Syariah Red and White Cooperatives and the Constitutional Promise
The theme of the 79th National Cooperative Day on 12 July 2026, ‘Empowered Cooperatives, Glorious Indonesia’, reminds us that a cooperative’s presence is insufficient if it merely exists as a legal entity. It must be empowered, living within the economic activities of citizens, trusted by its members, managed soundly, and providing benefits felt in daily life. At this point, the Red and White village/kelurahan cooperatives need to be examined more comprehensively. They are not merely an institutional formation programme in villages and kelurahan. They are an endeavour to revive the constitutional promise. The Preamble to the 1945 Constitution speaks of general welfare and social justice, and Article 33 affirms that the economy shall be organised as a common endeavour based on the principle of kinship. Cooperatives are one of the forms closest to that mandate, as economic entities built not only by large capital but also by the togetherness of citizens.
Presidential Instruction Number 9 of 2025 on the Acceleration of the Formation of Red and White Village/Kelurahan Cooperatives provides a strategic framework for the establishment, development, and revitalisation of 80,000 village/kelurahan cooperatives. However, the success of a programme of this scale cannot ultimately be measured solely by the number of cooperatives formed, signboards installed, or outlets established. A more substantive measure is whether the cooperatives truly ease citizens’ lives, strengthen small businesses, open access to sound financing, improve the bargaining position of farmers and micro-enterprises, and become economic institutions trusted by their communities. Data from the Village Cooperative Information System (Simkopdes) as of 1 July 2026 shows the movement has progressed on a massive scale: 83,383 cooperatives are registered, and 50,268 of them have held annual members’ meetings. This achievement deserves appreciation, but the large numbers also carry an important message that after institutional formation, the next task is to ensure cooperatives are truly active, healthy, accountable, and provide real benefits to members.
In many villages, trust is born not only from geographical proximity but also from the alignment of values. For many Muslim citizens, economic services are assessed not just by the cost, but also by the fairness of the contract, transparency of transactions, and compliance with sharia principles. Therefore, the sharia option within the Red and White cooperatives should not be understood as a divisive differentiator. It is more accurately seen as a bridge for social acceptance, bringing cooperative services closer to the needs, beliefs, and traditions of the communities they serve. This reality is beginning to appear on the ground. Data from the Ministry of Cooperatives indicates that more than 6,000 Red and White village/kelurahan cooperatives have been registered as sharia cooperatives, spread across eight provinces. Aceh serves as an important example due to its unique legal and social characteristics in strengthening sharia financial institutions, but similar interest is also growing in other regions, including West Nusa Tenggara, West Sumatra, West Java, and several areas with strong socio-religious bases.
The message we can read is that when the sharia option is opened, a segment of society welcomes it as a form of cooperative more suited to their socio-economic needs. Indeed, this space of choice is actually close to the citizens. In practice, the formation of Red and White cooperatives begins through a special village or kelurahan deliberation, allowing the community to discuss from the outset the business model, governance, and choice of economic principles most appropriate for their needs. Consequently, a sharia Red and White cooperative must not stop at being a label. The sharia name carries a mandate. It must be reflected in the contracts, governance, record-keeping, financing, supervision, and the way the cooperative treats its members. If a cooperative uses the sharia name but its practices are no different from the transactions the community wishes to avoid, trust will be quickly damaged. In the people’s economy, trust is often more expensive than financial capital.
The legal basis is already available. The Cooperatives Law, as amended by the Job Creation Law, opens space for cooperatives to conduct business activities based on sharia principles and mandates the existence of a sharia supervisory board. At the technical level, savings and loan activities by cooperatives have also been regulated through ministerial regulations covering institutional aspects, licensing, operational standards, supervision, reporting, and sharia supervisory boards. This means the strengthening of sharia cooperatives is not an idea standing outside the law, but part of an already developing cooperative legal framework. However, the next challenge is making sharia compliance realistic for village cooperatives. It is not easy to fully establish a sharia supervisory board in thousands of small cooperatives, due to limitations in both human resources and costs. Therefore, what is needed is not just a formal obligation, but a workable compliance architecture, such as the drafting of standard basic contracts in accordance with the fatwas of the National Sharia Board of the Indonesian Ulema Council (DSN-MUI) that are easy to understand for village cooperatives; sharia operational guidelines for village cooperative business units; tiered sharia supervision through secondary cooperatives or at the district/city level; and sharia compliance training for cooperative facilitators. A tiered approach is important so that sharia does not become an administrative burden, but rather a quality of service. Village cooperative administrators must not be left to interpret contracts on their own without guidance, and cooperative facilitators need to understand the differences between sale, lease, profit-sharing, and lending so that sharia services do not merely change labels.