Mohammad Hatta:
THE FATHER OF COOPERATIVES

Mohammad Hatta has been regarded as a significant figure in the history of Indonesia. He was amongst the nation's founding fathers – one of the leaders during the nationalist movement in the first few decades of the last century and a prominent diplomatic combatant throughout the Japanese occupation in the 1940s that culminated in the declaration of independence of Indonesia today, 76 years ago. In addition, as taught in a preponderance of public elementary schools nationwide, he is also known as the father of Indonesian cooperatives, an intrinsic component of the Indonesian economic system that was actively supported during the early periods of the nation.

​

Born on August 11, 1902 in Bukitinggi, Hatta was a grandson to a well-known religious dignitary in West Sumatera (Mappapa, 2020). As early as 13, he was admitted to a Dutch-instructed secondary school in Batavia, howbeit his mother insisted on him staying in Padang. He thus went to a local MULO instead, and thereby he bolstered his network through extracurricular clubs and associations he partook in. By 16, he was already involved in youth activism, serving as the treasurer of Jong Sumatranen Bond. He left for Batavia eventually, pursuing his study before taking further education at the Rotterdam School of Commerce in 1921 (Kahin, 1980). Amidst his course, Hatta developed an interest in the conception of cooperatives. He was even compelled to delve more into which by voyaging to Northern European countries wherein cooperatives were burgeoning. Hatta subsequently assimilated what he learned into the nationalist movement from abroad when Perhimpunan Indonesia, under his leadership, established the idea of cooperatives as one of the organization's economic principles (Mappapa, 2020). He ever since turned into a remarkable proponent of cooperatives in Indonesia.

​

Hatta predominantly explained cooperatives at a more philosophical level. He despised capitalism and communism alike, for they were recognized as extensions of foreign and great powers with an intense association with colonialism. By the same token, he attempted to "nationalize" cooperative values as a national ideal that could become a middle way that resolves the capitalism versus communism debacle. For Hatta, cooperatives harmonize with local culture in the spirit of collectivism and mutual assistance, and as such, aligns with Pancasila. This harmony was sanctioned within Article 38 of the then-in-effect Provisional Constitution of 1950 that Hatta often referred to. Private enterprises are strenuous to maintain in the long run and thus need to be gradually superseded by the more sustainable cooperative entities (Higgins, 1958). His reinvention of cooperatives as a pearl of local wisdom was pivotal as during the first decennaries of the twentieth century, cooperatives were correlated exclusively with local Muslim communities who frequently implemented the entity for their economic activities (Watkins, 2020).

​

There have been a plethora of cooperative categories emerging in Indonesia, including saving and loan cooperatives, also known as credit unions. Credit unions are typically nonprofit, cooperative lending institutions organized around a particular group serving voluntarily as their members. They are considered depository institutions – financial intermediaries that accept deposits and make loans. Credit union cooperatives acquire funds from deposits called shares and primarily make consumer loans. This distinguishes credit unions from commercial banks, whose funds are allocated to more varied financial instruments (Mishkin & Eakins, 2018). Moreover, credit unions are notable for administering financial education services to their members, making their presence substantial for attaining financial inclusion (Birken, 2020).

​

In 2019, there were 20,852 saving and loan cooperatives in Indonesia, comprising about 15 percent of cooperatives nationally (Ministry of Cooperatives and SMEs of the Republic of Indonesia, 2019).  In general, saving and loan cooperatives have become more active in recent years, considering the increasing average values of saving deposits, time deposits, and loans, as well as the skyrocketing mean net profit amongst the entities across the country. However, a data finding illustrates that credit unions are highly concentrated in Java, weighing for almost half of the total number of national cooperatives (Statistics Indonesia, 2021). This raises a question on the focus on maximizing credit unions in bolstering rural development.

​

Sixty-eight years have gone by since Hatta was officially benamed the father of cooperatives, still the entity remains an essential part of the country that continuously stimulates economic growth and improves living standards. In Indonesia, the current law pertaining cooperative entities is formalized in the newly legalized Omnibus Law on Job Creation, and this change has become a dominant discourse when discussing Indonesian cooperatives. The impact of changes to how cooperatives may operate under this new norm should be investigated further, particularly their performance to support equal economic development and promote financial independence for individuals.