Though the cooperative movement in Nepal was launched in 1953 after the establishment of the Department of Cooperatives, it is still in the process of constant search and experiment for the most suitable and effective local organization which serves to institutionalize the process of rural development. Despite various supports by the state to the cooperatives since its inception, cooperatives still need to develop entrepreneurial capacity to diversify their socio-economic activities. Basically the rural based agricultural cooperative societies have had financial and business development problems, they are still lacking the activities to harness opportunities provided by the new Cooperative Act, 1992. The Act has recognized cooperative as an autonomous, self-controlled, member based strong business enterprise. Despite various reasons behind the slow progress of agricultural cooperatives, it is a well-visualized fact that the major cause of this is the lack of member participation. Lack of active member participation has also given encouragement to increase control over the society affairs by elite group and local politicians.