The initiative, which will channel up to Rp 400 trillion (US$24.3 billion) in funding, has raised concerns over a potential rise in nonperforming loans (NPLs) and liquidity strains.
ndonesia’s state-owned lenders are facing fresh financial risks as President Prabowo Subianto moves forward with a massive plan to establish 70,000 to 80,000 village cooperatives nationwide, funded by a mix of village funds and bank loans.
The initiative, which would channel up to Rp 400 trillion (US$24.3 billion) in funding, is expected to put pressure on state banks Bank Rakyat Indonesia (BRI), Bank Mandiri, Bank Negara Indonesia (BNI) and Bank Tabungan Negara (BTN), raising concerns over a potential rise in nonperforming loans (NPLs) and liquidity strains.
Doddy Ariefianto, banking analyst at Binus University, said forcing state banks to funnel hundreds of trillions of rupiah to newly established cooperatives “is theoretically possible but practically unsound”.
Distinct from traditional business structures, he argued no cooperative has yet demonstrated a viable and profitable model that is worthy of this scale of funding, especially given the many previous cases of fraud and defaults.
Speaking to The Jakarta Post on March 11, Doddy argued that even BRI, specializing in micro, small and medium enterprises (MSMEs) lending, lacked the capacity to handle these kinds of financing.
“SOE banks don’t have spare liquidity to finance MSMEs at scale, let alone cooperatives, which aren’t their core business,” Doddy said.
Banks could push back by rejecting risky loan applications just as they would with any other proposals, Doddy noted.
Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.
Thank you for sharing your thoughts. We appreciate your feedback.
Quickly share this news with your network—keep everyone informed with just a single click!
Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
Get the best experience—faster access, exclusive features, and a seamless way to stay updated.