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Regional Development Planning Strategy Through the Integration of

Strengthening Village-Owned Enterprises and the Transparency

Utilisation of Village Funds

Ayu Anggraini Tambunan

, Siti Khikmatul Rizqi

, M. Irvanni Bahri

, Nur Aima Shafie

Faculty of Science and Technology Universitas Amal Ilmiah Yapis Wamena

Faculty of Social and Political Sciences and Law, Universitas Amal Ilmiah Yapis Wamena

School of Business Economics and Management, International Trade Study Programme, Institute

Teknologi Batam

Accounting Research Institute, University Teknologi MARA, Malaysia

*Corresponding Author

DOI: https://doi.org/10.47772/IJRISS.2025.910000190

Received: 28 September 2025; Accepted: 04 October 2025; Published: 07 November 2025

ABSTRACT

The administration of village funds in Indonesia is crucial for fostering local economic growth in accordance

with the principles of good governance. The community-Owned Enterprise (BUMDes) is a primary tool for

optimising the utilisation of community revenues. This study seeks to examine options for enhancing BUMDes

via integration with regional development planning, concentrating on Bireuen Regency, which possesses

significant potential in agriculture, marine, and tourism sectors. The employed methodology is a qualitative study

utilising a descriptive-analytical technique grounded in secondary data, encompassing regulations, governmental

papers, academic literature, and statistical information pertinent to the advancement of BUMDes in Bireuen. The

findings indicate that while the quantity of BUMDes in Bireuen rose from 326 units in 2019 to 356 units in 2021,

a disparity persists between the number of villages and the active BUMDes. This data suggests that the primary

issue pertains not just to the quantity of BUMDes but also to the quality of governance and sustainability. The

primary issues encountered consist of inadequate planning, insufficient transparency about the utilisation of

village funds, and constrained human resource capabilities. Nonetheless, the ample local potential presents

significant chances for village business growth, particularly through the utilisation of village finances for

agriculture, fisheries, and processed products rooted in local knowledge. This study establishes that the

incorporation of BUMDes enhancement into regional development planning is an essential method for attaining

economic autonomy in villages of Bireuen Regency. The execution of this strategy necessitates unwavering

policy endorsement, clear oversight, robust business planning, and enhanced managerial competence.

Consequently, BUMDes can operate effectively as a catalyst for rural economic advancement, enhance

community autonomy, and exemplify the implementation of ethical governance principles at the local tier.

Keywords: Village Funds, Village-Owned Enterprises, Regional Planning, Local Economic Development,

Village Governance

INTRODUCTION

Indonesia is an archipelagic nation characterised by cultural diversity, religious plurality, and a lengthy history

that influences the identity of each region. This diversity is manifested in a governmental structure that

accommodates the unique peculiarities of individual regions via autonomy policies. Bestowing special status

upon certain provinces constitutes a sort of state acknowledgement of the distinctive history, culture, and social

attributes of their inhabitants. Aceh is an area that has been constitutionally endowed with recognised privileges

and special status. This particular status is not the outcome of an immediate policy but rather the result of a

protracted history characterised by political, social, and cultural factors. Aceh, characterised by a robust Islamic

heritage and a legacy of opposition to colonialism and injustice, holds a distinctive status within the Unitary

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State of the Republic of Indonesia (NKRI). This unique status is affirmed by multiple statutes that differentiate

Aceh from other provinces [1]. Since the reform era, at least three significant statutes have established the

foundation for this special position. Initially, Law No. 44 of 1999 pertains to the Special Region of Aceh.

Secondly, Law No. 18 of 2001 pertains to Special Autonomy for the Special Region of Aceh, designated as the

Province of Nanggroe Aceh Darussalam. Third, Law No. 11 of 2006 about the Government of Aceh was enacted

as a consequence of the Helsinki peace accord (Helsinki MoU) and provides a more complete framework for the

administration of Aceh's government post-conflict. The present administration of Aceh is founded on Law No.

11 of 2006. This legislation introduces several new authorities, notably the creation of the Wali Nanggroe

Institution, which oversees customary institutions and contributes to the maintenance of peace. This regulation

enhances the enforcement of Islamic law in financial management and the daily life of the community, including

social security for the impoverished, which is administered by Baitul Mal Aceh.

