FINDING THE PATH: Savings and Loan Cooperatives Work to Rebound Amidst the Pandemic

Savings and Loan
Photo: Robert Pramudarto, USAID-EGSA

There are approximately 123,048 cooperatives in Indonesia, 13 percent of which are savings and loan cooperatives. These cooperatives play an important role in providing credit to micro, small, and medium enterprises—especially those with limited access to banking services. The COVID-19 pandemic has disrupted cooperatives’ liquidity, as the economic crisis affected their members’ ability to repay their loans and social distancing orders limited their ability to collect payments.

To help alleviate some of these concerns, the U.S. Agency for International Development (USAID) Economic Growth Support Activity (EGSA) supported the Ministry of Cooperatives and Small and Medium Enterprises (SMEs) with an analysis of liquidity of savings and loan cooperatives during the pandemic. As part of the study, EGSA held a workshop, “Analysis of Savings and Loan Cooperative Liquidity,” on November 17, 2020 in Semarang, Central Java. The workshop disseminated relevant information collected by EGSA pertaining to the operation of savings and loan cooperatives during the pandemic. Workshop participants discussed findings from the study and gathered inputs which will contribute to the formulation of policy recommendations.

Twenty-three attendees from the Department of Cooperatives and Micro, Small, and Medium Enterprises (MSMEs) (Dinas Koperasi) of the East Java and South Sulawesi provinces and Pacitan and Bulukumba districts attended the workshop. Panelists included Andy Arslan Junaid, Chairman of Kospin Jasa Cooperative, Ema Rachmati, head of the Department of Cooperatives and MSMEs of Central Java Province, and Meliadi Sembiring and I Wayan Dipta— experts in cooperative evaluation and modernization— shared insights and experiences on the development of cooperatives in Indonesia.

Christina Agustin from Ministry of Cooperative and SMEs opened the workshop. Photo: USAID-EGSA

As a result of the pandemic and social distancing restrictions issued by the Government of Indonesia (GOI), many businesses have shuttered and unemployment has increased. In response to these challenges, the GOI launched the PEN (National Economic Recovery), which includes a fiscal stimulus for MSMEs of IDR 123.4 trillion (USD 8.75 billion). As part of its support to MSMEs, the GOI allocated IDR 1.85 trillion (USD 131.2 million) to the Revolving Fund Guarantee Agency (Lembaga Penjamin Dana Bergulir, or LPDB) to help cooperatives through loans or other financing schemes. LPDB’s funds are not sufficient to help all cooperatives, however, and the government is discussing further solutions to assist additional cooperatives.

“The Government’s attempt to accelerate economic recovery must be supported by updated information and analysis as inputs for policy formulation and decision-making. USAID EGSA, in collaboration with the Ministry of Cooperative and SMEs, conducted a study to understand how the pandemic affected savings and loan cooperatives’ finances. The study will help to develop policy recommendations to support those savings and loan cooperatives which did not get assistance from the LPDB during this pandemic. This workshop is part of a study which was started in May of 2020,” said Renata Simatupang, Chief of Party, USAID EGSA.

Christina Agustin, Assistant Deputy for Cooperative Organization and Legal Entity, Ministry of Cooperatives and MSMEs, and Renata Simatupang, EGSA Chief of Party, opened the workshop. In her opening speech, Ms. Agustin thanked participants for their collaboration during the study and commended USAID/Indonesia for its attention and support to the sustainability of cooperatives in Indonesia, noting that there is less support from donors to cooperatives.

Panelists answered questions from workshop participants. Photo: USAID EGSA

“I hope EGSA USAID will continue to collaborate with the Ministry of Cooperatives and SMEs after the completion of the study,” she added. The workshop helped to identify several key recommendations for the Ministry, including the need for a revolving fund mechanism at the province/district level to support cooperatives’ liquidity in times of crisis; capacity building for cooperatives’ staff and management in financial planning and reporting; a rating system to categorize cooperatives based on their financial and management health; and modernization in some aspects of operations such as financial reporting, payment systems, and membership assembly. By implementing such policies, cooperatives could maintain sufficient liquidity to support credit distribution to their members, increase their capability to adapt to digital technology, and innovate daily business operations to continue operating during the pandemic.

“Strengthening the local government to build a strong commitment to cooperatives’ empowerment, and possibly have a certification to make cooperatives more credible, are important,” Panelist I Wayan Dipta noted during the discussion.

USAID EGSA will share key findings and recommendations with the Ministry of Cooperatives and SMEs as inputs to policy formulation to help savings and loan cooperatives survive the impact of the pandemic. EGSA USAID will follow up with the Ministry of Cooperatives and SMEs to discuss future engagements to support cooperatives in Indonesia.

The workshop was attended by representatives from Dinas Koperasi of East Java and South Sulawesi provinces, and the Pacitan and Bulukumba districts. Photo: USAID EGSA

EGSA’s Analysis of Savings and Loan Cooperative Liquidity Report is available in Bahasa Indonesia on USAID’s Development Experience Clearinghouse.

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