Building trust: How good governance fosters success in cooperatives for MSME development

Micro, small and medium enterprises (MSMEs) are central to local economic development, yet in developing economies they remain constrained by limited access to finance, inputs and markets. Cooperatives can relax these constraints, but only when members trust the organisation. This article examines how governance practices, particularly transparency and communication, shape members’ trust and participation in cooperatives serving MSMEs. Drawing on a qualitative comparative case study of two cooperatives in East Java, Indonesia (a dairy village cooperative and a cooperative supplying imported soybeans and microcredit to tempeh producers), and on semi-structured interviews with cooperative leaders and members, we identify four themes: the transparency of financial flows, institutionalised versus personalised communication, the ambiguity of public funds, and member heterogeneity. Where routine, collective communication makes financial flows intelligible, trust survives delayed payments and members continue to participate. Where information is withheld and relationships are personalised, members interpret price differences and public grants through suspicion, default on loans and exit. The study shows that cooperative governance determines which MSMEs, and which localities, benefit from collective action, and it draws implications for Indonesia’s expanding cooperative policy, including the national village cooperative programme launched in 2025.