"Kami membaca di sekolah."
Translation:We read at school.
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it is not about formal/informal. it is about the proper grammatical structure. "baca" is the basic form of the verb. in english, it is called the infinitive, which means "to read". when you want to make a simple sentence where the subject is to read something (verb type 1/present and type 2/past), then you should add prefix me- before the verb. if prefix me- is contracted with a verb beginning with letter "b", it becomes mem-.
baca=to read membaca=read, reads, reading
"saya baca buku" is actually grammatically incorrect, but can be used in daily conversation with no problem at all. in a languange test however, "saya membaca buku" is a better sentence structure.