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

Irim Tiara Puri; Khoirunurrofik Khoirunurrofik

doi:10.15294/edaj.v10i1.40823

Irim Tiara Puri Universitas Indonesia
Khoirunurrofik Khoirunurrofik Universitas Indonesia

DOI: https://doi.org/10.15294/edaj.v10i1.40823

Abstract

Regional disparities between rural and urban areas in Indonesia are still being an important issue in
the 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 potential
positive effects of implementing the Village Fund in Indonesia is creating a local economic
institution 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 whether
BUMDes, as one of the programs driving the village economy affected the welfare of rural
communities by looking at the differences in the improvement of the village economy. This study
used BUMDes and Village Potential (Podes) data in 2014 and 2018, and Village Fund Allocation
as a proxy for economic activity at the village level by using the econometric model approach of
Propensity Score Matching and Difference in Difference with a fixed effect model. The results
showed that villages that had BUMDes gave a greater effect than the ones which did not have
BUMDes in improving the economy of the village community.