The government is accelerating the formation of tens of thousands of cooperatives in Indonesian villages. Given billions of rupiah in capital, they are expected to drive the village economy. Can it foster community participation?

Pramodhana Ekaputra still remembers the message on the WhatsApp application from Melawai Village. The content: asking him to become a board member of the Merah Putih Cooperative, around mid-June. It only took approximately 24 hours for Pram to agree to the request, and join the cooperative as treasurer.

Pram and several residents of Kelurahan Melawai who were appointed to manage the cooperative gathered at the end of June. Pram said that the kelurahan fully directed the business line that would be run. Namely, a grocery outlet that sells basic household needs, ranging from rice, oil to sugar.

For three weeks, cooperative administrators worked together to realize the cooperative sales kiosk, which could finally be set up in the Blok M area of South Jakarta. The construction was quick because all resources were supplied by Jakarta's state-owned and local-owned enterprises, including the Jakarta Provincial Government.

"Because this is a program from the center, yes, there is a direct order from above, so we work together," Pram said when met by SUAR at Koperasi Merah Putih Melawai, Thursday, July 24, 2025.

At the kiosk, which is the spearhead of the Merah Putih Melawai Village Cooperative's business, shelves of staples are lined up. On the left side of the stall, rice and sugar line the shelves. In the center, there is a refrigerator containing beef and chicken.

Then, on the left side, snacks and drinks are served. LPG gases were also seen at the front of the shop.

There were also various institutional logos displayed, as sponsors. There are Bank Mandiri, Telkom Indonesia, Pertamina, Bulog, MRT Jakarta, Pasar Jaya, Bank Jakarta, Food Station and Dharma Jaya. According to Pram, Bank Mandiri took a major role in working on the cooperative building from start to finish. The rest, other institutions supply the products, such as Food Station and Bulog who fill the rice.

The Melawai location, Pram said, was not without calculation. The Blok M area was chosen because it is considered the central location of the residents' activities. Melawai residents are accustomed to activities in Blok M Square and Blok M Hub, starting from shopping activities or just hanging out.

"We consider the middle economic class segmented enough, so we chose Blok M," he said.

Target market for UMKM players

Even so, the market segmentation of this Melawai cooperative targets UMKM players. Pram knows very well that many traders of various products, especially culinary, sell their wares in Blok M. From heavy food to snacks. That way, the cooperative is expected to be a place for traders to shop.

"We want to assist UMKM players. We will make the price competitive," he said.

This strategy is also in accordance with the location of the cooperative, the ground floor of the Blok M Hub building can be found by culinary vendors. Only less than 200 meters away, a food court is lined up which is crowded with customers every day.

However, when SUAR asked several traders, they said they did not know much about the red and white cooperative. In fact, since the beginning of the discourse on the establishment of cooperatives, the traders did not get information.

"There is no socialization (of the establishment of the red and white Melawai cooperative). There is no information in the group (social media) of traders either," said one of the traders.

When asked if they wanted to buy supplies at the Merah Putih Melawai Village Cooperative, traders were still hesitant. For example, when it comes to rice, traders have been relying on supplies from rice wholesalers located around Blok M and in the Pasar Minggu area.

For traders, the price of rice there is already quite friendly. "If the price is cheaper, we are willing to buy (from the cooperative). If it's expensive, it's difficult too," said a trader who declined to be identified.

"If the price is cheaper, we are willing to buy," said the trader.

According to the merchants, the Merah Putih Cooperative of Melawai Village could be attractive if its services resembled those of their grocery supply subscription. Such as delivery services, ready to deliver at any time when there is an order, and can be paid in installments. "Well, we can't have a cooperative like that," said the trader.

The traders, especially those who have been selling for a long time, think the name of the cooperative is still questionable. They take an example of a bad precedent about a savings and loan cooperative that once existed in the Blok M area. At that time, the cooperative management allegedly fled after receiving contributions from members and there were parties who took away the money deposited for loan payments.

