The Merah Putih cooperative is one of the Indonesian government’s policy instruments designed as a strategic vehicle for strengthening the grassroots economy at the village and urban ward levels. This study aims to analyze the community economic empowerment model through Koperasi Merah Putih within the framework of Islamic economics, encompassing the principles of ta’awun (mutual assistance), distributive justice, and avoidance of usurious practices. The method employed is a qualitative literature study with a critical analytical approach applied to regulations, policy documents, and relevant academic studies. The findings reveal that Merah Putih cooperative holds significant potential as a community-based economic empowerment model, particularly when integrated with participatory and equitable Islamic economic values. The alignment between the foundational principles of cooperatives and maqashid al-shariah—especially in the aspects of hifz al-mal (protection of wealth), hifz al-nafs (protection of life through economic welfare), and hifz al-‘aql (protection of intellect through economic education)—serves as a convergence point that reinforces the legitimacy of this model. The study also identifies several implementation challenges, including low Islamic financial literacy, institutional governance weaknesses, and suboptimal synergy among stakeholders. The implication of this research is the need for an institutional framework grounded in Islamic values to enable Koperasi Merah Putih to function optimally as an agent of economic change at the grassroots level.