Economist: Consignment scheme insufficient to meet KDKMP working capital needs

Jakarta (ANTARA) - Yusuf Rendy Manilet, an economist at the Centre of Reform on Economics (CORE) Indonesia, believes that the consignment (consignment/sale-on-approval) scheme can help reduce the capital requirements for Red White Village/Sub-district Cooperatives (KDKMP) to provide stock, but it cannot entirely replace the cooperatives’ working capital needs.

According to him, through consignment, cooperatives do not need to pay suppliers immediately for all goods displayed in outlets. This scheme can be applied particularly to local products and micro, small, and medium enterprises (MSMEs).

“The consignment scheme can indeed reduce cash requirements for certain inventories, especially local products and MSMEs. However, this scheme does not resolve all working capital needs,” he said when contacted in Jakarta on Tuesday.

Yusuf explained that certain commodities still require cash payments to farmers or suppliers. Cooperatives must also provide funds for distribution needs and other operational costs.

Furthermore, he noted that the effectiveness of consignment depends on the speed of inventory turnover. If consigned goods are not sold quickly, cooperatives will still face cash flow problems despite not bearing the full cost of the inventory.

“If sales are low, the outlet may appear full, but the cooperative’s cash flow remains weak,” he added.

Previously, Deputy Minister of Cooperatives Farida Farichah stated that the government would optimise equity participation, including from the Revolving Fund Management Agency (LPDB), and consignment schemes as sources of working capital for KDKMP once the cooperatives begin operations.

This statement was made to address questions regarding the sources of working capital for KDKMP after the Rp3 billion loan ceiling is utilised to finance the construction of warehouses and outlets, as well as goods procurement.

However, Member of Commission VI of the Indonesian House of Representatives (DPR RI), Darmadi Durianto, assessed that the consignment scheme would be difficult to implement for the procurement of fast-moving consumer goods (FMCG).

“Those goods cannot be consigned. No one would offer consignment to KDKMP for products from companies like Indofood or Unilever,” said Darmadi.