Start small, big target. President Prabowo officially launched the Merah Putih Village Cooperatives program on 21 July (see Eco Box 1. Cooperatives 101). Of the total 80,081-unit target, 108 cooperatives are now fully operational, each with at least seven business units such as a cooperative office, grocery store, clinic, pharmacy, logistics hub, warehouse/cold storage, and savings-and-loans unit. President Prabowo stated that the initiative aims to shorten the distribution chain for essential goods particularly affordable medicine and basic commodities to benefit lower-income communities.
Tied to free nutritious meal program. Earlier this year, President Prabowo signed Presidential Instruction No. 9/2025, which states that the Merah Putih Village Cooperatives will serve as the supplier for the free nutritious meal program. In addition, the cooperatives also act as off-takers for farmers harvests, helping to stabilize prices at the farm level. As of 21 July, the free nutritious meal program has served around 6.7mn recipients through 2,200 central kitchens across the country. In terms of timeline, the program will enter its development phase in August October to operate 80,081 cooperatives, followed by monitoring and evaluation in November December.
Administrative requirements. As of 21 July, Coordinating Minister Zulkifli Hasan stated that all 80,081 cooperatives had obtained legal status. The establishment of each cooperative must result from a village assembly meeting, which also determines its organizational structure. To set up cooperative, legal documents must be prepared, including legal entity status and a Business Identification Number. For establishing a village cooperative grocery (Kopdes Mart), the process includes a feasibility study, developing management and financial reports, and partnerships with local suppliers, with store sizes ranging from 20 m2 to 100 m2 and estimated costs IDR60-500mn (Exhibit 1).
Source of financing. President Prabowo stated that the estimated cost of the program is around IDR2 2.5bn per year per village, implying a total annual budget of IDR160 200 trillion (0.7 0.8% of GDP). Separately, the Ministry of Home Affairs has identified four potential sources of initial capital: 1) central government capital participation, 2) grants from regional governments, 3) corporate CSR contributions, and 4) financing from state-owned banks (Exhibit 2). In the 2025 budget, the government allocated IDR864tn in transfers to regions, of which IDR69tn is allocated for the village fund implying an average of IDR0.9bn per village.
Financing schemes. On 21 July, the MOF issued Ministerial Regulation No. 49/2025, which regulates bank loan for Merah Putih Village Cooperatives. Cooperatives may apply for bank loans with approval from the city mayor/village chief. The loan size for each cooperative depends on the amount of village fund received by the respective villages, with the credit limit set at IDR3bn. The interest rate is 6% per annum, and the maximum tenor is 72 months (Exhibit 3). Cooperatives must undergo the standard loan process, including a creditworthiness assessment. Cooperative assets will serve as collateral. In times of financial difficulty, cooperatives may use Village Funds and General/Revenue Sharing Transfers (DAU/DBH) from the state budget as additional collateral.
Macro impacts and risks. If executed well, this program could significantly boost rural financial inclusion, stabilize agricultural prices, and create jobs by formalizing informal sector activities through grassroots cooperatives. It may also strengthen the MSME sector, support domestic demand, and reduce urban migration pressure. However, the risks could stem from weak governance, fiscal strain, and credit quality concerns if cooperatives are poorly managed or overly reliant on government funding.
