Redesigning the Governance of Village Cooperatives (KDKMP)

Economic sage Prof. Dr. Soemitro Djojohadikusumo once remarked on cooperatives, stating, “Cooperatives must be managed professionally and not merely as charitable institutions. As long as we position cooperatives as ‘institutions for the poor’, we should not be surprised if only those with no other options join.” Sadly, this years-old observation now appears prophetic regarding the Village Cooperatives/Koperasi Merah Putih (KDKMP).

The misdirection of KDKMP, as signalled by Prof. Soemitro, is evident in various media reports. Issues range from the deduction of Village Funds to finance the programme, the potential for failure due to minimal feasibility studies, to discussions of restricting modern retail that are seen as stifling competition. The most recent development is the recruitment of managers for KDKMP to be placed across Indonesia, an unprecedented move in the history of the cooperative movement.

Yet, according to the Father of Indonesian Cooperatives, Bung Hatta, the essence of a cooperative is a people’s economic movement based on family spirit and mutual cooperation. Hatta’s core views define cooperatives as a joint business platform, a means to improve economic livelihoods through mutual assistance, a rejection of individualism, and a tool to achieve equitable public prosperity. Thus, a cooperative is not merely a business tool, as has been touted for KDKMP—a place to sell goods like a retail shop, reducing KDKMP to nothing more than a minimarket.

My book, ‘Strengthening Koperasi Merah Putih Through Local Products Based on Collective Brands’, clearly outlines prerequisites to prevent KDKMP from suffering the same fate as the Village Unit Cooperatives (KUD) of the New Order era. First, the cooperative must not just be a retail shop but must optimise local products from the surrounding community where it operates. From this, the goal of KDKMP as an agent of community empowerment and a driver of the local economy can be achieved. Second, choosing to become a production cooperative is the best path amidst the turbulence surrounding the use of state budget-sourced village funds. This approach allows for the expansion of cooperative membership optimisation. Third, the progress of a cooperative is determined not by quantity, but by quality. Stakeholders must learn from countries that have successfully developed cooperatives, so that KDKMP does not spring up like mushrooms in the rainy season, only to wither and die.

This proposal is linked to another flagship government programme, the Free Nutritious Meals (MBG) initiative. In implementing the MBG programme, a major challenge is ensuring the availability of quality, sustainable foodstuffs from local sources. In this context, KDKMP can act as an aggregator—an institution that collects, coordinates, manages, and distributes products from various local businesses to the MBG programme organisers. The role of aggregator transforms the cooperative from merely a business entity into a bridge between local producers and a large, guaranteed market, thereby creating a more efficient and inclusive food supply chain.

To become an aggregator, a redesign of KDKMP is necessary. Most crucially, the MBG kitchens or Nutritional Fulfilment Service Units (SPPG), which have been managed by foundations and are the ‘root cause’ of the SPPG’s lack of transparency and accountability, can be resolved by making KDKMP the MBG kitchens. This would be a unique attraction, as all local resources would be centralised within KDKMP, enabling its function as a tool for empowerment and a spark for the local economy.

KDKMP as an aggregator in the MBG programme positions it as a centre for production consolidation, quality assurance, supply chain management, and a link between local producers and the needs of a national programme. This role allows the cooperative to consolidate its members’ output to meet the required standards of quantity, quality, and continuity. If run professionally and based on cooperative principles, the aggregator function not only supports the success of the Free Nutritious Meals Programme but also returns the cooperative to its original purpose as a people’s economic movement that strengthens members’ bargaining power, creates collective added value, and builds village economic independence and national food security.

In its development, the formation of KDKMP has been too focused on how to sell products, giving rise to the retail shop label, rather than on how to gather as many products from the surrounding community as possible to then be managed and distributed. This retail shop concept reduces cooperative members to mere investors who contribute capital, but not parties who utilise the cooperative’s services. This is because, under the retail shop concept, members are only seen as consumers, so economic benefits are not returned to members based on business participation. In reality, economic relationships within a cooperative are built on participation, not the dominance of capital.

Instead of turning KDKMP into retail shops that displace or compete with existing retailers, KDKMP should become a collaborator. The concept of KDKMP as a collaborator positions the cooperative as a strategic partner connecting local producers with a wider trade network. In this role, KDKMP functions as an institution that consolidates members’ products, improves supply quality and continuity, and builds a mutually beneficial distribution ecosystem. This collaborative approach aligns with cooperative principles that prioritise cooperation, mutual assistance, and economic empowerment.