The governmental tier nearest to the village is the Gampong, overseen by a Keuchik (Village Head). Village

leaders are referred to by numerous termsGeuchik, Keuchik, Reje, and Datokeach holding a valid status. The

administration of the gampong is conducted by village officials, whereas oversight is performed by an

independent entity known as Tuha Peut [9]. Gampongs, as components of the national government system, must

manage their budgets systematically to ensure successful governance. Article 117 of Law Number 11 of 2006

delineates the status, roles, and structure of gampongs, encompassing their financial management authority,

which has engendered numerous new issues. This strategy is deemed prudent as the function of thegampong

now extends beyond the preservation of customs and culture to encompass financial management, enhancement

of community welfare, and the support of central government programmes.

This paper aims to analyse the integration of Village-Owned Enterprises (BUMDes) and village fund

transparency within regional development planning in Bireuen Regency, identifying opportunities, challenges,

and strategic measures for fostering sustainable local economic growth and governance improvement.

LITERATURE REVIEW

Research on Aceh's governance encompasses not just the enforcement of Islamic law but also significant matters,

such the administration of village revenues. The Indonesian government has empowered villages to administer

village finances as a strategic initiative to enhance community welfare. The critical enquiries are: do the allocated

village finances genuinely enhance the people' wellbeing, and what measures must be employed to guarantee

effective management? Comparable techniques are also observed in other nations, such as Thailand, with its

Village Fund initiative. In the last sixty years, Thailand has enhanced its economy via national and social

development initiatives that promote manufacturing and exports. Research conducted by Jirawan, Jonathan, and

Shahidur, utilising socio-economic survey data from 2002 to 2004, revealed that households employing two

forms of aid, specifically the village fund and the Urban Revolving Fund, saw greater benefits than those relying

on a single source.

2012 World Bank research identified the Village Fund as the second largest microcredit initiative globally;

nevertheless, its focus on social objectives rather than financial ones restricts innovation. Research conducted

by Lukas and Ornsiri indicates that village funds in Thailand more effectively serve low-income households

compared to formal financial institutions, facilitating credit access for borrowers typically reliant on informal

financial sources, thereby alleviating credit constraints despite their restricted reach. The Thailand Village and

Urban Community Fund (VF) initiative allocated over US$2 billion—approximately one million baht to over

78,000 villages and neighbourhoods, significantly benefiting low-income people and exhibiting a "pro-poor"

orientation. Quasi-experimental cross-village research conducted by Joseph and Robert demonstrated a rise in

total credit, consumption, and short-term income, whereas asset growth tended to drop. The favourable impact

on wages corroborates the model of households with constrained credit and the theory of growth predicated on

intermediation [18].

Indonesia has enacted a comparable regulation via Law No. 6 of 2014 concerning Villages. The objective is to

enhance local autonomy, alleviate poverty, diminish inequality, and generate employment opportunities [20].

Nonetheless, its execution encounters obstacles. For instance, not all communities commit a minimum of 20%

of their income to agriculture; the majority is designated for infrastructure. In numerous regions, communities

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prioritise family economic development over environmental conservation or reforestation, despite the potential

for substantial income generation through enterprises like agrotourism. Governance challenges often emerge,

including theft and corruption. Proactive prevention is essential via enhanced societal awareness and fortified

internal controls through the Village Supervisory Agency [25]. Instances of village fund misappropriation

exacerbate public scepticism regarding the village's budgetary management, necessitating accountability and

creativity from the local administration.

The allocation of local funding does not adequately address environmental concerns, including peatland

restoration. A study of community attitudes identified issues including the lack of environmental considerations

in village development pillars, minimal community engagement in the environmental economy, and inadequate

district oversight, despite the presence of potential to enhance governance [28]. In Aceh, the village fund policy

is particularly critical due to the province's significant potential, particularly in agriculture and marine sectors.

Bireuen District is renowned for its prominent commodities, including rice, soybeans, corn, and plentiful marine

items. Optimising this potential can be achieved by enhancing Village-Owned Enterprises (BUMDes), which

empower communities to operate profitable companies, so improving community welfare, generating

employment, and reinforcing economic independence. The activity level of BUMDes in Aceh remains

inconsistent, necessitating meticulous planning, proficient administration, and governmental assistance that

benefits the agricultural sector.