"We are tired of that kind of cooperative model," said the trader.

Regarding such concerns, Pram admitted that currently the cooperative management team has not conducted socialization to the target market. Likewise, the maturation of the cooperative concept is still under discussion within the management.

So, currently there are no members who have entered - only the management is involved. "We hope to socialize what is in the cooperative to UMKM players. We will have a meeting at the end of this month," he said.

Thanks to cross-agency synergy

Located in the Hambalang Village Office area, this red and white cooperative in Bogor Regency is present and is predicted to become a pilot cooperative in West Java. When SUAR visited this cooperative, there were kiosk buildings in a row. At the end of the left side, there was a pile of LPG gas. In the next kiosk, there is fertilizer.

The other side is filled with foodstuffs until at the far right of the building stands the BRI Link and Pos Indonesia kiosks. The latter kiosk is intended as a means of payment or financial transaction services for residents and delivery of goods.

The secretary of the Merah Putih Hambalang Village Cooperative, Saepul Rizal, said that everything presented in the cooperative was thanks to the synergy between agencies. There is SOE Pertamina that supplies LPG, SOE Pupuk Indonesia that provides fertilizer supplies, SOE Bulog with its rice, and BRI Bank and Pos Indonesia that facilitate services.

"This cooperative is by far the most complete. We became a pilot cooperative," said Rizal when met by SUAR on Friday (25/7).

The selection of commodities presented, said Rizal, is in accordance with the purpose of establishing the cooperative. For the management, the cooperative is expected to be a place where residents depend on to fulfill their daily needs. "We see villagers as the main consumers of the cooperative," Rizal said.

In the Hambalang landscape, most people are farmers. Cassava farmers, to be precise. The urea fertilizer, which plays an important role in the farmers' production process, is expected to be fulfilled by the cooperative.

Rizal said that the price of fertilizer in his cooperative will be slightly below the market price. "There are many farmers here, we have to help them farm," he said.

As for residents who sell groceries, Rizal said that the grocery stalls in the cooperative can be used by traders. This is so that traders get a good price. This is because all commodities in the cooperative come directly from the first hand. "The supply chain is cut. The price is definitely more affordable than taking it at the agent," he said.

In the cooperative, which is not far from President Prabowo Subianto's residence, there is also a health facility in the form of a general practitioner clinic. According to Rizal, the function of this health clinic is to help the work of the local health center. There are already medical equipment available at health clinics in general.

The clinic operates from morning to evening, and is staffed by one general practitioner and one midwife. "The doctor is from the puskesmas. So that the synergy between the cooperative and the puskesmas is established," said Rizal.

When asked about the price of services at this clinic, Rizal said the price would be below other public clinic practices. For cooperatives, all business units are aimed at the public interest, so prices will be adjusted accordingly. Not only the medicine and health services, but also the prices of the products served in the cooperative.

"The profit is small but if there are many, it will still be a profit. We just think quantity," Rizal said.

Speaking of turnover, since the release day on July 21, the cooperative's gross income has reached above IDR 15 million. All commodities contributed equally. There are farmers who buy fertilizer, there are residents who buy LPG gas to rice. "We also didn't expect it to be like this," said Rizal.

However, not all villagers are aware of the cooperative. Some farmers not far from the location of the cooperative do not know that fertilizer is sold at the cooperative.

They also still doubt whether the price offered is cheaper than the agents they have subscribed to so far. This is because cassava farmers have for years depended on fertilizer supplies from outside the Hambalang area. "The price is 120,000 per kilo. How much can the cooperative give?" said another farmer.

These farmers are also not fully convinced to shift their purchases to the cooperative. If farmers depend on fertilizer from the cooperative, then they lose their allotment at the agent. The problem is that farmers still doubt the sustainability of the cooperative. "This cooperative can last a long time," he asked.

