Indonesia government commits to cooperative loan repayments as deadline looms
JAKARTA: Indonesia's government will make repayments of bank loans that are funding a national village cooperative programme, the finance minister said, as the first instalment falls due on Friday.
Jakarta: The Indonesian government has pledged to make repayments on loans used to fund a national village cooperative program, as the first installment becomes due on Friday. Finance Minister Suahasil Nazara announced on Thursday that the repayments will occur once the government confirms the funds were utilized as intended, including the construction of cooperative stores in numerous villages.
The government has allocated 37 trillion rupiah (US$2.1 billion) for this purpose in the 2026 budget. Verification processes must confirm the construction and count of these facilities.
The loans are part of a complex financing scheme for the Red and White village cooperative program, initiated by President Prabowo Subianto to boost rural economies and achieve an 8% national growth rate. This initiative aims to have cooperatives sell subsidized products like fertilizers and cooking gas, purchase local produce, and offer low-interest loans to villagers.
Under the scheme, four state banks - Bank Rakyat Indonesia, Bank Negara Indonesia, Bank Mandiri, and Bank Syariah Indonesia - have provided a combined US$13.6 billion in 6-year, low-interest loans to PT Agrinas Pangan Nusantara, the state company building the 80,000 cooperative stores. Upon completion, the loans will be repaid by the government, and the cooperatives will eventually be transferred to local communities.
The verification process will be handled by the cooperative ministry and state auditors. The government believes this financing method offers a better outcome than previous schemes where funds were given directly to villages. However, credit rating firm CreditSights has expressed concerns about potential administrative delays and non-payment risks, which could lead to underperformance and affect earnings.
They also question the long-term sustainability of individual cooperatives due to the top-down rollout with a one-size-fits-all model, limited feasibility testing, and reports of suboptimal site selections. As of Thursday, 25,977 cooperative stores have been built out of the targeted 35,000 for the year.
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