An extensive examination of village fund management in Aceh, specifically in Bireuen Regency, is essential to

address several strategic enquiries: how can the village fund management mechanism be harmonised with the

unique attributes of Aceh, to what degree can BUMDes serve as the primary vehicle for agricultural economic

empowerment, and what challenges and prospects exist in its execution? The efficacy of the village fund

initiative is contingent not alone upon budgetary magnitude but also on transparent government, community

engagement, and the harnessing of local resources. This study aims to generate pertinent strategic

recommendations for Aceh by analysing the experiences of Thailand and practices across different regions of

Indonesia, specifically to enhance BUMDes in bolstering the agricultural sector, which is fundamental to the

economy of Bireuen Regency.

METHODOLOGY

This study employs a qualitative methodology, utilising pertinent library research techniques to examine village

finance management practices and the advancement of Village-Owned Enterprises (BUMDes) in Bireuen

Regency. [1], [2]. The comprehensive research method focused on the exploration, evaluation, and integration

of literature concerning village fund policies, agricultural economic empowerment, and village governance

practices in alignment with the principles of good governance. Primary data was sourced from multiple official

entities, including national and regional legislation pertaining to village funding and BUMDes, governmental

papers, and pertinent prior study findings. To facilitate the academic investigation, the researchers employed

scientific journal articles indexed by Scopus and esteemed national periodicals recognised by official

governmental bodies. This study incorporated secondary data obtained from statistical reports, regional

development planning documents, and the official websites of the Aceh Provincial Government and the Bireuen

Regency Government. This data amalgamation offers an extensive overview of the evolution of village numbers,

BUMDes, BUMDes activity levels, and regional policies pertaining to agricultural sector enhancement. This

literature-based qualitative methodology enables researchers to discern trends, evaluate policies, and devise

strategies for managing village funds through the optimization of BUMDes, thereby providing practical

recommendations for local governments to foster a sustainable village economy.

RESULTS AND DISCUSSIONS

Potential and Challenges

The examination of local funds in Indonesia is not novel. Numerous studies have long emphasised several facets

of village administration to achieve village finance management aligned with the ideals of good governance. An

essential component associated with village funding and indicative of effective governance practices is the

administration of Village-Owned Enterprises (BUMDes). Research conducted by Andriana, Sudarno, Utami,

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Susanto, and Kurniaty indicates that BUMDes can be effectively managed in alignment with good governance

principles by adhering to several critical and interconnected stages: meticulous planning, efficient programme

execution, administrative oversight, transparent reporting, and ongoing accountability and supervision [31]. This

sequence of actions establishes the basis for BUMDes to operate as the catalyst of the village economy,

concurrently mitigating financial mismanagement.

Nevertheless, the situation on the ground indicates that the administration of village funding in Aceh continues

to encounter numerous obstacles. Multiple studies indicate that the allocation of village funds does not align

with the actual requirements of the community, there is nepotism in decision-making, a deficiency in budget

openness, inflated prices in the procurement of goods and services, and manipulation of financial reporting [32].

These data illustrate the necessity of enhancing village financial management in accordance with the tenets of

good governance. Aceh Province is the ninth largest beneficiary of village contributions among 33 provinces in

Indonesia. A substantial sum of money necessitates stringent oversight and robust accountability measures. In

the absence of adequate oversight, the likelihood of misappropriation of village finances increases significantly,

potentially eroding public confidence in the village administration [34]. Consequently, enhancing both internal

and external oversight mechanisms is vital to prevent potential errors and guarantee the appropriate utilisation

of village money.

An region of significance that warrants consideration is Bireuen Regency in Aceh Province. This regency

possesses significant economic potential, particularly within the agriculture sector. Food crops, especially rice

and soybeans, significantly enhance area revenue. Data indicates that the expanse of rice and soybean cultivation

encompasses around 29,814 hectares, with rice production hubs located in the sub-districts of Samalanga,

Peusangan, and Gandapura. Bireuen Regency enhances agricultural output by utilising seven rivers that

discharge into the Malacca Strait, including the Pante Lhong irrigation system sourced from Krueng Peusangan.

