Village-run enterprises improve the delivery of water-services in Indonesia

Sumedang, Indonesia, March, 20, 2015 – In February 2015, Indonesia’s Constitutional Court annulled the 2004 Water Resources Law, thus providing state agencies more authority over water resources.  That means community-owned enterprises managing water resources at the village level – locally known as Bumdes – may become more prominent in water management in coming years.

Transforming informal village enterprises into established Bumdes

While these developments provide opportunity to many Bumdes, they also present challenges.  Many Bumdes are not effectively managed or remain informal organizations, without formal authority or formal financial structures.

“Currently, not all of these village-owned business entities are institutionally and financially sound,” said Subagio, head of Sumedang District’s regional planning agency.

To address these capacity-building challenges, Mitra Prima, a partner of the World Bank Group’s Water and Sanitation Program, started an initiative to help these community-based organizations build their skills.  In collaboration with local government agencies, Mitra Prima helps transform the Bumdes by helping them boost competencies in governance, technical and managerial capacity, and financial management.

So far, the program has helped 26 community-based water organizations in West Java connect with rural development banks and obtain loans. This has helped the Bumdes increase and expand coverage of clean water supply for their communities.

Ensuring clean water distribution in villages

Life was much worse before the establishment of the Bumdes.  Villagers in many areas of Sumedang had to fetch unsafe water from wells and nearby rivers for bathing, cooking and drinking.

Nurbaiti, a housewife living in Bongas Subdistrict, remembers the illnesses her family endured.  “We used to rely on shallow wells and the streams for our bathing and drinking needs. It caused our family to suffer frequent diarrhea and skin infections,” said Nurbaiti, who adds that her family now gets sick much less often. 

Another benefit from the arrival of community-based water organizations: funds to share with the community, and jobs.

“The Bumdes contributes 10% of its net profit to the village,” says Aang Kunaefi, a Bumdes secretary in Bongas. “So the benefit for the community is more than just clean water.”

At present, Bongas families enjoy clean water 24 hours a day, seven days a week. The Bumdes serves 544 house connections – that’s 1,706 users – and hope to expand beyond Bongas.

Omkartowajaya, head of the Bumdes, said, “We want to offer our services to nearby villages, and we will need access to financing for both expansion and for maintenance. We need all the help we can get from our stakeholders.”

Transformation from an informal entity to a legal enterprise

To help secure financing for the Bumdes, Mitra Prima has also tapped into rural development banks fully owned by local governments. The banks are moving ahead with their partnership plans with several Bumdes.

Anton Abdul Rosyid of Subang Rural Development Bank explains that they are driven by both business motives and social conscience.  “We have both social and commercial goals. For the social objective, we want to improve the livelihood of the communities, by improving their access to clean water.  But we also see huge business potential,” says Rosyid.

These initiatives are in line with the government’s target of provididing an additional 10 million house connections by 2019 – the year when Indonesia aims to achieve universal access to clean water for the whole country.  That in the process has also helped the villages improve their economy – that’s an added incentive that will hopefully lead to even better results.