Koperasi Merah Putih Indonesia represents the world’s most ambitious cooperative program, establishing 80,081 village and sub-district cooperatives across Indonesia in just four months through Presidential Instruction No. 9/2025. With backing of Rp200-400 trillion in government funding, partnerships with 18 state-owned enterprises, and comprehensive digital infrastructure, the program aims to achieve sustainable food self-sufficiency, strengthen village economies, and reduce extreme poverty by 2045. While legal formation targets were exceeded by July 2025, the critical challenge ahead involves transitioning from paper entities to operational businesses, with only 20% having active stores as of October 2025, requiring sustained capacity building, careful financial management, and community engagement to avoid repeating Indonesia’s historical cooperative failures.
This initiative directly supports President Prabowo Subianto’s Asta Cita priorities, particularly national food self-sufficiency and village-based economic development. The program’s unprecedented scale—covering 96.88% of Indonesia’s 83,762 villages and sub-districts—positions these cooperatives as integrated service centers providing seven mandatory business units while breaking dependency on loan sharks and middlemen. Success depends on transforming ambitious formation into sustainable operations, with the government targeting full operational readiness and physical infrastructure completion by March 2026.
Legal foundation and presidential mandate
Presidential Instruction (Inpres) No. 9/2025, signed by President Prabowo Subianto on March 27, 2025, forms the cornerstone of this national cooperative movement. The instruction contains six comprehensive directives commanding coordinated action across 16 ministries and government agencies, from the Coordinating Ministry for Food Affairs down to 83,762 village heads nationwide. The directive mandates comprehensive, coordinated, and integrated steps to establish, develop, and revitalize 80,000 village and sub-district cooperatives through optimization and acceleration strategies.
The legal basis extends beyond the presidential instruction to encompass a complex regulatory framework. Constitutional authority derives from Article 33 of the 1945 Indonesian Constitution, which establishes that “the economy shall be organized as a common endeavor based upon the principles of kinship.” This is operationalized through Law No. 25/1992 on Cooperatives, which provides the statutory foundation for cooperative formation, governance, and operations. The Ministry of Cooperatives issued Circular Letter No. 1/2025 on March 18, 2025—nine days before the presidential instruction—providing procedural guidance on formation stages, naming conventions, management structures, and supervision mechanisms. This was followed by Implementation Guidelines (Petunjuk Pelaksanaan) No. 1/2025, which detail technical requirements for cooperative establishment.
Critical financial regulations came from the Ministry of Finance through Regulation No. 49/2025, issued July 21, 2025, establishing loan procedures with maximum financing of Rp3 billion per cooperative at 6% annual interest for up to 72 months with 6-8 month grace periods. The Ministry of Villages issued Circular Letter No. 6/2025 providing technical guidelines for village governments, linking cooperative formation to food security programs and requiring minimum 20% Village Fund allocation for food security activities. Presidential Decision No. 9/2025 established a national task force for program acceleration, while a joint decree from four ministers (Home Affairs, Villages, Cooperatives, Finance) coordinates implementation across government levels.
The Coordinating Ministry for Food Affairs, led by Minister Zulkifli Hasan, chairs the national acceleration task force and synchronizes cross-ministerial implementation. The Ministry of Cooperatives and SMEs, under Ministers Budi Arie Setiadi and Ferry Juliantono, develops business models, provides training, and conducts monitoring. The Ministry of Finance allocates Rp200 trillion in government funds to five state-owned banks plus Rp16 trillion for interest subsidies. The Ministry of Villages facilitates village-level implementation and Dana Desa utilization, while the Ministry of Home Affairs coordinates 34 provincial governors, 416 regents, and 98 mayors in regional execution. The Financial and Development Supervisory Agency (BPKP) conducts assurance activities and risk mitigation, while the Ministry of Law and Human Rights processes legal entity registration through its online SABH system.
Program objectives and strategic vision
Koperasi Merah Putih serves as a cornerstone initiative for Indonesia’s long-term development vision toward Golden Indonesia 2045 (Indonesia Emas 2045). The program directly implements three of President Prabowo’s eight national priorities (Asta Cita): achieving sustainable food self-sufficiency through shortened supply chains and price stabilization, developing agro-maritime industries with cooperative participation as agricultural aggregators and processors, and building economic equity from the village level upward through grassroots economic empowerment.
The economic transformation objectives are ambitious and multifaceted. The program targets creation of at least 240,000 management positions (three per cooperative) plus additional employment through cooperative operations, with potential for over 400,000 officers and 1.2 million managers across the ecosystem. By eliminating intermediaries (tengkulak) and loan sharks, the program aims to increase farmer incomes by 15-30% while improving the Farmers’ Exchange Rate (Nilai Tukar Petani). Cold storage facilities and improved logistics infrastructure target significant reductions in post-harvest losses, which currently drain substantial value from agricultural production. The government projects contributions toward its 8% GDP growth target through enhanced economic activity at the village level.
Social protection forms another crucial objective dimension. The cooperatives provide affordable access to essential services previously unavailable or prohibitively expensive in rural areas—healthcare through village clinics, medications through village pharmacies, and low-interest loans at 6% annual rates compared to predatory lending ranging from 20-200% annually. Breaking dependency on illegal online lending (pinjol) and traditional loan sharks protects vulnerable communities from debt traps that have plagued Indonesian villages for generations. The program emphasizes inclusive participation through voluntary membership based on mutual assistance (gotong royong) principles, with explicit requirements for women’s representation in leadership positions.
Institutional development goals position cooperatives as modernized, professionally managed enterprises rather than the dormant or poorly-run cooperatives that have characterized much of Indonesia’s cooperative history. The program mandates transparent governance with village heads serving as ex-officio supervisory board chairmen, prohibitions against nepotism and family relationships among boards, and digital management systems for real-time transparency. Each cooperative must establish seven mandatory business units—cooperative offices, basic commodities stores, savings and loan units, village clinics, pharmacies, cold storage warehouses, and logistics facilities—before expanding into additional ventures based on local potential.
The food security imperative drives much of the program’s urgency. By establishing 80,000 agricultural storage and distribution points with price stabilization capacity through government-regulated pricing (Harga Eceran Tertinggi), the cooperatives create a nationwide buffer stock system. This infrastructure supports the Free Nutritious Meals (Makan Bergizi Gratis) program, which targets 70% of beneficiaries in rural areas and requires reliable local food procurement networks. The shortened supply chains between farmers and consumers reduce price volatility while ensuring fair returns to producers and affordable prices for consumers.
The seven mandatory business units explained
Every Koperasi Merah Putih must establish seven core business units before pursuing additional ventures, creating a standardized foundation for village-level economic services. This mandatory structure ensures comprehensive service delivery while allowing flexibility for additional units based on local characteristics and potential.
The Kantor Koperasi serves as administrative headquarters and operational command center, handling member services, financial transactions, record-keeping, and coordination of all business units. This office functions as the visible manifestation of cooperative presence in each community, providing a centralized location where members can access information, conduct transactions, and participate in governance. The office typically includes retail trade capabilities for office machinery and administrative supplies, generating modest revenue while supporting operational needs.
The Kios Pengadaan Sembako (basic necessities store) represents the most visible and immediately impactful business unit for most community members. These stores distribute nine basic necessities (sembilan bahan pokok)—rice, cooking oil, sugar, flour, eggs, milk, meat, salt, and chilies—at government-regulated maximum retail prices (HET). By sourcing directly from state-owned food enterprises like Perum Bulog and PT ID Food, these stores eliminate multiple distribution layers that typically inflate rural prices. The stores also handle wholesale distribution of fertilizers and agrochemical products, positioning cooperatives as agricultural input suppliers. The pricing strategy emphasizes affordability and inflation control rather than profit maximization, with government subsidies supporting operations where needed.
