Koperasi Merah Putih: A National Strategy for Inclusive Growth
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On 27 March 2025, the Government of Indonesia issued Presidential Instruction Number 9 of 2025 on the Acceleration of the Establishment of Koperasi Merah Putih (“Inpres 9/2025”). Complementing this initiative, the Government also enacted the Minister of Koperasi Regulation Number 2 of 2025 concerning the Development of Village/Urban-Village Koperasi Merah Putih Enterprises (“MOC Reg 2/2025”). Together, these instruments underscore the government’s strategic push to strengthen grassroots economic institutions, enhance food security and align local economic governance with the long-term vision of Indonesia Emas 2045.
This ARMA Update will highlight the key mandates of Inpres 9/2025 supported by MOC Reg 2/2025, examines their potential impact on the Koperasi Merah Putih movement and local economies and provide insights into what stakeholders should anticipate moving forward.
General Overview of Koperasi Merah Putih
A Koperasi in Indonesia is a unique legal entity funded on the principles of cooperation. It is formed by individuals with the primary goal of improving the welfare of its members. Koperasi functions as a people’s economic movement, based on the principle of kinship (asas kekeluargaan),1 emphasizing mutual assistance, solidarity, and shared benefit, rather than profit maximization. A Koperasi consists of three key organs, which are the Meeting of Members (Rapat Anggota), the Management Board (Pengurus), and the Supervisory Board (Pengawas). Meeting of Members serves as the highest authority in decision-making, while Management Board is responsible for the day-to-day management and representation of the Koperasi, and the Supervisory Board ensures accountability, transparency, and compliance with Koperasi principles and applicable regulations.2
The legal framework of Koperasi lies in Law Number 25 of 1992 on Koperasi (“Law 25/1992”), which establishes the operational and governance guidelines for Koperasi. These principles are enshrined within Law 25/1992, ensuring Koperasi are not just business entities, but also social institutions focused on economic equality, financial inclusion, and community empowerment.
In contrast, Koperasi Merah Putih under Inpres 9/2025 represents a national strategy to strengthen local economies at scale. While rooted in Koperasi principles, its purpose is broader and more aligned with national goals. As mandated in Inpres 9/2025, the establishment of Koperasi Merah Putih is intended to (i) strengthen local economic institutions; (ii) enhance food security through agricultural and fisheries supply chains; (iii) expand financial inclusion via savings, loans, and sustainable financing; (iv) provide community services such as clinics and cold storage; and (v) position Koperasi Merah Putih as drivers of equitable, sustainable growth toward the vision of Indonesia Emas 2045. Unlike traditional koperasi, which typically serves its members’ immediate needs, Koperasi Merah Putih plays a role in national development, aimed at addressing larger social and economic challenges, making it a key player in national economic resilience.
The governance framework emphasizes transparency and accountability, supported by structured monitoring, evaluation and direct reporting to the President through the relevant ministries and agencies. Ultimately, Koperasi Merah Putih is not intended as a mere administrative creation, but as a resilient, independent, and sustainable business institution capable of delivering enduring benefits to its members and advancing national development.3
Regulatory Purpose
At its core, Inpres 9/2025 mandates the creation of 80,000 Koperasi Merah Putih across villages and urban villages nationwide. These Koperasi Merah Putih are intended as community-based enterprises that meet local needs while linking rural economies to broader value chains.4 In practice, MOC Reg 2/2025 allows each Koperasi Merah Putih to develop business units such as a Koperasi office, procurement of basic goods, health clinics, pharmacies, warehousing or cold storage, logistics and savings and loans. The choice of business units must reflect the characteristics and potential of the village or urban-village and may also include other activities assigned by the government or based on local needs.5
To accelerate this initiative, Inpres 9/2025 directs 18 government institutions, comprising ministries, agencies and local governments to adopt affirmative, holistic and sustainable programs through coordinated strategies, alignment of acceleration measures and adherence to good governance. Inpres 9/2025 further emphasizes that Merah Putih Village/Community Koperasi (Koperasi Desa/Kelurahan Merah Putih) can build partnerships with businesses, government and institutions to trade products, join supply chains, access financing and develop innovation. These partnerships must be registered in the registration in the information management system, known as the Sistem Informasi Manajemen Koperasi Desa/Kelurahan Merah Putih (“SIMKOPDES”) platform and may be facilitated by ministries or local governments. To scale up, Koperasi Merah Putih are encouraged to form secondary Koperasi, create networks and promote flagship products collectively.6
Funding Framework and Oversight
The financing structure under Inpres 9/2025 relies on contributions from the state budget (“APBN”), regional budgets (“APBD”) and village budgets (“APBDes”), supplemented by credit facilities from state-owned financial institutions. This diversified scheme provides continuity and stability, yet it also demands strong oversight to prevent inefficiency, corruption and overdependence on subsidies. By combining public funding with community participation, the Koperasi Merah Putih initiative seeks to uphold both institutional sustainability and accountability.7
The capital structure of Koperasi Desa/Kelurahan Merah Putih comprises two principal components: own capital and loan capital. Own capital originates from government allocation through APBN, APBD, and APBDes, as well as members’ principal savings, mandatory savings, reserve funds and grants. Loan capital, meanwile, includes credits facilities extended by members, other Koperasi and their members, banks and financial institutions, as well as the issuance of bonds or debt instruments, provided such sources remain lawful. In addition, Koperasi Merah Putih may also strengthen their financial base through equity participation capital, enabling greater flexibility for growth and long-term development.8
Furthermore, as outlined in the Preamble Consideration sections of Minister of Home Affairs Regulation Number 13 of 2025 on Support of the Heads of Regent/Mayor in the Funding of Koperasi Kelurahan Merah Putih, local district heads are empowered to support the establishment and operation of these koperasi through the provision of loans from government banks. These loans, which are crucial for starting up and sustaining koperasi activities, are designed to provide necessary capital for the koperasi. In addition to offering loans, local governments can provide a support fund, financial incentives or ease of loan repayment, to ensure that koperasi can fulfill its financial obligations.