Alongside rice and soybeans as primary commodities, this region also features distinctive products like as giri

matang, a variety of grapefruit exclusive to Matang Geulumpangdua.

The economic potential of Bireuen extends beyond the agricultural sector. The maritime sector presents highly

attractive opportunities. In Peudada District, the local government has established a Fish Landing Centre (PPI)

as a primary facility for fishermen. Tiger prawn farming has emerged as a revenue source for coastal

communities. The Gle Geulungku area has been designated as an industrial development zone to foster industrial

expansion, while Bireuen offers appealing river tourism destinations, including Krueng Simpo and Batee Iliek,

renowned for their picturesque natural landscapes.

In addition to its economic potential, Bireuen Regency serves as a site for the execution of national projects that

promote community empowerment. The Grand Design Alternative Development (GDAD) was developed by the

National Narcotics Agency (BNN) in partnership with the Ministry of Agriculture. This plan has two objectives:

to diminish drug abuse in Aceh and to enhance the economic conditions of the local community. This plan in

Bireuen aims to enhance corn cultivation, which holds significant potential. Bireuen, including around 11,074

hectares, has been recognised as the preeminent maize production centre in Aceh. Through GDAD, populations

historically susceptible to drug misuse have been encouraged to cultivate maize, consequently augmenting their

income and diminishing drug abuse rates [39]. The success of this initiative demonstrates the cooperation

between vertical government entities and the community in advancing the agricultural sector as a cornerstone of

the local economy.

The agricultural potential of Bireuen extends beyond rice, soybeans, and maize. The area is renowned as a hub

for banana cultivation, particularly in Jeumpa Subdistrict. Bananas are marketed not only in their fresh form but

also transformed into several value-added products, like banana chips, which have become emblematic of

Bireuen. The banana chip processing enterprise has evolved into a regional culinary emblem, creating new

employment prospects for the community. Bireuen's diverse agricultural commodities provide a robust platform

for the development of sustainable village-based enterprises.

Bireuen District is administratively divided into 17 sub-districts and 609 settlements. The considerable quantity

of villages, along with significant agricultural economic potential, renders Bireuen a highly important region for

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the development of a village fund management model predicated on Village-Owned Enterprises (BUMDes). The

primary approach that the district government may implement is to optimise BUMDes as the catalyst for the

village economy, particularly in the agricultural sector, which has not been adequately leveraged. Via BUMDes,

villages in Bireuen can administer collective enterprises, cultivate superior goods, and employ village money

more efficiently and sustainably.

The optimisation of BUMDes in Bireuen yields several significant advantages. Initially, it enhances village

revenue by managing enterprises aligned with local capabilities, such as agricultural processing, aquaculture, or

agrotourism development. Secondly, it generates work opportunities for the local community, thereby

diminishing unemployment and enhancing wellbeing. Third, it enhances the economic autonomy of the

community, as the earnings may be used for infrastructure development, education, healthcare, and other social

initiatives. Moreover, transparent and accountable management of BUMDes will promote good governance

practices, hence enhancing public trust in the village administration.

The success of BUMDes is not achieved spontaneously. Multiple strategic measures are necessary, including

the formulation of a robust business plan, enhancement of human resources through management and financial

training, and ongoing oversight by the district administration and independent regulatory bodies. Community

engagement at every phase—from design to evaluation—is essential for ensuring that BUMDes genuinely

functions as a collaborative enterprise that benefits all people.

Given the many potentials and constraints, enhancing BUMDes in Bireuen District is not merely an option but

a strategic imperative. The effective administration of village funds via BUMDes will foster local economic

development, mitigate income disparity, and enhance community welfare sustainably. Moreover, effective

governance practices in BUMDes can exemplify the implementation of good governance principles at the village

level, aligning with the national objective of fostering autonomous and prosperous communities.