The Unit Bisnis Simpan Pinjam provides microfinance services designed to displace predatory lending practices that have trapped rural communities in debt cycles. Members can deposit savings and access loans at 6% annual interest—dramatically below the 10-15% charged by commercial banks and orders of magnitude below the 20-200% rates common among loan sharks and illegal online lenders. Grace periods of 6-8 months accommodate agricultural production cycles where farmers need time between planting and harvest. This unit mobilizes local capital, keeping village savings circulating within village economies rather than flowing to urban financial centers. The cooperative structure ensures loan decisions consider community relationships and local knowledge rather than purely commercial risk metrics.
The Klinik Kesehatan Desa/Kelurahan brings primary healthcare services to communities where medical access has been limited or nonexistent. These clinics range from basic community health centers (Puskesmas) to private clinics offering specialized services including general practice, maternal and child health, immunizations, health education, and preventive care. Staffing typically includes doctors, nurses, and community health workers, with partnerships to address personnel shortages. The clinics integrate with the national healthcare system while providing affordable access regardless of insurance status, charging fees calibrated to local economic capacity.
The Apotek Desa/Kelurahan complements clinical services by ensuring affordable access to essential medications, addressing a critical gap where village residents previously traveled long distances to district towns for pharmaceuticals. These pharmacies must employ licensed pharmacists or pharmacy assistants, creating professional employment opportunities in rural areas. The pharmacies stock human and animal medicines, traditional remedies, medical equipment, and health products, all sold at government-regulated maximum prices. Partnerships with state-owned pharmaceutical enterprises (PT Indofarma, PT Kimia Farma, PT Bio Farma) ensure reliable supply chains and authentic products, combating the counterfeit medicine problem in rural markets.
The Sistem Pergudangan/Cold Storage addresses one of agriculture’s most persistent problems—post-harvest losses that can reach 30-40% for perishable products. These temperature-controlled facilities preserve agricultural, plantation, and fishery products, extending shelf life and enabling farmers to store products until market prices improve rather than selling immediately at low prices. The warehouses serve as aggregation points where small-holder farmers can consolidate production for bulk sales, strengthening bargaining positions. This infrastructure transforms the economics of rural production by capturing value that previously disappeared through spoilage and distress selling. The storage capacity also supports the national buffer stock strategy for food security.
The Sarana Logistik Desa/Kelurahan provides distribution and transportation infrastructure connecting villages to broader markets. These facilities handle product movement from villages to urban centers, input delivery from suppliers to farmers, and internal distribution of cooperative products and services. The logistics units may operate vehicles, manage supply chains, coordinate transportation schedules, and optimize distribution routes. This infrastructure reduces transaction costs that have historically disadvantaged rural producers, who often accepted low farmgate prices due to transportation challenges and limited market access.
Beyond these seven mandatory units, cooperatives develop additional businesses tailored to local contexts—fishing equipment rental in coastal areas, coffee processing in plantation regions, repair shops in industrial areas, fish processing near aquaculture zones, and physiotherapy services in retirement communities. This flexibility ensures each cooperative responds to genuine community needs rather than imposing uniform templates unsuitable for local circumstances.
Reaching 80,000 cooperatives: formation timeline and current status
The program achieved its headline target with remarkable speed, establishing 80,081 cooperatives in just four months from presidential announcement to national launch. President Prabowo first emphasized village cooperatives during the Regional Leaders Retreat at the Military Academy in Magelang on February 21-28, 2025, framing them as essential infrastructure for food security improvement. The formal announcement came March 3, 2025, during a Limited Cabinet Meeting at the State Palace, where the 80,000-cooperative target was publicly declared. Presidential Instruction No. 9/2025 followed on March 27, providing legal authority and directing 16 ministries to coordinate formation efforts.
The formation phase unfolded with exceptional velocity between April and July 2025. Individual villages moved through standardized processes—Special Village Deliberations (Musyawarah Desa Khusus) to discuss formation, business model development, officer selection, notarized establishment deeds, legal entity registration through the Ministry of Law’s online system, tax identification number acquisition, and business license registration through the Online Single Submission system. By May 8, 2025, just six weeks after the presidential instruction, 9,835 cooperatives had been established. The momentum accelerated through June and early July, with villages racing to complete formations before the planned National Cooperative Day launch on July 12, 2025.
The national launch occurred July 21, 2025, when President Prabowo officially inaugurated the program at Koperasi Desa Merah Putih Bentangan in Klaten, Central Java. At that moment, 80,081 cooperatives had been established, slightly exceeding the 80,000 target. By August 1, 2025, the count reached 81,147 cooperatives across 96.88% of Indonesia’s 83,762 villages and sub-districts. As of October 2025, between 80,068 and 82,223 cooperatives have obtained legal entity status from the Ministry of Law and Human Rights, creating minor discrepancies in official statistics due to timing differences between formation, registration, and legal certification.
Provincial performance varied dramatically, revealing stark geographic and administrative disparities. Central Java led with 8,563 cooperatives, benefiting from hosting the national launch site and strong provincial coordination through Governor Decree 100.3.3.1/148/2025 establishing provincial task forces. East Java followed closely with 8,494 cooperatives, while Aceh achieved 6,497 despite challenging terrain. North Sumatra reached 6,110 cooperatives with particular success in districts like Simalungun (413 cooperatives with 64% digital activation). West Java formed 5,957 cooperatives, recording the highest number of legal entity registrations among all provinces.
Eastern provinces demonstrated impressive participation rates relative to their administrative complexity. East Nusa Tenggara formed 3,442 cooperatives across dispersed island communities, while South Sumatra achieved 3,260 despite geographic challenges. South Sulawesi formed 3,059 cooperatives (2,266 village, 793 sub-district), though only 38 (1.24%) had achieved full operational status by October 2025, highlighting the gap between formation and functionality. Lampung reached 2,651 cooperatives, and Southeast Sulawesi established 2,285 despite administrative capacity constraints.
Urban areas showed more limited participation, reflecting demographic realities where sub-district populations have different economic structures and service access than rural villages. DKI Jakarta formed only 267 cooperatives—the nation’s smallest count—understandable given Jakarta’s limited number of sub-districts and predominantly urban character where traditional cooperative models fit poorly. Bangka Belitung Islands achieved 393 cooperatives, limited by its small number of administrative units rather than lack of political will.
Three Papua provinces—Papua Pegunungan, Papua Tengah, and Papua Selatan—remained incomplete as of August 2025, facing extraordinary challenges from mountainous terrain, limited internet connectivity, dispersed populations, and administrative capacity constraints. These provinces received targeted support and extended timelines, recognizing that rigid uniformity would be counterproductive given geographic and infrastructural realities.
The formation employed three distinct models tailored to local institutional contexts. New establishment (pendirian baru) created cooperatives in villages and sub-districts without existing cooperative structures, requiring minimum nine founding members with encouragement for maximum community participation. Villages with fewer than 500 residents could jointly establish cooperatives with neighboring villages, recognizing that minimal populations cannot sustain independent operations. Development (pengembangan) expanded existing active cooperatives by amending bylaws, adjusting names to include “Merah Putih” designation, and broadening business scope to encompass the seven mandatory units. Revitalization (revitalisasi) reactivated dormant cooperatives through management restructuring, possible mergers with other cooperatives, and restoration of operations with government support.
