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View all search resultsAnalysis: Desperately seeking funds for Red and White cooperatives
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Farmers plant rice in a paddy field on June 28, 2025, at Lambaro in Aceh. (AFP/Chaideer Mahyuddin)
T
he Red and White Cooperative (KDMP) initiative is rapidly transforming from a flagship economic program into a mandate that must succeed at any cost. In its wake, the program is now cannibalizing the Village Fund, the very backbone of rural development and a decade-long symbol of local empowerment.
Earlier this month, Finance Ministry Regulation No. 7/2026 on Village Fund Management issued a startling directive requiring that 58 percent of all Village Funds be diverted to the KDMP. This mandate drastically strangles the budgetary autonomy of local leaders across the archipelago.
With the 2026 Village Fund ceiling set at Rp 60.6 trillion (US$3.6 billion) for distribution to 75,260 villages, each community receives an average of Rp 805 million. Under these new provisions, villages are left with a meager Rp 332 million to address locally determined needs.
For the nearly 60 percent of Indonesian villages that generate zero internal revenue, the Village Fund is not a supplementary "bonus", it is their entire lifeline for survival and growth.
Since 2015, fiscal decentralization has allowed villages to evolve from passive recipients of aid into autonomous planners. The results were measurable, as the number of self-sufficient villages skyrocketed from a mere 173 in 2015 to over 20,500 by 2025. This progress was built on the principle that local people know their needs better than the central government.
By mandating how over half of these funds are spent, the government risks reverting villages into mere branch offices of a central bureaucracy. The friction is already visible in regions like Kediri and Lamongan, both in East Java, where public outcry erupted over plans to pave over village soccer fields to make room for cooperative offices. These local landmarks have become symbols of a top-down approach that prioritizes national quotas over social cohesion.
This shift creates a glaring political contradiction. During the 2024 campaign, the Prabowo-Gibran ticket pledged to quintuple the Village Fund to Rp 5 billion per village. Instead, the current reallocation feels like a "policy paradox" to critics who supported that vision.
