President Prabowo inaugurated the establishment of 80,081 village cooperatives (Koperasi Merah Putih) across all Indonesian villages and wards (Kelurahan) on 21 July 2025. The primary purpose of this establishment, a part of the national economic empowerment program to strengthen rural economies, is to boost MSMEs (micro, small and medium enterprises) and ultimately reduce inequality.

As a part of the program, such village cooperatives will receive support in the form of:
- Logistics infrastructure (pickup trucks, warehouses)
- Retail and savings outlets
- Financing access via state banks (Himbara)
- Village funds (IDR1bn/year/village) will be utilized to support the initiative under local supervision.

Main focus areas include:
- Boosting protein consumption, especially fish (target price: IDR60k/kg)
- Digitalization and youth participation in rural cooperatives
- Early implementation shows 100% cooperative coverage in East Java and North Maluku.
- The program signals strong government push toward inclusive, bottom-up economic growth—potentially unlocking rural consumption, financial services penetration, and local productivity.

We expect that major banks, primarily SOE banks, will play a crucial role in the success of such program, specifically providing access to financing. However, at present, there are no details on banks’ financing schemes to these cooperatives. Nevertheless, from our recent discussions with stakeholders, there are two possible financing schemes for these cooperatives, namely capex and working capital loans.

Given still relatively tight liquidity in the banking system, the government might assist with funding (similar liquidity assistance, which is a part of the low-cost subsidized housing programme that is already implemented). We think these funding from the government could yield ~3.0% p.a. (relatively cheap funding costs than time deposit rates that most banks are offering). In return, these cooperatives could get cheap financing from the banks (which probably will hover ~6.0% p.a.). This relatively low asset yield that lending banks would get reflects the guaranteed scheme that the government will provide in the event of defaults (using the village funds of IDR1bn/village/year).

Financing from these banks could be used by these cooperatives to make purchases of goods such as fertilizers and could be sold to member farmers (for example). In theory, although it might not be material, we think this program should be earnings-enhancing for banks without putting additional liquidity risks. We expect the funding provided by the government to enable banks to lend to these cooperatives, and that it could extend into other programmes such as Housing KURs, which would be net positive for banks.

Given the above, we see limited downside risks to the banks in our coverage. 

Valuations and risks

BBCA IJ, Buy – We derive our TP of IDR12,300 using DuPont analysis with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 0.8x and a CAR-adjusted ROAE of 24.5%. Our TP implies 5.4x FY25F P/B (vs current price valuation of 4.3x) and 26.7x FY25F P/E (vs current price valuation of 18.8x). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

BMRI IJ, Buy – We derive our TP of IDR7,300 using DuPont analysis with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 11.0%, beta 1.05x and a CAR-adjusted ROAE of 19.5%. Our TP implies 2.3x FY25F P/B (vs current price valuation of 1.7x) and 12.2x FY25F P/E (vs current price valuation of 8.4x). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

BBRI IJ, Buy– We derive our TP of IDR5,000 using DuPont analysis with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 9.3%, beta of 0.85x and a CAR-adjusted ROAE of 18.0%. Our TP implies 2.3x FY25F P/B (vs current price valuation of 1.9x) and 12.8x FY25F P/E (vs current price valuation of 10.2x). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

BBNI IJ, Buy – We derive our TP of IDR6,100 using DuPont analysis with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 8.5%, beta of 1.0x and a CAR-adjusted ROAE of 16.5%. Our TP implies 1.3x FY25F P/B (vs current price valuation of 0.9x) and 10.7x FY25F P/E (vs current price valuations of 6.9x). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.

BRIS IJ, Buy– We derive our TP of IDR3,500 using DuPont analysis with key parameters as follows: a risk-free rate of 6.5%, an equity risk premium of 7.8%, beta of 1.2x and a CAR-adjusted ROAE of 18.0%. Our TP implies 3.2x FY25F P/B (vs current price valuation of 2.5x) and 21.3 FY25F P/E (vs current price valuation of 15.7x). Risks are worsening economic trends, tighter liquidity competition, and/or higher credit cost and opex growth.