Indonesia expects state bank funding to spur village co-op programme

[JAKARTA] The Indonesian government expects the US$12 billion it has moved to state banks to spark an acceleration in plans to set up 80,000 village cooperatives across the country after a slow start to the flagship scheme, a minister said on Monday (Sep 15).

The “Red and White Cooperatives” are intended to drive growth and create jobs at a village level, as President Prabowo Subianto aims to lift economic growth to 8 per cent from around 5 per cent currently, a target he set during last year’s election campaign.

“The money is now available at state banks,” Zulkifli Hasan, a senior minister overseeing the cooperative programme, told reporters, noting a slow start since the plan’s launch in July.

“We ask for an acceleration in loan disbursement. It has been (some) months since the launch, don’t let the money sit in the banks for too long,” he said, adding the government wanted 16,000 co-ops to be funded by the end of the month. Finance Minister Purbaya Yudhi Sadewa last week deposited US$12.2 billion of government funds with five state banks, saying it was to be used for lending.

The co-ops are expected to sell basic household necessities as well as subsidised cooking gas and fertiliser, among other businesses. Each one can apply for a loan from a state bank of up to 3 billion rupiah (S$234,381), with the interest rate capped at 6 per cent.

Bank Rakyat Indonesia, Bank Mandiri, Bank Negara Indonesia and Bank Syariah Indonesia have identified more than 1,000 eligible co-ops that could potentially borrow 1.06 trillion rupiah, a government report showed on Monday.

On Monday, the finance minister told reporters that state banks could reduce the interest they paid on government deposits if the funds went to cooperatives. The central bank has also agreed to cover some of the cost via a “burden sharing” agreement with the finance ministry announced earlier this month. REUTERS