The Role of Village-Owned Enterprises (BUMDES) for The Village Community Economy

Abstract

Regional disparities between rural and urban areas in Indonesia are still being an important issue inthe economic development. The government has carried out an economic stimulus in the village,one of them is through the Village Fund program for village development. One of the potentialpositive effects of implementing the Village Fund in Indonesia is creating a local economicinstitution that is expected to be able to develop the competition between villages through Village-Owned Enterprises (BUMDes). This study aimed to find out the empirical evidence whetherBUMDes, as one of the programs driving the village economy affected the welfare of ruralcommunities by looking at the differences in the improvement of the village economy. This studyused BUMDes and Village Potential (Podes) data in 2014 and 2018, and Village Fund Allocationas a proxy for economic activity at the village level by using the econometric model approach ofPropensity Score Matching and Difference in Difference with a fixed effect model. The resultsshowed that villages that had BUMDes gave a greater effect than the ones which did not haveBUMDes in improving the economy of the village community.

Are Village Fund and Village-Owned Enterprises Crucial in Eradicating Poverty in Indonesia

“…The result of this study shows that village fund has influenced the reduction of the poverty level in Aceh. This research is in line with other previous studies including research conducted by Arham & Hatu (2020), Syafingi et al (2020), Puri & Khoirunurrofik (2021). However, the management of village fund is still far from optimal.…”

“…Regional disparities between rural and urban areas in Indonesia are still an important issue in economic development. The government has carried out economic stimulus in villages, one of which is through the Village Fund program for village development (Puri & Khoirunurrofik, 2021). One of the efforts to encourage economic development in the village is through the establishment of villageowned enterprises.…”

“…Nonetheless, the higher number of BUMDes is not followed by large utilization, This information is obtained from large number of people who are not employed in rural areas with this BUMDes (Arifin et al, 2020). However, villages that have BUMDes have a greater influence than villages that do not have BUMDes in improving the economy of rural communities (Puri & Khoirunurrofik, 2021). One of the solutions that can be offered is that to allocate the village funds for capital participation in BUMDes (Syafingi et al, 2020).…”

Determinant Factors of Village-Owned Enterprise Best Practice in Indonesia

“…The forecast number of start-up VOEs across Indonesia in 2018 was approximately 41,000, with only 600 categorized as healthy (Suryanto, 2018). Unhealthy VOEs indicate performance issues (Puri & Khoirunurrofik, 2021). The challenges ranged from internal factors, such as the management of VOEs, to external influences, such as the willingness of the village government and other stakeholders in the village to support VOEs (Puri & Khoirunurrofik, 2021;Srirejeki, 2018).…”

“…Unhealthy VOEs indicate performance issues (Puri & Khoirunurrofik, 2021). The challenges ranged from internal factors, such as the management of VOEs, to external influences, such as the willingness of the village government and other stakeholders in the village to support VOEs (Puri & Khoirunurrofik, 2021;Srirejeki, 2018). The situation has made it increasingly difficult for VOEs to contribute substantially to the village's well-being.…”