Cost Savings and Zero-Interest Loans: How A Dairy Cooperative Reduces Members' Production Burden and Increases Net Income

In many developing countries, small-scale dairy farmers face high production costs and limited access to affordable credit, which erode their net income. Cooperatives are often positioned as a solution, yet empirical evidence on how specific cooperative mechanisms reduce cost burdens remains scarce. This study shifts the focus from the broad concept of "member value" to a more targeted analysis of cost efficiency and credit accessibility as direct drivers of farmer welfare. Using a descriptive quantitative case study of Koperasi Peternak Sapi Bandung Utara (KPSBU) Lembang, West Java – the largest dairy producer cooperative in Indonesia – we analyzed audited financial reports (2020–2024) and structured survey responses from 32 purposively sampled active members. The results show that the cooperative consistently provided lower feed prices (savings of IDR 500–1,000/kg), higher milk prices (IDR 200–700/liter above market), cheaper household goods through its waserda unit (price index 2.96%–3.46% below market), and zero-interest loans (total outstanding loans IDR 25.09 billion in 2024). Total direct economic benefits to members increased from IDR 16.26 billion (2020) to IDR 48.26 billion (2024), with feed and milk price advantages contributing over 97% of the total. The zero-interest loan policy alone generated an estimated annual interest saving of approximately IDR 3 billion compared to market rates. Member surveys confirmed strong positive perceptions: the zero-interest loan item scored a maximum 160/160, while milk price advantage and feed price advantage scored 134 and 138 respectively (both in the "profitable/affordable" range). We conclude that cooperative-driven cost savings on production inputs and interest-free credit are powerful, measurable, and often overlooked mechanisms for improving smallholder welfare – mechanisms that can be more impactful than surplus distribution (SHU) for daily household economies. This finding offers a replicable model for producer cooperatives in agrarian economies.

Cost Efficiency, Zero-Interest Loan, Dairy Cooperative, Member Welfare, Production Burden

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