The origins of the Indonesian cooperative movement are often romantically associated with post-independence ideals. Still, it is crucial to recognise that the true intellectual architect behind the movement was not President Sukarno, but rather Mohammad Hatta, who is rightfully honoured as the Father of Indonesian Cooperatives. Unlike Sukarno, whose political rhetoric often elevated cooperatives as a symbol of national pride and anti-imperialism, Hatta approached them with a more grounded economic philosophy. His vision was shaped by his deep engagement with European cooperative theory, especially during his time studying in the Netherlands. Hatta believed that cooperatives were the most effective tool for resisting colonial capitalism and uplifting the economic position of the Indonesian people, especially the poor and marginalised.
The mind of Mohammad Hatta was like a symphony composed of sharp intellect, clear conscience, and life principles that could never be bought—and scarcely ever matched. Within his thoughts lay not only the vision of a nationalist leader, but also the depth of a philosopher whose life was devoted to human dignity and justice. Where many figures leaned on emotion and charisma, Hatta’s strength was reason: his logic was calm yet firm, like an anchor in the storm of a young republic. His democracy was not the noisy spectacle of cheers and slogans, but one rooted in principle and moral awareness. To seek Hatta’s equal is to search for someone likewise nurtured by books, humble in spirit, and profoundly bound by moral responsibility—a combination exceedingly rare in today’s politics.
Mohammad Hatta was officially honoured as the Father of Indonesian Cooperatives on 12 July 1953, during the Indonesian Cooperative Congress (Kongres Koperasi Indonesia) held in Bandung, West Java. This title was not just a ceremonial recognition—it symbolised the nation's deep respect for Hatta’s lifelong dedication to the cooperative movement and his visionary economic thinking.
The congress, which brought together cooperative leaders and activists from across the archipelago, unanimously acknowledged Hatta’s intellectual and moral leadership in advancing cooperatives as a foundation of Indonesia’s economic independence. His writings, speeches, and advocacy had inspired a generation of Indonesians to see cooperatives not merely as financial entities but as a vehicle for social justice, empowerment, and national dignity.
Even decades after that historic congress, Hatta’s name remains synonymous with the cooperative ideal in Indonesia. His legacy is not just engraved in textbooks or commemorative plaques—it lives on every time a community forms a cooperative to help one another rise together.
Hatta didn’t see cooperatives as mere economic institutions, but as democratic spaces for collective ownership and mutual progress. To him, the cooperative embodied both economic practicality and moral integrity—an instrument through which Indonesians could stand on their own feet (berdikari). He famously wrote and spoke extensively about cooperatives, embedding the idea into the national consciousness long before it gained mass traction. His name and legacy continue to define the cooperative identity in Indonesia today.
During the Old Order, Hatta's vision was often invoked, though not always applied in practice. Sukarno used the concept of cooperatives as part of his ideological narrative, but the actual implementation often faltered due to political instability. It was not until the New Order that cooperatives received extensive institutional support—though, ironically, this support sometimes came with state control and politicisation, diluting their democratic essence.
The Reformasi era sought to restore Hatta’s original intent by reimagining cooperatives as tools for grassroots empowerment. With the emergence of new civil society actors and more decentralised governance, the cooperative movement gained a fresh spirit, moving away from bureaucracy and towards innovation.
Today, in the digital era, cooperatives continue to evolve. From farmer cooperatives using apps to track supply chains to creative collectives sharing revenue through blockchain, the essence of Hatta’s vision lives on—only now, it wears sneakers instead of batik.
Whilst the ambition behind Koperasi Merah Putih is grand—forming tens of thousands of village/kelurahan cooperatives to strengthen local economies, cut supply chains, support farmers, etc. — critics have flagged several substantial challenges, risks, and potential failures that might undermine the project if not handled closely and carefully.
First, there is the issue of top-down imposition. Some observers say that Cooperatives should grow organically from the local community, driven by local needs and mutual trust. When a cooperative is established chiefly via government instruction, there is a danger that its members see it as yet another government programme rather than a self-help institution. Critics argue this risks undermining the basic cooperative principles such as member control, autonomy, equality, democracy, and solidarity.
