This study offers a new perspective on measuring the impact of village funds (DD) on rural development. Using a mixed-method approach, the qualitative analysis reveals that, like previous rural development programs, the DD program struggles to implement inclusive methods for capturing community aspirations and evaluating outcomes. Despite rural infrastructure improvement, many villagers feel they have not fully benefited and do not view it as offering economic opportunities. The econometric model confirms the qualitative findings, indicating no significant DD influence on the village development index (IPD). Instead, effective governance factors like Musdes, regulations, and leadership are essential for the IPD improvement. Thus, enhancing village governments’ institutional capacity is crucial for increasing the DD effectiveness. The paper recommends several measures: training village officials in financial management and project planning, providing guidelines for the DD allocation and usage, creating robust monitoring-evaluation systems, developing communication strategies, and fostering partnerships with local NGOs and universities.

Adam, L., and Negara, S. D. (2011). How the national community empowerment program improves the living standards of the rural poor in Yogyakarta. Ekonomi dan keuangan Indonesia, 59(3), 297.

Antlov, H. (2003). Village government and rural development in Indonesia: The new democratic framework. Bulletin of Indonesian economic studies, 39(2), 193–214. https://doi.org/10.1080/00074910302013

Astariyani, N. L. G., Rumiartha, I. N. P. B., Maharani, I. G. A. S., Yusa, I. G., Danyathi, A. P. L., and Putra, M. A. P. (2023). Regulation of strengthening village government authority in policy determination: Case study in Indonesia. The international of social sciences world, 5(2), 263–271. https://doi.org/10.5281/zenodo.10259982

Bappenas. (1994). IDT program implementation guidance.

Bappenas. (2012). National community empowerment program (PNPM) annual report. In Bappenas (Issue April). http://documents.worldbank.org/curated/en/543401468259751080/PNPM-rural-impact-evaluation

BPS-Statistics Indonesia. (2019). Financial Statistics of Village Government. 648.

Daimon, T. (2001). The spatial dimension of welfare and poverty: Lessons from a regional targeting programme in Indonesia. Asian Economic Journal, 15(4), 345–367. https://doi.org/10.1111/1467-8381.00149

Evers, P. J. (2000). Resourceful villagers, powerless communities: Rural village government in Indonesia. A World Bank–Bappenas Research Project, 2000.

Faoziyah, U., and Salim, W. (2020). Seeking prosperity through village proliferation: An evidence of the implementation of village funds (Dana Desa) in Indonesia. Journal of regional and city planning, 31(2), 97–121. https://doi.org/10.5614/jpwk.2020.31.2.1

Gonschorek, G. J., and Schulze, G. G. (2018). Continuity or change?: Indonesia’s intergovernmental fiscal transfer system under Jokowi. Journal of Southeast Asian economies, 35(2), 143–164. https://doi.org/10.1355/ae35-2c

Hartojo, N., Ikhsan, M., Dartanto, T., and Sumarto, S. (2022). A growing light in the lagging region in Indonesia: The impact of village fund on rural economic growth. Economies, 10(9). https://doi.org/10.3390/economies10090217

Hilmawan, R., Aprianti, Y., Vo, D. T. H., Yudaruddin, R., Bintoro, R. F. A., Fitrianto, Y., and Wahyuningsih, N. (2023). Rural development from village funds, village-owned enterprises, and village original income. Journal of open innovation: technology, market, and complexity, 9(4). https://doi.org/10.1016/j.joitmc.2023.100159

Jayasinghe, K., Adhikari, P., Carmel, S., and Sopanah, A. (2020). Multiple rationalities of participatory budgeting in indigenous communities: evidence from Indonesia communities. https://doi.org/10.1108/AAAJ-05-2018-3486

Kuniyo, S., and Larasati, D. C. (2019). Evaluation of village development planning consultation/musyawarah based on law No 6 Year 2014 on village. Jurnal ilmu sosial dan ilmu politik, 8(3), 114–119.

Lako, E. S. W., Rumapea, P., and Lengkong, F. (2016). Relation between head of village and performance of village governance, in Mamuya Village, Galela Subdistrict, Halmahera Utara District. Jurnal Adminstrasi Publik Unsrat, 1–11.