Table 1: Comparison of Villages and Village-Owned Enterprises in Bireun Regency in 2019

Number of Villages

Number of Village-Owned Enterprises

609

326

Source: Website of the Aceh government [1]

Table 1 indicates that in 2019, Bireuen Regency comprised 609 villages, of which 326 had established Village-

Owned Enterprises (BUMDes) [44]. Approximately 53% of settlements in Bireuen has BUMDes, but the

remaining 47% lack them. This figure indicates that while the BUMDes establishment programme is in progress,

its distribution remains uneven across all villages. The graph contrasting active and inactive BUMDes offers a

comprehensive analysis of BUMDes management efficacy. Some existing BUMDes operate effectively and

enhance the local economy, while others remain impeded and inactive in doing economic activities, although

being administratively registered. This scenario indicates that the issues confronting Bireuen Regency extend

beyond the quantity of existing BUMDes to encompass the sustainability and management of operational

BUMDes. Given that almost half of the communities in Bireuen lack a BUMDes, the local government must

focus more on those villages that have not yet leveraged this institution, particularly those with significant

potential in agriculture, marine, and tourism sectors. Conversely, inactive BUMDes necessitate support,

managerial training, and enhanced access to capital to operate effectively, hence generating economic

opportunities and elevating the welfare of the village population. The Bireuen Regency government must

enhance its village empowerment initiative by increasing the establishment of BUMDes and revitalising dormant

BUMDes. Considering the significant potential of the agriculture, marine, and agrotourism sectors in Bireuen,

effectively managed BUMDes can serve as a catalyst for the village economy, enhance village revenue, provide

employment, and bolster the community's economic autonomy. Consequently, the administration of village

funds and the maximisation of local economic potential are significantly reliant on improving the operational

capacity of BUMDes for productive and sustainable functioning. The graph below illustrates the ratio of active

to inactive BUMDes. Table 1: Comparative Analysis of the Number of Villages and BUMDes in Bireun Regency

as of 2019

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Table 2. Comparison of Active and Inactive Village-Owned Enterprises—2019

Number of Village-Owned

Enterprises

Number of active village-

owned enterprises

Number of inactive village-owned

enterprises

326

264

Source: Primary Data of Research Results

Table 2 indicates that in 2019, Bireuen Regency possessed 326 Village-Owned Enterprises (BUMDes),

comprising 264 active BUMDes and 62 dormant BUMDes. This data reveals a substantial disparity between the

total of 609 villages and the number of established BUMDes. Nonetheless, the prevalence of active BUMDes

signifies the dedication and resolve of village administrations to enhance community welfare via village business

management. The existence of 264 operational BUMDes signifies a constructive advancement in the efficient

utilisation of local revenues. Subsequent advancements occurred in 2021. The count of villages in Bireuen

Regency stayed at 609, but the number of BUMDes rose to 356 units. This growth signifies the ongoing support

from regional and village administrations to enhance the establishment of BUMDes as mechanisms to stimulate

the local economy. The establishment of more BUMDes is creating potential to enhance the rural economy,

especially in industries where the region possesses a competitive edge. The management of village funds in

Bireuen Regency should prioritise the utilisation of BUMDes as the primary strategy for agricultural

empowerment. This action aligns with the local government's objective to establish Bireuen as the hub of corn

production in Aceh Province. Utilising village funding, BUMDes can cultivate commodity-oriented agricultural

enterprises, including rice, soybeans, and corn, while also overseeing the potential of processed goods such as

banana chips and fishery products. The optimisation of BUMDes in the agricultural sector is anticipated to

enhance village income, generate employment, and fortify the economic autonomy of the Bireuen community

sustainably. Table 2: Comparison of Active and Inactive Village-Owned Enterprises—2019.

Key Factors in BUMDes Development

Source: Development of Research Results

Figure 1. Overview of BUMDes Development

Figure 1 is a summary of the primary factors affecting the establishment of Village-Owned Enterprises

(BUMDes) in Bireuen District. A significant concern is the disparity between the number of villages and the

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number of operational BUMDes, suggesting that the distribution and efficacy of these institutions are not yet

uniformly established. Government policy support, via national programmes and regional initiatives, is essential

for reinforcing the viability of BUMDes [2], [3]. BUMDes are strategically positioned as essential tools for

optimising village fund utilisation and enhancing the welfare of rural communities. Nevertheless, the

management of village funds continues to encounter significant obstacles, including inadequate planning and

insufficient budget transparency, which may result in malpractice. Bireuen Regency possesses significant

economic potential, especially in agriculture, marine, and tourism sectors, which can underpin the sustained

development of BUMDes. The institution's success is ultimately contingent upon sufficient administrative

competence, effective business plans, professional management, and enhancement of human resource quality.

