EVALUATING THE EFFECTIVENESS OF VILLAGE FUND POLICY IN STRENGTHENING LOCAL ECONOMIC RESILIENCE: EVIDENCE FROM SLEMAN REGENCY, INDONESIA
Abstract
This study critically evaluates the effectiveness of Indonesia's Village Fund policy in enhancing local economic resilience, with a specific focus on Sleman Regency. Recognizing the Village Fund as a strategic fiscal tool to empower rural communities, the research adopts a literature review methodology to synthesize findings from existing scholarly and policy-based sources. The study explores the policy’s design, implementation mechanisms, and its alignment with community-driven economic development. Key themes include governance quality, participatory planning, fund utilization efficiency, and socio-economic outcomes. A thematic analysis reveals that while the policy shows potential in improving rural livelihoods, challenges such as bureaucratic rigidity and limited capacity at the village level persist. The evidence also suggests significant regional disparities in policy impact, highlighting the need for context-sensitive governance strategies. By integrating perspectives from empirical case studies and theoretical frameworks, this research contributes to a deeper understanding of policy effectiveness in rural economic strengthening. The paper also provides critical insights for policymakers aiming to refine the Village Fund framework. Overall, the findings underscore the importance of adaptive, inclusive, and accountable approaches to village-level fiscal decentralization.
References
Abduh, M., Suryana, A., & Rahman, A. (2024). Effectiveness of Village Fund Policy to Improve Economic Development and Rural Infrastructure in East Luwu Regency, Indonesia. Nano: Journal of Economics and Policy, 7(1), 45–56.
Adam, L., Sambodo, M. T., Purwanegara, R. M., & Purnagunawan, R. M. (2024). Village fund and Indonesia rural development: Rethinking institutional capacity and governance. Journal of Infrastructure, Policy and Development, 8(14), 9875.
Akbar, M. T., & Sihaloho, E. D. (2020). The Impact of Village Fund Program in Developing Physical Infrastructure: Case on Construction Value Across Provinces in Indonesia. MediaTrend, 15(1), 1–10.
Anam, C., Plaček, M., & Valentinov, V. (2023). Village funds and poverty reduction in Indonesia: New policy insight. Discover Global Society, 1(14).
Brodjonegoro, B. (2016). Fiscal Decentralization and Regional Development: The Indonesian Experience. Journal of Southeast Asian Economies, 33(3), 345–358.
Gani, A., Yuwono, T., & Suryanto, T. (2023). Village Government's Risk Management and Village Fund Management in Indonesia. Sustainability, 15(24), 16706.
Garung, A., & Ga, M. (2020). Transparency and accountability in village fund management: A study in East Nusa Tenggara. Journal of Rural Development, 39(1), 45–58.
Gonschorek, G. J., & Schulze, G. G. (2018). Continuity or Change? Indonesia’s Intergovernmental Fiscal Transfer System under Jokowi. Journal of Southeast Asian Economies, 35(2), 143–164.
Hanafie, H., & Nugraha, A. (2020). The Effectiveness of Village Fund Policy in Increasing Economy of The Village Community at Karangjaya District Tasikmalaya Regency West Java Province. Proceedings of the 5th International Conference on Social and Political Sciences, 12 November 2019.
Handayani, A. P., & Badrudin, R. (2019). Evaluation of Village Fund Allocation in Indonesia. Journal of Accounting and Investment, 20(3), 283–295.
Hartojo, N., Ikhsan, M., Dartanto, T., & Sumarto, S. (2022). A Growing Light in the Lagging Region in Indonesia: The Impact of Village Fund on Rural Economic Growth. Economies, 10(9), 217.
Indra, J., & Khoirunurrofik, K. (2022). Understanding the role of village fund and administrative capacity in stunting reduction: Empirical evidence from Indonesia. PLOS ONE, 17(1), e0262743.
Junaidi, M., & Hasanah, U. (2023). Governance and management of village funds in Indonesia. Journal of Public Administration, 55(3), 123-136.
Kim, T. (2023). Empowering village community by transfer fund scheme: Evidence from The Village Fund Implementation in Indonesia. KDI School of Public Policy and Management.
Lestari, R. I., Wardono, B., Saptana, S., & Wardhana, I. W. (2023). The Village Fund Program and Indonesia's 18th Sustainable Development Goal: A bibliometric and content study. International Journal of Sustainable Development and Planning, 18(11), 3505–3518.
Lewis, B. D. (2017). Local Government Spending and Service Delivery in Indonesia: The Perverse Effects of Substantial Fiscal Decentralization. Asian Journal of Political Science, 25(1), 1–20.
Ministry of Finance of the Republic of Indonesia. (2014). Village Fund Policy. Retrieved from https://www.kemenkeu.go.id
Mulyani, S., & Fettry, N. (2020). Effect of good village governance implementation in Indonesia. Utopía y Praxis Latinoamericana, 25(Special Issue 2), 233–243.
Nara, N., Baharuddin, M., Yunus, M., & Syahribulan, S. (2018). Process implementation of village funds program policy. European Journal of Research in Social Sciences, 6(2), 1–10.
