Building Sustainable Village-Owned Enterprises: The Institutional Change of Microfinance in Banyuwangi Regency


of a government-driven program, namely involving the transformation of DBM (Dana Bergulir Masyarakat) into Village-Owned Enterprises (BUMDesa). This research will hopefully help in developing the best transformation model to enhance policy effectiveness and empower BUMDesa as the primary pillar in the spirit of partnership, by taking into account BUMDesa policy after the publication of the village law and its derivative regulations in the face of complex policy challenges. The Nawacita agenda, recognition-subsidiarity principle, and granting local autonomy at the village scale were the core principles of the preceding BUMDesa policy shift. BUMDesa’s current job is to change the government-centric agenda into practices that reflect the delegation of local power at the village scale, at both the village and rural area levels. Understanding the Berdesa tradition is essential for the broader policy agenda to promote village economic enterprises so that it is carried out in practice and still recognizes, respects, and elevates communities in Indonesia. Elinor Ostrom (1990) provides a thorough understanding of institutions in the management of common goods to achieve sustainability, and her work complements the conceptual framework developed by Douglass C. North and Bromley to understand the relationship between institutions and policies in the context of resource management. This study is guided by the theory of institutional change, and uses a qualitative approach with a case study design.

Keywords: institutiional transformation, village credit agency, microfinance institution

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