Presently, rural economic development has still been an integral part of national economic development in Indonesia. The basic problem of rural people is usually limited access to finance, information, technology, and capability on economic management and development. To cope this, the local government in Bali province has a specific economic program to rural people through the traditional village. This program is under the regional regulations, Number 3/2017 about Rural Credit Institution or LPDs which is aimed at increasing the economic activities of rural people. The objectives of this study are to describe the economic activities of LPDs and identify the challenges of LPDs in rural economic development. The study was done within three traditional villages which were purposively selected. Techniques of survey, observation and focus group discussion were done to collect data and information. Data analysed by using descriptive method.
The results of study pointed out that several economic activities of LPDs consist of (i) saving and deposit from the rural people; (ii) lending money or credit service to rural people; (iii) managing loan from outsiders/financial institutions to enhance the working capital; (iv) saving and making deposit the excess fund to the bank; and (v) having services for payment of of electricity, domestic water, and phone. The challenges encountered by the LPDs toward the dynamic economic development are (i) competition among LPDs and the other finance institutions; (ii) limited access to information and technology; (iii) the need of investment for the increased working capital; (iv) lack of capability of human resources; and (v) the conditions of socioeconomic of rural people. LPDs should have social and economic innovation to cope with the challenges by providing attractive incentive/bonus and motivation to rural people, and involving in the training on the technology to the management boards.