Indonesia offers lessons in govt benefit digitalization: Report

Indonesia has successfully digitized its government assistance programs, aiding poverty reduction inside the Asian-Pacific country. One of the next crucial steps will be incorporating digital ID and data analytics to improve the performance of public welfare, according to a new analysis from the Lowy Insititute.

The international policy think tank details how social assistance programs such as subsidies for energy and food have developed hand in hand with the national ID program. The report, titled Digitising the social safety net: Lessons from Indonesia, notes that digitizing welfare offers huge spill-over gain and that Indonesia’s experience offers important lessons for other countries in increasing inclusion and reducing poverty.

“The key observation from Indonesia’s experience is that there is no one-size-fits-all approach. However, with the requisite policy focus and careful design, leapfrogging past the analog delivery of social benefits is possible,” says the report’s author and Lowy Institute Research Fellow Hilman Palaon.

Palaon notes that the government required identification documents to enroll in social assistance programs which spurred individuals to obtain national IDs. The expansion of national IDs and digital financial services have, in turn, paved the way towards better digitized social safety nets.

Digital ID databases, electronic and biometric identification and data analytics ensure that assistance reaches the beneficiaries of social programs. At the same time, it reduces the risks of fraud.

Indonesia’s inspiration for digitizing its social welfare system came from India’s Aardhaar system while it found its development partners in the likes of Australia and the World Bank.

During 2018 and 2019, the country started piloting a biometric authentication using fingerprint and face recognition and a digital ID program to distribute a cooking gas subsidy. The goal of the pilot is for the government to stop subsidizing goods and start providing funds directly to beneficiaries. In 2023, it started verifying beneficiary data to distribute cooking gas subsidies while the following year, it introduced a digital beneficiary logbook.

At the beginning of 2019, Indonesia also kicked off the modernization of its social registry database to include eligible beneficiaries, linking it with the national ID database to speed up verification.

To allow beneficiaries to choose how to receive assistance, the government is encouraging the inclusion of financial institutions such as banks and fintechs through an “advanced digital disbursement system roadmap” – Indonesia Government-to-Person (G2P) Payment 4.0.

Palaon, however, warns that frequent data breaches continue to be a risk for beneficiaries and for digitized welfare programs.

“Strengthening cybersecurity and data protection will also be critical,” the report notes.

Indonesia has also recently launched a new platform called INA Digital which offers access to public services such as driver’s licenses, healthcare, education, social aid and more. The government is planning to launch a digital ID system for accessing public services as part of its digital transformation agenda. In June, the Ministry of Communications announced it was working on regulating data collection for digital IDs.

Last week, the country issued a call related to a digital identification project to companies company providing consulting services in digital ID, electronic know your customer (e-KYC), biometrics and data exchange.

Article Topics

digital government  |  digital identity  |  financial inclusion  |  INA Pass  |  Indonesia  |  national ID  |  social protection