According to Saepul Rizal, all product prices in the Hambalang cooperative can be even cheaper when purchased by members. Thus, residents, especially farmers and UMKM players, can become members. "We can reduce up to 10 percent of the normal price for members," he said.

A tool for the struggle of the little people

As we know, on July 21, 2025, the President of the Republic of Indonesia, Prabowo Subianto, officially launched the Merah Putih Village Cooperative (KDMP) in Bentangan Village, Wonosari District, Klaten Regency, Central Java. The launch marked the start of a national movement aimed at strengthening the village economy through cooperative institutions based on gotong royong and self-reliance.

A total of 80,081 cooperatives have been formed and legally authorized, spread across the country. The launch event was conducted in a hybrid manner, attended by thousands of village heads and cooperative managers from various regions.

President Prabowo emphasized that cooperatives are a tool of struggle for the small people to become economically strong and sovereign. Red and white cooperatives are designed to strengthen the economy of villages and urban villages, increase farmers' exchange rates, reduce local inflation, increase financial inclusion, and create productive jobs in villages.

This institution is also expected to be able to break the distribution chain that harms producers and consumers, and become a solution to fraudulent practices that have been detrimental to farmers. The Merah Putih Village Cooperative is geared towards a 7-in-1 business model that includes grocery outlets, a village pharmacy, a health clinic, a savings and loan unit, cold storage, logistics services, and a cooperative office.

SOEs such as Pos Indonesia and BRI also support cooperative operations through logistics and financial services. BRI, for example, integrates its AgenBRILink service into cooperatives to facilitate financial transactions in rural communities.

With regulatory support, funding from APBN/APBD, and cross-ministerial synergy, Merah Putih Village Cooperative is projected to become a locomotive of the people's economy. The government hopes that this cooperative will become the backbone of sustainable, equitable, and inclusive village development.

President Prabowo called the launch of the Merah Putih Village Cooperative a historic day and part of the struggle towards true economic independence. "Cooperatives are a tool to unite the small to become big, the weak to become strong," he said.

Cooperatives Minister Budi Arie Setiadi explained that the Red and White Village Cooperative was established in villages, so its ownership and members are villagers. In addition, all citizens have the right to oversee the management of this village cooperative.

In the future, Budi said, the development of this cooperative is intended to provide economic certainty in remote areas of the country, one of which is about prices. The cooperative is also aimed at combating the middlemen phenomenon that is prevalent in the villages.

"What are the middlemen's weapons? Money, right? Well, we provide capital at the beginning, so the weapon must be balanced to fight this middleman," said Budi.

So, with this village cooperative, the government wants to break the long distribution chain. "This is also the same as what the president said, we want to eliminate economic vampires," said Budi.

Be aware of negative effects

Director of the Center of Economic and Law Studies (CELIOS), Bhima Yudhistira, strongly criticized the government's newly launched Merah Putih Village Cooperative program. He believes that this program actually displaces local business actors in the village, instead of strengthening them.

"This cooperative does not create a new business community, but instead becomes a substitute for existing local businesses," he said.

According to Bhima, many micro-entrepreneurs such as stalls, LPG gas sellers, and even village pharmacies are vulnerable to being eliminated due to this cooperative. He warned that a program intended to create jobs could actually create unemployment. Conflicts at the village level are very likely to occur, especially between cooperative administrators and UMKM that have long existed.

Governance was the next issue highlighted. The government is said to have not prepared sufficient training or technical guidance before encouraging the launch of cooperatives simultaneously. "Are the red and white cooperatives ready? Can they run professionally?" asked Bhima.

Bhima also highlighted the source of cooperative financing that comes from bank loans. He said the use of loans from government-owned banks (Himbara) was high risk. "Especially if the collateral uses the Village Fund, it will disrupt existing village fund programs," he said.

In his view, this cooperative concept is contrary to the spirit of cooperatives that were born from citizen participation. He calls the government's top-down approach a form of coercion that is not in line with successful cooperative practices in other countries.