Current operational reality diverges significantly from formation statistics. While 80,000+ cooperatives exist legally, only 16,132 have active stores or outlets (20.2% of total). As of September 2025, 68,603 cooperatives had registered with SIMKOPDES (the Cooperative Management Information System), representing 85% of formations. However, only 42,349 cooperatives (52%) had created SIMKOPDES accounts, and merely 9,317 (11%) had updated their operational profiles. Approximately 5,000 cooperative buildings were under construction as of October 26, 2025, with a target completion date of March 2026. The program enrolled 1,120,318 members by October 2025 with 686,923 officers and supervisors managing cooperative operations.
Governance structure and organizational requirements
Koperasi Merah Putih operates through a three-tier governance structure mandated by Law No. 25/1992 on Cooperatives, designed to ensure democratic participation, professional management, and independent oversight. This architecture balances member sovereignty with operational efficiency while integrating village governance into cooperative accountability.
The Rapat Anggota (Members’ Assembly) serves as the supreme decision-making body, embodying the democratic principle of one member, one vote regardless of capital contribution or economic status. This assembly meets annually as the Rapat Anggota Tahunan (RAT) to approve annual reports and audited financial statements, elect officers (pengurus) and supervisors (pengawas) through democratic processes, establish policies and strategic direction for the coming year, approve budgets and business plans, and determine profit distribution formulas (Sisa Hasil Usaha/SHU). Extraordinary general meetings can be convened for urgent matters requiring member authorization. This structure ensures ultimate authority rests with members collectively rather than concentrated in management or outside interests.
The Pengurus (Board of Officers) handles daily operational management and strategic implementation. Regulations mandate minimum five members with odd numbers required (5, 7, 9, etc.) to prevent tie votes. The standard configuration includes a chairperson providing overall leadership and external representation, a vice-chair for business affairs overseeing all business units and commercial operations, a vice-chair for membership managing member services and capacity building programs, a secretary handling administration and documentation, and a treasurer managing financial operations and reporting. Larger cooperatives may expand this structure to include additional officers for specific functions like marketing, logistics, or technology.
Eligibility requirements for officers emphasize integrity and competence rather than social status or political connections. Officers must be cooperative members residing in the local village or sub-district, possess knowledge of cooperative principles and operations, demonstrate business acumen and entrepreneurial vision, exhibit integrity, honesty, loyalty and dedication, and have no first-degree family relationships with other officers or supervisors. Critically, village officials cannot serve as officers, preventing conflicts of interest between governmental authority and cooperative management. The regulations explicitly require consideration of women’s representation, though specific quotas are not mandated, recognizing that cooperative leadership should reflect community diversity.
Officer responsibilities extend beyond routine management to encompass strategic leadership, accountability, and legal representation. They implement decisions from the Members’ Assembly, prepare comprehensive work plans and budgets, submit regular financial reports with full transparency, maintain accurate registries of members and officers, and represent the cooperative in legal proceedings both as plaintiff and defendant. Officers may appoint professional managers (pengelola) for specific business operations, enabling cooperatives to hire technical expertise while officers retain oversight and accountability roles.
The Pengawas (Board of Supervisors) provides independent oversight of management performance and financial integrity. This board requires minimum three members including a chairman and two members. The most distinctive governance feature is that the village or sub-district head automatically serves as chairman of the supervisory board ex-officio—by virtue of holding that governmental position. This structural integration ensures direct accountability to local government, leverages the head’s authority and prestige to strengthen oversight, creates direct communication channels between cooperative operations and village administration, and theoretically reduces elite capture risks by involving the elected or appointed village leader in governance.
Supervisor members must possess relevant knowledge and work skills, demonstrate honesty and dedication to cooperative success, have no criminal history causing bankruptcy or financial crimes within five years, have no first-degree family relationships with officers or other supervisors, and not be involved in previous cooperative mismanagement. Their responsibilities encompass monitoring policy implementation and management decisions, conducting regular financial and administrative audits, examining records and documentary evidence, providing recommendations to the Members’ Assembly on management performance, and issuing warnings or improvement suggestions when problems emerge. This oversight function operates continuously rather than periodically, with supervisors expected to actively monitor rather than passively receive reports.
The governance structure explicitly prohibits nepotism through comprehensive family relationship rules. No first-degree relatives (parents, children, siblings, spouses) may simultaneously serve on the board of officers or supervisors, preventing family control that has undermined Indonesian cooperatives historically. Officers and supervisors face term limits and must stand for reelection, though specific term lengths vary by cooperative bylaws. Financial transparency requirements mandate all financial information be accessible to members, with annual audits by authorized institutions or public accountants depending on cooperative size and financial complexity.
This multilevel structure extends from village cooperatives upward through district, provincial, and national coordination mechanisms. At district/regency (kabupaten/kota) levels, the Cooperative and SME Office (Dinas Koperasi dan UKM) provides technical supervision and support, while regents or mayors allocate resources and implement policies. Sub-district heads (camat) coordinate multiple village cooperatives within their jurisdictions. District-level task forces (typically one per district) accelerate cooperative formation, facilitate inter-village collaboration, and report to provincial and national levels.
Provincial Cooperative Offices aggregate data and progress reporting, coordinate district and city governments, facilitate inter-district cooperation, provide policy guidance, and monitor target achievement. Regional coordination meetings bring together multiple provinces—for example, Regional I includes five Kalimantan provinces plus Central Java—to share best practices and coordinate cross-border logistics and supply chains. At the national level, the Ministry of Cooperatives manages the digital system (SIMKOPDES), formulates national policy, develops business models, provides training programs, and conducts comprehensive monitoring and evaluation through coordination with the Food Coordinating Ministry and 15 other ministries and agencies.
Membership and participation requirements
Membership in Koperasi Merah Putih follows voluntary, inclusive principles rather than compulsory participation, distinguishing this program from historical cooperatives that sometimes involved coerced membership. The foundational eligibility criteria begin with Indonesian citizenship proven by valid National Identity Card (KTP), with domicile requirements specifying residence in the same village or sub-district as the cooperative. Minimum age is 17 years or already married, reflecting Indonesian civil capacity standards. Members must possess legal capacity to perform legal acts and sign binding agreements. Crucially, prospective members must agree to accept the cooperative’s Bylaws (Anggaran Dasar) and Household Rules (Anggaran Rumah Tangga), which function as the cooperative constitution.
Financial obligations consist of three capital contribution types with amounts determined by each cooperative’s policies rather than nationally standardized rates. Simpanan Pokok (principal savings) represents a one-time payment upon joining, creating initial capital contribution that demonstrates commitment. Simpanan Wajib (mandatory savings) involves regular periodic contributions—typically monthly—that build member equity and create sustainable capital accumulation. Hibah (optional grants or donations) allows additional voluntary contributions beyond mandatory requirements, often for specific capital projects or expansion initiatives. These contributions establish member ownership stakes, with profit distribution (Sisa Hasil Usaha) typically allocated based on participation and capital contribution rather than equally per capita.
Registration processes leverage digital infrastructure to streamline membership enrollment. Prospective members access official websites at https://kopdesmerahputih.kop.id/daftar or https://merahputih.kop.id/daftar/anggota, where they select the appropriate formation scheme (new establishment, development, or revitalization) and complete digital registration forms. Required documentation includes photocopies of national ID cards, recent passport photographs, proof of principal and mandatory savings payment, and completed registration forms with verified information. Applicants must submit declaration statements confirming data accuracy and confirming all members come from the same domicile. After clicking “Daftar Sekarang” (Register Now), applications undergo verification and approval processes, potentially including orientation sessions, before membership activation.
The voluntary nature of membership has been repeatedly emphasized by government officials responding to concerns about coercion or mandatory participation. Village residents are explicitly not obligated to join cooperatives, with government encouragement coming through positive incentives like shopping discounts for members, priority access to certain services, and participation in profit-sharing rather than through penalties or exclusion from government services. This approach reflects self-reliance and mutual cooperation (gotong royong) principles foundational to Indonesian cooperative philosophy, where genuine voluntary participation creates stronger, more sustainable organizations than coerced membership.
