LEGAL CERTAINTY AND GOVERNANCE CHALLENGES IN VILLAGE-OWNED ENTERPRISES (BUMDES): A SOCIO-LEGAL STUDY IN NORTH SUMATRA, INDONESIA

Abstract

This study examines how regulatory disharmony and weak accountability mechanisms shape the governance of Village-Owned Enterprises (Badan Usaha Milik Desa/BUMDes) in North Sumatra, Indonesia. Using a socio-legal (normative-empirical) approach, the paper combines doctrinal analysis of the Village Law and its implementing regulations with qualitative evidence reported in the dissertation’s field-based chapters. The findings show three recurring governance bottlenecks. First, transitional and overlapping rules create uncertainty about BUMDes’ legal personality and transaction authority, which affects contracting, licensing, and access to finance. Second, the operational separation of village assets and BUMDes assets remains fragile, increasing legal and fiscal risk when assets are pledged, recorded, or used without valid deliberative decisions. Third, accountability is weakened by overlapping roles between village governments and BUMDes management, administrative supervision that is not audit-oriented, and limited disclosure of performance indicators that balance social and commercial mandates. These constraints reduce organizational legitimacy and impede sustainable contributions to village original revenue (PADesa). The paper argues that governance reform should prioritize harmonized regulatory interpretation, auditable minimum standards for asset separation and reporting, and a clearer division of authority coupled with risk-based supervision.