Lewis, B. D. (2015). Decentralising to villages in Indonesia: Money (and other) mistakes. Public Administration and Development, 35(5), 347–359. https://doi.org/10.1002/pad.1741

Mandafi, A. A., Supratomo, and Sultan, I. (2015). communication analysis on community participation in development planning consultation, resapan banjir village in Tempe Lake, Wajo District. Jurnal Komunikasi Kareba, 4(3), 226–238.

Ministry of Finance. (2017). Village fund pocket book. In Ministry of Finance.

Ministry of Finance. (2018). Evaluation of village funds allocation and distribution.

Ministry of Villages. (2019). Village development dynamics: Study of 7 island areas on the benefits of village funds in Indonesia.

Ministry of Villages. (2020). Village development index. In Kementerian Desa Pembangunan Daerah Tertinggal dan Transmigrasi.

Ministry of Villages. (2023). National Village Fund Report. https://sid.kemendesa.go.id/village-fund

Pangalila, G., Lengkong, F., and Tulusan, F. (2015). The effectiveness of village head’s leadership in mobilizing community participation in development in the Kembuan, Kembuan Satu, and Tonsea Lama Villages in North Tondao district. Jurnal administrasi publik UNSRAT, 2(029), 1295.

Permatasari, P., Budiarso, A., Dartanto, T., Samosir, A. P., Saputro, B., Ekayana, D., Agustono, E. D., Alim, T. E., Hartono, L., Wahyuputri, F. W., and Wardhana, I. W. (2024). Village fund management and reporting systems: are they accountable? Transforming government: people, process and policy. https://doi.org/10.1108/TG-07-2023-0098

Permatasari, P., Ilman, A. S., Tilt, C. A., Lestari, D., Islam, S., Tenrini, R. H., Rahman, A. B., Samosir, A. P., and Wardhana, I. W. (2021). The village fund program in Indonesia: Measuring the effectiveness and alignment to SDGs. Sustainability (Switzerland), 13(21). https://doi.org/10.3390/su132112294

Pusat Kajian Anggaran DPR RI. (2021). Poverty and inequality indicators.

Rammohan, A., and Tohari, A. (2023). Rural poverty and labour force participation: Evidence from Indonesia’s village fund program. PLoS ONE, 18(6 June). https://doi.org/10.1371/journal.pone.0283041

Salim, A., Bulan, W. R., Untung, B., Laksono, I., and Brock, K. (2017). Indonesia’s village law: Enabler or constraint for more accountable governance? (Issue October). https://www.comminit.com/gestion-del-riesgo/content/indonesias-village-law-enabler-or-constraint-more-accountable-governance

SMERU. (2018). Utilization of the village fund (Issue 2).

Suryahadi, A. (1999). The Economic Crisis: effects and policy framework. In post-Soeharto Indonesia renewal or chaos (G. Forester (ed.)). Institute of southeast asian studies.

Suryahadi, A., and Sumarto, S. (2010). Poverty and vulnerability in Indonesia before and after the economic crisis. Poverty and social protection in Indonesia, 17(1), 36–62. https://doi.org/10.1355/9789812309525-011

Susilo, A. T. H. (2012). The Indonesian national program for community empowerment rural: Decentralization in the context of neoliberalism and world bank policies. In international institute of social sciences-the hague (Vol. 66, Issue July).

The Republic of Indonesia. (2014). Indonesia village law No.6 (p. 56). http://www.indolaw.org/UU/Law No. 6 of 2014 on Villages.pdf

TNP2K. (2018). Rapid assessment of changes in the implementation of village funds.

TNP2K. (2021). Increasing the productivity and capacity of the regional budget in accelerating village development.

World Bank. (1997). Poverty reduction and the world bank: Progress and challenges in the 1990s. In Population and Development Review (Vol. 23, Issue 1). https://doi.org/10.2307/2137483

World Bank. (2009). Community empowerment for poverty reduction.

Yamauchi, C. (2004). Evaluating poverty alleviation: Evidence from a uniquely assigned program in Indonesia. September 2004.

Zakaria, Y. (2000). Abih tandeh: Village communities under the new order regime.