Village Fund Spending

Poverty and Inequality Analysis
Monitoring, Evaluation and Learning
Policy Research

We begin this edition with the results of SMERU and LSP-WB‘s monitoring of the Village Fund (VF) and Village Fund Allocation (ADD) spending. Since 2015, SMERU carried out a three-year monitoring of ten villages in Sumatra, Java, and Nusa Tenggara. This is considered important because in 2016 the government disbursed 47 trilion rupiahs of VF, and two years later the figure rose almost 1.5-fold. In addition, the amount of ADD continued to increase.

So far, the use of VF and ADD has been focused on physical development. However, the people have not felt any impact on their income. The reason for this is that much of the funds were spent outside the village. Meanwhile, the amount of funds spent on empowerment tends to be small due to the difficulty of distributing it equally. The policy of fair distribution has rendered the marginalized community untouched. 

At the end of 2016, SMERU, with the support of KOMPAK and National Development Planning Agency (Bappenas), did a study on Sustainable Livelihood (P2B). The study was carried out in ten villages/kelurahan across Java, Sulawesi, and Nusa Tenggara. P2B aimed to reduce poverty through a pentagonal asset approach, comprising human resource, social, financial/economic, natural, and physical infrastructure assets. In many villages/kelurahan kelurahan, the pentagonal assets is sufficients to maintain welfare,  but not to improve it. In this respect, the government holds a key role in increasing

SMERU also analyzed poverty reduction by using the 1997 Indonesia Family Life Survey (Sakerti) as the baseline. Our researchers used the multinomial logit model estimation on the 2007–2014 data set to see the important factors related to the probability of rural workers leaving the agricultural sector. The result shows that poverty in the village has declined, yet the economic gap between the city and the village widened. The cause for the widening gap was that the majority of the rural poor worked in the agricultural sector. Another dinding points out that the proportion of poor community in agriculture did not change. According to the authors, the key to tackling this issue is education and agricultural mechanization.

The optimism of a village head for improved welfare through the implementation of the Village Law ends this edition. In the past, he wrote, the village was just a target location for programs from the upper level and often the programs did not suit the needs of the village. Now, the village has been given the authority and budget, serving as the village’s capital as well as the power for its development. In order for the authority to make any impact on welfare, the village head suggested, among others, that the village should set up a database, create a larger room for participation, and establish cooperation with various stakeholders.

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Asep Suryahadi
Widjajanti Isdijoso
Syaikhu Usman
Nuning Akhmadi
Nina Toyamah
M. Sulton Mawardi
Palmira Permata Bachtiar
Joseph Natanael Marshan
Liza Hadiz
Gunardi Handoko
Village Law
Village Funds
Structural transformation
Publication Type 
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