"The capital should also come from membership fees. In this case, it is fed from the center," he said.

Bhima gave examples of cooperatives in other countries that grew from citizen initiatives. He mentioned NTUC in Singapore and many cooperatives in Denmark that were not formed by the government directly. "The government only helps cooperatives that already exist. They don't cut the compass," he said.

Regarding the government's claim that the program will create jobs, Bhima questions how many local businesses will lose their income.

He considers this approach not a solution, but a form of hijacking people's businesses. "The government always says it will create jobs, but how many people have become unemployed because their businesses were hijacked by Kopdes Merah Putih?" he said.

He also questioned the readiness of digitalization promised by the government. According to him, technology will not necessarily increase productivity if infrastructure and human resources are not ready. "Before talking about digitalization, the readiness of human resources must first be considered," he said.

He argued that many villages do not have internet access, so the idea of digitalization seems forced. He cited the case of Chromebook procurement which was ineffective because the internet network was not available. The concept of digitalization echoed by the government is not in line with the reality on the ground.

He also believes that the presence of Kopdes Merah Putih has the potential to cause unfair competition with existing village-owned enterprises (Bumdes). "The existing Bumdes can be disrupted now because of Kopdes Merah Putih," he said. In fact, according to him, these two entities are competing for roles and resources in the village.

Bhima said Kopdes and Bumdes sell to the same market and involve the same village officials. According to him, this intersection of roles will create friction. He called it a form of "cannibalism" between institutions.

He also believes that residents will be encouraged to change professions or be forced to enter the cooperative system because their businesses are no longer running. "That is not a form of employment. It is substitution, not complementary," he said.

The biggest impact of this top-down approach, according to Bhima, is the death of community creativity. He explained that a healthy cooperative should grow from people's own initiatives and needs. "The way of thinking of the management of the Merah Putih cooperative is only waiting for assistance or programs from the center," he said.

The need to foster local participation

Bhima gave an example of the success of the Sidogiri Islamic Boarding School Cooperative, which now has trillions of rupiah in assets, because it grew from below. According to him, models like Sidogiri prove the importance of local participation and creativity. In contrast, Kopdes Merah Putih is only "waiting for the ball" from the center.

If this program is to be continued, the thing that must be done is to limit the loan ceiling. "If this program is already running, the loan ceiling should not be more than Rp15 million per cooperative," he said. According to him, the restriction is important so that trials can be conducted and systemic risks to the financial sector can be prevented.

Meanwhile, Head of Research at the Indonesian Banking Development Institute, Trioksa Siahaan, assessed that the role of Himbara banks in supporting the red and white cooperative business is a good thing for the banking business itself. "I think Himbara banks will look more towards financing opportunities if it has become a government program," Trioksa told Suar, Thursday.

Even so, the ratio of non-performing loans must also be highlighted. In the latest study from Pefindo, the non-performing loan rate is around 8.5% in the cooperative sector. Trioksa said banks must be careful in providing credit facilities. "But because NPLs to the cooperative sector are also high, banks will also pay attention to risk and risk mitigation so that financing can still run with risks that can be measured and accepted by banks," he said.  

As for the calculation of profit from financing for this cooperative, he said, the calculation is that the rate of return is still much higher than the credit risk. So that banks still see financing opportunities to the cooperative sector.

"The potential for return remains as long as the financing can be right on target and can help develop the cooperative business sector, especially those in the village," he said.

"The feasibility of financing is still carried out according to bank policies and sop so that credit quality is maintained," he added.

Similarly, banking policy observer, Andry Asmoro, said that bank financing intervention in red and white cooperatives in rural areas would be an added value. "What banks see is the ecosystem that can be created from these village cooperatives in the future. Many village potentials can then become the basis for economic growth from thebottom up and up. This can be a business opportunity for banks," Asmoro told SUAR.

Mukhlison, Harits Arrazie, Rohman Wibowo