IPB University Scholar: Cooperatives in Indonesia Need to Adapt Without Losing Their Identity

Cooperatives face new challenges amid changes in technology, the digital market, value chains, and an increasingly complex business environment. However, becoming modern does not mean abandoning the fundamental principles of cooperatives.

Dr Suharno, a lecturer at the Faculty of Economics and Management (FEM) at IPB University, stated that the main challenge for Indonesian cooperatives does not lie in cooperative principles that are no longer relevant, but rather in the gap between those principles and the institutions that implement them.

“The main issue facing Indonesian cooperatives does not lie in the irrelevance of cooperative principles, but rather in the gap between normative principles and the institutional arrangements that put them into practice,” emphasized Dr Suharno during Strategic Discussion Series 3, organized by the Department of Agribusiness at IPB University on the Dramaga Campus some time ago.

According to him, member ownership, democratic control, shared benefits, and service to members are the core identity of cooperatives that must be preserved.

Meanwhile, governance, capital structure, audit systems, professional management, networks or federations, digital platforms, and business models are institutional tools that can evolve in response to changes in the environment.

Global Cooperative Benchmarks
He also analyzed the dynamics of domestic cooperatives compared to the success of global cooperatives such as Fonterra (New Zealand), Rabobank (the Netherlands), and Amul (India).

These successes demonstrate that cooperatives can grow on a large scale through institutional innovation. Their strategies include organizational consolidation, management professionalization, the formation of federations, capital structure innovation, value chain integration, business diversification, brand strengthening, digitalization, and investment in education, research, and development.

“These experiences are not meant to be directly replicated by Indonesia. The key lesson is how cooperatives maintain their core principles while adapting their institutional mechanisms,” he explained.

Members Must Be Active
To achieve this success, Dr Suharno stated that member participation needs to shift from merely being a matter of membership numbers to tangible economic participation. Members need to act as both owners and users, utilizing cooperative services, investing, exercising oversight, voicing their aspirations, and reaping economic benefits.

The success of a cooperative cannot be measured solely by its assets, revenue, or net surplus, but rather by its ability to improve members’ economic standing, expand market access, strengthen bargaining power, and ensure business sustainability.

Institutional Evolution
In the Indonesian context, institutional changes in cooperatives have been a long-standing process, beginning with credit institutions in the late 19th century, the ideas of Mohammad Hatta, the development of Village Unit Cooperatives (KUD), various regulatory changes, and culminating in the Merah Putih Village/Subdistrict Cooperatives (KDMP).

For Dr Suharno, every change can resolve specific issues but also presents new challenges. KUDs, for example, were able to expand economic scale and access but subsequently faced the problem of dependence on government programs.

“Meanwhile, KDMPs represent an effort to address fragmentation and issues of village economic coordination, while simultaneously raising questions regarding member ownership, autonomy, sustainability, and dependence on the state,” he added.

Adaptive and Professional
According to Dr Suharno, institutional reform must go hand in hand with strengthening organizational capabilities. Cooperatives require strong leadership and talent, the ability to learn, member engagement, accountable governance, and technology aligned with the needs of the organization and its members.

“Successful cooperatives are not those that carry out a one time reform and then consider the matter closed, but rather those that have the ability to continuously adapt to meet emerging challenges,” he concluded.

The Faculty of Economics and Management (FEM) at IPB University held Strategic Discussion Series 3, titled “The Institutional Evolution of Cooperatives: What Can Indonesia Learn from Global Experiences?” in a hybrid format at the FEM Equilibrium Room on Wednesday 09/02/26). This discussion highlighted the importance of modernizing the institutional architecture so that national cooperatives can adapt and compete globally without losing their fundamental identity.

The study also explored the importance of institutional strengthening in promoting the strategic role of cooperatives in the national economy. Examining institutional evolution is crucial for addressing the governance and efficiency challenges that cooperatives in Indonesia frequently face.

“Hopefully, this study will serve as part of FEM’s ongoing effort to consistently host interdisciplinary discussions, benefiting not only IPB academics but also the general public,” said the Dean of the Faculty of Economics and Management at IPB University, Prof. Irfan Syauqi Beik, S, in his opening remarks.

The discussion’s keynote speaker, Dr Suharno M Adev, an economics expert and lecturer at the Faculty of Economics and Management (FEM) at IPB University, provided an in depth analysis of the dynamics of domestic cooperatives compared to the success of global cooperatives such as Fonterra (New Zealand), Rabobank (the Netherlands), and Amul (India). According to his analysis, the stagnation of cooperatives in Indonesia is driven by a disconnect between ideological principles and operational practices, such as the presence of free rider problems, capital structure constraints, weak governance, and institutional rigidity.

“The main issue facing Indonesian cooperatives does not lie in the irrelevance of cooperative principles, but rather in the gap between normative principles and the institutional arrangements that put them into practice,” emphasized Dr Suharno.

To overcome these operational challenges, Dr Suharno advocates for a paradigm shift in participation from merely focusing on the number of members to fostering genuine economic participation. Resilient cooperatives must ensure that their members actively function as both owners and users of products, balanced by a clear separation between members’ democratic control functions and professional management governance. Additionally, the pillars of capitalization and the strengthening of federation networks need to be developed without sacrificing member control.

The evaluation of a cooperative’s success must also be revised so that it is no longer based solely on the size of its assets, revenue, or Net Operating Surplus (NOS), but rather on the extent to which its members’ economic status has improved. “A successful cooperative is not one that carries out reforms once and is then done; rather, it is one that has the ability to continuously adapt to meet emerging challenges,” concluded Dr Suharno.

The event, organized by the Department of Agribusiness at FEM IPB, was held in the Equilibrium Room at FEM and broadcast online. The discussion featured a panel of IPB University academics and is expected to yield policy recommendations that promote the strengthening of the cooperative ecosystem based on professionalism and active member participation. (MW) (IAAS/LAN)