17.1 Most Laws provide restrictions on dividends. Even Cooperative principles till the Manchester Congress included “limited interest on Capital”. Thus by subscribing to a member except in credit societies. To encourage larger subscription in shares by members, the dividend will have to be reasonably attractive, depending on the prevailing market conditions in each country. A balance approach could be to allow dividend not more than 2% on the rate of interest being paid by banks on long-term deposits. The principle of limited interest on capital has been revised in the new cooperative principles to read ‘member economic participation’. For cooperatives running capital intensive industries like sugar and cotton processing units, fertilizer manufacturing etc., the benefits of preferential shares by members and non-users, and non-management participation shares with assured return, may be considered.
