South Asian Journal of Social Studies and Economics

Indonesia’s Village Fund (Dana Desa) has transformed rural public finance by transferring substantial resources to villages and expanding local discretion under the Village Law. However, allocation and spending practices often remain weakly aligned with heterogeneous village potentials and binding constraints, particularly in peri-urban–rural districts where accessibility and service quality vary sharply. This article develops an equity-oriented, potential-based allocation framework and demonstrates its use in Biru-Biru Subdistrict, Deli Serdang Regency, North Sumatra. Using a mixed-methods approach that combines stakeholder interviews, community survey responses, field observation, and secondary administrative and statistical data, we map village potentials (agriculture, tourism, local enterprises) and constraints (roads, bridges, terrain, and institutional capacity). A SWOT-based strategic diagnosis is then applied to prioritize policy actions and position the subdistrict’s development stance. Findings indicate that while stronger villages may attract marginally larger shares, several geographically constrained villages continue to face infrastructure deficits that suppress economic potential. The recommended strategy emphasizes growth-oriented but equity-sensitive investment: improving last-mile connectivity, strengthening participatory planning and oversight, upgrading village financial information systems, and building local capacity to reduce reliance on external facilitators. The article contributes a practical planning logic for aligning inter-village transfers with measurable potentials and constraints, supporting more inclusive and accountable rural development outcomes in Indonesian villages.