Risk Of Large Fund Leaks, The Merah Putih Cooperative Program Injures Village Development

JAKARTA President Prabowo Subianto is optimistic that the formation of the Red and White Village Cooperative will encourage the mutual cooperation economy. But the CelIOS study stated otherwise. Cooperatives are actually vulnerable to becoming a field of corruption.

The Red and White Village Cooperative Program was inaugurated by President Prabowo on Monday (21/7/2025). The inauguration was carried out symbolically in Klaten, Central Java.

The target is as many as 80,081 cooperatives will operate fully in the next four months. As a first step, there are 108 cooperatives that are already operating.

The Minister of Cooperatives Budi Arie, who was also present at the inauguration ceremony, targeted the Red and White Kopdes to present pillars of village economic independence, cooperatives as the main foundation of national economic growth.

The government said the budget for the establishment of the Red and White Kopdes reached Rp300 trillion. Later, each cooperative can get a maximum capital loan of Pp3 billion from banks that are members of the Association of State-Owned Banks (Himbara).

With a large budget, the Kopdes Merah Putih program faces a big challenge, namely in terms of budget supervision which is considered crucial.

In his study, the Center of Economic and Law Studies (CELIOS) said, although it was brilliant in the 1950s and 1960s, now the fate of cooperatives no longer knows what the role of cooperatives today is nothing more than encouraging in the national economy.

Although the contribution to Gross Domestic Revenue (GDP) is claimed to continue to increase, these claims are not strong because the data collection system at the Ministry of Cooperatives and SMEs is still not in sync.

The tendency of political interests is an interesting reason for claims to increase cooperative contribution to Gross Domestic Product (GDP). This problem is because there have been no important policies in recent years that have added the strength of cooperatives.

The cooperative reform program promoted by the Ministry of Cooperatives and SMEs (now the Ministry of Cooperatives) only targets the deactivation of cooperatives that have long been dead and naughty. "In addition, it almost doesn't sound like what other cooperative programs are like," wrote CelIOS.

Currently, cooperatives are also considered as a formality of the practice of Article 33 of the 1945 Constitution but in its implementation it is far from expectations. It's like a cooperative is currently living, reluctant to die. If left dead, the government will be labeled a cooperative killer, but even cooperatives in Indonesia are not allowed to live, as expected by the originator of Article 33," continued CelIOS.

Currently, wrote CelIOS, more than 70 thousand villages in Indonesia already have Village-Owned Enterprises (BUMDes) as local economic instruments. Although its performance is not evenly distributed and still requires improvement, BUMDes has shown potential in encouraging the village economy through various business units, both in the financial sector, production, and distribution.

"Then, what is the urgency of forming a new cooperative if there are already BUMDes running? What will happen to the village business unit that already existed?" said CelIOS.

Moreover, the allocation of village funds that should be the right of village autonomouss, is now threatened with being sucked in to finance cooperative projects that are not yet clear in direction and sustainability. This actually narrows the village fiscal space and opens up opportunities for the return of centralization patterns in village empowerment. This is a setback from the spirit of the Village Law which guarantees local autonomy.

Another risk is the potential misuse of funds. Fictitious cooperative cases of aid recipients have been found in the field, and without strict supervision, this massive cooperative program could open up new loopholes in corrupt practices.

CelIOS said the risk of corruption and potential budget leaks could reach Rp4.8 trillion from 80 thousand cooperatives targeted by the government. The figure of Rp4.8 trillion is obtained assuming that all Red and White Cooperatives receive the same financing, namely Rp3 billion per year and the risk of budget leakage of 20 percent, according to estimates from the World Bank.

Corruption loopholes, still in the study of CelIOS, have the opportunity to be found in all stages of cooperatives. For example, during the initial disbursement of capital originating from village funds or bank loans, it is prone to corruption in the cost of establishing or fictitious cooperatives.

"At this stage, perpetrators of corruption can come from village heads, regional officials, or notaries," said BELIOS researcher Muhammad Saleh.

In the implementation phase, CelIOS continued, the potential for corruption is much greater, ranging from the release of project value to the use of cooperative funds for election purposes. This misappropriation could involve village elites and political parties.

This potential corruption is related to the rule of law that oversees the Red and White Kopdes program. Institutionally, this program is considered to violate the Cooperative Law which confirms that cooperatives must be formed voluntarily by members.

But in reality, the Red and White Kopdes actually stood up from the Presidential Instruction. CelIOS revealed that the Red and White Cooperative is prone to conflict over village rules and Village-Owned Enterprises (BUMDes). This is because the village government was forced to form the Merah Putih Cooperative by debting it to banks amounting to Rp. 3 billion.

Saleh highlighted how the installment payments did not come from cooperative profits, but from cutting village funds.

"This means that the proper funds for village development are instead used to pay loan installments whose profits are uncertain," Saleh explained.

Meanwhile, the Director of Economics for CelIOS Nailul Huda stated that village development driven by the central government is not a tangible form of national development that arises from the community. The village funds that are used as collateral actually injure the village development that is aspired to in the Village Law.

"There is the potential for massive misuse of loan funds from the Red and White Cooperative because it opens up new loopholes for corruption. Especially with the status of Danantara and BUMN losses which no longer bear the status of state losses, there is the potential for corruption crimes," said Huda in a statement received by VOI.

"In addition, there is the potential for the Red and White Cooperative to become predators for other business entities that already exist. Village economic actors who will suffer losses such as business actors and cooperatives of micro financial institutions," said Huda.