Ilustration by AI
Good Cooperative Governance Seen as Key to Preventing Rural Cooperative Losses in Indonesia
Farmer and livestock cooperatives in Pari Village, Pantai Cermin District, Sei Rampah Regency, Indonesia, are facing growing financial and governance challenges that threaten rural economic stability. A 2026 study by Maysarah from Universitas Pembinaan Masyarakat Indonesia highlights how preventive revitalization based on Good Cooperative Governance can reduce corruption risks, strengthen financial transparency, and improve the welfare of cooperative members.
The study, published in the Indonesian Journal of Society Development, examines the “Maju Bersama” farmer and livestock cooperative in Pari Village. The findings are significant because cooperatives remain one of the main economic pillars for rural communities in Indonesia, especially in agriculture, fisheries, and small-scale livestock sectors.
The research comes at a time when many village cooperatives across Indonesia are struggling with weak oversight, financial mismanagement, unequal profit-sharing systems, and allegations of corruption. According to the study, improving governance structures and legal literacy among cooperative managers could become an effective long-term solution.
Rural Cooperatives Play a Critical Economic Role
Pari Village is located in a coastal area bordering the Malacca Strait and has strong economic potential in fisheries, agriculture, livestock farming, tourism, and marine-based small businesses. The village also has a population of more than 7,000 residents, creating a large labor force and local market for cooperative development.
Most residents work as:
- Fishermen
- Farmers and plantation workers
- Small-scale livestock breeders
- Traders and MSME operators
- Daily laborers
The study explains that cooperatives in villages like Pari are essential for distributing fertilizers, seeds, livestock feed, and marketing agricultural products. Cooperatives also distribute SHU, or Remaining Business Results, which functions as profit-sharing for members.
However, many cooperatives have failed to implement professional governance systems.
The research identified several recurring problems:
- Lack of transparent financial reporting
- Weak internal and external audits
- Unequal distribution of SHU and commissions
- Manual financial administration systems
- Limited legal understanding among managers
- Risks of embezzlement and corruption
The study also found that middlemen continue to dominate agricultural and fisheries markets, forcing farmers and fishermen to sell products at low prices.
Financial Losses Increased Sharply Between 2022 and 2025
One of the most important findings in the study is the sharp increase in cooperative losses over several years.
Financial simulation data presented in the research showed:
- 2022: Profit of Rp50 million
- 2023: Loss of Rp100 million
- 2024: Loss of Rp400 million
- 2025: Loss of Rp650 million
The study linked the worsening financial condition to several suspected factors:
- Corruption and embezzlement
- Fertilizer procurement mark-ups
- Fictitious financial reports
- Excessive commission distribution
- Weak internal auditing systems
The research also documented additional losses between 2021 and 2025 caused by non-performing loans, crop failures, and alleged misuse of aid funds.
According to Maysarah, the trend demonstrates an urgent need for stronger oversight and preventive legal action.
The paper states that “internal-external audits and civil/criminal/bankruptcy legal measures are needed” to stop the financial decline and prevent recurring misconduct.
Research Combined Governance and Legal Approaches
Unlike many cooperative studies that focus only on economics, this research combined four major legal perspectives:
- Cooperative law
- Criminal law
- Civil law
- Bankruptcy law
The study reviewed how Indonesian cooperatives comply with Law Number 25 of 1992 concerning cooperatives, including transparency obligations and democratic member participation.
The research also examined possible criminal violations, including:
- Embezzlement of cooperative funds
- Corruption involving government assistance funds
- Financial statement fraud
Civil law analysis focused on contract disputes involving fertilizer and feed procurement, while bankruptcy law analysis explored risks faced by cooperatives unable to repay debts.
To simplify preventive action, the study proposed a governance model:
Loss Findings → Internal Audit → External Audit → Mediation / Civil Lawsuit / Criminal Report / Bankruptcy
This framework is intended to help cooperatives identify financial irregularities before they escalate into larger legal or economic crises.
Community Training Became Part of the Solution
The project involved 55 participants, including cooperative members, managers, and farmer-livestock groups. Activities included:
- Legal counseling sessions
- Governance training
- Internal and external audit workshops
- Simulations of civil, criminal, and administrative dispute resolution
Participants actively discussed concerns regarding commission distribution and financial transparency. Some participants questioned annual commission programs and large cooperative expenditures that allegedly caused major capital losses.
The study found that many managers lacked basic legal understanding related to:
- Cooperative regulations
- Contract law
- Criminal liability
- Bankruptcy risks
To address these weaknesses, the research recommended several preventive measures:
- Digitization of cooperative financial systems
- Standard operating procedures for fund disbursement
- Dual approval systems for financial decisions
- Mandatory annual member meetings
- Routine audits
- Transparent reporting to members
- Blacklisting former managers involved in misconduct
The study also applied the Fraud Triangle Theory, which explains that corruption often occurs because of pressure, opportunity, and rationalization.
Strong Governance Could Strengthen Rural Economies
The findings suggest that healthy cooperatives can become powerful tools for rural economic empowerment if governance systems are improved.
According to the research, well-managed cooperatives can:
- Reduce corruption risks
- Increase member trust
- Improve access to business capital
- Strengthen farmer and livestock bargaining power
- Support digital marketing for local products
- Reduce dependence on middlemen
The study also emphasized that healthy cooperatives require transparent financial reports, fair SHU distribution, regular member meetings, active supervision, and sustainable business operations.
Maysarah wrote that preventing corruption is more effective than handling repeated financial scandals after losses occur. The study argues that governance reform should become a priority for rural cooperatives throughout Indonesia.
Author Profile
Adv. Dr. Hj. Maysarah is a lecturer at the Faculty of Law, Universitas Pembinaan Masyarakat Indonesia. Her expertise includes cooperative law, civil law, organizational governance, and community economic empowerment.
0 Komentar