The Relationship of Village Funds With Village Economic Development

A Village Level Study in Indonesia


  • Mohamad Yusuf Faculty of Economics and Business, Universitas Indonesia
  • Khoirunurrofik Faculty of Economics and Business, Universitas Indonesia



Village Fund, IDM, fiscal policy, village development


The Village Fund Program is a manifestation of fiscal decentralization in Indonesia, which is intended to support equitable development and increase community welfare. The village government has the authority to plan the use of the Village Fund and to spend it concerning regulations from the central government. The use of the Village Fund needs to be evaluated to determine whether the funds have been spent properly and support the village's economic development. This study aims to identify Village Fund program activities that can affect village economic development and determine regional priorities in utilizing Village Funds for village development in the economic field. The analysis was conducted using a qualitative approach by mapping and tagging Village Fund expenditures. The mapping and tagging aim to ensure that Village Fund spending follows the mandate and to know the composition of the share of economic spending in each region. The results showed that: (1) the utilization of the Village Fund was following the applicable priority guidelines for the use of the Village Fund; (2) the share of economic spending in the eastern part of Indonesia is lower than in other regions, but the trend is constantly rising, while the share of economic spending in the islands of Java and Bali shows a higher number. Based on the research results, this study suggests that villages in disadvantaged areas prioritize Village Fund spending for infrastructure improvement and regional openness to increase village progress or independence.


Download data is not yet available.


Arcand, J.-L., & Bassole, L. (2007). Does Community Driven Development Work? Evidence From Senegal. 1–42.

Arifin, B., Wicaksono, E., Tenrini, R. H., Wardhana, I. W., Setiawan, H., Damayanty, S. A., Solikin, A., Suhendra, M., Saputra, A. H., Ariutama, G. A., Djunedi, P., Rahman, A. B., & Handoko, R. (2020). Village Fund, Village-Owned-Enterprises, and Employment: Evidence From Indonesia. Journal of Rural Studies, 79, 382–394.

Arina, A. I. S., Masinambow, V. A. J., & Walewangko, E. N. (2021). Pengaruh Dana Desa dan Alokasi Dana Desa terhadap Indeks Desa Membangun di Kabupaten Minahasa Tenggara. Jurnal Pembangunan Ekonomi dan Keuangan Daerah, 22(3), 22–41.

Arsandi, S. (2022). Collaborative Governance in the Optimization of Tax Revenue: Case Study in Yogyakarta. Jurnal Bina Praja, 14(1), 17–29.

Aziz, N. L. L. (2016). Otonomi Desa dan Efektivitas Dana Desa. Jurnal Penelitian Politik, 13(2), 193–211.

Baidhowah, A. (2022). Explaining Decentralization Performance in Indonesia: Member of Parliament Decision, Political Networks, and Constitution Amendment. Jurnal Bina Praja, 14(1), 97–109.

Beath, A., Christia, F., & Enikolopov, R. (2015). The National Solidarity Programme: Assessing the Effects of Community-Driven Development in Afghanistan. International Peacekeeping, 22(4), 302–320.

Berelson, B. R. (1952). Content Analysis in Communication Research. The Free Press.

Boonperm, J., Haughton, J., & Khandker, S. R. (2013). Does the Village Fund matter in Thailand? Evaluating the impact on incomes and spending. Journal of Asian Economics, 25, 3–16.

Chase, R. S., & Sherburne-Benz, L. (2001). Household Effects of African Community Initiatives: Evaluating the Impact of the Zambia Social Fund.

de Mello, L. R. (2000). Fiscal Decentralization and Intergovernmental Fiscal Relations: A Cross-Country Analysis. World Development, 28(2), 365–380.

Deininger, K., & Liu, Y. (2009). Longer-Term Economic Impacts of Self-Help Groups in India. World Bank Policy Research, WPS 4886, 1–31.

Direktorat Jenderal Perimbangan Keuangan. (2019). Buku Pintar Dana Desa: Dana Desa untuk Kesejahteraan Rakyat. Direktorat Jenderal Perimbangan Keuangan.

Dwitayanti, Y., Maria, Nurhasanah, & Armaini, R. (2020). The Impact of Village Fund Program Implementation Toward Society Welfare in Indonesia. Proceedings of the 3rd Forum in Research, Science, and Technology (FIRST 2019). 3rd Forum in Research, Science, and Technology (FIRST 2019), Palembang, Indonesia.