Second, human resources (HR) capacity is often judged insufficient. Many villages lack people with managerial, accounting, strategic planning, or technical skills to run a cooperative well. Some of the proposed cooperatives’ leadership is elderly or inexperienced, especially in rural areas. Without enough training, mentorship, or ongoing support, there is a risk of mismanagement, low efficiency, or even collapse.
Third, there is concern about transparency, governance, and oversight. Critics point out the risk of fraud, misuse of funds, or elite capture (where local elites or political actors capture control of cooperatives for their own benefit). Many call for strong, independent systems of audits, public reporting, and community participation in oversight.
Fourth, financial / funding models are questioned. Critics warn that starting cooperatives with ambitious capital or credit lines without ensuring viable business plans, markets, or cash flow could lead to unsustainable operations. If cooperatives are dependent on government support (loans, grants, or subsidies) rather than market-oriented operations, there may be risk when support reduces or is withdrawn. Also, mismatches in scale, potential losses, or payment defaults may burden the local government or the state budget.
Fifth, legal and regulatory clarity is mentioned. Some argue that there isn’t yet a fully developed legal basis or regulation that ensures that these new cooperatives preserve their cooperative “identity”—that is, abiding by the cooperative principles, not becoming de facto arms of government or dominated by non-members. Also, different villages have radically different local conditions, potentials, and constraints; a one-size-fits-all programme faces risk.
Sixth, partnerships, technical support, and sustainability. Several reports say that while many cooperatives are being formed (legal entities, etc.), operating them meaningfully (making them work, making them entrepreneurial, ensuring ongoing income streams, linking to markets, having logistics, etc.) is still deeply uncertain. Also, support infrastructure (technical assistance, access to credit, stable supply chains, storage facilities, transport) needs strengthening.
In sum, critics say that without careful attention to governance, capacity building, community participation, risk mitigation, and market integration, the risk is high that many of the cooperatives will become legal shells that absorb funds rather than engines of local prosperity.
During the Old Order under Sukarno, cooperatives were often treated more as political symbols than as genuine economic instruments. Mohammad Hatta, the so-called “Father of Indonesian Cooperatives,” had envisioned them as vehicles for economic democracy, but Sukarno’s regime increasingly tied them to nationalist rhetoric rather than building sound managerial and financial structures. As a result, many cooperatives in that era existed only on paper, lacked professional management, and were vulnerable to inefficiency and corruption.
When the New Order under Suharto took control, cooperatives were re-engineered into bureaucratic extensions of the state. Rather than being independent organisations owned and managed by their members, they were frequently used to channel government subsidies, distribute fertilisers, or control village-level trade. While this gave them visibility and funding, it simultaneously undermined their autonomy. Cooperatives became “top-down” projects, run with instructions from Jakarta rather than initiative from the grassroots. Many citizens began to associate cooperatives not with community empowerment, but with bureaucratic obligations.
By the time of the Reformasi era, the word “cooperative” had already lost much of its credibility. Society had grown sceptical, seeing them as relics of bureaucratic control rather than dynamic engines of economic progress. Politicians may still praise the cooperative model, but ordinary Indonesians often prefer more flexible microfinance institutions, digital platforms, or informal community savings groups. In short, the lack of enthusiasm stems not from the irrelevance of the cooperative idea itself, but from the historical baggage of mismanagement, politicisation, and the perception that cooperatives are outdated and inefficient compared to newer financial tools.
If cooperatives are to stage a comeback in Indonesia, they must shed the baggage of their past and reinvent themselves within the digital economy. Rather than being perceived as dusty bureaucratic projects, they should transform into agile, tech-savvy platforms that genuinely empower members. Digitalisation is the crucial key: mobile apps can allow members to save, borrow, and track dividends in real time, while blockchain technology could ensure transparency and prevent the leakages that crippled so many cooperatives in earlier eras.
Moreover, cooperatives must rediscover their original spirit as people-centred economic institutions. In the age of gig work and fragmented livelihoods, a cooperative could provide collective bargaining power, fairer prices for farmers and small producers, and access to wider markets without exploitative middlemen. If combined with proper education and entrepreneurial training, cooperatives could become attractive again, especially for younger generations who are looking for both solidarity and innovation.
