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The implementation of Good Corporate Governance (GCG) significantly improves the institutional capacity of Village-Owned Enterprises (BUMDes) in Cigombong Subdistrict, Bogor Regency. This finding comes from a 2026 study by Herli Andani, Muhamad Husein Maruapey, and Cecep Wahyudin from Djuanda University, Indonesia, published in the International Journal of Applied Research and Sustainable Sciences (IJARSS). The research highlights how governance quality directly affects the ability of BUMDes to operate effectively and sustainably, making it highly relevant for rural economic development in Indonesia.
Village-Owned Enterprises (BUMDes) are a key instrument in Indonesia’s strategy to strengthen rural economies. These institutions are designed to manage local resources, generate village income, and improve community welfare. However, many BUMDes across Indonesia remain underperforming due to weak management systems, limited human resource capacity, and poor organizational governance.
Bogor Regency reflects this broader national challenge. Despite establishing 416 BUMDes across 40 subdistricts, not all are active or functioning effectively. In Cigombong Subdistrict, the situation is more critical: out of nine BUMDes, only two are active, while the remaining seven are inactive or underperforming. This condition highlights the urgent need to strengthen institutional capacity at the village level.
The study conducted by Herli Andani and colleagues from Djuanda University focuses on how governance practices influence institutional performance. The researchers used a quantitative approach involving 74 respondents, including BUMDes managers and business partners. Data was collected through structured questionnaires and analyzed using statistical methods to examine the relationship between governance practices and institutional capacity.
The results clearly show that Good Corporate Governance has a strong and positive effect on BUMDes institutional capacity.
Key findings include:
- Positive and significant relationship
The regression analysis shows that each increase in GCG implementation improves institutional capacity by 0.474 points. This indicates a direct and measurable relationship between governance quality and organizational strength.
- High explanatory powerGCG accounts for 69.8% of the variation in institutional capacity, as shown in the determination coefficient results on page 8. The remaining 30.2% is influenced by other factors such as human resources, community participation, and government support.
- Statistically significant resultsThe t-test results show a value of 12.998, far exceeding the critical threshold of 1.993, with a significance level below 0.001. This confirms that the impact of GCG is not due to chance but reflects a real and consistent effect.
- Improved organizational performanceBetter governance leads to clearer organizational structures, improved accountability, more transparent financial management, and more effective decision-making processes.
The regression table on page 7 illustrates this relationship through the equation Y = 10.364 + 0.474X, showing that institutional capacity increases in line with improvements in governance practices.
According to Herli Andani from Djuanda University, the findings demonstrate that governance is not merely an administrative requirement but a strategic factor in institutional development. She explains that stronger implementation of GCG principles—such as transparency, accountability, responsibility, independence, and fairness—directly enhances the ability of BUMDes to manage resources and deliver economic benefits.
The implications of this research are significant for multiple stakeholders.
For policymakers, the study provides empirical evidence that strengthening governance frameworks can improve the effectiveness of village economic institutions. This insight supports ongoing efforts to reform rural development policies and enhance institutional performance.
For village governments, the findings emphasize the importance of establishing clear regulations, providing continuous supervision, and facilitating training programs for BUMDes managers. Strong governance structures can help ensure that BUMDes operate professionally and sustainably.
For BUMDes managers, adopting Good Corporate Governance principles can improve operational efficiency, increase transparency, and build trust among stakeholders. This is crucial for attracting partnerships and expanding business opportunities.
For local communities, well-managed BUMDes can generate higher village income, create jobs, and support inclusive economic growth. The study confirms that governance improvements at the institutional level can translate into tangible benefits for society.
However, the research also notes that governance alone is not sufficient. While GCG explains a large portion of institutional capacity, other factors such as human resource competence, leadership quality, and community participation also play important roles. Addressing these factors is essential for achieving long-term sustainability.
The study recommends several practical steps to enhance BUMDes performance. These include strengthening transparency in financial reporting, improving accountability mechanisms, clarifying roles and responsibilities within organizations, and enhancing internal control systems. Increased collaboration between village governments, communities, and external partners is also seen as critical.
This research reinforces the idea that effective governance is the foundation of strong institutions. By implementing Good Corporate Governance consistently, Village-Owned Enterprises in regions like Cigombong can transform into sustainable engines of rural economic growth.
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