Wahyoe Boediwardhana, Malang – Hundreds of cooperatives in Malang city are threatened by insolvency as an increasing number of them go out of business, said a local expert recently.
An expert in economics and financial affairs at the Malang city administration, Abdul Malik said of the 638 registered cooperatives, only 374 remain active to date.
"The cooperatives are no longer active, as shown by the lack of business activities at each cooperative," he said. "Some of them have declared bankruptcy due to capital loss and can no longer hold members' annual meetings."
Malik added that most of the cooperatives were liquidated due to capital loss, and consequently they were unable to compete with banks in providing basic services to their members and the public.
Many banks are able to provide loans at low interest rates easily while cooperatives with limited capital are no longer able to provide such services, prompting people to eventually move back to banks.
"This is a real challenge for the cooperatives. However, they must survive because they are greatly neded by the people," said Malik.
"If this situation continues, it is likely that the 374 cooperatives will not be able to survive and will be threatened with bankruptcy for similar reasons."
In response, Malang city administration spokesman, M. Subkhan, said the municipality would immediately take the necessary steps to address the issue.
"The city administration is currently coordinating with the Indonesian Cooperatives Council (Dekoping) to evaluate the situation of all remaining cooperatives," said Subkhan. "We can only take action after the evaluation."
If a cooperative has to be closed after evaluation, the remaining funds can be injected into a prospective cooperative unit, so the presence of the cooperative could be maintained and services still provided to the people.
The head of the East Java Cooperatives and Small and Medium Enterprises Agency, Brahman Setya, said currently there were Rp 38.4 billion (US$3.62 million) worth of nonperforming loans (NPLs).
The amount is 12 percent of the total Rp 325 billion disbursed by the agency to around 18,000 cooperatives in East Java's 38 regencies and mayoralties from 2003 to 2008. The funds were derived from the provincial budget.
Brahman did not specify the reasons behind the NPLs. He only said that the funds had been intended for small and medium enterprises under the supervision of the cooperatives in East Java.
"Only 21 regencies and cities have been commended as cooperative motivators. We will encourage 17 other regions to earn similar approbation," said Brahman.