Indonesia's Cooperative Payroll Proposal Faces Resistance as Finance Minister Says Payments Will Stay Unchanged
A proposal to let Red and White Village/Urban Cooperatives (KDKMP) distribute Indonesian civil servants' salaries has drawn objections from ministers and warnings about regional banks. Cooperatives Minister Ferry Juliantono says the idea remains under discussion, while Finance Minister Suahasil Nazara says the existing payment system will remain in place.
No approved change to salary payments
Speaking at the Presidential Palace in Jakarta on the evening of October 21, 2026, Ferry said he had discussed a possible payroll role for KDKMP with Suahasil and planned a joint meeting with the Finance Ministry. He described the cooperatives as a potential payment channel, not an approved replacement for the current system.
"The cooperative is offering to participate in salary payments. I just spoke with the Finance Minister earlier. A joint meeting will be held," Ferry said.
A day earlier, on October 20, Suahasil said salaries for Indonesia's State Civil Apparatus (ASN) had not been paid through the cooperatives. "It will remain as it is; I will still transfer as usual," he said at the Palace Complex in Jakarta.
Stateline MEDIA reported that, as of mid-October 2026, ASN salary payments went through the Association of State-Owned Banks (Himbara), PT Pos Indonesia and Regional Development Banks (BPD).
Cooperatives Ministry Secretary Ahmad Zabadi offered a narrower description of the proposed role in mid-October. He said no official decision had been made on cooperative involvement in either civil servant salary or pension payments. The aim, he said, was for cooperatives to become payment partners for pensioners alongside PT Pos Indonesia and commercial banks, rather than to replace banks or BPDs.
Ministers stress access and caution
Administrative and Bureaucratic Reform Minister Rini Widyantini rejected the proposal, emphasizing that any salary arrangement must avoid making payment more difficult for civil servants.
"What is important is that ASNs receive their rights easily, comfortably, and transparently. That's the principle; we shouldn't complicate things for ASNs," she said.
Deputy Home Affairs Minister Bima Arya said in mid-October that payment through KDKMP outlets was only an option, not a requirement for all civil servants. In his assessment, the payroll system operated by Himbara and BPDs already worked well, and any transfer would need careful study.
The KDKMP program was inaugurated by President Prabowo Subianto in Bentangan Village, Klaten, Central Java, on July 21, 2025. It set a nationwide target of 80,000 cooperatives, with their establishment accelerated under Presidential Instruction No. 9 of 2025.
Regional banks warn about losing payroll business
The proposal has received mixed responses in the House of Representatives (DPR). Commission II Chairman Rifqinizamy Karsayuda warned that moving salary payments to KDKMP could deprive regional banks of savings and demand deposits that help sustain them, potentially causing banks to collapse.
In comments to Kompas.com on October 15, 2026, Rifqinizamy also cited concerns from the Association of Regional Development Banks (Asbanda) about cash and salary payments moving from regional banks to Himbara. He urged the government to safeguard the regional banking ecosystem.
Asbanda, chaired by Agus H. Widodo, separately called in mid-October for regional ASN payroll management to stay with BPDs. The association described those banks as strategic partners of local governments and part of their regions' financial ecosystems.
Figures cited by Stateline MEDIA in its mid-October coverage put BPDs' third-party funds (DPK) at Rp770 trillion and outstanding loans at Rp673 trillion.
Reporting by Kontan.co.id in October illustrated the banks' payroll business. As of August 2026, Bank BPD DIY handled salaries for about 101,000 ASN, totaling Rp440 billion each month. Bank Jatim managed 419,053 payroll accounts, described as the majority of ASN payroll in East Java.
CORE Indonesia economist Akhmad Akbar Susamto warned that routing civil servant (PNS) salaries through village cooperatives posed three risks. He said the cooperative system was not yet credible and could delay payments; BPDs could weaken because regional PNS payroll deposits supply part of their funding; and civil servants could face risks to their own finances.