Current membership statistics reveal participation challenges. With 80,000+ cooperatives formed but only 1,120,318 members registered by October 2025, average membership stands around 14 members per cooperative—extraordinarily low given village populations typically range from hundreds to thousands. This suggests either incomplete membership registration, communities still evaluating whether to join, registration systems not fully operational, or genuine hesitancy about cooperative participation given Indonesia’s history of failed cooperatives. The ratio of officers and supervisors (686,923) to regular members (1,120,318) at roughly 1:1.6 indicates governance structures are established but member enrollment lags significantly behind formation.
Capital structure and comprehensive funding sources
The financial architecture supporting Koperasi Merah Putih represents one of Indonesia’s largest rural economic interventions, with total program budgets ranging from Rp250 trillion to Rp400 trillion depending on calculation methods and implementation timeframes. Each individual cooperative can access maximum financing of Rp3 billion, allocated as up to Rp2.5 billion for capital investment and physical infrastructure and up to Rp500 million for operational expenses. This ceiling applies whether cooperatives operate independently in single villages or jointly across multiple villages with limited populations.
Government funding begins with Rp200 trillion placed in five state-owned banks (collectively known as Himbara) through a groundbreaking liquidity arrangement finalized in September 2025. Bank Rakyat Indonesia received Rp55 trillion, Bank Negara Indonesia received Rp55 trillion, Bank Mandiri received Rp55 trillion, Bank Tabungan Negara received Rp25 trillion, and Bank Syariah Indonesia received Rp10 trillion. These placements use government surplus budget funds (Saldo Anggaran Lebih/SAL) previously deposited with Bank Indonesia, redeploying these resources to productive rural lending. The government charges these banks only 2% annual interest on the placed funds, while cooperatives pay 6% annual interest on their loans, creating a 4-percentage-point differential that makes cooperative lending profitable for banks while maintaining affordability for borrowers.
An additional Rp16 trillion interest subsidy fund was allocated from the 2025 State Budget (APBN) to cover any remaining interest differentials and ensure financial sustainability. This subsidy mechanism allows member borrowers potentially to access funds at even lower effective rates of 3-4%, particularly through special Kredit Usaha Rakyat (KUR) schemes designed specifically for Koperasi Merah Putih. Combined with grace periods of 6-8 months and maximum loan tenors of 72 months, the financing terms are dramatically more favorable than commercial alternatives, where rural borrowers typically pay 10-15% from commercial banks or 20-200% from informal lenders and predatory online lending platforms.
Regional government budgets (APBD) supplement national funding through provincial and district/city allocations. These cover administrative costs including notary fees for cooperative establishment (typically Rp2-5 million per cooperative), legalization fees at the Ministry of Law and Human Rights, technical assistance and training programs, and supporting infrastructure. Specific APBD allocations vary significantly by regional fiscal capacity, with wealthier provinces and districts providing substantially more support than fiscally constrained regions.
Village Funds (Dana Desa) play a crucial dual role as both capital source and loan guarantee mechanism. Villages can allocate portions of their Dana Desa budgets for initial capital participation in cooperatives, land provision or facility rental, and operational support during startup phases. More innovatively, Dana Desa serves as collateral through an “intercept mechanism” where automatic deductions from future Dana Desa transfers repay cooperative loans if defaults occur. This government guarantee transforms what would otherwise be unsecured lending into effectively guaranteed obligations, allowing banks to lend without traditional collateral requirements while maintaining prudential banking standards. For sub-district cooperatives lacking Dana Desa access, the intercept mechanism uses DAU (General Allocation Funds) or DBH (Revenue Sharing Funds) allocated to district/city governments, with similar automatic deduction provisions.
Village Budgets (APBDes) beyond Dana Desa transfers provide additional support through performance incentives for active cooperatives (alokasi kinerja), infrastructure support, and operational subsidies. The Ministry of Finance offers performance-based and incentive allocations to villages and sub-districts actively participating in cooperative formation and demonstrating operational success, creating financial rewards for effective implementation.
Banking sector participation extends beyond government-placed funds through Kredit Usaha Rakyat (KUR) programs where state-owned banks provide additional lending capacity. These KUR products offer favorable terms specifically tailored to cooperative circumstances, including KUR Kecil (Small KUR) for smaller capital needs and KUR Khusus (Special KUR) designed exclusively for Koperasi Merah Putih with relaxed requirements. The Financial Services Authority (OJK) has provided regulatory relaxation for Himbara lending to cooperatives, easing credit loss provision requirements (CKPN), reducing minimum reserve requirements (GWM), and moderating deposit insurance contributions (LPS), effectively lowering banks’ cost of capital for cooperative lending.
Alternative financing sources include the Revolving Fund Management Institution (Lembaga Pengelola Dana Bergulir/LPDB), which manages revolving funds specifically for cooperatives, though administrative delays have frustrated some cooperatives seeking LPDB access. Corporate Social Responsibility (CSR) programs from private companies provide grants and technical assistance, particularly from companies with operations in rural areas seeking community development impacts. Member capital contributions through principal savings, mandatory savings, and voluntary grants create member-owned equity that strengthens cooperative independence from external funding.
The construction of physical infrastructure follows a distinct financing model. PT Agrinas Pangan Nusantara, a state-owned enterprise, partners with the Indonesian National Military (TNI) through an agreement signed October 10, 2025, at TNI Headquarters to construct 80,000 cooperative facilities including cold storage warehouses, basic goods stores (gerai sembako), village clinics, pharmacies, cooperative offices, savings and loan units, and logistics facilities. This infrastructure development is fully financed through Danantara (the BUMN super-holding company) and government budget allocations, with villages and cooperatives not requiring upfront capital. Repayment occurs through the Dana Desa intercept mechanism over the six-year loan period, effectively making infrastructure construction a government investment in rural economic capacity rather than a debt burden on nascent cooperatives.
Government support programs and capacity building
Beyond financial capital, the government provides comprehensive non-financial support recognizing that money alone cannot ensure cooperative success. Training and capacity building received Rp1.2 trillion in dedicated budget allocations, targeting 240,000 supervisors (three per cooperative) at approximately Rp5 million per person for comprehensive training programs. Training areas encompass cooperative principles and governance, financial literacy and accounting systems, business proposal preparation and presentation, digital system adoption and management, marketing and distribution strategies, agricultural processing techniques, inventory management and logistics, healthcare service delivery standards, and pharmaceutical operations and regulation.
The Ministry of Cooperatives leads training implementation with support from Himbara banks offering business proposal writing workshops, BUMN technical experts providing sector-specific training, local Cooperative and SME Offices conducting regional programs, and academic institutions contributing curriculum development and delivery. Training delivery occurs through residential workshops lasting several days, regional coordination meetings combining training with progress reviews, online learning modules through SIMKOPDES platform, on-site mentoring by professional facilitators, and peer learning through exchanges between successful and nascent cooperatives.
Professional facilitation infrastructure ensures cooperatives receive sustained support beyond initial training. Business Assistants are deployed at a ratio of one assistant per ten cooperatives, providing hands-on operational support, problem-solving assistance, financial management guidance, and coordination with government agencies. Project Management Officers (PMO) assigned to each district/city oversee implementation effectiveness, coordinate multiple Business Assistants, troubleshoot systemic problems, report progress to provincial and national levels, and facilitate access to resources. Enumerators at district Cooperative Offices conduct active data monitoring, verify operational status, update digital systems, and identify cooperatives needing intervention. PPPK (Government Contract Employees) began deployment in October 2025 to provide longer-term professional support, addressing the reality that volunteer Business Assistants cannot sustain indefinite engagement without compensation.
