LEGAL RECONSTRUCTION OF VILLAGE FUNDS IN REALIZING THE ECONOMIC DEVELOPMENT OF INDONESIAN MSMES

Abstract

Micro, Small, and Medium Enterprises (MSMEs) have significant potential to become the primary driver of economic transformation from the perspective of village economic development. To support this need, clear and measurable regulations are required to direct Village Funds so that their utilization is appropriately targeted. Although Village Funds have great potential as an instrument to promote village economic growth and MSME empowerment, their implementation still faces various obstacles, such as unintegrated regulations, low capacity of village officials, and weak supervision and accountability in budget utilization. The purpose of this research is to examine the conditions, weaknesses, and formulate legal reconstruction of Village Fund management regulations in supporting the economic development of MSMEs in Indonesia. This research employs a constructivism paradigm with descriptive-analytical research specifications and qualitative research design. The data types include primary data, secondary data, and tertiary data. Data collection methods encompass literature study, interviews, and observation, which are then analyzed using a qualitative analysis approach.Research findings indicate that the legal regulatory framework governing the management of village funds for the development of the MSME economy in Indonesia is currently based on Law Number 6 of 2014, as amended by Law Number 3 of 2024, along with its derivative regulations such as Ministerial Regulation of the Village, Development of Disadvantaged Regions, and Transmigration (Permendesa PDTT) Number 7 of 2023. In practice, however, a larger portion of the funds is allocated to physical infrastructure development, while productive sectors like MSMEs receive less attention. Program planning often remains a mere formality. The weaknesses in the regulation of Village Fund management in supporting MSME economic development in Indonesia include both technical and substantive aspects. The absence of specific regulations on systematic MSME development has led to uncoordinated program implementation. Legal reconstruction of Article 26 paragraph (3), Article 34A paragraph (4), Article 39, Article 72, Article 87A paragraph (3), and Article 118 of Village Law is expected to optimize efforts toward achieving MSME-based economic development