Economist: Village Cooperative Implementation Should Be Based on Village Readiness
Jakarta (ANTARA) — The Head of the Centre for Macroeconomics and Finance at the Institute for Development of Economics and Finance (Indef), M Rizal Taufikurahman, has argued that the implementation of the Koperasi Desa Merah Putih (KDMP, or Red and White Village Cooperative) should be based on village readiness rather than mandatory allocation.
“Villages that have the capacity and potential can run KDMP, whilst other villages should remain focused on basic needs and strengthening the local economy,” Rizal told ANTARA in Jakarta on Wednesday.
The government has allocated 58.03 per cent of the 2026 Village Fund budget to KDMP development, amounting to Rp34.57 trillion out of a total ceiling of Rp60.57 trillion. The remaining Rp25 trillion has been allocated for the regular Village Fund.
The policy is regulated under Minister of Finance Regulation (PMK) Number 7 of 2026, signed by Finance Minister Purbaya Yudhi Sadewa and effective from its promulgation on 12 February 2026.
According to Rizal, an allocation exceeding half of the total ceiling risks displacing the underlying philosophy of the Village Fund, which was designed to give decision-making space at the village level, given that needs across villages are not homogeneous.
When the majority of the budget is directed towards a single national programme, he continued, an empowerment instrument transforms into a project instrument.
From a public policy economics perspective, Rizal assessed that this policy risks creating crowding out of local priorities — villages would no longer choose based on their actual problems (farm access roads, clean water, sanitation, or strengthening village-owned enterprises) but instead conform to a programme design.
“Programme outputs may be visible, but village development actually becomes less adaptive,” he said.
He noted that the implications of this policy are not merely administrative but also carry consequences for economic performance.
Moreover, not all villages possess the institutional capacity or economic potential suited to KDMP.
Rizal said the strength of the Village Fund has historically lain in its distribution of labour-intensive spending that directly increases the purchasing power of village communities.
“If spending is concentrated on a single scheme, the benefits become narrower and risk creating underutilised assets. In the medium term, this could reduce the economic resilience of village households rather than strengthen it,” Rizal explained.
He therefore recommended that the policy approach to KDMP implementation and its relationship with the Village Fund budget needs to be adjusted.
Beyond the village readiness approach, the government was also recommended to set minimum spending thresholds for basic services, small-scale infrastructure, and village economic development so that the remaining allocation is not eroded by a single programme.
Oversight was recommended to shift from budget absorption to village welfare indicators, namely income growth, local economic activity, and reduction of vulnerability.
In this way, the Village Fund could be optimised to deliver a greater impact on village self-sufficiency.