Risk management and oversight mechanisms address Indonesia’s troubling cooperative history where fraud caused losses exceeding Rp26 trillion from just eight cooperatives in recent years. The Financial and Development Supervisory Agency (BPKP) conducts assurance and consultancy activities, providing recommendations to address potential risks before they materialize. The Attorney General’s Office (Kejaksaan) partners through the Jaga Desa application, which enables oversight of village financial flows including cooperative transactions, reducing fraud opportunities. Semi-annual audits by authorized institutions or public accountants provide independent financial verification for larger cooperatives, while smaller cooperatives undergo annual audits. Mandatory due diligence by banks before loan disbursement includes business viability assessment, management capacity evaluation, market analysis, and financial projection validation.
The Ministry of Finance has issued regulations enabling villages to use Dana Desa and DAU/DBH as loan guarantees through the intercept mechanism, which the Financial Services Authority (OJK) recognizes as valid government guarantees satisfying prudential banking requirements. This regulatory innovation solved the collateral problem that has historically excluded poor communities from formal financial services, since village assets and future government transfers provide security banks require without demanding individual borrowers pledge land, homes, or other property.
Partnerships with 18 state-owned enterprises provide operational support beyond financial services. PT Indofarma, PT Kimia Farma, and PT Bio Farma supply pharmaceuticals at regulated prices to village pharmacies. PT ID Food distributes rice, cooking oil, sugar, and other basics to cooperative stores. Perusahaan Perkebunan Nusantara (PTPN) provides estate crop products. PT Pupuk Indonesia establishes cooperatives as official fertilizer distribution points with subsidized pricing. Perum Bulog manages rice procurement and buffer stock distribution. PT Pertamina designates cooperatives as sub-distribution points for 3kg LPG cylinders and MinyaKita cooking oil. PT Pos Indonesia integrates postal services within cooperative facilities. PT Telkom Indonesia provides the DigiKoperasi digital platform integrating 12 BUMN and startup partners for accounting, financial management, and e-commerce. PT Agrinas Pangan Nusantara constructs physical infrastructure in partnership with TNI.
Digital transformation and technological infrastructure
Digital systems form the backbone of transparency, monitoring, and operational efficiency, distinguishing this initiative from analog predecessors that often lacked accountability. SIMKOPDES (Sistem Informasi Manajemen Koperasi Desa/Kelurahan) serves as the primary digital ecosystem, encompassing formation registration, business proposal submission, financial transaction recording, inventory management, performance monitoring and reporting, and member service delivery. The Dashboard Pembentukan provides real-time monitoring from sub-district through national levels, enabling officials to track progress instantaneously and identify problems requiring intervention.
Each cooperative receives a microsite displaying its profile and operational data, village potential information, financial performance metrics, and transparency indicators accessible to members and the public. This digital transparency is unprecedented in Indonesian cooperative history, theoretically reducing opportunities for financial manipulation and mismanagement. Mobile applications available through Google Play enable members to access savings and loan information, conduct financial transactions, track cooperative performance, communicate with officers, and participate in democratic decision-making. As of September 15, 2025, 81,485 cooperatives had obtained legal entity status, but only 42,349 (52%) had created SIMKOPDES accounts and merely 9,317 (11%) had updated their operational profiles—revealing significant digital adoption gaps.
Legal entity registration leverages the Ministry of Law’s SABH (Sistem Administrasi Badan Hukum) for electronic submission and processing, dramatically accelerating registration compared to paper-based procedures. Business license registration occurs through the OSS (Online Single Submission) platform at oss.go.id, which provides NIB (Business Identification Numbers) through a single portal rather than requiring multiple agency visits. Tax registration through NPWP (Tax Identification Numbers) similarly occurs online, streamlining previously cumbersome administrative requirements. These digital government systems interoperate with SIMKOPDES, enabling data sharing across ministries and reducing duplicate data entry.
Third-party digital solutions supplement government platforms, offering cooperatives choices suited to their technical capacity and specific needs. Smartcoop provides comprehensive cooperative management software used by thousands of Indonesian cooperatives, covering accounting, member management, and reporting. The Kopdesa Platform offers all-in-one establishment and digital transformation services. DCN Indonesia, Invelli, and KoperasiIndonesia.id provide various management systems. Features typically include point-of-sale systems for store operations, automated accounting complying with cooperative standards, marketplace integration for e-commerce sales, member management databases, loan tracking and repayment monitoring, inventory control systems, and financial dashboards for management decision-making.
DigiKoperasi, developed by PT Telkom Indonesia, represents the most ambitious integration effort, bringing together 12 BUMN partners and technology startups into a unified ecosystem. The platform centers on RUN System’s Accounting+ artificial intelligence-based cooperative accounting, designed specifically for cooperative financial management requirements. Integration features include digital payment systems eliminating cash transaction requirements, supply chain management connecting cooperatives to suppliers and markets, e-commerce capabilities enabling online sales beyond village boundaries, business analytics providing performance insights, and seamless data exchange with government monitoring systems.
Digital infrastructure requirements created unexpected barriers in remote regions. Many Papua, Maluku, and outer island villages lack reliable internet connectivity, making real-time digital systems impractical. Some regions lack electricity infrastructure necessary to power computers and servers. Digital literacy among village populations and cooperative officers varies enormously, with many older leaders uncomfortable with technology. These realities forced adaptive implementation where highly connected regions rapidly digitize while remote regions employ hybrid paper-digital systems with periodic manual data uploads during monthly visits to district offices.
Integration with village development programs
Koperasi Merah Putih integrates with broader village development frameworks rather than operating as isolated economic entities. The most significant linkage involves Dana Desa (Village Funds), which provide Rp1.6 trillion annually to approximately 75,000 villages nationwide, representing one of the world’s largest village-level fiscal transfer programs. Villages now face pressure to form cooperatives as a condition for receiving Dana Desa Stage II disbursements, creating powerful incentives for rapid formation but also risks of “paper cooperatives” established merely to access funds without genuine operational intent.
The Free Nutritious Meals program (Makan Bergizi Gratis/MBG), one of President Prabowo’s flagship initiatives, targets 70% of beneficiaries in rural areas and requires reliable local food procurement networks. Cooperatives serve as primary suppliers for nutrition centers (Satuan Pangan dan Gizi/SPPG), providing rice, chicken, eggs, vegetables, and other ingredients. Examples include Koperasi Merah Putih Sukorejo in Blitar supplying 450 kg rice and 200+ kg chicken weekly to three district nutrition centers, creating substantial guaranteed demand driving cooperative revenues and justifying investment in storage and logistics infrastructure.
Cheap Food Stalls (Kios Pangan Murah), another government food security initiative, operates through cooperative stores selling basic necessities at subsidized prices. Integration enables cooperatives to access government commodity allocations and distribution margins while fulfilling government food stabilization objectives. Presidential Instruction No. 17/2025 mandates land allocation for cooperatives, requiring minimum 1,000 square meters per cooperative for facilities construction, fundamentally addressing the space constraints that have delayed physical infrastructure development in land-scarce villages.
Governance integration centers on village heads serving as ex-officio cooperative supervisory board chairmen, creating direct accountability between cooperative performance and village governance. Special Village Deliberations (Musyawarah Desa Khusus) required for cooperative establishment ensure community participation in formation decisions, business model design, officer selection, and risk assessment. Village Consultative Bodies (Badan Permusyawaratan Desa/BPD) participate in deliberations, adding checks on village head authority. Village development planning processes (Musyawarah Perencanaan Pembangunan Desa/Musrenbangdes) now incorporate cooperative development targets, physical infrastructure needs, and budget allocations into annual village work plans.