Nevertheless, the cultural challenge remains: cooperatives need to rebrand themselves. They must be seen not as relics of Sukarno or Suharto, but as twenty-first-century start-ups with a social mission. If this transformation is successful, Indonesia could rediscover the cooperative model as a powerful alternative to both unbridled capitalism and rigid state control, fulfilling Hatta’s vision in a form that speaks to today’s digital natives.
If Indonesia truly wishes to revive its cooperative movement after years of dormancy, the starting point must be trust. For decades, cooperatives have been associated with inefficiency, corruption, and state interference. Without rebuilding confidence among ordinary citizens, any relaunch will only repeat history. The most sensible entry point is therefore small-scale pilot projects in communities where mutual trust already exists—such as farmer groups, fishermen associations, or urban creative collectives—where cooperatives can prove their worth through visible results.
The second foundation is education. Many Indonesians do not fully understand what a cooperative is beyond the stereotype of a savings-and-loan shop. Schools, universities, and vocational programmes should reintroduce the cooperative model as a modern, democratic business structure, showing how it differs from banks or private firms. Once people grasp that a cooperative means “owned by members, run for members,” they are more likely to engage seriously.
Finally, the movement must start with digital infrastructure. A twenty-first-century cooperative cannot rely on dusty offices and handwritten ledgers; it must live on smartphones, with transparent accounting systems and user-friendly apps. If the revival begins with trust, education, and technology, cooperatives can once again become relevant—not as relics of past regimes, but as engines of inclusive growth for the future.
Now, let’s imagine this “cooperative revival” as if it were a three-season Netflix series.
Season One would have to focus on rebuilding credibility. After years of neglect, the cooperative brand carries the weight of mistrust, so the first step would be to showcase small but tangible successes. Pilot cooperatives in farming villages, fishing communities, or urban neighbourhoods could demonstrate that this model still works when managed transparently. These “episodes” would centre on trust, where communities begin to see that a cooperative can actually deliver fairer prices, cheaper credit, and collective strength.
Season Two would move into expansion and education. Once the first examples prove reliable, the narrative shifts towards scaling up and teaching the next generation. Schools, universities, and training centres would introduce cooperative values as part of economic literacy, while digital tools would make it easy for anyone with a smartphone to join and participate. This season would be about growth, energy, and the rediscovery of cooperatives as modern institutions rather than dusty relics.
Season Three would finally embrace digital transformation and long-term sustainability. Cooperatives would no longer be small experiments but integrated players in the national economy. Blockchain-based ledgers, mobile apps, and transparent governance would make them competitive with banks and fintech platforms, while their member-driven ethos would keep them socially grounded. In this final act, the cooperative becomes not merely a nostalgic idea from Hatta’s time, but a twenty-first-century engine of inclusive prosperity.
Pragmatically speaking, applying the three-season phased approach—legal formation, pilot operationalisation, and full-scale nationwide rollout—requires time, careful coordination, and patience. Yet the Merah Putih Cooperative programme has political and economic pressures demanding immediate action. The government cannot afford to wait years for perfect preparation; there is both a symbolic and practical need to demonstrate progress.
The solution, therefore, lies in a hybrid approach. Core pilot cooperatives can continue to serve as living laboratories for governance, bookkeeping, and market integration, while simultaneously scaling up legal formation and registration of additional units. Tranching the release of resources—whether seed capital, government guarantees, or training support—ensures that cooperatives do not become “ghost entities” on paper while still signalling momentum.
Moreover, technology can be leveraged to accelerate oversight. Digital dashboards, centralised reporting platforms, and online training modules can allow rapid assessment and support of newly formed units without waiting for months of in-person auditing. This way, the programme can show tangible results to the public, satisfy political imperatives, and gradually build operational capacity in a structured manner.
Communication is also key. Clear messaging that some cooperatives are pilot-ready while others are still in formation helps manage expectations, reduce the risk of perceived failure, and maintain public confidence. It’s about creating a sense of motion and achievement without overstating operational readiness.
In short, the way forward is simultaneous scaling and piloting: allow a fraction of cooperatives to operate fully while the majority are progressively onboarded, with resources and oversight distributed in a staged but accelerating pattern. This keeps the programme alive politically, economically, and socially, while still respecting the realities of time, training, and human capacity.
