Upon arriving at the Merah Putih Village Cooperative in Bentangan, President Prabowo Subianto was greeted enthusiastically by thousands of residents from Bentangan Village, Wonosari District, Klaten Regency, Central Java, on Monday afternoon (21/7/2025)
In front of several ministers from the Merah Putih Cabinet, the President officially launched the establishment of 80,081 Merah Putih Village and Urban Cooperatives. Prabowo firmly stated that cooperatives are a tool of struggle for the common people to gain economic strength.
“Today we are launching the 80,000 Village and Urban Merah Putih Cooperatives, more precisely, 80,081 cooperatives. This is truly a historic day. We are beginning a major effort. This cooperative movement is a large and strategic initiative,” President Prabowo said, as quoted from presidenri.go.id.
President Prabowo also promised infrastructure support for the Merah Putih Village Cooperative administrators. This includes storage warehouses, cold storage facilities, staple goods outlets, pharmacies, and logistics vehicles. The Merah Putih Village Cooperatives will also be equipped with super micro-loans to ease goods distribution and boost the village economy.
“If we have good intentions, strong will, and strong motivation, we can make it happen. What seemed impossible can become possible. Eighty thousand,” he said.
President Prabowo Subianto is inaugurating the establishment of 80,000 Merah Putih Village Cooperatives in Bentangan Village, Wonosari District, Klaten Regency, Central Java, on Monday, July 21, 2025. Muchlis Jr/Biro Setpres
The Merah Putih Village Cooperative is one of President Prabowo’s flagship programs. It is claimed to have the potential to improve village welfare and tackle rural economic issues.
The establishment of the Merah Putih Village Cooperative is part of a broader movement to build a modern rural economic ecosystem that prioritizes the interests of the grassroots. This was stated by the Coordinating Minister for Food Affairs and Head of the National Merah Putih Cooperative Task Force, Zulkifli Hasan, during the launch in Klaten last Monday.
The Merah Putih Village Cooperative is touted as a powerful force in dismantling the networks of loan sharks, middlemen, and online lending schemes, key contributors to rural poverty. These issues continue to affect millions of people living in poverty in rural areas.
Ali Zainal Abidin, S.E., M.E., a microfinance expert from Universitas Muhammadiyah Surakarta (UMS), affirmed the potential of the Merah Putih Village Cooperative to eliminate the role of exploitative middlemen. The cooperative’s presence is expected to be a breath of fresh air, reducing farmers’ and fishers’ dependency on middlemen who have long profited more than the producers themselves.
“It’s not a 100 percent new breakthrough, but it becomes new because the President aims to unify all cooperatives under a single framework managed by the Ministry of Cooperatives,” said Ali, Friday, (25/07/2025)
Ali observed that cooperatives operating in rural areas have long failed to eliminate the distribution chain dominated by middlemen. This is due to the entrenched role of middlemen, which over decades has become a kind of status quo, where their presence is seen as essential. It takes considerable boldness to disrupt that approach.
“Most cooperatives have never dared to touch that specific point (middlemen), because the supply chain has been running that way for decades,” he added.
President Prabowo Subianto listens to a presentation by Coordinating Minister for Food Affairs Zulkifli Hasan during the inauguration of 80,000 Merah Putih Village Cooperatives in Bentangan Village, Wonosari District, Klaten Regency, Central Java, on Monday, July 21, 2025. Rusman/Biro Setpres
Minister of Agriculture Amran Sulaiman, in a press conference earlier in June, stated that this dependency on middlemen actually harms farmers. Amran mentioned that rice production by farmers reached 21 billion kilograms. The middlemen alone can pocket as much as Rp42 trillion from a price margin of Rp2,000 per kilogram.
“Don’t mess around, we're working ourselves to the bone, working tirelessly to support the farmers. Do you even know how much a farmer earns? A farming family earns only about Rp1 million to Rp1.5 million per month,” said Amran, as quoted by CNBC Indonesia on Wednesday (23/7/2025).
Ali explained that eliminating the role of middlemen from the logistics distribution chain would bring many benefits to the community. The most direct impact would be more affordable prices for goods.
“If you ask me what happens if the middlemen are removed, will it directly affect prices? Absolutely. My answer is a definite yes,” affirmed the UMS Development Economics lecturer.
According to Ali, middlemen limit farmers’ direct access to industry. For example, corn farmers who wish to sell their harvests to processing factories are often forced to go through middlemen. As a result, the added distribution cost inflates corn prices by the time they reach the factory.
Although this could lead to lower prices, it brings a new set of challenges. If farmers can access processing factories directly, standardization becomes crucial. Legal compliance and the ability to meet consumer demand are also important. Ali acknowledged that many farmers are still unfamiliar with such standards and legal requirements.
“They (the farmers) can’t sell their products directly to the factories that actually need them. That’s where middlemen come in. And of course, on average, the profit earned by these middlemen is higher than that of the producers,” he added.
The Merah Putih Village Cooperative is not just a breakthrough in tackling the middleman issue, it’s also gaining attention for the significant capital support it’s receiving from the government.
The Merah Putih Village Cooperative has been designated a National Strategic Project (Proyek Strategis Nasional, or PSN) for 2026. According to Tempo.co, Minister of Cooperatives Budi Arie Setiadi explained that the program meets all criteria for PSN status.
These criteria include alignment with the national mid-term development plan, significant economic impact, and a strategic role in driving regional economic growth.
Its PSN designation grants the Merah Putih Village Cooperative regulatory guarantees and access to funding. Under Presidential Instruction No. 9 of 2025, which mandates the acceleration of the cooperative’s establishment, the government has opened funding streams from state-owned banks and village funds to serve as the cooperative’s initial capital.
Each Merah Putih Village Cooperative is set to receive an initial loan package worth a staggering Rp3 billion. According to Coordinating Minister for Food Affairs Zulkifli Hasan, the funding will not come in the form of grants, but rather as credit.
“These cooperatives aren’t being handed money, they’re given a credit ceiling, a loan limit. Initially Rp3 billion, which must be paid back,” said Zulkifli, as quoted by Tempo.co on Wednesday (23/7/2025).
Ali Zainal Abidin believed this setup will significantly ease the cooperatives’ access to bank funding. He noted that government backing for the loan structure distinguishes the Merah Putih Village Cooperative from traditional cooperatives.
The Presidential Instruction effectively acts as a guarantee to banks, making them more willing to extend credit to this new initiative. “The amount is quite substantial (Rp3 billion), and it’s a strong starting point for business development,” Ali said.
However, he cautioned that the ease of access to credit comes with substantial risks. Issuing large loans to newly formed institutions with unproven track records could result in non-performing loans (NPLs) or even fund misappropriation.
To prevent this, Ali emphasized the importance of building a clean and transparent cooperative ecosystem. He called on the Ministry of Cooperatives to actively monitor the performance of the Merah Putih Village Cooperatives, ensuring compliance with legal frameworks and proper use of funds.
While overseeing 80,000 cooperatives may seem daunting, Ali insisted that rigorous monitoring is essential to ensure sound governance. Only with consistent and rigorous oversight can that goal be achieved.
“Any business left unmonitored carries the risk of misconduct, especially when we’re dealing with large sums of money whose usage isn’t clearly tracked,” he concluded.
Writer: Gede Arga Adrian
Translator: Farizal Luqman Majid
Editor: Al Habiib Josy Asheva
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