Coordination with military district commands (Kodim) involves TNI infrastructure support, logistics assistance during construction phases, and territorial officers participating in socialization. While this military involvement raises civil-military boundary questions, proponents argue TNI’s engineering capabilities and logistics reach accelerate implementation in remote areas lacking private contractor presence. The coordination with BUMDes (Village-Owned Enterprises) ranges from complementary to competitive depending on local circumstances. In best-case scenarios, cooperatives and BUMDes divide functions—BUMDes handling commercial ventures requiring substantial capital while cooperatives focus on essential services and member savings-loans. Conflicts arise where both institutions compete for the same business opportunities, limited village funds, or community participation.
Implementation successes and instructive case studies
Koperasi Desa Merah Putih Bentangan in Klaten, Central Java, served as the national launch site on July 21, 2025, when President Prabowo inaugurated the program. This cooperative demonstrates comprehensive implementation with six operational outlets including a basic necessities store (gerai sembako) selling rice, cooking oil, sugar, and eggs at government-regulated maximum retail prices, a village clinic providing primary healthcare with doctors and nurses, a village pharmacy stocked with essential medications, a savings and loan unit offering 6% annual interest loans, a PT Pos service point bringing postal services to the village, and an LPG distribution point for 3kg cylinders and fertilizer sales. Community testimonials during the presidential visit reported affordability improvements—residents previously traveling to district towns for medicines and basics now access these locally at lower prices. Partnership with multiple BUMN provides reliable supply chains and technical support, making Bentangan a model for cooperative-BUMN collaboration.
Koperasi Desa Merah Putih Metuk in Boyolali, Central Java, earned extraordinary recognition from Minister Budi Arie Setiadi as “an extraordinary example of Kopdes Merah Putih.” Within months of establishment, membership exploded from 27 founders to 700 members from a village population of 3,000, representing 23% participation—far above national averages around 1-2%. Business diversification beyond mandatory units includes physiotherapy services, mini-market operations, and transportation services, demonstrating adaptive response to local needs. All staff positions are filled by Desa Metuk residents, ensuring employment benefits remain within the community and leveraging local knowledge for customer service. The rapid growth and diversification suggest strong community acceptance, effective leadership, and genuine response to unmet village needs.
Koperasi Merah Putih Sukorejo in Blitar, East Java, inaugurated by Deputy Minister Ferry Juliantono after just 2.5 months of operation, demonstrates rapid operational maturity. The cooperative emphasizes consignment models for UMKM (micro, small, medium enterprise) products, enabling small producers of rice, sambal pecel (traditional peanut sauce), and other local specialties to access broader markets without upfront capital or inventory risk. Market integration with the Free Nutritious Meals program supplies 450 kg rice weekly, over 200 kg chicken weekly, and substantial quantities of eggs and vegetables to nutrition centers in Tanggung, Tlumpu, and Srengat sub-districts. This guaranteed institutional demand from government programs provides stable revenue foundations supporting physical infrastructure investment and working capital accumulation.
Koperasi Desa Merah Putih Gadungan in Tabanan, Bali, evolved from a small savings and loan operation established in 2010, representing the “development” formation model where existing cooperatives expanded rather than creating new entities. Current membership exceeds 1,100 from a village of several thousand residents. The cooperative operates all seven mandatory business units—savings-loans, basic goods store, logistics, warehouse, clinic, and pharmacy—plus additional ventures suited to Tabanan’s tourism-adjacent economy. Recognition as a digital transformation pioneer led to a site visit by Deputy Finance Minister Suahasil Nazara evaluating the cooperative’s technology adoption. This case demonstrates that cooperatives with pre-existing operational history, established trust, and experienced management can rapidly scale when provided additional capital and policy support.
Koperasi Desa Merah Putih Sinduadi in Sleman, DIY, traces institutional origins to a 2004 community savings-loan group (Badan Keswadayaan Masyarakat/BKM), which evolved through successive national community development programs—P2KP (Urban Poverty Alleviation Project) and PNPM (National Community Empowerment Program)—before transforming into Koperasi Merah Putih. This institutional continuity provided organizational capacity, community trust, financial management experience, and trained personnel. Partnerships span BUMN for commodity supply, Regional Government Enterprises (BUMD) for technical support, Intimart for retail operations management, SMK Binatama vocational school providing pharmacists and pharmacy assistants, and Klinik Raisa for healthcare services. This partnership ecosystem demonstrates how cooperatives need not develop all capabilities internally but can orchestrate networks leveraging partner expertise.
Farmer testimonial from Tedi Suyanta in Klaten illustrates grassroots benefits: “Melon sells well because of good quality. I can buy fertilizer and seeds easily through the cooperative. Very helpful for farmers like me.” This simple statement captures the program’s core value proposition for agricultural producers—reliable access to quality inputs at fair prices without traveling long distances or negotiating with multiple suppliers, enabling focus on production quality rather than input procurement logistics.
Regional success patterns reveal that Java provinces—particularly Central Java, East Java, and DIY—dominate successful implementation due to higher population density supporting cooperative viability, stronger administrative capacity in village governments, better internet and transportation infrastructure, proximity to BUMN distribution networks, and higher baseline cooperative culture and literacy. Banten province achieved 99.94% formation rate (1,551 of 1,552 villages/sub-districts) and pioneered training programs, with 652 chairmen and supervisors completing intensive training (July 23-28, 2025)—the first provincial-scale training in Indonesia. Yogyakarta was designated a national pilot province through an agreement between the government and Sultan Hamengkubuwono X, targeting best practice implementation for replication elsewhere.
Confronting implementation challenges and developing solutions
Minister Budi Arie Setiadi identified eight fundamental challenges that must be addressed for program success. Public perception problems arise from decades of failed cooperatives creating skepticism about cooperative viability, with many Indonesians viewing cooperatives as outdated institutions unsuited to modern economies. Solutions involve massive socialization campaigns emphasizing the new model’s digital transparency, professional management, and government backing that distinguish Koperasi Merah Putih from historical failures. Media coverage of successful cooperatives like Bentangan and Metuk provides concrete proof of concept, while member testimonials from early adopters build grassroots credibility.
Understanding gaps persist where communities confuse cooperatives with government programs or mistake them for charity operations rather than member-owned businesses. Comprehensive training at all levels—village deliberations explaining cooperative principles, workshops for officers and supervisors, member education programs, and school curricula introduction—addresses these knowledge deficits. The principle of “one member, one vote” regardless of capital contribution requires explanation in contexts where wealth traditionally determines influence. The distinction between cooperatives and commercial businesses—prioritizing member benefit over profit maximization—remains counterintuitive in increasingly commercialized economies.
Conflict of interest challenges emerged from existing institutions threatened by cooperative formation. Village-Owned Enterprises (BUMDes) sometimes resist cooperatives as competitors for limited village business opportunities and government support, fearing loss of market share, access to village budgets, or political influence. Middlemen (tengkulak) whose livelihoods depend on exploiting information and transportation asymmetries naturally oppose cooperatives that threaten their business models. Informal moneylenders charging 20-200% annual interest see cooperatives’ 6% loans as existential threats. Solutions emphasize complementarity rather than competition—cooperatives handle essential services and member needs while BUMDes pursue commercial ventures—though tensions inevitably arise where missions overlap. Some villages resolve this through merged institutions or clear business territory divisions negotiated in village deliberations.
