about expanding the substantive choices available to people, particularly those on the margins of the formal economy.

Table: 1 Comparative Overview of Selected Cooperative Case Studies

Determinants of cooperatives’ effectiveness

While the case studies demonstrate the effectiveness of cooperatives in alleviating poverty, as also highlighted in the literature review, it is important to acknowledge that cooperatives can only thrive under certain enabling conditions. This subsection synthesises and outlines key factors that are vital in determining the effectiveness of cooperatives: autonomy, human capital and the role of government.

Birchall emphasises that cooperatives achieve their full potential when they remain autonomous, member-driven organisations. True cooperatives are “independent of government and not owned by anyone other than the members,” and are founded on voluntary association, democratic control, and shared values such as self-help, equity, and solidarity [42]. He highlights the ILO Promotion of Cooperatives Recommendation (R193), which recognises the importance of a supportive framework provided by government, while stressing that the support must not violate the values and principles of cooperatives.

Accordingly, the governments should not use cooperatives as tools of development, rather, the government’s role should be limited to providing assistance to cooperative members, helping them to create income-generating activities, gain access to markets, and improve their socio-economic well-being while always preserving their autonomy and self-governance principles [42]. This is because government-initiated cooperatives, as opposed to community-initiated cooperatives, tend to demonstrate lower technical efficiency, as there is less motivation behind their formation [43, 44, 45]. In all three case studies reviewed, the cooperatives were initiated by professionals or grassroots members, free from direct government intervention [46, 47].

While the Pishgaman Cooperative Group stands out as a successful example in Iran, many other cooperatives have struggled due to unclear definitions. This ambiguity has enabled government interference in agricultural cooperatives’ policy and decision-making, thereby violating the principle of autonomy [48]. Overly ambitious policy targets such as aiming for cooperatives to contribute 25% of GDP, and limited member engagement have also contributed to these shortcomings. The government’s emphasis on quantity over quality has led to the formation of numerous cooperatives that exist only on paper, lacking genuine functionality or sustainability [49].

Secondly, as highlighted by R193, it is also important for the government to promote education and human resource development (HRD), and to strengthen cooperatives’ technical and managerial capacities [50]. Various initiatives have been taken by the government in three countries. Numerous scholars have noted that technical efficiency is a key driver of cooperative effectiveness [51, 52, 43].

For example, in India, the National Cooperative Union of India (NCUI) runs regular government-funded training programs, while the National Bank for Agriculture and Rural Development (NABARD) sponsors skill development workshops for cooperative members [53]. The government has also established Vamnicom, a specialised school for cooperative management in Maharashtra [49].

A similar effort in tertiary education is also present in Iran, despite low demand for such courses [49]. Iran’s HRD initiatives also include joint training projects with UNDP for managers and members, as well as government-supported programmes focused on skills-building, business development, and capacity-building for cooperatives [54].

In Brazil, a founding member of the ILO, the government, through partnerships with organisations such as the Serviço Nacional de Aprendizagem do Cooperativismo (SESCOOP), has established comprehensive, subsidised training programmes aimed at strengthening cooperative management, leadership, and technical capacity [55].

In addition, in all three case studies, the cooperatives also integrated professionals of various backgrounds into their management teams to ensure professional and managerial competence in supporting sustained growth and impact [36, 38, 46].

Finally, governments are also encouraged to facilitate access to credit, markets, and information, uphold workers’ rights, promote gender equality, and foster best practices in governance and productivity, all while consulting with cooperative stakeholders in shaping relevant policies [42, 50, 56, 57]. In practice, governments in all three countries have played an active role in enabling cooperatives through measures such as facilitating access to credit and markets, as well as granting tax exemptions. The following examples illustrate how these supportive policies have contributed to cooperative development and impact.

For instance, SEWA benefited from government funds and grants for two of its schemes: i) building 6,000 houses for affected flood victims in Gujarat; and ii) full-time childcare for women factory and agricultural workers [58]. The government of India also implements favourable tax incentives, including deductions and full exemptions for cooperatives in selected sectors under Section 80P of the Income Tax Act. This has played a significant role in supporting the growth and effectiveness of cooperative societies [59].

While in Iran, the General Policies of Principle 44 of Iran’s Constitution introduced new cooperative models, allocating 30% of privatisation revenues to national cooperatives for poverty alleviation. These policies also provide cooperatives with tax breaks, insurance privileges, and legal support to strengthen their role alongside the private and state sectors [49, 60].

