The Role of Village Fund Financing for Infrastructure Development on Regional Economic Growth
1 Pages Posted: 16 Apr 2021
Date Written: March 9, 2021
In 2015 the Indonesian Government introduced a program to implement a Social Safety Net the “Village Fund” (Dana Desa) to improve village life and build infrastructure. With the arrival of the Covid19 virus in 2020, the Indonesian Government chose to use this program to distribute funds to the Villages for distribution to individual citizens or implement social programs in the belief that it had been successful in the past and would be a suitable program for the distribution of Covid-19 funds. The purpose of this paper is to review the effectiveness of this original program. This paper will review the available data from 2011 until 2018 with the intention of validating the value of the program and producing a measured outcome. The data on regional economic growth will be assed and compared in two periods, 2011 until 2014 and 2015 until 2018 with the intention identifying the programs contribution to regional development. The influence will be measured using a range of development activities financed from village funds, health infrastructure, education, clean water and housing sanitation. The secondary data source is an unbalanced panel of 514 Indonesian districts, with testing was carried out using a random effect model. The authors found that the village funds that were provided since 2015 drove the regional income growth by 27.7% greater than before the program’s implementation. The independent variable used in the model demonstrated a variation of the dependent variable by 53.3%. This research provides a scientific basis for policies to overcome the effects of Covid-19 through a village fund program. The limitation in this research is that the data in each district was not completely available at the time of publication.
Keywords: growth, infrastructure, policy, village fund
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