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Indonesia has made significant strides in digitizing its government assistance programs, effectively contributing to poverty reduction within the Asian-Pacific region. A new analysis by the Lowy Institute highlights the importance of integrating digital ID and data analytics to further enhance public welfare performance.
The international policy think tank outlines how social assistance programs, including subsidies for energy and food, have evolved alongside the national ID program. The report, titled Digitising the Social Safety Net: Lessons from Indonesia, emphasizes that digitalizing welfare brings substantial benefits, offering valuable lessons for other countries aiming to boost inclusion and reduce poverty.
“The key takeaway from Indonesia’s experience is that there is no one-size-fits-all solution. However, with focused policies and meticulous design, it is possible to leapfrog beyond the analog delivery of social benefits,” states Hilman Palaon, the report’s author and a Research Fellow at the Lowy Institute.
Palaon notes that the requirement for identification documents to enroll in social assistance programs motivated individuals to obtain national IDs. The expansion of national IDs and digital financial services has subsequently paved the way for more efficient digitized social safety nets.
Digital ID databases, along with electronic and biometric identification and data analytics, ensure that assistance reaches the rightful beneficiaries of social programs, while also minimizing the risk of fraud.
Indonesia drew inspiration from India’s Aadhaar system for digitizing its social welfare system and collaborated with development partners like Australia and the World Bank.
In 2018 and 2019, Indonesia piloted biometric authentication using fingerprint and facial recognition, along with a digital ID program to distribute cooking gas subsidies. The pilot aimed to shift from subsidizing goods to providing funds directly to beneficiaries. By 2023, the country began verifying beneficiary data to distribute cooking gas subsidies and introduced a digital beneficiary logbook the following year.
At the start of 2019, Indonesia also began modernizing its social registry database to include eligible beneficiaries, linking it with the national ID database to expedite verification.
To provide beneficiaries with more options on how to receive assistance, the government is promoting the inclusion of financial institutions such as banks and fintech companies through an “advanced digital disbursement system roadmap” known as Indonesia Government-to-Person (G2P) Payment 4.0.
However, Palaon cautions that frequent data breaches pose a risk to beneficiaries and digitized welfare programs. “Strengthening cybersecurity and data protection is crucial,” the report notes.
Recently, Indonesia launched a new platform called INA Digital, which provides access to public services such as driver’s licenses, healthcare, education, social aid, and more. As part of its digital transformation agenda, the government plans to launch a digital ID system for accessing public services. In June, the Ministry of Communications announced efforts to regulate data collection for digital IDs.
Last week, the country issued a call for companies providing consulting services in digital ID, electronic know your customer (e-KYC), biometrics, and data exchange to participate in a digital identification project.
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