World Bank Approves Financing to Expand Indonesia’s Social Assistance Program

May 9, 2017

Washington D.C., May 9, 2017 – The World Bank’s Board of Executive Directors today approved US$200 million in financing to support the Government of Indonesia’s efforts to expand its social assistance program.

The financing supports the expansion of the government’s conditional cash transfers under the Program Keluarga Harapan (PKH or Family Hope Program), the strengthening of the program’s delivery system, and improved coordination with complementary social programs.

Due to PKH’s high impact, the government decided to scale up its coverage from 3.5 million families in 2015 to 10 million, or 15 percent of the population, by the end of 2020.

“Expansion of PKH to 10 million households is expected to help achieve government targets of accelerated poverty and inequality reduction. By expanding social assistance, Indonesia is taking a step forward to further reduce poverty and inequality; not just in the near term, but also to improve the future of children from poor families through better education and health services,” said Rodrigo A. Chaves, World Bank Country Director for Indonesia.

Among Indonesia’s social assistance programs, the PKH, implemented by the Ministry of Social Affairs, has the highest impact per dollar spent in terms of poverty and inequality reduction but has the lowest budget allocation. With the expansion, the government takes a welcome step in ensuring that its most effective social assistance program is scaled up for maximum impacts for the poor and vulnerable.

“With the expansion, all provinces in Indonesia are now covered. PKH will become the second largest conditional cash transfer in the world, only behind Brazil, from over 70 countries implementing such programs. Based on our analysis and projections, we expect that PKH will achieve a similar strong performance in poverty and inequality reduction as the other large programs of its kind,” said Pablo Ariel Acosta, World Bank Senior Economist.

Further coverage expansion will be supplemented by better targeting, particularly among the vulnerable population who may easily fall below the poverty line due to various shocks, and focus on disadvantaged and remote regions with a high presence of indigenous populations.

The PKH is associated with better utilization of health and nutrition services that had led to reduction in severe stunting among children by 3 percentage points, a significant milestone in a country with very high levels of malnutrition.

“One-third, or almost 9 million, Indonesian children under the age of five are stunted, and expansion of the PKH has the potential to play a bigger role in Indonesia’s fight against malnutrition,” said Changqing Sun, World Bank Senior Economist.

This US$200 million financing will support the government’s budget allocation of US$5.5 billion, over the next five years, to improve the capacity and systems to deliver the expansion of PKH.  The World Bank’s support for Indonesia’s social assistance program is a key component of the World Bank Group’s Country Partnership Program Framework for Indonesia, which focuses on government priorities that have transformational impact.

Integration of family-based social assistance through conditional cash transfers is a key strategy of Indonesia’s mid-term development plan. Through alliances with key strategic development partners such as the Government of Australia’s Department of Foreign Affairs and Trade (DFAT), the World Bank will continue to complement financing with technical assistance to the Ministry of Social Affairs.

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