This study examines the integrative framework of rural development in Indonesia, focusing on the interplay between Village Fund management, labor-intensive employment programs (Padat Karya Tunai), community participation, and the mediating role of Village-Owned Enterprises (BUMDes) in promoting village economic growth. Using a quantitative approach with Structural Equation Modeling (SEM), data were collected from 372 village respondents across multiple regions to test the direct and indirect relationships among these variables. The findings reveal that Village Fund management, participatory governance, and labor mobilization each have significant positive effects on rural economic outcomes. More importantly, the study confirms the strategic mediating role of BUMDes in transforming fiscal and labor inputs into productive development outputs. The model supports the theory of institutional complementarity, suggesting that budgetary decentralization yields better results when accompanied by strong local institutions and active citizen engagement. Despite these positive links, challenges remain, particularly in areas such as entrepreneurial capacity, financial planning, and governance quality within BUMDes' operations. Therefore, policy design must integrate fiscal transfer mechanisms with institutional strengthening and participatory frameworks to ensure inclusive and sustainable rural development.
Haeril et al. (2025) studied this question.