The findings of this analysis affirm that the presence of BUMDes in Bireuen Regency is not simply an

administrative adjunct, but rather the principal catalyst for rural economic development. The disparity between

the quantity of villages and operational BUMDes indicates underlying structural issues that require urgent

attention, either by promoting the establishment of new BUMDes in villages lacking them or by revitalising

dormant BUMDes. Challenges in village financial management underscore the necessity for more transparency

and accountability in planning and supervision procedures to bolster public trust in the management of

community funds. While abundant local potential offers a robust basis, harnessing this potential is challenging

without competent management help. Consequently, the approach to enhance BUMDes must be executed in a

cohesive manner, encompassing supporting policies, transparent governance, optimal utilisation of local

resources, and the augmentation of human resource capability. This synergy will enable BUMDes to serve as a

catalyst for sustainable economic growth in villages while upholding the ideals of good governance at the local

level.

CONCLUSIONS

The administration of village funding in Bireuen Regency exhibits significant promise alongside intricate

obstacles. The economic potential, particularly in agriculture, marine, and tourist sectors, offers villages the

opportunity to establish viable companies through Village-Owned Enterprises (BUMDes). Data indicates that

while the quantity of BUMDes has consistently risen year, the disparity between the total number of villages and

the number of operational BUMDes remains significant. This condition signifies that the primary issue pertains

not merely to the number of BUMDes established, but also to the quality and sustainability of their management.

The optimisation of BUMDes in Bireuen serves a strategic function as a catalyst for the village economy,

yielding advantages such as enhanced village revenue, employment creation, and the fortification of community

economic autonomy. Nonetheless, significant issues persist, especially regarding village fund administration,

planning misaligned with requirements, inadequate transparency, and restricted human resource capabilities.

Consequently, the enhancement of BUMDes in Bireuen Regency necessitates the implementation of a cohesive

strategy encompassing the formulation of robust business strategies, capacity development via training and

mentorship, and transparent, responsible oversight. Active community engagement is essential for ensuring that

BUMDes operate effectively as collective companies that deliver equal advantages. By implementing these

measures, BUMDes in Bireuen can evolve into pivotal tools for attaining sustained rural community welfare and

exemplifying the implementation of good governance principles at the village level.

Research Implications

This study's results have significant ramifications for policy, village governance, community economics, and

academic research advancement. From a policy standpoint, it is essential to enhance rules and bolster local

government support to guarantee that each village in Bireuen Regency establishes and activates a Village-Owned

Enterprise (BUMDes) as a catalyst for the local economy. The Bireuen Regency Government and the Aceh

Provincial Government are anticipated to formulate incentive programmes, provide technical assistance, and

establish a robust monitoring system to ensure that the handling of village funds is transparent, responsible, and

adheres to the principles of good governance. These findings underscore the necessity for village governments

to utilise village funds effectively, prioritising key sectors such as agriculture—specifically rice, soybeans, and

corn—alongside fisheries and local products like banana chips. This should be achieved through the

implementation of professional management, robust business planning, and training for BUMDes administrators

to enhance the competitiveness and sustainability of village enterprises. The optimisation of BUMDes directly

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impacts the community's economy by generating employment opportunities, enhancing familial economic

resilience, and decreasing unemployment via the management of agricultural potential and the processing of

value-added local products. This research academically contributes by facilitating quantitative studies and field

research that evaluate the efficacy of BUMDes programmes, including their effects on community income,

employment rates, and the impact of social and cultural factors on the effective management of BUMDes in

Bireuen. This research substantiates that BUMDes-based village fund management serves not only as a tool for

economic development but also as a mechanism for community empowerment and enhancement of village

governance, enabling Bireuen District to evolve into a self-sufficient, competitive, and sustainable agricultural

and village economy hub.

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