RADAR TULUNGAGUNG – The ambitious Merah Putih Village Cooperatives program launched by Indonesian President Prabowo Subianto is facing serious challenges in Blitar Regency, East Java. Just weeks after the nationwide inauguration ceremony, hundreds of cooperatives reportedly remain inactive due to a lack of operating capital.
According to a local report on August 10, 2025, as many as 244 Red and White Village Cooperatives in Blitar have yet to begin operations. The issue has raised concerns over the sustainability of the government-backed rural economic program.
The Merah Putih Village Cooperatives initiative was introduced as part of the government’s effort to strengthen village economies, support farmers, and create new rural business ecosystems. However, local officials say the reality on the ground is far from expectations.
Sri Wahyuni, Head of the Cooperatives and SMEs Office in Blitar Regency, admitted that the main obstacle remains capital funding. Without immediate financial support, the newly formed cooperatives risk becoming inactive before they can even serve local communities.
Capital Problems Threaten Cooperative Operations
Sri Wahyuni explained that most of the cooperatives are still waiting for financing mechanisms involving state-owned banks under the Himbara group. Discussions regarding collateral requirements and technical procedures are reportedly still ongoing.
Out of 248 cooperatives planned in Blitar, only four are currently operating. Those four cooperatives were able to function because they originated from existing institutions such as Village-Owned Enterprises (BUMDes) and farmer groups known as Gapoktan.
The remaining 244 cooperatives reportedly lack sufficient funds to start business activities. Initial mandatory savings and principal member contributions are considered too small to sustain operations.
This condition has fueled public debate about whether the cooperative model truly reflects traditional cooperative principles. Critics argue that relying heavily on bank loans rather than member-based capital creates a system closer to debt financing than grassroots economic empowerment.
The report also highlighted concerns regarding future loan repayment mechanisms. Under the proposed system, unpaid cooperative loans could potentially affect village fund allocations, sparking fears that public village budgets may eventually be used to cover bad debts.
Farmers Wait for Economic Benefits
Farmers in Blitar had initially hoped the Merah Putih Village Cooperatives program would strengthen local agriculture. Officials promoted the initiative as a solution for fertilizer access, crop distribution, and rural business development.
Blitar’s agricultural sector has relied on cooperatives and farmer groups for years. Local observers therefore expected the new program to strengthen existing systems rather than create overlapping institutions.
Some business owners now worry that subsidized cooperatives could disrupt existing local businesses. Smaller traders may struggle to compete if cooperatives receive easier access to financing and government support.
At the same time, cooperative experts continue to question whether regulators will loosen rules for savings-and-loan activities under the new system. Indonesia previously tightened cooperative regulations to reduce fraud cases and improve financial accountability.
Many practitioners believe strict supervision helped reduce problematic savings-and-loan cooperatives in recent years. They now fear that rapid expansion without strong oversight could revive old problems in the sector.
Government Faces Pressure to Deliver Results
The Blitar case has become one of the first major field reports that challenge the readiness of the nationwide cooperative program. The government launched nearly 80,000 village cooperatives across Indonesia during a large ceremonial event, but many regions still struggle with operational preparations.
Local officials continue to urge the central government to finalize funding systems, technical guidelines, and operational standards as soon as possible.
Despite the criticism, many villages still hope the program can succeed if authorities improve coordination and provide realistic financial support. Residents believe properly managed cooperatives could still strengthen local economies and help rural communities grow.
For now, however, hundreds of Merah Putih Village Cooperatives in Blitar remain inactive while communities wait for clarity about capital access and operational certainty.