Proceedings of the 2nd Aceh Global Conference on Business Economic and Sustainable Development Trends (AGC-BEST) 2019, October 17-18, 2019, Banda Aceh, Indonesia The Contribution of Village Owned Enterprises in Improving Rural Economy in Nagan Raya Regency 1*Wahyuddin, 2 Ar Royyan Ramly, 3 Muslim A. Djalil, and 4 Mirna Indriani 1Lecturer of Islamic Banking Department, Faculty of Islamic Studies, Universitas Serambi Mekkah, Indonesia; 2Lecturer of Islamic Banking Department, Faculty of Islamic Studies, Universitas Serambi Mekkah, Indonesia; 3Senior Lecturer of Islamic Economic Department, Faculty of Economics and Business, Universitas Syiah Kuala, Indonesia; 4Senior Lecturer of Accounting Department, Faculty of Economics and Business, Universitas Syiah Kuala, Indonesia; *Corresponding author: [email protected] Abstract - This study aims to analyze the influence of the contribution of Village-Owned Enterprises (BUMDes) in Improving the Economy and welfare of rural communities in Nagan Raya district. Nagan Raya, with a wealth of potential villages, owned such as agriculture, plantations, animal husbandry, and small industries. However, the management of BUMDes in Nagan Raya Regency has not been maximized. The research sample in ten sub-districts in Nagan Raya that has a Village-Owned Enterprises (BUMDes) is selected BUMDes that are already running or active in each district. The research sample locations were taken by Gampong Langkak, Gampong Purworejo, Gampong Cot Kumbang, Gampong Alue Peusaja, Gampong Alue Gajah, Gampong Krueng Itam, Gampong Garu, And Gampong Simpang Peut. This study uses a quantitative approach and uses descriptive statistical estimates, to the contribution of BUMDes to economic improvement in Nagan Raya district. The dependent variable used is the Village Growth Percentage (Y), while the independent variable used is Social Capital (X1), Regional Potential (X2), Human Resources (X3). The results showed the influence of the three Social Capital Variables (Log_X1), and Regional potential (Log_X2) influencing the contribution of BUMDes in improving the economy in the village. While Human Resources (Log_X3) does not significantly influence the contribution of BUMDes in improving the economy in Kabupaten Nagan Raya. From the F test results obtained F-count = 3.648 with p-value = 0.026 <0.05 so it can be concluded that H1 is accepted. Keywords - Village Owned Enterprises (BUMDES), Village Economy Improvement, 1. INTRODUCTION Research on the Empowerment of the village economy has been researched by Natsuda (2012) and Park, A & Wang, (2010), explaining that to improve the village economy, the business must be done based on the village's potential. Specifically, Hackett (2015), Akella & Eid (2018), Wiagustini (2015), Galera & Borzaga (2009), and MacDonald & Howorth (2018), stated that the concept of social enterprise became a social mission for those doing business both in cities and in cities village. One form of social undertaking is to make donations (charity) to the poor and weak groups. To fulfill the basic needs of the poor, this will be realized with the support of adequate readiness of HR management managers of BMUDes (Chintary & Lestari, 2016), while Wiagustini's research (2015), analyzes the factors that influence village credit institutions (LPD) towards BUMDes, that the cooperative attitude of the village community is one of the factors that must exist in running the BUMDes. As one of the sample districts in this study is Nagan Raya Regency. Nagan Raya, with a wealth of potential villages, owned such as agriculture, plantations, animal husbandry, and small industries. However, the management of BUMDes in the Nagan Raya Regency has not been maximized (Ramly & Mursyida, 2018). The main cause is the uneven mapping of local potential, only a part of the area that looks potential to obtain empowerment from the economic sector both from local and provincial governments. This is also reinforced by the weak cultural conditions for the management of village fund management, lack of adequate Human Resources (HR), lack of village management skills, lack of business assistance, very little access to capital, not supported by good facilities, as well as community behavior which is less participatory in the village. So that the chain of poverty of the community is never complete and very far from the word prosperous, as evidenced by the 2016 poverty rate of 30,310 people or 19.25% and increased in 2017 by 30,060 people or 19.34% (BPS, 2018). To answer this problem, it is important and urgent to conduct scientific research on empowering Sharia-based BUMDes and local potential to realize an independent village through maximizing the village's potential. In the interest of improving the village economy and community welfare, the BUMDes must be maximized in full, based on the author's observation, it should be that the BUMDes in the Nagan Raya sub-district are evaluated and studied academically as a reflection of the effects of an increase in the village economy. 2. LITERATURE REVIEW In general, village-owned enterprises (BUMDES) have two functions, namely; first the commercial function and social function. The BUMDes commercial function, in this case, can support village economic activities such as businesses owned by BUMDes units, village markets, shop houses, mineral water refill, village cooperatives, renting, trading and broking. Then the social function, BUMDes not only see business interests but also pay attention to the potential and ability of human resources to have a capable capacity in managing the potential of the village. 47 Wahyuddin, Ar Royyan Ramly, Muslim A. Djalil, Mirna Indriani According to Prasetyo (2016), researching the role of BUMDes in community development and empowerment by using quantitative descriptive analysis. The indicators used are community participation, patterns of utilization of village funds, and the contribution of BUMDes to the community. The results obtained indicate that community participation in BUMDes activities is still lacking because community knowledge of the BUMDes program is still small. Related to the pattern of more utilization in the physical development of the village while the contribution to community empowerment is still not optimal due to several obstacles, especially the BUMDes budget. In implementing BUMDes, it has been mentioned above that the role of BUMDes is as an economic and social business. The role of the economy, of course, can improve the welfare of rural communities through businesses managed by the BUMDes and its contribution to the PADes. While the social role can be seen from how the BUMDes will be able to empower the community, increase interaction and solidarity that has begun to be fostered so far through BUMDes activities that are managed collectively (Prasetyo, 2016). According to Ihsan (2018), BUMDes is a business entity whose entire or most of the capital is owned by the village through direct participation from village assets that are separated to manage assets, services, and other businesses to improve the welfare of the village community. Establishment of BUMDes aims to improve the village economy, optimize village assets to benefit the welfare of the village, improve community efforts in managing the economic potential of the village, develop business cooperation plans between villages and/or with third parties, create opportunities and market networks that support public service needs residents, opening up employment opportunities, increasing the welfare of the community through improving public services, growth and equitable distribution of the village economy and increasing the income of the village community and the original income of the village. (Ihsan, 2018). Then research Kehik, & Mael (2017). Analysis of the village fund program in improving the community's economy. There are several indicators compiled according to utilization for the needs of rural communities, namely, Conformity between programs and needs; Budgeting accuracy; Accuracy of planning; Adequacy of funds; Program alignment; and clarity of responsibility. Then the results obtained from this study indicate that the management of village funds has been carried out by taking into account the appropriateness of the program with community needs. To ensure the entire set of community activity programs in ADD management, good and appropriate financial management within the budget has been set. This is done with the consideration that the funds that have been prepared in connection with activities that are urgent in the life of the community are carried out following the available budget lines taking into account and taking into account that the activities carried out guarantee the interests and welfare of the community. Alignment of the program of activities carried out using the overall development activities that must be directed at the interests and needs of the community so that the results of the development carried out are not redundant and in the end, the community gives a positive response to the series of development activities carried out. Accountability is carried out systematically based on the whole existing program, thus automatically opening a positive nuance of openness or transparency. Then Mutolib, Nikmatullah & Effendi (2019). Examining the analysis of the contribution of the Village Fund in the development of BUMDes using in-depth interviews with village officials and BUMDes managers and field observations. The results of this study indicate