Impacts of Village Funds Share on Village Development Index in Bogor Regency, Indonesia

Abstract

Law Number 6 of 2014 concerning villages has positioned them as spearhead of development and improvement of community welfare. Village funds are allocated in the APBN to improve welfare and villages are given adequate authority and funding sources so that they can manage their potentials to reach such welfare whose indicators are described by Indeks Desa Membangun (IDM) or Village Development Index. This research aims to identify the impacts of village fund portion on such index in Bogor Regency. Using data panel approach, data series from 2017-2020, and cross-section, 416 villages are identified in the district. The estimation method used a fixed effect model and the estimation results show that village fund and village fund allocation have a significant positive effect on the development of village index; however, village fund allocations have greater impacts than village fund. Meanwhile, in regards to financial assistance, although it has a positive impact on the IDM in the district, it is not statistically significant. Currently, there are four villages with underdeveloped status, implying that the village development that has been carried out so far has not met expectation, therefore a development acceleration is needed by increasing village fund allocation. In parallel, provincial and district financial assistance are still needed to accelerate the status of the underdeveloped villages to become developed ones. Keywords: IDM, village fund, village fund allocation, financial assistance