JAKARTA, October 27, 2026 — The Head of Prawatan Village, Klaten, together with Sajogyo Institute and Koperasi Edukarya Negeri Lestari (KEN8), has filed a judicial review petition with the Constitutional Court concerning implementation of the Merah Putih Village/Urban-Village Cooperative program.
The petitioners challenge the formation of cooperatives through government directives, the use of Village Funds to support a central government program, and the risk of financing costs being borne by villages. They argue that the policy reduces residents’ ability to determine their village’s needs and weakens members’ rights to manage their cooperatives.
The petition was filed by Sabiq Muhammad, Head of Prawatan Village; Yayasan Sajogyo Inti Utama, or Sajogyo Institute; and KEN8, represented by its Chair, Muhammad Tauhid Aminulloh.
The three petitioners are accompanied and represented by the Challenge Merah Putih Village Cooperatives Coalition, comprising CELIOS, Themis Indonesia, Indonesia Corruption Watch (ICW), Transparency International Indonesia (TII), Trend Asia, Koperasi Indonesia Baru, and Solidaritas Perempuan.
Muhamad Saleh, a representative of the petitioners’ legal counsel, said the central government must respect residents’ decisions in setting village development priorities. The needs of each village differ and cannot always be addressed through a uniform program.
“The central government cannot assume it knows best what every village needs. Some residents need roads and irrigation repaired; others need support for schools, health services, or businesses. If residents’ decisions at village deliberations can be set aside in pursuit of central government targets, why invite them to deliberate at all?” Saleh said.
The petitioners are seeking judicial review of several provisions in the Village Law, the Cooperatives Law, and the Law on Financial Relations between the Central Government and Regional Governments (HKPD). The provisions under review include those governing priorities for the use of village budgets, government assignments, village deliberations, cooperative principles, and cooperative development.
They are also asking the Constitutional Court to strike down Article 134 paragraph (3) of the HKPD Law, which authorizes the government to determine the focus of Village Fund use in line with national priorities each year.
In their petition, the petitioners ask that government assignments to villages be accompanied by adequate funding from the assigning authority’s budget. Such funding must be specifically allocated, separate from the revenue villages use to exercise their own authority. The financial risks of an assignment must also not be shifted to villages by reducing Village Funds or using village assets as collateral.
Village budgets shrink
The petition highlights adjustments to Village Fund allocations under Minister of Finance Regulation Number 7 of 2026. Under the regulation, the adjustment to support implementation of the Merah Putih Village Cooperative program is calculated at 58.03 percent of each village’s Village Fund ceiling, amounting to Rp34.57 trillion in total.
According to the petition, Prawatan Village received more than Rp1 billion in Village Funds in 2025, while in 2026 the amount fell to around Rp373 million. Despite this reduction, the village still has to fund residents’ needs, including early childhood education services and support for early childhood education teachers.
CELIOS Executive Director Bhima Yudhistira said the government needs to explain how this policy affects villages’ ability to fund the services and development their residents need.
“A shrinking village budget means residents’ needs will have to be put off. Roads, irrigation, health services, and support for early childhood education teachers all require funding. The government cannot simply pursue targets for the number of cooperatives and buildings, then ask villages to bear the consequences,” Bhima said.
The petition also cites CELIOS research, The Economic Impact of Merah Putih Cooperatives, which projects a risk of Rp85.96 trillion in defaults over six years under the financing scheme examined. This figure is a risk projection, not the value of defaults that have already occurred.
Bhima called on the government to make public its assessments of the business viability of Merah Putih Village Cooperatives, including their revenue sources and capacity to meet their obligations. Residents, he said, should not bear the risks of financing decisions they do not control.
Members must remain in control
The petitioners also point to Constitutional Court Decision Number 28/PUU-XI/2013, which struck down Law Number 17 of 2012 on Cooperatives. In that decision, the Court reinstated Law Number 25 of 1992 on an interim basis until a new law was enacted.
Saleh said the decision should serve as the foundation for reforming cooperative law. New regulations must guarantee voluntary participation, the authority of the members’ meeting, and cooperative independence, while also allowing diverse forms of enterprise to emerge in response to community needs.
“The Constitutional Court has already stressed that cooperatives are founded on the principle of kinship. It is difficult to uphold that principle if their formation is rushed through by order, their businesses are made uniform, and members are merely expected to follow decisions made by outsiders. Cooperatives must give members control over their shared enterprise,” Saleh said.
KEN8 Chair Muhammad Tauhid Aminulloh said cooperatives grow out of their members’ needs and willingness to work together. Members need to decide what business to pursue, elect their managers, and oversee the cooperative’s management.
He also highlighted the impact that forming new cooperatives could have on cooperatives and small businesses already established in communities. He said 83,259 new cooperatives had been formed as of August 2, 2026, alongside 139,203 cooperatives already in existence.
“Existing cooperatives have been built with their members’ capital, labor, and trust. Village shops also sustain families. The government must consider the impact that support for Merah Putih Village Cooperatives will have on those businesses. Assistance for new cooperatives must not end up squeezing local businesses that are already operating,” Tauhid said.
In their petition, the petitioners ask the Constitutional Court to affirm that Village Funds may not be used to finance the formation, facilities, capitalization, operations, or obligations of cooperatives under the program. They also ask that Village Funds and village assets not be used as collateral or as a source for repaying cooperative obligations.
The petitioners ask that the program model be halted where it compels the formation of cooperatives, takes over members’ decision-making, or shifts costs and risks onto villages, until regulations are in place that guarantee cooperative principles and protect village authority and finances.
The government is also being asked to conduct and publish a comprehensive evaluation involving affected communities, village governments, cooperative members, and the cooperative movement. Halting the contested model would not in itself dissolve cooperatives operating voluntarily, democratically, and independently. Members’ rights and the rights of third parties acting in good faith must continue to be protected.
Complaints center
Alongside the filing of the petition, the Challenge Merah Putih Village Cooperatives Coalition has opened a Merah Putih Village/Urban-Village Cooperative Complaints Center for members of the public who have experienced or are aware of problems in the program’s implementation.
Complaints can be submitted online at bit.ly/LaporkanKDKMP or in person at the Indonesia Corruption Watch (ICW) office.
The Coalition invites residents, village heads and officials, cooperative members and managers, and business owners to share their experiences. Public complaints will help assess the program’s impact on the ground and inform the Coalition’s efforts to monitor the judicial review process at the Constitutional Court.
Media contact
Muhamad Saleh - 082133290067