July 12th is commemorated in Indonesia as Cooperative Day, as the first cooperative congress was held in Tasikmalaya in 1950. However, the cooperative movement in Indonesia was initiated by Patih R. Aria Wiriatmadja at Purwokerto, Central Java in 1896. Since then the cooperative movement has gone through some ups and downs. Now the movement is facing a dilemma. On one side, the cooperative is believed to be a model of a people’s economy. But on the other hand, it is still not able to improve the economic power of the people after 56 years of implementation.
The Accomplishment of Cooperative Principles
The study and mapping conducted by the German Development Cooperation through GTZ Economic Recovery and Microfinance in Aceh shows that the cooperative structure in the province is still underdeveloped. Thirty years of conflict is widely accepted to be a main cause of this, however, institutional problems are likely to be the primary cause, or an equally significant cause, as the same problems also exist in other parts of Indonesia. The institutional problems occur as the cooperative principles have not yet been fully accomplished, causing loss of trust in society.
The cooperative principles were introduced in Rochdale, England. The principles are still used as a basis of present cooperatives and were adopted in the Indonesian Cooperative Law (UU no. 25/1992).
Principle 1: Membership
The Indonesian Cooperative Law stated that a cooperative was obliged to have at least twenty (20) members. Though there are a number of cooperative members, they do not comply fully with this law. There is an indication that the motivation to establish a cooperative is as an easy way to obtain legal or formal status of a business. Consequently the “owners” are not willing to expand the membership because they do not want to lose control of the institution, which is prone to becoming a private and exclusive business entity.
Principle 2: Democratic
Concerning the “one man, one vote” rule, the cooperative is supposed to be a reflection of democracy in the economic sector. The rules ensure equal partnership among members. However, most cooperatives failed to perform democratically as indicated by the degree of absence from general assembly meetings and unchanging board members.
Principle 3: Economic Activity
Furthering economic activity should be the reason for the establishment of a cooperative. However, it is common to find that the establishment of a cooperative is conducted to obtain funds from donors (the government) and there are no economic activities conducted after receiving the funds except waiting for the next donors program. As a result, the cooperative is not able to increase the economic growth of the area since it does not perform any economic activities.
Principle 4: Autonomous
The autonomous principle is demonstrated by a cooperative being established, managed and controlled by the members and for the sake of the members. If this principle is taken for granted, it seems that there is no need to have a cooperative. The government / donor program which actually intends to encourage a cooperative might be diminishing its autonomy, especially when it comes to financial assistance. Such intervention is likely to create spoiled cooperatives and create other motives for establishing a cooperative, such as to acquire funds for the benefit of the individual.
Principle 5: Education and Training
As an indirect impact of the situation, people are no longer believing in cooperatives and do not feel any ownership of them as the principle of Education and Training is also neglected. Therefore people (especially in Aceh) seem to no longer trust in this institution of membership basis. People who are already a member are refusing to continue paying the compulsory saving (simpanan wajib) whereas others are refusing to join and / or refusing to establish a new cooperative.
Principle 6: Networking and Cooperation
The networking and cooperation among cooperatives is still weak in Indonesia. Despite a few good cooperative associations or secondary cooperatives, the number of cooperatives that are still weak is high. The worst part is that there are a number of cooperatives which do not belong to secondary structures or simply stand alone. Even if there is a secondary structure, their function as an apex organisation still needs to be improved. Strong networking and cooperation of cooperatives would also lead to a more autonomous cooperative system, thereby incorporating Cooperative Principle 4.
Principle 7: Community Responsibility
Cooperatives should be established by a community in order to increase prosperity. Therefore, if their establishment is not based on the will of the community (top down initiatives rather than bottom up), the relationship between the cooperative and its social environment becomes either poor or nonexistent. In the end, the cooperative fails to promote prosperity and the community is not motivated to oversee the cooperative.
The strategy of the Development of the Cooperative Sector in Aceh
Although cooperatives are unpopular on the grassroots level, a microfinance institution called Baitul Qirad (House of Financing) was introduced in 1995 in Aceh. Baitul Qirad (BQ) has legal status as a cooperative and can still stand and serve its members despite the military conflict and tsunami. As an Islamic microfinance institution, BQ operates not only on commercial but also on a social basis as it can manage commercial and social funds / religious taxes and donations (zakat, infaq and sadaqah). This unique characteristic develops a mutual relationship between BQ and its community, which might be the reason for its sustainability in Aceh. Furthermore Aceh is a province in which the culture is strongly influenced by Islamic values and it has been implementing sharia law since 2001. These factors indirectly also promote the development of the sharia financial system. This new “Brand Name”, along with sharia financial mechanisms, brings an opportunity to regain the trust of society as well as to enhance development of the cooperative sector in the province.
Based on the Cooperative Principles, GTZ (on behalf of the German Government) assists the cooperative sector in Aceh on various levels. On the micro level, fifteen (15) new Baitul Qirad will be established across the province by 2008. The establishment process is started by social mobilisation in selected sub-districts to revitalise the cooperative spirit under the new term, BQ. Technical assistance will only be given when the people have collected the initial social capital (IDR 50 million) and obtained the legal status of a saving and credit cooperative. This is intended to ensure a BQ which has a strong membership, is democratic and is also autonomous. The technical assistance covers education and training for members, boards, supervisory board and management in order to establish a basis of institutional learning. Technical assistance also includes recruitment of managers, procurement of office space, Management Information Systems (MIS) as well as development of policy and standard operational procedures. A soundness rating criteria will be applied to monitor their performance.
Establishing a secondary cooperative (Baitul Qirad Centre / BQ Centre) is the focus on a meso level. It is expected that the BQ Centre will become the development centre for BQs by providing training and / or other necessary financial and non-financial services for members. Through the BQ Centre, a better network and better cooperation between BQs is expected to be developed and furthermore it will provide more space for the BQ sector to autonomously manage and sustain control.
On the macro level the cooperation and coordination with the cooperative office (Dinas Koperasi dan UKM) in Aceh is established and strengthened. The holistic approach is expected to improve the meta level by regaining society’s trust in the cooperative sector as the sector will have a new operational paradigm based on the Cooperative Principles.
