VILLAGE INSTITUTIONS, GOVERNANCE, AND BUMDES: DRIVERS OF RURAL ECONOMIC DEVELOPMENT

Abstract

This study addresses the persistent challenges of rural economic development in Pejengkolan Village, Padureso District, Kebumen Regency, particularly the limited effectiveness of village institutions, participatory governance, and Village-Owned Enterprises (BUMDes) in improving community welfare and local economic productivity. The study aims to analyze the influence of village institutions, village governance, and the role of BUMDes on rural economic development. The research employed a quantitative explanatory approach using Structural Equation Modeling-Partial Least Squares (SEM-PLS). Data were collected from 194 respondents consisting of village officials, BUMDes administrators, MSME actors, community leaders, and local residents selected through purposive sampling. The findings indicate that village institutions, village governance, and the role of BUMDes positively and significantly affect rural economic development. Village governance emerged as the most dominant variable influencing local economic development. The study contributes to the development of institutional economics and participatory governance perspectives in rural economic development by emphasizing the importance of institutional capacity, local governance quality, and community-based economic institutions in promoting sustainable rural transformation.