[Part 9]When it comes to capitalisation, the government’s support for cooperatives must be both practical and credible. The first step is to provide access to affordable seed capital without drowning them in bureaucracy. Instead of burdening cooperatives with endless paperwork or politically motivated loans, the state should design financing schemes that are simple, transparent, and directly accessible to member-driven initiatives. This could include revolving funds managed at the local level, where accountability is built into the process.
Secondly, the government must offer credit guarantees. Many cooperatives, particularly those in rural areas, cannot obtain loans from banks because they lack collateral. By creating a guarantee system, the state can reduce the risk for financial institutions and encourage lending to cooperatives without the crippling interest rates that often follow informal borrowing.
Finally, long-term government support should focus on capacity rather than mere cash injections. Training in financial literacy, modern accounting systems, and digital platforms ensures that cooperatives can manage funds responsibly and grow sustainably. In short, government intervention in capitalisation must not only put money into the system but also build the skills and structures that prevent that money from being wasted.
If capital is poured into cooperatives without proper oversight, the risks are immense. The first danger is the familiar ghost of mismanagement: money might be absorbed by untrained administrators or vanish through corruption, leaving members disillusioned and sceptical. This does not only waste public funds but also damages the reputation of the cooperative movement itself, reinforcing the old stereotype that cooperatives are inefficient and unreliable.A second risk is dependency. If cooperatives are constantly fed with subsidies and soft loans without being trained to generate their own sustainable revenue, they risk becoming welfare projects rather than genuine economic institutions. Such dependency creates fragile organisations that collapse as soon as government support dries up.
Finally, poorly monitored funding can trigger political capture. Local elites or opportunistic figures might hijack cooperative funds for personal or electoral purposes, turning what should be a collective empowerment tool into yet another instrument of patronage politics. In such a scenario, the cooperative not only fails economically but also contributes to deeper cynicism about the link between state, society, and trust.
The first strategy to prevent these risks is transparency by design. Cooperative funds must be tracked with digital tools that allow every member to see where money comes from and where it goes. If accounting is accessible through mobile apps or online dashboards, it becomes much harder for mismanagement or corruption to hide in the shadows.
The second safeguard is strong capacity-building. Training programmes in financial literacy, governance, and digital management should be mandatory for cooperative leaders. It is not enough to inject money; members need the skills to steward those funds responsibly. This professionalisation of cooperatives can transform them from vulnerable grassroots groups into credible economic actors.
A third strategy is community oversight. Instead of leaving monitoring solely to government auditors—who themselves may be politicised—cooperatives should empower their members with voting rights, audit committees, and regular public meetings. When members themselves feel ownership and responsibility, they become the most effective guardians against abuse.
Finally, the state must adopt a “sunset clause” approach to subsidies: financial support should decrease gradually as cooperatives become self-sustaining. This ensures they grow strong enough to stand on their own, avoiding the trap of permanent dependency. Combined, these measures create a culture of accountability, resilience, and independence, which is the true foundation of a lasting cooperative revival.
In terms of capitalisation, the government’s support for cooperatives often begins with the provision of credit facilities, channelled through state-owned banks and special funds earmarked for small and medium enterprises. These measures are designed to reduce dependency on informal moneylenders who impose predatory interest rates, ensuring that cooperatives gain access to fairer financing. Beyond this, successive administrations have attempted to inject capital through grant schemes or soft loans, though these efforts are frequently hampered by bureaucratic inefficiency and corruption at the distribution level. Another approach has been the promotion of savings and loan cooperatives, which function as grassroots financial institutions capable of self-sustaining capital growth if well-managed. More recently, there has been a push for digital financing platforms to integrate with cooperatives, theoretically expanding their access to broader capital markets. Yet the recurring challenge remains the limited financial literacy of cooperative members, which often undermines the intended impact of these governmental interventions.
