7 Chapter I Introduction Background Rapid urbanization will be one of the key megatrends that will imply the life of rural people (Chu et al., 2023; PWC, 2022). Many villagers will depart from their rural areas to search for better opportunities in big cities. Urbanization events occur in almost all regions of the world. Indonesia has experienced an increase in the proportion of urban population since the 1997 census, which was only 30.9 percent to 53.12 percent in the 2015 census (Hadijah et al., 2020). On the other region, Croatia experience obvious threats of depopulation in major rural communities (Detelj et al., 2018). Advanced countries such as the United States of America also had 2,9% of rural population growth compared to 9,1% of the entire USA population growth because of the migration of younger people and more educated residents from their village (Mayer et al., 2017). The depopulation process, fragile economic, and financial distress became dread combination to the rural presence (Vuković et al., 2018; Yoshida et al., 2018). Urbanization from rural areas to urban areas was stimulated dominantly by the prospect of better income (Liu, 2011). Unfortunately, most of the rural people who migrate to bigger cities were young people (Dewees et al., 2003; Liu, 2011; López et al., 2019; Rustiadi & Nasution, 2017). This young people migration indirectly affects the availability of human capital in rural areas, because they migrated out to cities (Mayer et al., 2017) and created a backwash effect which allows local resources flow out from rural to urban areas (Rustiadi & Nasution, 2017). The shortage of young people in depopulated rural areas will bring negative impacts to the local economic developments (López et al., 2019; Vuković et al., 2018; Wouterse, 2016). In developing countries, the urbanization created worsen atmosphere in rural areas due to prior problems such as unemployment, poverty, low productivity, individualism, and social conflict (Hosseinzade et al., 2018b). Urbanization is not the only problem for rural areas. The vulnerability of farmers because of monotonous agriculture and less community cohesion will contribute to the rural suffer (Byg & Herslund, 2016; Pesci et al., 2023). Farmers who dominated 8 most of the employment in rural areas especially in developing country are still subsistence farmers (Cieslik & D’Aoust, 2018). It caused them to be more in pain because they are risk-averse and avoid to seek new opportunities and technology in the area (Cieslik & D’Aoust, 2018). On the other hand, most farmers, especially in developing countries, are labor farmers who did not own the land by themselves (Nurlaela et al., 2023). Rural areas also have barriers in access for developments such as limited access to market, opportunity for networking and modern technology (Fuller-love et al., 2006; Lyne et al., 2018). Problems of market accessibility also impacted rural areas in Northern Ghana that restrict their effort to achieve competitiveness through economies of scale (Asitik et al., 2016). Barriers also attributed to the minimum support of funding and knowledge of agricultural technology (Afrin et al., 2010). Due to those barriers, it is understandable that competitiveness and performance of rural ventures are lower than urban entrepreneurs (L. Pato & Teixeira, 2018; Yu & Artz, 2018) and less participation of rural community into globalization phenomenon (Akinbami & Momodu, 2013). Challenges in access tend to push rural ventures to have limitations in the trained worker, sufficient funding, and infrastructure so that they are having difficulties in promoting rural growth (Yu & Artz, 2018). The global challenge to the existence of rural community has also become a concern of the government of the Republic of Indonesia since 2014. Since then, rural areas have become headlines in the discourse of Indonesia's economic development. The Indonesian government produced numbers of rules and policies to support village growth and started with the issuance of Rural Act Number 6 of 2014 (UU Desa, 2014). The enactment of the Rural Act 6/2014 has the impact of providing communities more power over regional management, planning, budgeting, and the execution of village development based on the principles of recognition and subsidiarity. The rural position is even more substantial because it is one of the key phrases in the 2020–2024 RPJMN, which focuses on developing a strong economic foundation, a competitive edge for the region, and quality human resources for an Indonesia that is aimed to be