Hybrid Fiscal-Backed Financing in Cooperative Policy: Institutional Design, Risk Allocation, and Governance Challenges in Indonesia

Abstract

This study examines the institutional design and governance implications of hybrid fiscal-backed financing in Indonesia’s cooperative development policy, focusing on the Koperasi Merah Putih program. The research aims to analyze how the integration of public fiscal instruments and private banking mechanisms reshapes risk allocation, accountability structures, and policy effectiveness. Using a qualitative policy analysis approach combined with institutional economics, this study evaluates recent regulatory developments, including Presidential Instruction No. 17 of 2025 and the draft Minister of Finance regulation on intergovernmental transfers. The findings reveal that the financing scheme constitutes a hybrid system in which the state functions as a liquidity provider, fiscal regulator, and systemic guarantor through transfer deduction mechanisms. While this design enhances credit accessibility and reduces financial risk, it simultaneously generates governance challenges, including financial ambiguity, moral hazard, institutional mismatch, and accountability gaps. The study proposes the concept of Hybrid Fiscal-Backed Cooperative Finance as a theoretical framework to explain these dynamics. The findings contribute to the literature on public finance innovation and institutional governance while offering policy recommendations to improve accountability, risk-sharing mechanisms, and institutional capacity for sustainable implementation.