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Village Law and Community Empowerment

Reducing poverty and inequality in a country as large and diverse as Indonesia requires enabling communities, villages, service providers and governments to identify and implement local solutions to these problems. Village governments and communities are key stakeholders in most national development objectives. For more than 15 years, the World Bank has partnered with the Government of Indonesia on large-scale community and village development initiatives designed to reduce poverty by empowering communities to play a central role in improving local services and livelihoods.

This partnership has seen three phases:

  1. The Kecamatan Development Program (KDP) 1998-2002 supported approximately 20,000 villages to introduce community-driven approaches to plan, budget, implement, and monitor local infrastructure projects. KDP provided block grants, capacity building through trained facilitators, and an M&E system to participating communities.
  2. The National Community Empowerment Program (PNPM Mandiri) 2007-2014 scaled up these community-driven methodologies to reach over 65,000 villages.
  3. The Village Law, enacted in 2014, incorporated principles and practices from KDP and PNPM into village government and governance.

The Village Law phase marks a major shift in Indonesia’s ongoing decentralization. It provides increased authority and financing (more than $7 billion annually) to villages, and seeks to integrate community-driven approaches (that were largely conducted outside of village governments) into village governance and development processes. It also marks a major shift in Bank support-away from design and implementation of large scale community-driven development projects (KDP/PNPM)-toward a new focus on integrating good practices from CDD into the policies, systems, and capabilities that enable village government and service delivery.

The World Bank supports Village Law implementation through two channels:

  1. Operational support under the Village Innovation Program (restructured from an earlier $650 million loan supporting the former PNPM program), and;
  2. Analytical and technical support under the Village Law Programmatic Advisory Services and Analytics (PASA).

The Village Innovation Program supports the Ministry of Villages to provide innovation grants, technical service providers, and innovation teams to improve use of Village Law funding.

The Village Law PASA supports the Government’s efforts to ensure accountable village governance and participatory village development through four pillars:

  1. Resource mobilization, allocations and flows;
  2. Village development governance, accountability and capacity;
  3. Community empowerment and inclusion; and
  4. Monitoring, evaluation and thematic studies.


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