Policy design and challenges in village funds utilisation for health financing in Indonesia

Public Financial Management (PFM) plays an important role in improving the efficiency and effectiveness of public spending on health. However, little is known about how policy design and governance shape the allocation of Indonesia’s Village Fund (Dana Desa) for health through PFM lens. This study examines the design and governance of Village Fund utilisation for health financing across the PFM cycle. This qualitative study applies a PFM framework to examine the design and governance of Village Fund utilisation for health financing. Data were collected through an online national-level focus group discussion with six key informants from four ministries responsible for fund design, allocation, and oversight. The transcripts were thematically analysed through open coding, with emerging themes mapped onto the PFM framework covering budget formulation, execution, and evaluation, with intergovernmental coordination examined as a cross-cutting governance component. Governance challenges were identified across the PFM cycle. Budget formulation was constrained by unclear and delayed technical guidance and limited alignment between Village Fund allocations and health priorities. During budget execution, variations in fiscal capacity and village-level capacity influenced resource allocation, while funding continued to favour infrastructure over basic health services. Budget evaluation was constrained by fragmented monitoring and information systems, while coordination challenges across ministries and levels of government affected governance throughout the PFM cycle. The findings demonstrate that strengthening the contribution of Village Funds to health financing requires attention not only to resource allocation but also to governance across the PFM cycle. Clearer institutional responsibilities, stronger coordination across ministries and levels of government, improved village capacity, and more integrated monitoring and evaluation mechanisms are needed to strengthen the alignment of Village Fund utilisation with health priorities.