The Indonesian government devised numerous strategic plans to achieve 12.7 million hectares of social forestry areas as targeted by the social forestry program. This target is achieved through specific policies issued by the Indonesian government, which regulate the implementation and management of village forests. This study examined the readiness of the Forest Management Unit and the Village Forest Management Institute as the main institutions involved in the implementation of village forests. Additionally, the study discovered that readiness was directly proportional to the poverty alleviation level among forest users, the improvement of forest conditions, and the empowerment of forest users. This research applied an objective-based evaluation and institutional assessment. Furthermore, the data obtained was qualitative data, which was quantified using a scale, then the calculated scale results were analysed to produce index value. The data analysis was employed by adopting an FMU performance appraisal method, which utilised community-managed forest management indicators. In the last five years, from the submission of the permit proposal to the issuance of forest license, the results showed an increase of community participation, particularly on the initiatives of (i) institutionalising business unit management, (ii) integration of the village forest management to the village fund, (iii) building the capacity of village enterprise group, and (iv) contributing to wildlife conflict mitigation.