Cooperatives, Micro, Small, and Medium Enterprises (“MSMEs”) are one of the pillars of people’s economic power that can a role in increasing people’s incomes and encouraging economic growth. In this case, the development of Cooperatives and MSMEs needs to be optimized in order to make a major contribution to the country’s economic development.

The Government has issued Government Regulation No. 7 of 2021 on Ease, Protection, and Empowerment of Cooperatives and MSMEs (“GR 7/2021”). In addition to being a follow-up form of Law No. 11 of 2020 on Job Creation (“Job Creation Law”), GR 7/2021 was designed to meet legal needs because there has been no integration of arrangements related to the ease, protection, and empowerment of Cooperatives and MSMEs.

The issuance of GR 7/2021, is expected to encourage Cooperatives and MSMEs to be resilient and strong and can become the backbone of Indonesia’s economy. The ease and benefits after the issuance of GR 7/2021 can be listened to for business actors as follows:


Ease of Cooperative Establishment Requirements

Previously, referring to the provisions of Article 7 of Law No. 17 of 2012 on Cooperative Law (“Law 17/2012”), to establish a Primary Cooperative requires at least 20 (twenty) orang. But after the issuance of GR 7/2021, now the Government has set a  new norm which states Primary Cooperative formed by at least 9 (nine) people.


The Emergence of Sharia Cooperative Principles

Previously the Cooperative Principle was regulated in the provisions of Article 6 of Law 17/2012, which included:

  1. Cooperative Membership is voluntary and open;
  2. supervision by members is democratically organized;
  3. Members actively participate in cooperative economic activities;
  4. Cooperatives are autonomous, independent self-help enterprises;
  5. Cooperatives organize education and training for Members, Supervisors, Administrators, and employees, and provide information to the public about the identity, activities, and benefits of cooperatives;
  6. Cooperatives serve their members primed and strengthen the Cooperative Movement, by working together through a network of activities at the local, national, regional, and international levels; and
  7. Cooperatives work for sustainable development for the environment and its communities through policies agreed upon by members.

Now GR 7/2021 provides an opportunity for business actors to establish Cooperatives that carry out business activities based on Syariah Principles, this is regulated in the provisions of Article 13 paragraph (1) of GR 7/2021. The enactment of Syariah Principles does not override the Cooperative Principle stipulated in Article 6 of Law 17/2012.

Syariah Principles are the principle of Islamic law in operational activities based on fatwas issued by institutions that have authority in the determination of fatwas in the field of Syariah (Article 1 point 7 PP 7/2021).

Cooperatives that carry out business activities based on Syariah Principles as referred above must include the word ” Syariah” in the naming of Cooperatives, in addition, businesses based on Syariah Principles must be stated in the Cooperative’s articles of association.


The Role of Government in Encouraging the Progress of Cooperative Activities

“Through this GR, the government is not only a regulator, but a companion, motivator, and partner for prospective budding entrepreneurs,” stated Minister of Cooperatives and SMEs Teten Masduki, quoted from the Press Release dated February 23, 2021, on GR Number 7/2021 Issued, Cooperatives and MSMEs Get a Lot of Eases.

The statement is in accordance with the provisions of Article 19 GR 7/2021 which regulates the determination of areas of economic activity that can only be conducted by Cooperatives.

In addition, in the provisions of Article 20 GR 7/2021, the Central Government and Domestic Government can restore Cooperative business in certain emergency conditions through credit restructuring, business reconstruction, capital assistance, and/or other forms of assistance.

The Fifth Section of GR 7/2021 regulates specifically the policy of cooperative development in certain sectors. This is a form of the government efforts to empower development of Cooperatives.


Government Project Ration for Cooperatives

Article 81 GR 7/2021 mandates that ministries/non-ministry government agencies and regional devices must allocate at least 40% (forty percent) of the budget value of goods services of the Central Government and Local Government to use MSME and Cooperative goods/services from domestic production.

Furthermore, through Article 82 GR 71/2021, state-owned enterprises are mandated to prioritize the use of MSME and Cooperative production in the procurement of goods / services.


MSME criteria

Referring to the provisions of Articles 35 and 36 GR 7/2021, it can be known that MSMEs are grouped based on the criteria (i) of business capital; or (ii) annual sales results.

Business CapitalAnnual Sales Results
Article 35 paragraph (3) PP 7/2021Article 35 paragraph (5) PP 7/2021
·         Micro Business – maximum business capital of Rp1,000,000,000.00 (one billion rupiah);

·          Small Business – business capital of more than Rp1,000,000,000.00 (one billion rupiah) up to a maximum of Rp5,000,000,000.00 (five billion rupiah); and

·         Medium Enterprises – business capital of more than Rp5,000,000,000.00 (five billion rupiah) up to a maximum of Rp10,000,000,000.00 (ten billion rupiah).

·         Micro Business – annual sales results up to at most Rp2,000,000,000.00 (two billion rupiah);

·         Small Business – annual sales result of more than Rp2,000,000,000.00 (two billion rupiah) up to a maximum of Rp15,000,000,000.00 (fifteen billion rupiah); and

·         Medium Enterprises – annual sales proceeds of more than Rp15,000,000,000.00 (fifteen billion rupiah) up to a maximum of Rp50,000,000,000.00 (fifty billion rupiah).


Description:  it does not include land and buildings where the business is conducted.


MSMEs Facilities and Incentives

Referring to the provisions of Article 124 paragraph (1) of GR 7/2021, Micro Enterprises and Small Enterprises (“MSe”) are given the ease or simplification of tax administration in the framework of the submission of financing facilities from the Central Government.

In addition, certain MSe can be incentivized income tax (Article 124 paragraph (2) GR 7/2021).

MSe is given incentives in the form of deductions, waivers, or exemptions of local taxes and / or local levies by meeting the following criteria:

  1. just start producing or operating;
  2. business circulation of at most Rp7,500,000,000.00 (seven billion five hundred million rupiah) per year;
  3. doing business in the agricultural sector, plantations, livestock, industry, services, transportation / transportation, 1-star hotels / jasmine hotels / hostels / homestays / guest houses, boarding houses, campgrounds / provision of other short-term accommodation, restaurants / taverns / stalls; and / or
  4. follow the procurement of government goods / services electronically.

The above provisions are stipulated in Article 124 paragraph (4) and paragraph (5) GR 7/2021.

Furthermore, MSe oriented in the field of exports can be given customs incentives, in the form of exemptions or waivers of import duties (Article GR 7/2021).

Grants/Cooperative Assistance and MSMEs

The Central Government and Local Government are obliged to provide legal assistance and assistance services to MSe. This obligation is stipulated in the provisions of Article 48 paragraph (1) pp 7/2021.

Furthermore, through the provisions of Article 125 PP 7/2021, the Local Government provides assistance to Cooperatives and/or SMEs in the form of:

  1. Capital assistance;
  2. Assistance for research and development;
  3. Provide vocational training facilities.

In addition, referring to the provisions of Article 128 paragraph (5) of GR 7/2021, the Central Government and Local Government provide grants and/or assistance in the least form:

  1. capital for micro-enterprises and startups with innovative products that have market potential, commercial value, or technology-based, for business development and/or incubation;
  2. capital to the Cooperative in order to support strategic programs; and
  3. The Central Government and Local Government provide financing in the form of guarantees in the form of guaranteed payment to guarantor institutions to guarantee at most 80% (eighty percent) of loans or financing provided by the bank and non-bank financial institutions.



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