Celios: Merah Putih Cooperative Risks Defaulting on Rp85 Trillion Loan

President Prabowo Subianto inaugurated the launch of 80,000 Merah Putih Village/Sub-district Cooperatives across Indonesia on Monday (July 21, 2025).

Prabowo stated that these cooperatives aim to curtail the dominance of large economic players that have hindered the progress of the people.

"Today is indeed a historic day. We are embarking on a great endeavor. This cooperative is a strategically significant undertaking," said Prabowo in a press release (July 21, 2025).

However, according to calculations by the Center of Economic and Law Studies (Celios), the Merah Putih Cooperatives face a significant risk of loan defaults.

Celios made this calculation based on the assumption that the Merah Putih Cooperatives will have a loan default rate or non-performing loan (NPL) similar to that of micro, small, and medium enterprises (MSMEs).

"The average NPL for MSMEs is in the range of 4-5 percent. With this NPL rate, it can be concluded that these cooperatives have a considerable potential credit risk, especially if not accompanied by strict governance and risk mitigation," said Celios.

Assuming each cooperative can borrow capital from banks amounting to Rp3 billion per business unit, with a loan term of six years and an interest rate of 3% per year, Celios predicts that the risk of loan default for the Red and White Cooperatives will reach Rp7.18 trillion in its first year.

The value of defaults is then projected to continue increasing, potentially reaching Rp28.33 trillion in the sixth year.

If accumulated, the total value of the Merah Putih Cooperatives' default risk is predicted to reach Rp85.96 trillion.

"There is a risk of default for the Red and White Cooperatives over the 6-year loan period amounting to Rp85.96 trillion, and this risk is borne by the Village Government, approximately 20% of the total village funds over six years," wrote Celios in its report.

"In the long term, this accumulation of losses can become a significant burden, and damage public trust in cooperative schemes and village empowerment based on people's economy," they said.