Forms and functions of state and non-state institutions

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Non-state institutions refer to institutions that are organized by private individuals or groups for the purpose of providing services to the members of society. These institutions are not controlled by the government but are regulated through laws and statutes of the state.Non-state institutions refer to institutions that are organized by private individuals or groups for the purpose of providing services to the members of society. These institutions are not controlled by the government but are regulated through laws and statutes of the state.

There are non-state institutions that play vital roles in the economy because they are the ones providing the needs of the people that the government cannot provide. However, a corresponding price or payment is needed in exchange for their services.

Typical examples are different kinds of financial institutions, specifically a bank, and different kinds of business organizations, specifically a corporation.Trade unions and cooperatives have the primary role of promoting labor welfare and good industrial relations.

Trade unions and cooperatives are organizations comprising workers and laborers with common goals, purposes, and interests. They mostly concern employment relations, decency, and welfare.

Financial institutions are organizations that serve as bridges or intermediaries that facilitate the flow of money in various transactions. This means that financial institutions serve as links between the source of funds, the depositor, the fund user, and the borrower.

Banks receive savings and deposits of their clients. These may be loaned out to borrowers.


Juan dela Cruz has PhP 10,000.00, which he has saved from his salary as a manager. He deposits it at Maharlika Bank, which offers a 2% interest per annum. This would mean that if he does not withdraw any of his savings, he will get 10,000.00 + 2% = 10,200.00 after one year.

Now, Mr. Entrepreneur needs PhP 7,000.00 because he wants to put up a sari-sari store. He borrows PhP 7,000.00 form Maharlika Bank.

Can you see the flow of money? Juan gets more than PhP 10,000.00 after a year. At the same time, he is able to help Mr. Entrepreneur put up a business. These would not have happened without the help of Maharlika Bank since Juan and Mr. Entrepreneur do not know each other.

Banks started during the Renaissance period in Italy. The word 'bank' traces its origin from the Old Italian word banca which means 'table' or 'bench,' and is where transactions occurred at that time.

The role of a financial institution as a link in the transfer of money from the source to the borrower is very important to our economy.

Banks provide safe-keeping place for money and valuables of individuals. They also perform a role in settling payments and credit intermediation.



The Bangko Sentral ng Pilipinas is known as the banks of all banks in the Philippines. It is the bank responsible for the regulation, creation, and management of monetary supply in the country.

These are the different types of banks:

Commercial banks accept savings deposits, check deposits, and time deposits. Examples of Philippine commercial banks are Bank of the Philippine Islands and Metrobank.

Thrift banks are categorized into stock savings and loan associations, savings and mortgage banks, and private development banks. They consolidate the savings deposits of their members into a fund from which their members can draw loans with interest. They also accept deposits from the public and provide loans for small- and medium-scale enterprises.

Rural banks cater primarily to farmers and small business people, mostly in rural areas.



A corporation is an organization of people legally bound by a charter to conduct some type of business. It has a legal entity separate from its owners. The type of business that a corporation wants to venture in depends on its articles of incorporation.

Articles of incorporation are written applications to the government requesting permission to form a corporation. This will give the name, address, and type of business for the corporation; the names of the officers, and the initial amount of money being put into the business.

The following are the advantages of corporations as business organizations in the economy:

easy to raise funds–since the corporate form is the most effective for raising money

limited liability–the concept that owners of the business are only responsible for its debts up to the amount they invest in the business

unlimited life–not ceasing to exist if a major stockholder dies

specialized management–affording to have specialized managers to run the business

shared risks–spreading business risks among many owners

The following are the disadvantages of corporations as business organizations in the economy:

difficult to start–needs government approval before starting the business

less direct control–owners that are usually far from the day-to-day operation of the business

double taxation–corporate taxes that need to be paid by the corporation and the owner who received dividends from the profit

limited activities–limited activities by the article of incorporation


A cooperative is a voluntary organization of people who have agreed to pool their resources together to undertake an economic enterprise to meet their everyday needs. A cooperative is something that they democratically manage, control, and share the economic benefits by participation and patronage (Cooperative Development Authority, CDA).

Trade unions or labor unions are voluntary associations of either employees, employers, or independent workers to protect their interest and become an instrument of defense against exploitation and maltreatment.

The commonalities of these two non-state institutions are the following:

• organized and formed by a group of people to protect their interest,

• promotes the common good among members, and

• voluntary in nature.

Type of Cooperative  Description 
 Credit cooperative  Promotes thriftiness among its affiliates, and creates funds to grant loans for productive endeavour of members
 Consumer cooperative  Procures and distributes commodities to members and non-members
 Producer cooperative  Undertakes joint agricultural or industrial production
 Marketing cooperative  Participates in the supply of production inputs to constituents, and markets their products
 Service cooperative  Engages in medical and dental care, hospitalization, transportation, insurance, housing, labor, electric lights and power, communication, and other services


The Differences between Cooperatives and Trade Unions

As to the Purpose:

CooperativesCooperativesRepublic Act 6938: Cooperative Code of the Philippines   Trade Unions

To encourage thrift and savings mobilization among members,

To produce funds and extend credit to constituents for productive and provident purposes,

To encourage systematic production and marketing among members,

To provide goods, services, and some requirements to members,

To develop expertise and skills among members,

To acquire lands and provide housing benefits or support to members,

To insure against losses of the members,

To promote or advance the educational, social, and economic status of members,

To establish, own, or lease cooperative banks, cooperative wholesale and retail complexes, insurance, agricultural, or industrial processing enterprises, and public markets, and

To coordinate and facilitate various activities of the union.

 To maintain or improve the conditions of employment at the workplace, such as ensuring safety standards, right to be protected from unfair termination of employment, right to paid leave, and right to equality,

To bargain with the employer on behalf of the union members and negotiate labor contracts, and

To protect the economic, political, and social interests of its members


As to Function:

 Cooperatives  Trade Unions

 Provide maximum economic benefits to its members

Teach people efficient and effective ways of doing things in a cooperative manner

Propagate cooperative practices and new ideas in business and management, and allow lower income groups to expand their ownership of wealth

Negotiate or discuss with the management the issues that affect the organization’s workers

Represent individual members when they have a problem at work

Provide information and advice to its members about work-issues and concerns


Cooperatives and Trade Unions as Means of Promoting Self-help Towards Economic Development

Cooperatives are self-help organizations presently utilized by the government as more efficient tools for economic development. These are also business enterprises which affiliates own, manage, and control following accepted democratic principles. Members are not organized primarily for profit nor to serve other persons, but to address the needs of their members. Memberships in cooperatives are voluntary and open to all those who need their services. Members share economic benefits from unions in proportion to the individual member's patronage of the business or enterprise.

Trade unions are always fighting for better wages by improving employees pay and other benefits such as holiday entitlements.


• Secure improvements in employees' working conditions, including hours of work, health or safety at work, improving pensions, and industry injury benefits.

• Provide improved standards of living.

• Safeguard the interest of workers by encouraging firms to increase employee participation in decision-making.

• Prevent employees from exploitation.

With trade union on a place, strikes can be avoided, thus resulting in stability and growth of the firm. This promotes unity, spirit of self-reliance, and self-respect, and may lead to economic development.