SETTLEMENT OF DEFAULTS ON VILLAGE-OWNED ENTERPRISES ACCORDING TO ISLAMIC ECONOMIC LAW

Study in Tangan-Tangan District, South Aceh

Abstract

This research discusses the law of default that occurs in the management of Village-Owned Enterprises (BUMG) in Gampong Suak Labu, Tangan-Tangan sub-district, South Aceh Regency. Defaults occur due to farmers' non-compliance in returning agreed loans. Although the agreement between BUMG and farmers is oral, the agreement is still valid according to the law, based on Article 1320 of the Civil Code which regulates the validity of the agreement. Farmers' non-compliance in repaying the loan has the effect of obstructing the flow of funds that should be used to assist other farmers, as well as disrupting BUMG's main objective of improving farmers' welfare. Based on Articles 1233 and 1243 of the Civil Code, farmers who fail to fulfil their obligations are considered to have defaulted and must compensate for the losses incurred. This study concludes that farmers' non-compliance in repaying loans is a form of default, which provides a legal basis for BUMG to demand fulfilment of obligations or compensation, as well as to improve the management system so that the programme can run effectively and sustainably.