Abstract
Following the nationwide implementation of the Village Funds, the government attempted to accelerate rural economic growth through rural enterprises ( Badan Usaha Milik Desa/BUMDes). This study aimed to analyze how social capital affects village-owned enterprise management to accelerate rural economy. This study was conducted in 2018 and applied a qualitative approach and case study design with a content analysis method derived from interviews, observations, and legal documents. The analysis shows that stakeholders’ development visions to initiate the establishment are critical to determining the management and cooperation of rural enterprises, especially regarding the common direction of development. This study’s results show that, presently, rural enterprises have a low impact on rural economic growth. This study also argues for policy implications by highlighting the importance of social capital and village local assets to determine BUMDes development in Indonesia. Specifically, local policies should also aim to enhance community participation and improve BUMDes’ human capital on management and marketing.
Highlights
Despite urban-bias policies, the government has attempted rural development through various programs without satisfactory results
This study considers the role of social capital in the economic performance of rural enterprises
As this study examines how social capital determines the economic performance of BUMDes, it employs a qualitative method
Summary
Despite urban-bias policies, the government has attempted rural development through various programs without satisfactory results. The government initiated a more balanced development in the Indonesia Medium-term Development Plan (RPJMN) 2015 to 2019 by introducing the national program “building Indonesia from the rural area by strengthening regions and villages within the framework of the Unitary State of the Republic of Indonesia.”. This is implemented by issuing Village Law, which allows villages as the development arena through government policies, development funds, and community empowerment. The implementation of the Village Funds is expected to stimulate and drive the economic wheels in rural areas by establishing Village Owned-Enterprises (Badan Usaha Milik Desa/BUMDes). The Law No 6 of 2014 concerning villages states that BUMDes was among the four priorities for using Village Funds directed by the Ministry of Villages for Disadvantaged Areas and Transmigration in 2017
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