COOPERATIVE FINANCIAL PERFORMANCE AND RURAL POVERTY IN INDONESIA: EVIDENCE FROM AN ARDL APPROACH

Abstract

This study examines the long-run relationship between cooperative financial performance and rural poverty in Indonesia. Drawing on the Vicious Cycle of Poverty framework and the concept of Inclusive Development, the study examines the associations of Business Volume and Net Income or Sisa Hasil Usaha (SHU) with the rural poverty rate. Using annual time-series data from 2006 to 2025, the study applies the Autoregressive Distributed Lag (ARDL) approach to examine short-run dynamics and long-run cointegration among the variables. The ARDL bounds test provides evidence of a long-run relationship between rural poverty, Business Volume, and SHU. The long-run estimation suggests that higher Business Volume is associated with lower rural poverty. In contrast, SHU is positively associated with rural poverty, indicating that higher cooperative surplus has not automatically translated into inclusive welfare gains for poorer rural households. The findings suggest that cooperative business expansion may be linked to lower rural poverty, while the distribution and utilisation of SHU require stronger attention to ensure that cooperative benefits reach economically vulnerable groups. Policy attention should focus on productive cooperative activities, member participation, transparent SHU allocation, and broader access to cooperative services.