independent, developed, equal, and prosperous. Furthermore, The State Ministry for the Development of Disadvantaged Areas' 9 name has been amended to the Ministry of Villages, Development of Disadvantaged Regions, and Transmigration as part of efforts to increase the focus on rural management (hereinafter referred as the Kemendes PDTT). This demonstrates the importance of the rural in the growth of the Indonesian economy. Indonesia has 84,096 villages from Nanggroe Aceh Darussalam Province to Papua Province that consists of 75,584 villages (desa), 8,444 villages (kelurahan), and 51 Transmigration Housing Units. Central Java has the most villages with 8.559 villages (desa and kelurahan), followed by East Java with 8.496 villages (desa and kelurahan), and Nanggroe Aceh Darussalam with 6,508 villages (desa only). Referring to the Development Village Index (Indeks Desa Membangun) initiated by the Kemendes PDTT, in 2022 there was 6,238 independent villages, 20,249 developed villages, 33,902 developing villages, 9,584 underdeveloped villages, and 4,982 very underdeveloped villages. The indicators in the index consist of aspects, namely social, economic, and ecological indicators. This index is used by the Kemendes-PDTT to map the development status of villages based on their characteristics in order to provide pertinent interventions. Furthermore, the government has promoted efforts to improve villages through the establishment of village-owned enterprise through the Rural Act 6/2014 in consideration of the number of communities that still suffer development issues (hereinafter VOE is referred as Bumdes). The Bumdes nomenclature actually already exists in the Regional Government Act Number 32 of 2004 (UU Pemerintah Daerah), but the Rural Act 6/2014 provides a more comprehensive existence for the Bumdes institution. In fact, in 2020, the government issued the Job Creation Act number 11 of 2020 (UU Cipta Kerja) which emphasized that the Bumdes institution is a legal entity. This policy is further strengthened by the issuance of Government Regulation of the Republic of Indonesia Number 11 of 2021 (Peraturan Pemerintah 11/2021) which specifically regulates the status of Bumdes legal entities. Based on the definition, Bumdes is an economic organization formed through village deliberations to be the driving force for economic activities and public services for rural communities (Republic of Indonesia Government Regulation No 6 (2014) - Implementing Regulations Regarding Villages, 2014). Through 10 Permendesa PDTT (2015), Bumdes was emphasized as a social business that is run with a kinship spirit and mutual cooperation to realize general welfare in the village. The establishment of the Bumdes was validated through village regulations. Bumdes managements are also selected professionally through village forum and may not have conflicts of interest with the village government. Based on a reference from Permendesa PDTT (2015), Bumdes is permitted to establish businesses in 8 fields ranging from mineral water for the village (springs), electricity power plants, village food barns, applied technology, rent services, broking, trading, and financial business. Apart from that, Bumdes is allowed to run a village tourism business that elevates the culture and local appeal of the village. Some well-known Bumdes are more dominated by Bumdes that engaged in tourism such as Bumdes Tirta Mandiri (Ponggok Village, Klaten, Central Java) and Bumdes Sumber Sejahtera (Pujon Kidul Village, Malang, East Java). On the other hand, there are also Bumdes who successfully run their business aside from offering tourism destinations. Bumdes Cibodas (Lembang, West Java) and Bumdes Cisantana (Kuningan, West Java) that deliver clean water to residents, Bumdes Tirto Nirmolo (Bantul, Special Region of Yogyakarta) who run a savings and loan business, Bumdes Karangkandri Sejahtera (Cilacap, Central Java) which is a distributor of goods for the Cilacap Power Plant, Bumdes Karya Jaya Abadi (Kotawaringin Barat, Central Kalimantan), which provides products and services to the needs of the local community, Bumdes Srisadani (Bojonegoro, East Java) which managing irrigation for community agriculture, and many other Bumdes are engaged in various fields in villages throughout Indonesia. Referring to Permendesa PDTT (2015), Bumdes is determined to be a social business unit where Bumdes can provide public services while still obtaining financial benefits. Referring to this, the analysis of Bumdes operations can be approached with the concept of social entrepreneurship theory.