Monitoring and Reporting
To ensure accountability, Inpres 9/2025 establishes a monitoring and reporting framework that obliges ministries and local governments to submit progress reports directly to the President.9
In parallel, supervision of Koperasi Desa/Kelurahan Merah Putih development is carried out by the relevant ministers, agencies, governors, and regents/mayors through assistance, socialization, training and other facilitation efforts aimed at strengthening Koperasi Merah Putih capacity, including digital transformation. Koperasi Merah Putih boards are obliged to submit quarterly reports on business progress, challenges and proposed solutions via the SIMKOPDES platform, with the reporting chain flowing from Koperasi Merah Putih to regents/mayors, then to governors, and ultimately to the Minister. These reports, combined with regular monitoring and evaluation at every level of government, form the basis for policy adjustments to enhance the effectiveness and sustainability of Koperasi Merah Putih development programs.10
Opportunities
Koperasi Merah Putih offers substantial opportunities for rural economic advancement and institutional strengthening. By expanding access to financial services such as savings, loans, and financing, Koperasi can drive economic empowerment and support financial inclusion, ultimately stimulating local economies and contributing to poverty reduction. Moreover, through supply chain integration, Koperasi Merah Putih has the potential to connect rural producers, particularly in the agricultural and fisheries sectors, to broader national and international markets, thereby enhancing market access and increasing local revenue streams.
In addition, the introduction of the SIMKOPDES digital platform further presents an opportunity to modernize Koperasi Merah Putih management through improved transparency, operational efficiency, and service innovation. Coupled with a robust legal framework, this digital transformation can strengthen governance structures, build public trust in the Koperasi Merah Putih model, and potentially attract greater investment and partnership opportunities from both private and public sectors.
Things need to be considered
The implementation of Koperasi Merah Putih across 80,000 villages presents several legal. institutional and structural considerations that need to be taken into account to ensure its overall effectiveness and long-term sustainability. First, effective regulatory coordination among multiple regional and sectoral institutions will be crucial. Variations in the interpretation of implementing guidelines could result in inconsistent governance practices, fragmented execution, and uneven policy outcomes. Establishing a clear and harmonized regulatory framework, accompanied by effective monitoring and evaluation mechanisms, will help maintain uniform standards across regions. Second, given the program’s reliance on government funding and loan facilities, maintaining financial sustainability and operational independence will also be important. Developing clear mechanisms for the institutional capacity to uphold the core principles of transparency, accountability, and participatory decision-making (good governance), particularly given the requirement to submit progress reports up to the Presidential level will help minimize administrative inefficiencies and ensure transparent monitoring. Third, as Koperasi Merah Putih encourage public-private collaboration, a clear legal framework governing contractual obligations, allocation of responsibilities, and dispute resolution is indispensable. Ensuring clarity is important to prevent differing expectations or benefit-sharing arrangements from affecting the spirit of trust and effective cooperation among stakeholders. Lastly, strengthening institutional capacity and governance standards at the cooperative level through training and oversight will also be vital to support the credibility and long-term sustainability of Koperasi Merah Putih as a vehicle for inclusive economic growth.
Ultimately, Inpres 9/2025 signals a bold reorientation of Indonesia’s Koperasi movement. Its success will be judged not merely by the number of Koperasi Merah Putih established but by their ability to deliver lasting value to members and contribute meaningfully to national development goals. If these objectives are met, Koperasi Merah Putih could become a cornerstone of Indonesia’s inclusive growth agenda and a key building block for Indonesia Emas 2045.
- Article 1 point (1) of MOC Reg 2/2025 ↩
- Article 21–40 of Law 25/1992 ↩
- Article 3 of MOC Reg 2/2025 ↩
- Point 1 & 2 of Inpres 9/2025 ↩
- Article 4 of MOC Reg 2/2025 ↩
- Point 4, 5 and 6 of Inpres 9/2025 ↩
- Point 8 of Inpres 9/2025 ↩
- Article 10 of MOC Reg 2/2025 ↩
- Point 7 of Inpres 9/2025 ↩
- Article 31 & 35 of MOC Reg 2/2025 ↩
Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.
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