The Effect of the Village Fund Program and Community Economic Empowerment on the Level of Community Welfare of Digampong Mon Geudong in 2020-2025

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FORMOSA NEWS - Medan - How Community Economic Empowerment Outpaces Village Funds in Driving Local Welfare in Gampong Mon Geudong. Between 2020 and 2025, researchers Maharani Sa'adah, Yosie Gabriela Panjaitan, Lestari Sihite, and Nurmasyahyati from Universitas Senior Medan conducted a comprehensive study examining what truly drives community welfare in Gampong Mon Geudong. Published in 2026, the study evaluated the individual and combined impacts of the government's Village Fund Program and community economic empowerment initiatives on local residents. The findings reveal critical insights for policymakers, local administrators, and community leaders aiming to eradicate poverty and close development gaps between urban and rural regions, proving that financial aid alone is insufficient without targeted economic capability building.

Background and Context

Rural development remains a cornerstone policy for governments worldwide attempting to bridge economic disparities between cities and villages. In Indonesia, the Village Fund Program serves as a major financial decentralization tool designed to fund local governance, infrastructure, and community empowerment. However, questions frequently arise regarding how effectively these funds translate into tangible improvements in citizens' daily lives, particularly concerning household income, health services, educational attainment, and housing conditions. Understanding whether physical infrastructure investments or direct financial assistance genuinely elevate community welfare is essential for optimizing future public spending and regional policy design.

Research Methodology
The study adopted a quantitative associative causal design to analyze the relationships between the research variables. Utilizing a total sampling method, the researchers engaged all 56 residents who received Direct Cash Assistance (BLT) from the village funds in Gampong Mon Geudong, located in Banda Sakti District, Lhokseumawe City. Data collection relied on primary surveys using a five-point Likert scale questionnaire, supported by interviews with local officials and secondary village records. The gathered data underwent rigorous validity and reliability testing, followed by classical assumption checks for normality, multicollinearity, and heteroskedasticity before being analyzed using multiple linear regression via IBM SPSS Statistics 26.

Key Findings
The statistical analysis unveiled striking contrasts between the two independent variables:

• Village Fund Program Impact: Partially, the Village Fund Program did not have a statistically significant direct effect on community welfare, with a calculated t-value of 1.165 and a significance level of 0.249. This demonstrates that standalone fund disbursements without structural alignment fail to generate direct welfare improvements.
  
• Economic Empowerment Impact: Conversely, community economic empowerment showed a powerful, positive, and statistically significant effect on local welfare, registering a t-value of 5.250 and a significance level of 0.000. Targeted training, business mentoring, and capital access directly boost household productivity and earnings.
  
• Combined Effect: When integrated, the Village Fund Program and economic empowerment simultaneously produced a major positive influence on community welfare, evidenced by an F-value of 42.180 and an R-squared value of 0.614. Together, these variables account for 61.4% of the total variation in local community welfare.
  

Real-World Implications and Industry Impact
These findings carry profound implications for local governments, policymakers, and village administrators across developing regions. The results demonstrate that village development budgets must shift from a purely physical infrastructure focus toward integrated economic empowerment programs. By combining fund management with continuous skills training, business mentoring, and targeted capital access, authorities can equip residents to independently cultivate sustainable income sources. Furthermore, active community participation in planning and execution ensures that public funds are accurately targeted and effectively managed to elevate living standards in education, housing, and health.

Author Profile
Maharani Sa'adah, B.A. in Economics, M.A. in Social Sciences. Affiliation: Senior University of Medan. Area of Expertise: Development Economics and Public Policy
Yosie Gabriela Panjaitan, B.A. in Economics, M.A. in Accounting. Affiliation: Senior University of Medan. Area of Expertise: Public Sector Accounting and Village Finance
Lestari Sihite, S.Sos., M.I.P. Affiliation: Universitas Senior Medan Area of Expertise: Public Administration and Community Empowerment
Nurmasyahyati, S.Stat., M.Si. Affiliation: Universitas Senior Medan Area of Expertise: Applied Statistics and Quantitative Analysis.

Source
Maharani Sa'adah, Yosie Gabriela Panjaitan, Lestari Sihite, Nurmasyahyati. The Effect of the Village Fund Program and Community Economic Empowerment on the Level of Community Welfare of Digampong Mon Geudong in 2020-2025. Formosa Journal of Applied Sciences (FJAS), Vol. 5, No. 9, 2026 (Halaman 2091–2106).
DOI: https://doi.org/10.55927/fjas.v5i9.124
URL Resmi Jurnal: https://journalfjas.my.id/index.php/fjas.