Fatoni, A. (2020). Fiscal Decentralization Dilemma in Indonesia: Between Corruption Accountability and Probability at Local Levels. Jurnal Bina Praja, 12(1), 101–110.

Handoyo, F., Hidayatina, A., & Purwanto, P. (2021). The Effect of Rural Development on Poverty Gap, Poverty Severity and Local Economic Growth in Indonesia. Jurnal Bina Praja, 13(3), 369–381.

Haryanto, J. T. (2018). Fiscal Condition of Sumatra in Decentralization Era. Jurnal Bina Praja, 10(1), 57–67.

Hindriks, J., & Myles, G. D. (2006). Intermediate Public Economics. MIT Press.

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.

Kadafi, M., Sudarlan, & Sudrahman, H. (2020). The Implications of Village Funds Received by Underdeveloped Village per District/City Against Poverty in Indonesia and Literacy Rate: Emperical Evidence in Indonesia. International Journal of Scientific & Technology Research, 9(1), 3924–3928.

Kusuma, H. (2016). Desentralisasi Fiskal dan Pertumbuhan Ekonomi di Indonesia. Jurnal Ekonomi Kuantitatif Terapan, 9(1), 1–11.

Labonne, J. (2013). The KALAHI-CIDSS Impact Evaluation: A Revised Synthesis Report (City Development Strategy (CDS) No. 69094). The World Bank Group.

Menkhoff, L., & Rungruxsirivorn, O. (2011). Do Village Funds Improve Access to Finance? Evidence from Thailand. World Development, 39(1), 110–122.

Murliasari, R. (2021). Implementation of Village Fund Management Policy Affirmation in Village Development. Jurnal Bina Praja, 13(3), 555–567.

Neuman, W. L. (2014). Social Research Methods: Qualitative and Quantitative Approaches (7th ed.). Pearson Education Limited.

Newman, J., Pradhan, M., Rawlings, L. B., Ridder, G., Coa, R., & Evia, J. L. (2002). An Impact Evaluation of Education, Health, and Water Supply Investments by the Bolivian Social Investment Fund. The World Bank Economic Review, 16(2), 241–274.

Nordin, M., & Manevska-Tasevska, G. (2013). Farm-Level Employment and Direct Payment Support for Grassland Use: A Case of Sweden. AgriFood Economics Centre.

Parajuli, D., Acharya, G., Chaudhury, N., & Thapa, B. B. (2012). Impact of Social Fund on the Welfare of Rural Households: Evidence from the Nepal Poverty Alleviation Fund. The World Bank.

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.

Rachma, D. D., Somaji, R. P., & Kustono, A. S. (2019). Government Expenditure, Poverty and Income Inequality in Indonesia: New Evidence From Village Funds. International Journal of Scientific & Technology Research, 8(8), 38–42.

Rosen, H. S., & Gayer, T. (2010). Public Finance (9th ed.). McGraw-Hill.

Sandjaja, F. R., Nafisa, F., & Manurung, I. N. (2020). The Impact of Fiscal Decentralization on Welfare in Selected Provinces in Indonesia. Jurnal Bina Praja, 12(1), 21–31.

Saragi, N. B. (2021). Indonesia’s Village Fund Program: Does It Contribute to Poverty Reduction? Jurnal Bina Praja, 13(1), 65–80.

Shaaban, S. (2019). Reviewing Egyptian Community Social Fund (Village Savings and Loans Association, VSLA) as an Approach for Community Social Fund. Horticulture International Journal, 3(1), 13–18.

Sigit, T. A., & Kosasih, A. (2020). Pengaruh Dana Desa terhadap Kemiskinan: Studi Tingkat Kabupaten/Kota di Indonesia. Indonesian Treasury Review: Jurnal Perbendaharaan, Keuangan Negara dan Kebijakan Publik, 5(2), 105–119.

Stone, P. J., Dunphy, D. C., Smith, M. S., & Ogilvie, D. M. (1966). General Inquirer: A Computer Approach to Content Analysis. MIT Press.

Yazid, Y., Abdullah, A., Mustafa, Edison, & Rafdeadi. (2019). Desa Funds and Achievement of SDG’S Purpose: Normative Study of Sustainable Development in Indonesia. 10th International Symposium on Islam, Civilization and Science (ISICAS 2019), 139–152.




How to Cite

Yusuf, M., & Khoirunurrofik, K. (2022). The Relationship of Village Funds With Village Economic Development: A Village Level Study in Indonesia. Jurnal Bina Praja, 14(3), 493–504.




Most read articles by the same author(s)