Finally, in Brazil, the Federal Constitution mandates favourable tax treatment for cooperatives, recognising the unique nature of cooperative transactions and requiring that acts performed between cooperatives and their members are exempt from certain federal taxes [61]. Various provisions across Brazilian tax law grant exemptions or reduced rates for cooperative activities, reinforcing the sector’s financial sustainability and developmental role. This legal framework has been instrumental in enabling Brazilian cooperatives to expand their activities, support member livelihoods, and play an important part in inclusive economic growth.

Taken together, these findings underscore that the effectiveness of cooperatives in poverty alleviation and welfare enhancement is shaped by a balance between cooperatives’ autonomy, professional management or human capital, and an enabling but non-intrusive government environment. Across the cases examined, cooperatives that are member-driven and professionally managed thrive when governments focus on providing capacity-building, regulatory clarity, and equitable fiscal incentives, rather than direct control or top-down formation. Conversely, the shortcomings observed in Iran’s cooperative sector highlight the pitfalls of quantity-focused policies, ambiguous definitions, and government overreach. Ultimately, the likelihood of sustainable cooperative impact depends on clear legal frameworks, robust human capital development, and policies that respect cooperative principles while fostering access to finance, markets, and social protections.

CONCLUSION

This study set out to examine the role of cooperatives in alleviating poverty and enhancing welfare in developing countries, through a qualitative analysis grounded in the SSE and CA. These frameworks enabled a holistic understanding of cooperatives not only as economic actors but also as institutions that can expand real freedoms and functionings, the ability of individuals to live the lives they value.

The case of Iran’s Accelerator Noaavary Pishgaman (ANP) illustrates how cooperatives can drive innovation and empower young entrepreneurs, integrating them into the digital economy. While, Brazil’s Unimed highlights the capacity of cooperatives to deliver high-quality, accessible healthcare at scale, benefitting both professionals and communities, and at the same time easing the burden on public healthcare. SEWA’s women-led cooperatives in India reveal the vital role of cooperative models in supporting vulnerable groups, particularly during crises such as the COVID-19 pandemic, by promoting gender-responsive leadership, digital adaptation, and community-based support.

The CA was central in analysing these cases, showing how cooperatives facilitate access not just to resources, but to meaningful opportunities (the doings and beings essential for human well-being). Across all three cases, cooperatives were found to cultivate agency, ensure local participation, and foster community empowerment, outcomes that directly contribute to reducing capability deprivation.

However, the impact of cooperatives is highly contingent on several enabling conditions: the preservation of member autonomy, professional and inclusive management, and a supportive yet non-intrusive policy environment. Case evidence suggests that cooperatives thrive when governments focus on capacity-building, regulatory clarity, and equitable fiscal incentives, rather than direct control. Conversely, government overreach or policies prioritising quantity over quality can undermine cooperative effectiveness, as happened to agricultural cooperatives in Iran.

Ultimately, cooperatives can significantly contribute to multidimensional poverty reduction by expanding real freedoms and opportunities for those most at risk of social and economic exclusion. For policymakers and practitioners, fostering sustainable cooperative movements requires a balanced approach, promoting autonomy, investing in human capital, and creating supportive legal and financial frameworks.

Limitations and Areas for Future Research

While this study provides a comprehensive qualitative synthesis of cooperatives’ roles in poverty alleviation and welfare enhancement across selected developing countries, several limitations should be acknowledged. First, the analysis is based primarily on secondary data. In the case of large or sector-leading cooperatives, particularly in the digital economy and health sectors, there is a notable reliance on grey literature and official websites due to the limited availability of independent, empirical studies on the subject matter.

Authors opted for a variety of alternative sources, including official cooperative websites (such as Unimed and Pishgaman), institutional reports (for example, from the ILO and UNDP), as well as field-based accounts and news articles (such as those covering SEWA and others), to obtain necessary information. However, this reliance on non-peer-reviewed and grey literature may constrain the critical depth and objectivity of the findings.

In addition, this study is limited by its reliance on secondary sources of academic papers, many of which aggregate data and use econometric models to analyse cooperative effectiveness, with less attention given to the internal dynamics, governance structures, and long-term impacts of large or transnational cooperatives. The focus on available quantitative associations and secondary data also means that important qualitative aspects, such as agency, participation, and institutional resilience, may be underexplored, limiting the generalisability and depth of the findings.

Given these limitations, future research should prioritise rigorous empirical studies, both qualitative and quantitative, on large-scale and sector-leading cooperatives. Longitudinal and comparative research could better assess the sustainability and impacts of cooperatives across different contexts, while deeper examination of internal governance, inclusivity, and the effects of digitalisation, for example, would help to further clarify the other conditions for cooperative success.

ACKNOWLEDGMENT

This paper results from an academic exercise for the subject EPPE6154 Economics of Social Policy funded by EP-2018-001 at the Faculty of Economics and Management, University Kebangsaan Malaysia.

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