Cooperatives

Karam Kim, Keimmi Hoko, Kevin

Halasan

What is a Cooperative?

Known as ‘Koperasi’ in Indonesian.

• A type of business entity owned and run jointly by its members, of whom the profits and benefits will be shared.

• Mainly Aimed towards the development of the community, the equal distribution of wealth and the better welfare of its members.

Legal Authority

Article 3 of the 1945 Constitution (UUD 1945): Cooperatives have an important role in developing Indonesia’s economy.

Article 3 of the no. 12 Law of 1967 constitution states that cooperatives are socially founded business entities using kinship of community members as its economic foundation.

Legal Authority (cont’d)

Article 1 clause 1 of the 1992 constitution echoes the sentiments expressed in the 1967 constitution by incorporating the traditional business practice into the modern age.

Article 17 clause 6 of the 12th constitution of 1967 defines the use/purpose of cooperatives based on their field of commerce and group of people who established and joined the entity.

Cooperative Rules and Regulations

Civil and professional manner

Fully disclosure of relevant financial information

Investors to have a return on their capital that exceeds fixed interest

Obtain joint appraisals/opinions.

Good Negotiations sessions to reach fair, collective compromise.

Identity of a Cooperative

Voluntary and open membership

Democratic member control

Economic participation of all members

Autonomy and independence

Education, training and information for members

Cooperation between one cooperative and another.

Established with the aim of positive community development.

Characteristics of a Cooperative

The liability of each members is only limited to their individual capital contribution.

Every member is entitled to one vote for each annual general meeting.

Managed by a board of directors and supervised by a board of supervisors/commissioners who report to the annual general meeting.

Types of Cooperatives Based on

its purpose (1967 Constitution)

Field of Commerce (consumption cooperatives, credit, saving and lending cooperatives, production cooperatives and micro-establishment cooperatives)

Social Groups (Cooperatives for civil servants, cooperatives for the police and armed forces and cooperatives for teachers, doctors, veterans, and retired people)

In the end, these purpose categorization is aimed to cater the needs of its members and improve their welfare.

Advantages of a Cooperative

The Liability on each member is only limited to their capital proportion – so no covering the losses of other members.

Established by members, intended for members in increasing their wealth.

Any new establishment of cooperatives is financially backed by the government through capital incentives

Disadvantages of a Cooperative

Double taxation

Decision making period takes a long between members

There is a possibility to divide by conflict between members

Comparison: Cooperatives vs. Informal Association.

Cooperatives

• Established under law and through formal procedure.

• Part of government funding, so easier to raise capital.

• Outreach only limited to the community its assigned to.

• More formal in nature and centered towards the needs of its members.

Informal Association

• Not always established under

law nor through a formal

procedure.

• Harder to raise capital.

• Outreach not limited to one

community or a group of

people.

• Less formal in nature and

generally aimed at socializing of

its members or helping people

outside the association.

Real Examples of Cooperatives

Agricultural Cooperatives

“Tani Sehat” Farmer’s Union Cooperative in Kedungbokor Village, Brebes District, Central Java Province.

Consisting of 236 local farmer members with approximately Rp. 435,000,000 (USD 34,000) active funding.

Aimed to increase the overall wealth of local farmers in the village through proper agribusiness management and logistics.

Encouraging diversification of crops and more focus on local produce such as rice, shallots, red chili and livestock.

Provides organic fertilizers, organic seeds, distance electricity and water payment services, and crop delivery service at low costs to members.

Thank You !