Political Leadership
Indonesia’s experience highlights the scale and long-term nature of digitalization, which requires a firm government commitment. President Joko Widodo (commonly known as “Jokowi”), who took office in late 2014, accelerated this agenda through his campaign and implementation of digitalized social assistance programs. Over the past decade, Indonesia’s social protection network has undergone a transformation, and its improved performance has garnered broad political support. Whereas cash transfers were once politicized as a cynical election tool for the incumbent president and lawmakers, they now have strong support across the political spectrum, and the new administration is also planning new initiatives of its own.
After taking office in late 2014, President Jokowi introduced a short-term financial support policy through bank accounts and mobile money apps.Tiga Kart Sakthi) program. These cards include the Prosperity Family Card (KKS — Copyright Ownership Card), cash assistance program for disadvantaged families, Smart Indonesia Card (KIP — Indonesia map), Indonesia Health Card (KIS — which provides educational funding assistance to students Best Cards in Indonesia), providing personalized health care.
In 2016, President Jokowi further accelerated the process of digitalizing Indonesia’s social security, aiming to improve the accuracy, efficiency, and overall quality of assistance to the needy, with a particular focus on food assistance. In July 2017, the President took a major step forward by signing a Presidential Decree on the Payment of Non-Cash Social Assistance, which mandated that all social assistance from the government be paid through bank accounts.
President Jokowi’s second term, which began in 2019, ushered in the continuation of Indonesia’s digitalization efforts. This began with the strengthening and modernization of the social registration database, which aims to become a central repository of beneficiaries of social assistance programs. The database is linked and integrated with the national ID database to streamline the verification and authentication process.
The cooking gas subsidy reform plan was launched in 2020 following a biometric pilot project implemented in 2018-19. The goal was to move from commodity subsidy to direct funding to eligible beneficiaries. The reforms are being implemented in phases, with verification of beneficiary data for the 3 kg Liquefied Petroleum Gas (LPG) cooking gas subsidy in 2023 and the introduction of a digital beneficiary logbook via a website application in 2024. Going forward, only registered beneficiaries will be able to purchase subsidized cooking gas.
Recently, the Indonesian Government-to-Person (G2P) Payments 4.0, a roadmap for an advanced digital payment system, was developed to promote interoperability, cater to beneficiary preferences, and foster collaboration among financial service providers such as banks and fintechs. The goal is to give beneficiaries the flexibility to choose their preferred payment channel, whether through a traditional bank account or an e-money account. Going forward, the new political leadership remains committed to social assistance programs and intends to use them as a tool to promote broader economic growth rather than focusing solely on poverty reduction.
Stakeholder cooperation
Digitizing the social safety net requires a holistic approach that encompasses solutions that bridge not only technical requirements but also policy, legal, regulatory, economic, and social requirements. The Indonesian government forged strong partnerships with multiple organizations to address the various challenges of digitalization. Ministries and regulators worked together to ensure policy coherence and coordination. State-owned enterprises and the private sector brought expertise in technological innovation, digital infrastructure, and service delivery.
A high level of government coordination was achieved through a series of meetings involving various ministries and regulators. An expert working group was established, consisting of experts and representatives from relevant ministries and regulators, including the Office of the President, the Task Force for Poverty Reduction in the Office of the Vice President (TNP2K), the Coordinating Ministry for Human Development and Culture, the Ministry of National Development Planning, the Ministry of Social Affairs, the Ministry of Finance, the Ministry of Interior, the Central Bank, the Financial Services Authority, banks, post offices, telecommunications operators, technology providers, and state-owned enterprises such as fintechs. Ministries, regulators, and the Central Bank adapted regulations to allow access to the national ID database and facilitate the e-KYC process. New payment mechanisms and changes to strengthen the payment system were tested.
Indonesia gained valuable insights from success stories in the Global South, including Bangladesh, Brazil, China, India, Kenya and Pakistan.
Collaboration extended well beyond central government ministries and regulators. Local governments were also involved and played a key role in disseminating information to beneficiaries and setting up offices and bases for registration, training, and program socialization. Banks were engaged to ensure safe financial access for beneficiaries through the introduction of savings accounts, branch/agent-less banks, and digital wallets. Telecommunications companies played a key role by providing free SIM cards exclusively for social safety net beneficiaries and increasing mobile network connectivity. Technology start-ups worked with the government to design mobile money platforms and biometric authentication methods. The diverse contributions of these actors highlight the collaborative, multifaceted approach that is essential to successfully digitalize social safety nets.
International collaboration was also key. Indonesia gained valuable insights from success stories in the Global South, including Bangladesh, Brazil, China, India, Kenya and Pakistan. This not only deepened Indonesia’s understanding but also sparked inspiration to create its own custom-made solutions. International development partners, particularly Australia and the World Bank, also played an important role, allowing Indonesia access to funding, technical expertise, information on best practices, and global perspectives on its own digitalization efforts.
Digital Building Blocks
Digitalization requires robust technological systems, including reliable internet and mobile network coverage for remote access and secure payment channels for transferring funds to beneficiaries’ accounts. With the growing reach of internet connectivity, mobile networks, and payment systems, the adoption of digital solutions has become more feasible than ever before. This evolution has brought significant benefits to social assistance programs, as beneficiaries can seamlessly access their entitlements through digital payments. The ease and convenience afforded by this digital infrastructure means beneficiaries are no longer bound by geographical constraints or the need for physical interactions with government agencies, banks, or intermediaries.
Indonesia is experiencing tremendous digital growth. By 2023, internet penetration will reach an astounding 77%, with approximately 213 million people immersed in the online world. The widespread influence of social media is also evident, with 167 million active users of social media platforms, or approximately 60% of Indonesia’s total population (see Figure 6). Furthermore, mobile technology has cemented its place in society, with mobile phone connections reaching 354 million, a staggering 128% of the country’s total population.
