THE ROLE OF SUPERVISORY AGENCY IN THE IMPLEMENTATION OF THE IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE AND ITS IMPLICATIONS ON LPD PERFORMANCE IN DENPASAR, INDONESIA

Lembaga Perkreditan Desa (LPD) is a microfinancial institution with a mission to encourage the economy of rural communities through the activities of collecting deposits and saving deposits from villagers and then channeled into loans to villagers in need. LPD performance can be seen from the level of LPD health. This level of health should be maintained by LPDs in order to continue to grow and provide benefits for the village community as a mediating body between those who need funds and the excess funds, and support village development. Performance is the concern of LPD leaders, LPD supervisory bodies, villagers, and the government as an institution for developing an LPD. Various efforts are made to maintain and improve the performance of the LPD. One important effort is to establish an LPD supervisory body. The LPD supervisory body is responsible for monitoring the operation of the LPD. The regulatory body is expected to improve the implementation of good corporate governance (GCG) practices by LPDs. The application of GCG principles is expected to improve LPD performance. The study sample was 35 LPDs in Denpasar City. Research respondents were LPD leaders. Data analysis was done using Partial Least Square. Based on the empirical findings, study found that effective supervisory bodies can improve good corporate governance practices. The better the implementation of the principles of good corporate governance, the better the performance of the LPD. Research does not prove the direct effect of the effectiveness of the regulatory body on LPD performance. Keywords: Corporate governance, supervisory bodies, performance, microfinancial institution