| Summary: | Development disparity between villages and cities has led the government to implement village funds policies to improve better development and reduce income inequality between villages and cities. This study aims to analyze the following: 1) the effectiveness of village fund programs; 2) the effect of village fund programs on village development and empowerment of village communities; 3) the effect of village fund programs, village development and empowerment of rural communities on community welfare; 4) the role of village development and empowerment of village communities in mediating the effect of village fund programs on community welfare. This study was conducted in Mendoyo, Jembrana. The samples of this study were 115 respondents taken using simple random sampling with lottery method. Data collection methods used was observation, interviews and in-depth interviews. The data analysis technique used was descriptive statistical analysis and Structural Equation Modeling (SEM) and the Partial Least Squares (PLS) are conducted to statistically test the model. The results of the analysis show that the village fund program in Mendoyo, Jembrana is relatively effective. Village fund programs have a positive and significant effect on village development and empowerment of rural communities. The village fund program does not have a significant effect on community welfare, but village development and empowerment of rural communities have a positive and significant effect on community welfare. Village development and empowerment of village communities fully mediate the influence of village fund programs on community welfare; given that village fund programs are directly insignificant towards community welfare.
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