Saving Cooperatives from a State of Limbo

This article is an opinion piece, and all content and opinions reflect the personal views of the author and do not reflect the editorial stance.

Amidst the growing narrative of strengthening the people’s economy, cooperatives are still grappling with old problems: existing but not thriving. There are many of them, but only a limited number function as productive economic engines. This reality is also evident in Village/Urban Cooperatives (KDKMP), which face a myriad of problems – from limited managerial capacity, business models that are not yet well understood, to liquidity pressures and the adoption of digitalisation. These problems are often reduced to human resource issues or a lack of guidance. However, seeing it only as such is misleading. The root of the problem is deeper: the institutional design of cooperatives has not been able to answer the complexities of the modern economy. Primary cooperatives operate independently, without adequate system support. As a result, small scale, high risk, and limited market access create a vicious cycle that is difficult to break. It is not just about the ‘level’ of the organisation; secondary cooperatives need to be positioned as system integrators – connecting, strengthening, and accelerating the performance of primary cooperatives, as well as acting as incubators. If Indonesia is serious about revitalising the cooperative sector, then incremental improvements are not enough. What needs to be addressed is the structural gap: the absence of strong secondary institutions or Apex cooperative institutions. International experience offers clear lessons. The success of Mondragon Corporation in Spain does not rely on cooperatives operating independently, but on a tightly integrated system. Its network includes a cooperative bank (Laboral Kutxa), a research and development centre, and a coordinated industrial cluster. This institutional architecture allows small cooperatives to gain access to capital, technology, and markets – capabilities that they would find difficult to build on their own. Similarly, Rabobank in the Netherlands grew from a network of local agricultural cooperatives into a globally competitive financial institution.