Indonesia’s macroeconomic backdrop in 2025 is mixed but generally supportive of targeted, well-designed pro-poor interventions. Growth projections for the near term sit around the mid-to-high fours (roughly 4.8–5.0 per cent), which signals resilience but also confirms that the economy is not firing on all cylinders yet; policymakers are therefore seeking ways to broaden domestic demand and lift productivity.Inflation has been unusually benign in 2025, giving the central bank room to ease monetary conditions; Bank Indonesia has already cut policy rates in a pro-growth stance, and the government has moved to deploy a fresh stimulus package to support consumption and job creation in the short run. Those policy choices create a window of opportunity to inject capital and support programs that target vulnerable communities — provided that such injections are well governed.At the same time, structural challenges persist: unemployment and underemployment remain meaningful constraints on inclusive growth, and although poverty has been declining, tens of millions still live near the poverty line. Any large-scale programme intended to reach villages must therefore be calibrated to solve real market failures (credit access, market linkages, logistics, aggregation of supply) rather than merely creating legal entities.From this perspective, Koperasi Merah Putih can be a useful instrument today—but only if it is re-designed around a strict set of success conditions. The cooperative model is especially well-suited to (a) improving farmers’ bargaining power and cutting out exploitative middlemen, (b) pooling credit and risk for micro-enterprises, and (c) leveraging social capital for collective investment in storage, processing or market access. However, these benefits are real only when cooperatives have competent management, transparent governance, viable business plans and credible market linkages.Therefore, the pragmatic answer is: yes, Koperasi Merah Putih can be part of the solution today — but only as a disciplined, pilot-driven programme that emphasises capacity building, market integration, financial transparency and time-bound public support. If the programme is rushed, top-down, or treated mainly as a headline-grabbing rollout, it will likely reproduce past failures and crowd out more effective local solutions.The question of whether the government should channel direct funding into Koperasi Merah Putih is both political and economic in nature. On the one hand, targeted capital support could provide the initial fuel that allows cooperatives to organise members, acquire basic infrastructure, and achieve economies of scale. Without such seed money, many cooperatives may remain trapped in small-scale operations that are unable to compete with middlemen or corporations. This argument suggests that some level of government injection is indeed necessary, particularly in the formative stage.On the other hand, the experience of previous cooperative programmes in Indonesia shows that indiscriminate capital injections often produce dependency, weak accountability, and ultimately very high rates of default. The risk is that cooperatives become “political projects” rather than viable business entities, with loans treated as grants and repayments neglected. In such an environment, the risk of non-performing loans (NPLs) could rise substantially — potentially even higher than the commercial banking sector’s NPL rate, which typically hovers around 2–3 percent in normal times. For poorly managed cooperatives, the effective NPL rate could easily exceed 10–15 percent, which would undermine the entire scheme.Therefore, the rational approach is not to ask whether government money should flow, but under what conditions it should flow. If disbursements are linked to strict milestones—digital accounting, audited reports, market contracts secured — the risk of NPLs can be reduced and public money can act as catalytic capital rather than wasted subsidy. If, however, funds are poured in quickly without such safeguards, the cooperative project is almost certain to replicate past failures and drain fiscal resources without lasting impact.Assume the government disburses Rp 1,000,000,000,000 (one trillion rupiah) equally across 1,000 cooperatives.Step-by-step arithmetic (digit-by-digit):Total fund = 1,000,000,000,000.Number of cooperatives = 1,000.Per cooperative = 1,000,000,000,000 ÷ 1,000 = 1,000,000,000.(Because 1,000,000,000,000 divided by 1,000 = 1,000,000,000.)Scenario A — 10% NPL:Portfolio loss = 1,000,000,000,000 × 10% = 1,000,000,000,000 × 0.10Portfolio loss = 100,000,000,000.(Move one decimal place: 1,000,000,000,000 → 100,000,000,000.)Loss per cooperative on average = 100,000,000,000 ÷ 1,000 = 100,000,000.(One hundred million rupiah loss per cooperative.)Scenario B — 15% NPL:Portfolio loss = 1,000,000,000,000 × 15% = 1,000,000,000,000 × 0.15Portfolio loss = 150,000,000,000.(Fifteen per cent of one trillion = one hundred fifty billion.)Loss per cooperative on average = 150,000,000,000 ÷ 1,000 = 150,000,000.