Village-owned enterprises (BUMDes) are central to Indonesia’s rural development agenda, yet their performance with respect to social capital formation varies widely with the stages of development. This study examines the impact of different stages of development of the BUMDes on social capital (as trust, networks and norms) formation. The BUMDes generally pass through four stages of development: Basic, Growing, Developing and Advanced. The purpose of this study is to assess and compare social capital dimensions at each level of classification. Advanced BUMDes have been found to possess significantly greater levels of internal trust, more complex and richer networks, organisational norm compliance and stronger/greater norm adherence. One-way analysis of variance test further confirms that these differences are statistically significant across stages. Social capital is also shown to be influenced by leadership background and external partnerships, showing that social capital functions simultaneously as a measure of institutional development and maturity. Enhancing leadership and fostering collaborative external partnerships alongside formalising shared norms can aid in the development of BUMDes. The findings of this study advance theory on rural institutions while offering practical policy recommendations.
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