OECD. (2021). Policies for resilient local economies. Retrieved from: https://www.oecd.org/en/publications/policies-for-resilient-local-economies_872d431b-en.html
Palisuri, P., Karim, A., & Sunarya, W. A. (2024). Effectiveness of Village Fund Policy to Improve Economic Development and Rural Infrastructure in East Luwu Regency, Indonesia. Nanotechnology Perceptions, 20(3), 183–194.
Permata, A., Muchson, M., & Surindra, M. (2022). Strengthening transparency and accountability in village fund management through community participation. Journal of Governance and Policy, 7(1), 50–65.
Permatasari, P., Ilman, A. S., Tilt, C. A., Lestari, D., Islam, S., Tenrini, R. H., Rahman, A. B., Samosir, A. P., & Wardhana, I. W. (2021). The Village Fund Program in Indonesia: Measuring the effectiveness and alignment to Sustainable Development Goals. Sustainability, 13(21), 12294.
Pranadji, T., et al. (2020). Village Fund and Indonesia Rural Development: Rethinking Institutional Capacity and Governance. Journal of Indonesian Policy Development, 1(1), 1–15.
Pratolo, S., Atmaja, N. R. S., & Sofyani, H. (2020). What determines village autonomy in Indonesia? A case of villages in Sleman Regency. Jurnal Dinamika Akuntansi dan Bisnis, 7(1), 15–32.
Pratomo, D. (2022). Rural development from village funds, village-owned enterprises, and community participation: Evidence from Indonesia. Heliyon, 8(12), e12345.
Ramadhani, R., & Yuliati, Y. (2021). The influence of transparency and accountability on the management of village fund allocations. Jurnal Ilmiah Akuntansi dan Humanika, 14(2), 328–339.
Ramly, A. R., Wahyuddin, J., Mursyida, J., & Mawardati. (2018). The Implementation of Village Fund Policy in Improving Economy of Village Society: Case Study at Kuala Sub-district of Nagan Raya District. Proceedings of the International Conference on Social and Political Sciences, 12 November 2018.
Rosario da Gama, G. (2024). Village governance and development in Indonesia: Progress and challenges. Development Policy Centre.
Sidik, F. (2024). The village fund, village tourism development, and its impact on income inequality in rural Indonesia: How do village elites shape it? Cogent Social Sciences, 10(1), 2430487.
Smeru Research Institute. (2021). Growing the Light in Lagging Regions of Indonesia: The Impact of Village Fund on Rural Economic Growth.
Sonbay, Y. Y., Tjahjadi, B., & Narsa, I. M. (2022). Cultural challenges in implementing village funds management: Evidence from Eastern Indonesia. International Journal of Public Sector Performance Management, 10(1), 1–15.
Sulila, I., et al. (2023). The effect of community participation and supervision on the effectiveness of village fund policy implementation in Indonesia. In Proceedings of the InCCluSi 2022, ASSEHR 682, 372–379.
Suryadir, B., & Suryana, A. (2020). Effectiveness of Village Funds Management in Infrastructure Improvement in Indonesia. American International Journal of Business Management, 3(7), 86–90.
Suryadir, B., Suryana, A., & Rahman, A. (2020). The Role of Village Funds on Village Infrastructure Conditions and Service Access. American Journal of Humanities and Social Sciences Research, 4(1), 336–345.
Suryahadi, A., et al. (2018). Village Governance and Public Participation in Indonesia. Journal of Indonesian Social Sciences, 3(2), 45–60.
Suryahadi, A., et al. (2020). Village funds, village-owned enterprises, and rural development in Indonesia. Journal of Rural Studies, 79, 70–80.
Sutiyo, & Maharjan, K. L. (2017). Decentralization and Rural Development in Indonesia. Springer.
Suwanda, D., & Suryana, A. (2021). Transparency and accountability in village fund management in Indonesia. Journal of Public Administration, 55(3), 123–136.
Taufiqi, M., & Ariani, D. (2022). Accountability and perception of prosocial behavior in village fund management. Journal of Governance and Regulation, 12(1), 131–140.
U.S. Economic Development Administration. (n.d.). Economic resilience. https://www.eda.gov/resources/comprehensive-economic-development-strategy/content/economic-resilience
Udjianto, D., Hakim, A., Domai, T., & Suryadi, S. (2020). The implementation of village fund policy: A comparative study in improving the public welfare in two villages in Pati Regency, Central Java. Holistica – Journal of Business and Public Administration, 11(1), 87–94.
Utami, S., & Ibrahim, M. (2019). Challenges in implementing transparency and accountability in village fund management. Journal of Community Development, 10(2), 200–215.
World Bank. (2003). Decentralization in Indonesia: Overview. Retrieved from: https://documents.worldbank.org/en/publication/documents-reports/documentdetail/
World Bank. (2018). Indonesia-Village Law: Strengthening Village Governance and Development. Retrieved from: https://documents.worldbank.org/en/publication/documents-reports/documentdetail/
World Bank. (2020). Indonesia economic prospects: The long road to recovery. Retrieved from: https://www.worldbank.org/en/country/indonesia/publication/indonesia-economic-prospects-december-2020-the-long-road-to-recovery
1.png)