(One hundred fifty million rupiah loss per cooperative.)Interpretation and context:A 10–15% NPL on a government-backed cooperative portfolio is substantially high compared with typical commercial banking NPLs (which in benign times are often in the single digits, frequently around 2–3%). At 10% NPL, the state would effectively lose Rp 100 billion of the Rp 1 trillion injected; at 15% NPL, the loss rises to Rp 150 billion. Those are material fiscal hits and would undermine public confidence if they stem from weak governance or political capture.The most practical way to ensure that public money allocated to Koperasi Merah Putih does not simply become another pool of wasted funds is to impose a disciplined framework of conditionality and transparency. Government support should never be released in one lump sum, but rather in carefully designed tranches that are only disbursed once cooperatives meet specific milestones such as the implementation of digital bookkeeping systems, the completion of independent audits, or the securing of formal market contracts.To reduce the burden of risk on the state, a partial credit guarantee scheme combined with revolving funds should be employed, thereby encouraging commercial banks to participate while ensuring that responsibility for repayment is shared. At the same time, portfolio diversification must be enforced: resources should not be concentrated on a single commodity or confined to one province, but spread across sectors and regions to minimise systemic vulnerability.Capacity-building is equally essential, for no amount of funding will succeed if cooperative managers lack the financial literacy, credit assessment ability, and recovery mechanisms necessary to keep the organisation afloat. Moreover, transparency must be brought to the forefront by mandating a public-facing digital dashboard that allows both members and the wider public to track financial flows in real time.Finally, any subsidies or interest support must be designed with a sunset clause, meaning that they are temporary measures intended to ease the transition, not permanent crutches. Over time, cooperatives should be expected to operate independently, standing on their own commercial viability rather than leaning indefinitely on the state.By 21 July 2025, 80,081 cooperatives had been inaugurated under the Merah Putih scheme. Also, there is a statement by the government that many of those cooperatives have obtained legal status (i.e. become formal entities).In terms of operational activation, there are some targets and small-scale claims. For example, the Ministry of Cooperatives aimed for 15,000 units of Kopdes Merah Putih to be “active/operating” by August 2025. In some provinces, local statements indicate that by October 2025 they plan for full operation — Aceh, for instance, says they are preparing to bring all their units into full operation by end of October. The national program expects 80,000 units of Kopdes Merah Putih to be fully operational by 28 October 2025.So the picture is: legal formation has largely been achieved in terms of numbers, but the leap from legal status to fully functional cooperatives is still in progress and is being scheduled to culminate in October 2025.The Merah Putih Cooperative movement represents one of the most ambitious economic social experiments in modern Indonesia. In theory, it seeks to revive Bung Hatta’s cooperative spirit — a vision of self-reliant communities bound by shared ownership, fairness, and local productivity. Yet in practice, the initiative sits uneasily between the idealism of grassroots economics and the pragmatism of state-driven policy. The mass registration of more than eighty thousand units may look impressive in headlines, but the real test lies in whether these cooperatives can evolve into living, breathing economic organisms rather than remain mere administrative creations.
At its best, the programme has rekindled national conversations about economic independence and collective empowerment. Across villages and towns, it has sparked curiosity, hope, and a sense of belonging that echoes the old promise of “gotong royong.” For some communities, especially in agricultural and artisanal sectors, the Merah Putih cooperatives could indeed become the bridge between small-scale local effort and national-level opportunity. These early successes, however, remain isolated, and the larger machinery of oversight, training, and access to markets still demands deeper attention.The greatest danger, therefore, is not failure in intention but failure in execution. A cooperative without capable management, digital literacy, or transparent bookkeeping is a body without a heartbeat. If the focus remains on quantity rather than quality, Indonesia risks repeating the pattern of countless past economic programmes: politically celebrated but economically hollow. Sustainable growth cannot be built on ceremonial inaugurations alone — it requires daily discipline, skill, and trust among members.For the Merah Putih initiative to truly honour its name, it must demonstrate the spirit of red and white not just in banners and logos but in the moral courage to be accountable. That means open dashboards, periodic audits, and a culture where success is measured by shared prosperity, not bureaucratic statistics. Only then can the cooperative movement shed its image as a symbolic project and become a genuine engine of equitable growth.In the end, Hatta's dream was never about numbers or targets; it was about dignity—the ability of ordinary Indonesians to stand tall without dependence. Suppose the Merah Putih cooperatives can rediscover that essence. In that case, Indonesia’s cooperative renaissance might yet become not merely another government programme but a living testament to what unity in diversity can achieve when translated into real, shared economic power.
[Part 7]