Business viability questions acknowledge that not all 83,762 villages and sub-districts can sustain independent cooperatives, particularly small villages with minimal populations, declining villages experiencing out-migration, or villages with predominantly subsistence economies generating insufficient cash flows. Solutions include multi-village cooperatives where three to five neighboring villages jointly establish single cooperatives achieving economies of scale, sub-district level management where kelurahan cooperatives serve multiple neighborhoods, and flexible business models emphasizing only the mandatory units realistic for local circumstances while delaying others until demand materializes. The government accepts that some cooperatives may remain small, relatively inactive institutions rather than expecting uniform large-scale operations.
Limited human resource capacity represents perhaps the most serious constraint. Indonesia faces critical shortages of trained cooperative managers, accountants understanding cooperative financial standards, healthcare professionals willing to work in villages, pharmacists for village pharmacies, logistics and supply chain managers, and digital technology specialists. Historical cooperative fraud has created additional challenges, with talented professionals reluctant to associate with institutions carrying reputational baggage. Solutions deploy Business Assistants at one per ten cooperatives providing hands-on support, Project Management Officers per district coordinating multiple cooperatives, continuous training programs through the Ministry of Cooperatives and Ministry of Manpower, PPPK (Government Contract Employee) recruitment starting October 2025 bringing professional civil servants into cooperative support roles, and partnerships with vocational schools (SMK) like SMK Binatama providing pharmacy assistants and healthcare workers.
Elite capture risks worry observers who recall how previous development programs enriched village elites while bypassing intended beneficiaries. Wealthy village families might dominate officer positions, divert resources to connected businesses, or extract rents through preferential pricing. Mitigation strategies include transparent governance with digital financial recording in SIMKOPDES accessible to members and government monitors, prohibition of family relationships among boards preventing kinship networks from controlling cooperatives, village heads serving as ex-officio supervisory chairmen providing oversight by elected officials, mandatory village deliberations for major decisions ensuring community participation, and regular audits by supervisors, village consultative bodies, and external auditors. Effectiveness depends on active monitoring and willingness to sanction violations rather than mere regulatory existence.
Fraud risk haunts the program given Indonesia’s cooperative history where Rp26 trillion was lost in just eight cooperative scandals involving accounting manipulation, fictitious loans, insider lending without repayment, and asset stripping. Technology-based monitoring through SIMKOPDES creates digital audit trails difficult to manipulate undetectably. The Attorney General’s Jaga Desa application monitors village-level financial flows including cooperative transactions, enabling prosecutor oversight. BPKP provides risk assessment and mitigation recommendations before problems escalate. Semi-annual audits detect irregularities early. Mandatory due diligence before loan disbursement includes management background checks, business plan scrutiny, and market validation. The Dana Desa intercept mechanism protects banks from losses but doesn’t prevent fraud—it merely shifts losses to villages through reduced future Dana Desa allocations.
Sustainability concerns dominate critiques from economists and development specialists who note Indonesia’s graveyard of failed cooperatives. Three to five year survival rates for Indonesian cooperatives historically hover around 30-40%, with most either becoming dormant or operated purely for officer benefit. Solutions emphasize bankable business models with realistic revenue projections rather than aspirational plans, professional management through trained officers and Business Assistants, continuous capacity building extending beyond initial formation, performance-based support concentrating resources on cooperatives demonstrating viability, and gradual expansion where cooperatives start with a few units, stabilize operations, then expand rather than attempting all seven units simultaneously without adequate capacity.
Operational challenges manifested in funding delays despite Rp216 trillion in prepared funding (Rp200 trillion placed in Himbara banks plus Rp16 trillion interest subsidy). Banks conducted extensive due diligence rather than rushing to disburse, examining business plans, assessing management capacity, conducting market analysis, and evaluating repayment viability. Ministry of Finance Regulation No. 49/2025 establishing lending procedures was reportedly cancelled and revised, creating regulatory uncertainty that paused disbursements. By October 2025, only 1,064 cooperatives had submitted loan proposals to banks despite 80,000+ formations, with about 1,000 approved for initial disbursement totaling approximately Rp1 trillion. Finance Minister Purbaya Yudhi Sadewa expressed willingness to intervene if banks unreasonably delay disbursements, while bank executives emphasized responsible lending requiring proper risk assessment regardless of government pressure.
Administrative bottlenecks initially complicated formation through complex Special Village Deliberation requirements, lengthy regional approval processes, notarization delays with limited notaries certified for cooperative establishment deeds, and legal entity registration backlogs at the Ministry of Law. Solutions simplified procedures allowing simultaneous rather than sequential village deliberations, removing head approval requirements that slowed processes, increasing numbers of certified cooperative notaries (Notaris Pembuat Akta Koperasi/NPAK), and expanding Ministry of Law SABH system capacity for electronic registrations. These adaptations accelerated formations from initial timelines of 2-3 months to as little as 3-4 weeks in efficient districts.
Implementation gaps between legal formation and operational reality emerged starkly in South Sulawesi, where 3,059 cooperatives were formed but only 38 (1.24%) achieved full operational status by October 2025. Root causes include capital access—business proposals not completed or approved, delayed technical guidelines causing confusion about operational requirements, limited trained personnel to manage operations, and infrastructure constraints with buildings still under construction. Solutions deployed PMO and enumerator teams to accelerate operational transitions, intensive capacity building in lagging regions, simplified proposal templates reducing documentation burdens, and pragmatic phasing allowing partial operations while completing full infrastructure.
“Paper cooperative” risks materialize where villages form cooperatives purely to access Dana Desa Stage II disbursements without genuine intent to operate businesses. These zombie institutions meet minimal legal requirements—registered, minimal membership, officers appointed—but conduct no actual business, serve no members, and exist only on paper. Mitigation requires mandatory business plans demonstrating realistic operations, active monitoring through SIMKOPDES tracking actual transactions, performance-based support where only active cooperatives receive continued assistance, and potential sanctions including withholding future support or even legal entity revocation for persistently inactive cooperatives.
Regional disparities leave Papua provinces lagging due to mountainous terrain making travel and construction prohibitively expensive, limited internet connectivity preventing digital system use, dispersed populations unable to support viable cooperative scale, and administrative capacity constraints with limited trained personnel. Approaches include phased implementation with extended timelines for remote provinces, additional technical and financial support for challenging geographies, flexibility allowing different operational models suited to local realities, and potential acceptance that universal coverage may not be feasible in some extreme contexts where alternative development approaches better serve communities.
Comparative analysis with other cooperative programs
Indonesia’s cooperative history provides both cautionary tales and occasional success models. Koperasi Unit Desa (KUD) dominated the Suharto era’s rural economic landscape from the 1970s through 1990s as top-down, government-controlled institutions. Village heads typically served as KUD leaders, creating principal-agent problems where leaders answered to government officials rather than members. KUD focused primarily on agricultural input distribution (fertilizers, seeds, pesticides) and output marketing (rice, cash crops), serving government production and price control objectives more than farmer interests. Systemic failures included dependency on government subsidies without developing commercial viability, corruption with KUD leaders embezzling funds or manipulating pricing, declining membership as farmers abandoned unresponsive institutions, and eventual dormancy with most KUD becoming inactive shells maintained only for government reporting purposes.
Koperasi Merah Putih attempts to avoid KUD failures through community ownership with members electing officers rather than government appointment, participatory decision-making via annual Members’ Assemblies, diversified business focus beyond agriculture to healthcare, finance, and retail, and digital transparency making manipulation more difficult though not impossible. Skeptics note structural similarities—village heads as supervisory chairmen, heavy government involvement, Dana Desa funding creating dependency—questioning whether new cooperatives can escape historical patterns merely through digital systems and better intentions.
