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Savings and Credit Cooperatives: Definition, Examples, Functions, and Their Roles

This business unit is managed independently and democratically by each member who participates voluntarily or openly

Cooperatives are one of the oldest financial institutions in Indonesia, emerging after the Dutch colonial period. Applying the principles of kinship and mutual cooperation, cooperatives are considered as one of the pro-people business entities in Law No. 17 of 2012.

To improve people's welfare there are various forms of cooperatives, one of which is a savings and loan cooperative.

Savings and loan cooperatives, abbreviated as KSP, have long been considered a form of the people's economy in Indonesia as well. It has multiple functions and roles that provide benefits to its members. KSP also does not use a credit system like a bank to carry out its duties.

Next, DailySocial.id explains about the savings and loan cooperative below!

Definition of Savings and Loans Cooperative

Savings and loan cooperatives are microfinance institutions whose business consists of taking deposits and making capital loans.

This is in accordance with Article 19 of Government Regulation no. 9 of 1995 which states that the two main activities of savings and loan cooperatives are the collection of joint savings/term savings and the provision of loans to members, prospective members or other cooperatives. .

This business unit is managed independently and democratically by each member who participates voluntarily or openly. Therefore, the General Meeting of Shareholders is the highest decision of the cooperative.

In addition, the remaining operating profit or SHU from this business unit is distributed evenly and fairly to all members of the cooperative based on their contribution.

Sources of Funds in Savings and Loans Cooperatives

In running its business, KSP has capital that comes from two sources. The first source is obtained from the savings of cooperative members, both of a principal nature, mandatory savings, or voluntary/grants savings.

While the second source can be obtained from loan capital to business entities or other cooperatives.

  • Principal savings: Deposits that are paid for the first time by members of the cooperative when they join as members. This deposit is paid only once
  • Mandatory savings: Deposits are mandatory which must be paid every month by all members
  • Voluntary savings: Deposits whose amount and time are not specified
  • Reserved fund : The remaining business results are not distributed to members and are used to finance or increase cooperative capital
  • Loan Capital : Funds borrowed by cooperative management from other parties such as banks to strengthen cooperative capital
  • Grant or donation: Funds given free of charge from other parties to cooperatives as capital in running a business

In order for the wheels of the economy to keep turning and to be able to provide benefits to its members, KSP also applies a certain mechanism in terms of lending.

Where the implementation remains with due regard to the existing rules, as stipulated in Law No. 17 of 2012 concerning Cooperatives.

Savings and Loan Cooperative Functions

In general, the function of the existence of savings and loan cooperatives consists of four main things, which include:

  1. Collecting funds in the form of deposits and savings from members
  2. Distributing and providing loan assistance to members and prospective members who have very urgent needs
  3. Provide additional business capital for members and prospective members
  4. Serving the purchase and sale of goods in cash and credit

Initially, this function could only be felt by cooperative members. However, along with its development, KSP is willing to provide the same thing to non-members, with the condition that the status of the party is a prospective member during the savings and loan period.

There are several conditions that must be met to become a cooperative member, namely:

  1. Indonesian citizens
  2. Membership is an individual, not a legal entity
  3. Willing to pay principal savings and mandatory savings as stipulated by the institution
  4. Approve the Articles of Association (AD), Bylaws (ART), and the provisions that apply in cooperatives

Meanwhile, when applying for a loan, the customer will get an explanation regarding the interest, contract, and loan term. Where in general, the interest given by KSP is lower than other banks or financial institutions.

In this case, several alternative calculations for the mother in KSP include flat interest mechanisms, decreasing interest calculations, annuity interest calculations, and effective interest calculations. All of which aim to not be too burdensome for the members.

The role of KSP

Because it is guided by the basic principles of cooperatives, KSP has several roles whose aim is to strengthen the member's economy. Where this includes:

  1. Increasing the income as well as the welfare of members through the distribution of credit funds
  2. Determination of low interest so that customers avoid illegal loan entanglements
  3. The distribution of SHU is an injection of fresh funds for members who contribute actively to the savings and loan cooperative
  4. Management of savings funds or member savings as a form of investment
  5. As a stimulus so that the desire to save or save in cooperatives arises

This is an explanation regarding the definition, sources of funds, functions, and the role of a savings and loan cooperative. It can be concluded that KSP is a financial institution whose business activities are in the form of raising funds and providing loans.

Where this is the main function of its existence, as well as to help improve the welfare of its members.

KSP can also be used as a means of saving that is safe and secure along with opportunities to help others in need. Likewise, when we need funds suddenly, KSP can be a solution to this problem.

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