A new approach to stimulate rural entrepreneurship through village-owned enterprises in Indonesia

Abstract

Purpose Village-owned enterprises, in this study called Badan Usaha Milik Desa (BUMDes), are rural communities economic empowerment program developed by the Indonesian Government to encourage the growth of rural entrepreneurship by using the potential of locally owned resources. However, the implementation and effect of the BUMDes program are questionable. Thus, this study aims to investigate the role of BUMDes in encouraging rural entrepreneurship and strengthening rural economic development. In addition, this study also explores challenges in implementing the BUMDes program. Design/methodology/approach This study uses a qualitative method with a case study approach. Data were obtained through in-depth interviews using purposive sampling techniques to key people in management at five BUMDes in Garut Regency, West Java, Indonesia, which have successfully implemented the BUMDes program. Findings The findings of this study indicate that BUMDes are proven to encourage rural entrepreneurship with the dimensions of exploration and empowerment, capacity building and the support and involvement of all stakeholders. BUMDes were established in accordance with government policies based on the village discussion process as the culture of the Indonesian people by involving elements of the village government, associations and the community. However, the challenges in implementing BUMDes are still faced by managers including implementation and regulatory mismatches, lack of qualified human resources and lack of synergy between the village government and BUMDes. Research limitations/implications In this study, the development of a local economic empowerment program as a driver of rural entrepreneurship is carried out in the Indonesian context. In addition, based on the unique nature of case studies, making this study can only be implemented in cases that have similar characteristics. Therefore, in the context of other countries, it can be done by modifying the results obtained based on the conditions and potential of each region. Originality/value Although recognition of entrepreneurship is one of the main determinants of rural economic development, empirical research in this area is relatively rare. Thus, this study adds a new perspective on the BUMDes program as an effort to grow rural entrepreneurship.