Strengthening BUM Desa: From Legal Entity to Measurable Results

Most villages in Indonesia now have a BUM Desa, a village owned enterprise that runs businesses and services for the village. Villages have invested heavily in these enterprises, yet their contribution to village revenue is still small

This article explains what a BUM Desa is under PP 11/2021, how it becomes a legal entity, where it struggles, and how villages, village facilitators (pendamping desa) and partners can strengthen it and measure its results

What Is a BUM Desa?

Government Regulation (PP) 11/2021 defines a BUM Desa as a legal entity established by a village, or by several villages together, to manage businesses, use assets, develop investment and productivity, and provide services for the welfare of villagers. A BUM Desa bersama is set up by two or more villages that share potential, business activities or proximity. The founding villages must own all or most of the capital, and the enterprise may run economic activities, public services or both

The Village Law (UU 6/2014) first called it a business entity funded from separated village wealth. The Job Creation Law (UU 11/2020) made it a legal entity able to form business units, provisions carried over into UU 6/2023 on Job Creation. A second amendment, UU 3/2024, adds that it is managed professionally to earn profit for community welfare and may cooperate with BUMN, regional government enterprises, private companies and cooperatives

The Village Law and PP 11/2021 use the abbreviation BUM Desa. The older BUMDes, from a 2010 regulation of the Ministry of Home Affairs, is still common and means the same thing

How a BUM Desa Is Set Up and Governed

A BUM Desa is founded through the Musyawarah Desa, a forum of the village council (BPD), village government and community, and set by a Peraturan Desa (village regulation) that includes the articles of association and the capital. A BUM Desa bersama uses a joint forum and a joint regulation of the village heads. The enterprise is separate from the village government, with four organs:

• Musyawarah Desa: the highest authority, which approves capital, the work plan and larger loans, decides profit sharing and accepts the annual report
• Penasihat (advisor): the village head by virtue of office
• Pelaksana operasional (operational manager): the director who runs the business for a five year term
• Pengawas (supervisor): oversees management and examines the books

Capital comes from the village budget (APB Desa), from villagers and local institutions, and from retained profit. The village's share of profit becomes village revenue, and the Musyawarah Desa sets its priority uses

From Village Decision to Legal Entity

A BUM Desa becomes a legal entity when it receives an electronic registration certificate. Permendesa PDTT 3/2021 and Permenkumham 40/2021 set the steps, which run online through the Sistem Informasi Desa (SID):

1. Register the Name in SID
2. Musyawarah Desa Decides
3. Issue the Peraturan Desa
4. Register Within 20 Working Days
5. Ministry of Villages Verifies
6. Ministry of Law Issues Certificate

The name must begin with “BUM Desa” and end with the village name. Registration needs the minutes of the Musyawarah Desa, the Peraturan Desa, the bylaws and the work plan, and the certificate now comes from the Ministry of Law, formed in November 2024

Ministry data cited by the government auditor BPKP counted 65,941 BUM Desa in June 2024, of which 18,850 had legal entity status. By 28 August 2026 the Ministry of Villages counted 48,898 BUM Desa and BUM Desa bersama with that status

BUM Desa and Koperasi Desa Merah Putih

Inpres 9/2025 of March 2025 speeds up the formation of 80,000 Koperasi Desa/Kelurahan Merah Putih, cooperatives in villages and urban wards. The government says they will not overlap with BUM Desa and plans more business partnerships between the two. Villages should still agree which businesses each one runs

Common Challenges for BUM Desa

A study of all Indonesian villages from 2018 to 2020 found higher average Village Development Index scores where a BUM Desa existed, but legal status is only a start. Five areas need attention:

• Governance and accountability: the enterprise is separate from the village government, yet the village head is its advisor. Without clear approval limits and a real annual review, decisions can drift back to the village office
• Choosing viable businesses: in October 2024 BPKP said 24.2% of about 66,000 BUM Desa were inactive, set up and given village capital but not operating. It named limited capital, low productivity, poor access to markets and weak commitment among the reasons BUM Desa grow slowly
• Dependence on village funds: Pendapatan Asli Desa, the village's own source revenue, was only 2.47% of village revenue in 2023 (BPS data). The ministry records about Rp55.6 trillion of village capital in BUM Desa by the end of 2023 and calls their contribution to that revenue, about Rp128 billion, very small
• Bookkeeping and reporting: PP 11/2021 requires reports every six months and every year, and Kepmendesa PDTT 136/2022 sets five financial statements on an accrual basis, a big step for an enterprise that keeps only a cash book
• Skills and continuity: directors and supervisors serve five year terms, renewable at most twice, with succession as one consideration. When knowledge sits with one person, a change of director can stall the business

How to Measure BUM Desa Results

Measuring results needs a baseline, a few numbers recorded the same way every month, and the habit of reporting them. Before a new business unit or partner program starts, record revenue, costs, assets, workers and people served, then track a few indicators:

Report these figures every six months to the advisor and supervisor, and every year to the Musyawarah Desa, which must meet within six months after the financial year and whose results must be made public. The yearly ranking by the Ministry of Villages and its strategic plan use similar measures, including the share of BUM Desa profit in Pendapatan Asli Desa. To value social benefits in money terms, see what SROI is

Strengthening BUM Desa in Practice

Plan From Village Assets and Needs

PP 11/2021 asks villages to base a BUM Desa on community needs, business feasibility and a clear business model. Before approving capital, ask who will buy, at what price and cost, and which village assets give an advantage. A public service such as clean water can justify modest profit if the Musyawarah Desa agrees openly

Put Governance and Bookkeeping in Order

Set approval limits for loans and contracts, keep the money in the enterprise's own bank account, and keep monthly books in the Kepmendesa PDTT 136/2022 format, checked by the supervisor or an independent auditor. Orderly accounts also open doors: a BUM Desa may borrow only after at least two consecutive years of healthy financial statements

Build Skills That Stay

Tie training to the job: a treasurer practices on real transactions, and a director learns to prepare a work plan and budget. Write procedures down and train a second person for each key task. PP 16/2026 lists BUM Desa development among the tasks of village facilitators. Then check whether practice changed (see measuring training results)

Partner With Companies and Donors on Fair Terms

PP 11/2021 lets a BUM Desa work with companies, for example through CSR or TJSL programs, on business, technology transfer and capacity building, and accept grants without binding conditions. Fair terms mean decisions through the BUM Desa's own organs, no village assets pledged as collateral (the regulation forbids it), funding for skills as well as equipment, and indicators with a baseline agreed at the start

Conclusion

A BUM Desa is now a legal entity with real duties. Its results depend on a business that fits the village, books that can be audited, managers who can be replaced, and a few indicators reported openly against a baseline

SIDIA's Rural Development and Training & Skills Development program areas work with communities, local government and private sector partners on rural livelihoods, local institutions and competency based training, and Sumaidi, a member of SIDIA's Board of Supervisors, has led a BUM Desa