Indonesia Mandates Red-White Cooperatives for Village Fund Disbursement

New Regulatory Requirements for Village Funding

The Indonesian government has introduced a significant change in village fund disbursement through Finance Minister Regulation (PMK) No. 81/2025. This new regulation modifies the existing guidelines outlined in PMK 108/2024 and adds substantial requirements for villages to access their allocated funds in 2025. The primary new condition is the mandatory formation of Red-White Cooperatives (Koperasi Merah Putih) at the village level.

Key Features of the New Regulation

1. Two-stage disbursement mechanism maintained from previous regulations

   • First stage: 60% of total village fund allocation by June
   • Second stage: 40% of total allocation from April onwards

2. New requirements for second-stage disbursement

   • Formation of Koperasi Desa/Kelurahan Merah Putih
   • Legal documents proving cooperative formation or proof of submission to notary
   • Commitment letter from village head supporting cooperative formation through APBDes

3. Continued existing requirements

   • APBDes (Village Budget Revenue and Expenditure) determination
   • Power of attorney for village fund transfer
   • Decision on BLT (Direct Cash Assistance) recipient families if applicable

Implementation Context and Rationale

The new regulation is part of the government's broader initiative to enhance village economic development through cooperative structures. By mandating the formation of Red-White Cooperatives, the government aims to create more organized and sustainable village economic units. This move aligns with President Joko Widodo's policy direction to strengthen grassroots economic institutions.

Impact Analysis

The introduction of this new requirement is likely to have multiple effects on village administration and economic activities:

1. Administrative burden on villages to establish legal cooperatives
2. Potential delay in fund disbursement for villages not ready with cooperative formation
3. Long-term economic benefits through structured cooperative development
4. Enhanced transparency in village fund management through formalized structures

Conclusion

The new regulation represents a significant shift in village fund management, emphasizing cooperative-based economic development. While it presents implementation challenges, the policy aims to create more sustainable village economic ecosystems through formalized cooperative structures.