Village Law, which was promulgated in 2015, has brought Indonesia’s decentralisation further to village level. It aims to empower 75 thousand villages across the Indonesian archipelago in improving the well-being of their communities. This involves a new fiscal transfer called Village Funds or Dana Desa that is being transferred directly to the village amounting averagely 600 million - 1.5 billion rupiah/year, making up a total of 60 trillion rupiah/year nationally.
Five years since its enactment, the impact of Village Funds on development outcomes remain to be seen. Rural poverty remains quite high despite some improvements, and disparity of basic conditions across the villages is still an issue with more than half (of the villages) is categorised as poor and lagged behind.
The brief synthesize key constraints at policy and operational levels, based on the evidence and learning from the last 5 years of Village Law implementation.