A cooperative is distinct because there is a linkage between the ownership and the users of the business. A cooperative is also distinct because it distributes its earnings to members according to the level of business conducted with the company rather than the level of equity investment. As you can see, the emphasis in cooperatives is on the users of the business, who are also the investors. In IOFs, the emphasis is on the investors, who might never be users of the business. One of the key features of new generation cooperatives is to increase the emphasis on the role of users as investors of the business.
Members represent the people who use and own the cooperative.
Earnings that the cooperative generates during the year are distributed to members according to the level of individual business that they conducted with the cooperative during that year. Earnings are therefore distributed according to the level of use rather than level of equity investment. Since they own the cooperative, the members are responsible for providing equity capital in order to finance the cooperative s operations. A member is usually required to make some sort of payment when he joins the cooperative. This direct investment might be the purchase of a membership share or some sort of common or preferred stock.