Previous regional cooperative initiatives scattered across Indonesian provinces mostly failed, reaching states described as “mati segan hidup tak mau” (reluctant to die, unwilling to live)—zombie institutions neither fully defunct nor genuinely operational. Causes included lack of sustainable business models relying on temporary project funding, poor management with untrained officers and supervisors, low community participation treating cooperatives as government programs rather than member-owned enterprises, and absence of monitoring allowing failures to persist without intervention. Koperasi Merah Putih improvements include digital integration enabling real-time monitoring, professional Business Assistants and PMO providing continuous support, substantial government financial backing reducing immediate viability pressure, and explicit sustainability focus through bankable business model requirements.
Successful Indonesian cooperatives demonstrate viability is possible with proper management and suitable contexts. Koperasi SBW Jatim, established in 1978 and led by women, accumulated assets exceeding Rp200 billion with over 10,000 members through disciplined savings mobilization, prudent lending, and member-focused services. Kospin Jasa Pekalongan grew to become Indonesia’s largest savings-loan cooperative through professional management, technology adoption, and serving urban middle-class members rather than traditional rural poor. KISEL Jakarta pioneered information technology best practices in cooperative management. These successes share characteristics: strong leadership with genuine cooperative values, member base with reliable income supporting savings and loan repayment, urban or peri-urban locations with sufficient population density, and focus on financial services (savings-loans) rather than complex multi-unit operations. These success factors make replicating such performance across 80,000 diverse rural cooperatives extraordinarily challenging.
International comparisons provide both inspiration and warnings. South Korea’s comprehensive UMKM ecosystem, referenced frequently by Indonesian officials, encompasses specialized UMKM banks providing appropriate financial products, educational institutions dedicated to small business training, marketing agencies helping small firms access markets, guarantee institutions enabling no-collateral loans, promotional bodies supporting exports and branding, and mandatory bank lending quotas directing capital to small enterprises. This ecosystem developed gradually over decades through consistent policy, substantial investment, and evolution responding to failures and successes. Indonesia’s attempt to create similar ecosystems through Koperasi Merah Putih within months rather than decades invites questions about realistic timeframes and whether rapid scaling allows sufficient learning and adaptation.
China’s Township and Village Enterprises (TVEs) during the 1980s-1990s represent another frequently cited comparison, driving rural industrialization through collectively-owned enterprises operating in gray zones between state and private sectors. TVEs achieved spectacular growth, lifting hundreds of millions from poverty and driving China’s early economic miracle. However, most TVEs eventually required privatization after corruption, mismanagement, and dual-pricing system abuses (where managers exploited differences between planned and market prices) created unsustainable losses. The lesson suggests that collective ownership without sufficient accountability mechanisms invites abuse even when initial intentions are sound, and that sustainability may eventually require transitioning to private ownership with proper regulation—a trajectory Indonesian officials would likely resist given cooperative ideology’s constitutional status.
Koperasi Merah Putih’s unique characteristics include unprecedented simultaneous scale with 80,000 establishments in months rather than organic gradual growth, digital-first architecture mandating SIMKOPDES integration from inception, massive government backing with hundreds of trillions in funding, mandatory structure requiring seven business units regardless of local capacity or demand, village governance integration with heads as supervisory chairmen, and program integration linking cooperatives to national priorities like food security and nutritious meal programs. Whether these distinguishing features represent innovations overcoming historical failures or adaptations insufficient to address fundamental cooperative viability challenges remains an open question requiring years of operational experience to answer definitively.
Future outlook: challenges on the path to March 2026
The critical transition from legal formation to operational sustainability unfolds through 2026, with government targets for all 80,000+ cooperatives to achieve operational status by October 28, 2025, and complete physical infrastructure by March 2026. Current reality shows only 20% with active stores and 52% with even basic digital system accounts, suggesting these targets face substantial delays. Construction of approximately 5,000 cooperative buildings was underway as of October 26, 2025, with PT Agrinas Pangan Nusantara and TNI partnership progressing but facing logistical challenges in remote areas, land availability issues in crowded villages, and weather delays during rainy seasons.
Financial sustainability beyond government support remains the ultimate test. Cooperatives must generate sufficient revenue from their seven business units to cover operational expenses, repay loans over six years, pay salaries to staff, invest in equipment and inventory replacement, and distribute surpluses to members—all while maintaining affordable pricing that justifies their social enterprise mission. Early revenue data from operational cooperatives shows wide variation, with successful examples like Metuk and Bentangan demonstrating viability while many struggling cooperatives barely cover costs. The government’s willingness to continue subsidies beyond initial periods will determine whether marginal cooperatives survive or collapse when preferential support ends.
Political sustainability across electoral cycles poses risks often underestimated in development programs. President Prabowo’s current term extends through 2029, providing medium-term political protection, but gubernatorial, regency, and mayoral elections occur on staggered schedules. New local leaders may deprioritize cooperatives, redirect resources to different initiatives, or face fiscal constraints limiting continued support. The presidential instruction’s legal authority expires with the administration that issued it unless renewed by successors, creating uncertainty beyond 2029. Embedding cooperatives in village budgets and community economic life before political transitions could strengthen institutional resilience.
Digital adoption acceleration requires addressing the 48% of cooperatives still lacking SIMKOPDES accounts and 89% not updating operational data. Solutions include simplified user interfaces reducing technical barriers, offline-capable systems accommodating intermittent connectivity, mobile-first design recognizing smartphones are more accessible than computers in rural areas, mandatory reporting requirements where Dana Desa allocations depend on digital data submission, and intensive digital literacy training for officers and members. The transparency benefits of digital systems only materialize if systems are actually used rather than existing only in regulation.
Capacity building must transition from initial formation training to sustained operational support. Many cooperatives received one-week training covering governance, finance, and business planning but need ongoing support for procurement negotiations, inventory management, quality control, customer service, digital marketing, financial reporting, conflict resolution, and strategic planning. Business Assistants and PMO cannot provide indefinite free support without burnout or funding exhaustion. Solutions require developing paid consulting services cooperatives can afford, peer learning networks where successful cooperatives mentor emerging ones, online resource libraries with video tutorials and templates, and specialized training modules addressing specific challenges like pharmacy regulation or cold storage management.
The program’s success ultimately depends on genuine community ownership rather than government direction. Cooperatives must evolve from externally-initiated projects to member-driven institutions where members actively participate in governance, contribute capital and labor, utilize services at levels justifying operations, hold officers accountable for performance, and identify cooperatives with community identity rather than government programs. This transformation from instrumental compliance to genuine commitment typically requires years of experience demonstrating cooperatives serve member interests. Premature withdrawal of government support before community ownership solidifies invites collapse, while excessive prolonged support prevents necessary transition to self-reliance.
Economic shocks or policy changes could destabilize the cooperative ecosystem. Global commodity price volatility affects both input costs and output prices for agricultural products. Banking sector stress might prompt Himbara banks to restrict cooperative lending regardless of government placements. Inflation exceeding projections could make 6% loans inadequate to cover cooperative costs. Policy changes to Dana Desa allocations, food subsidy programs, or regulated pricing for fertilizers and medicines would force operational adjustments. Building resilience requires diversified revenue streams so cooperatives don’t depend excessively on single business units, financial reserves to buffer shocks, flexible business models adaptable to changing circumstances, and risk management strategies including insurance and contingency planning.
The pathway forward requires balancing urgency with sustainability, maintaining momentum while allowing time for learning and adaptation, celebrating successes without ignoring persistent challenges, and supporting cooperatives through inevitable difficulties while maintaining accountability standards. Koperasi Merah Putih represents an extraordinary experiment in rural economic transformation whose outcomes will significantly influence Indonesia’s development trajectory toward 2045. Whether this initiative becomes a model of successful cooperative revitalization or another cautionary tale of ambitious programs exceeding implementation capacity will be determined by decisions and actions through 2026 and beyond, making the next 15 months critical for shaping cooperative futures and Indonesian rural development.