Community-Driven Development Approach Improves Infrastructure in Indonesia’s Slum Communities

April 14, 2016


Since 2008, the National Program for Community Empowerment in Urban Areas, known by its acronym PNPM Urban, has helped millions of poor families improve infrastructure in their communities. Covering  some 11,000 urban wards and reaching more than 30 million beneficiaries, PNPM Urban has improved road access and residential areas, as well as water and sanitation facilities. Social programs and revolving funds have also helped families improve their livelihoods. Female participation in decision-making has exceeded the 40 percent target, and the quality of their involvement is continuously improved through targeted facilitation. 



Despite significant economic growth since the 1998 Asian financial crisis, in 2014 over 18 million Indonesians live below the national poverty line and more than 100 million Indonesians – some 40 percent of the population – live just above the poverty line and are vulnerable to falling into poverty.  Income inequality has also increased, with the GINI coefficient now at 41, and higher in urban areas.  Many of the poor also suffer from limited and sometimes deteriorating access to basic infrastructure. In 2009, only 23 percent of the population had sustainable access to piped water, compared to 36 percent in the year 2000. Fewer than 3 percent of urban households have access to a piped sewerage connection, while the majority relies on individual or shared toilets, with septic tanks often not treated and seeping into the water table. Only 20 percent of solid waste is collected and transported to disposal sites that are often not sanitary. An increasing number of slum areas have few or no public services.



The long-running community-driven development program in Indonesia, named by its Indonesian acronym PNPM, has helped build infrastructure and established governance structures at the community level. In 2007, a spatially-focused slum upgrading model was introduced as part of PNPM Urban, in order to design, with community participation, integrated spatial plans to boost investments in infrastructure. Local governments were encouraged to lead the process of selecting priority areas and, in partnership with communities, of implementing the approach. The project uses a Web-based management information system for program monitoring, covering 269 cities and 11,000 urban wards (kelurahans) across Indonesia. The project website (, visited by more than 12,000 visitors daily, swiftly delivers information about the project’s outputs and outcomes, improving the project’s transparency and accountability. As a result, the decision-making process has been improved. The site also serves as a central point of communication for all stakeholders, from central government agencies, local governments and communities, to project consultants, firms, and community facilitators.  


PNPM Urban has been successful in improving investments in smal-scale infrastructure, social services, and revolving loans, with over 80 percent of project costs spent on these outputs. The remaining funds were allocated to capacity building and technical assis­tance aimed improving local governance. Important results include:

  • Improved access to essential infrastructure. The project has financed the construction of over 12,280 kilometers of urban ward roads, 3,400 kilometers of drains, 12,600 water supply facilities and 1,100 educational facilities.
  • Improved access to micro credit and social services. The project has financed revolving loan funds, with over 670,000 beneficiaries. The project’s social programs also benefit some  340,000 persons. A 2012 study esti­mated that 90% of participating urban wards s enjoyed improved access to economic and social services, well above the target of 80%.
  • The infrastructure built by the project is 20 percent less expensive. The project financed facilitators to help communities build infrastructure using community contracting. Close monitoring also took place; a quarterly spot check found that infra­structure financed by the project was on average 33 percent lower than the cost of equivalent works undertaken by local government contractors in 87 percent of participating urban wards. The project invested over $300 million in infrastructure, hence cost-savings amounted to $100 million.
  • Some 87 percent of beneficiaries reported satisfaction with improved services and local level governance. The quantitative evaluation also showed that 75 percent of respondents viewed the processes as transparent, participatory and fair. A 2011 evaluation also concluded that the vast majority of projects financed by PNPM Urban are of good quality. 


Bank Group Contribution

Since 1999, the Bank has committed over $1.2 billion in financing for urban community-driven development programs in Indonesia, financed by IDA, IBRD, and also a multi donor trust fund for Urban Poverty Projects. The remaining 20 percent of project costs was financed by counterpart funds from national and local governments as well as community contributions.  The government has decided to use the Bank loans largely for technical assistance and capacity building, regarding these components as most beneficial in terms of supporting the program’s overall governance.



Following the Indian Ocean tsunami in 2004 and the Yogyakarta earthquake in 2006, the Global Facility for Disaster Reduction and Recovery (GFDRR) provided technical assistance on integrating disaster risk management aspects into PNPM-Urban. The project has also leveraged parallel financing from the Islamic Development Bank that would cover 14 provinces; IBRD Loans and IDA Credit would be confined to 19 provinces. In 2012, the multi-donor-funded PNPM Support Facility approved a joint Government and USAID proposal for support to urban areas in Aceh, amounting to $24 million. In addition, the project also provided support to community-based post-disaster rehabilitation efforts, such as housing reconstruction program REKOMPAK.  


Moving Forward

The sustainability of the PNPM-Urban program has been broadly demonstrated. Strong community participation ensures buy-in and demand; local government participation ensures additional support and institutionalization of the process as well as increasing scale; and investments are proven to be of good quality and more cost-effective than traditional contracting. In 2015, PNPM Urban served as the model for the preparation of the government’s National Slum Upgrading Program (NSUP), which aims to eliminate slums as well as provide universal access to safe water and sanitation by the year 2019. For example, a national platform has been established at a total cost of $3 billion, financed by multiple sources, including central and local governments, the private sector, communities, as well as multi-lateral donors. The World Bank will provide $433 million IBRD financing. The Asian Development Bank and the Islamic Development Bank will each work on a subset of NSUP cities until the year 2020.



Kiosk owner Mas’ud is a beneficiary of the revolving loan fund in Banjarmasin, South Kalimantan. He runs his kiosk by borrowing working capital from PNPM Urban. “I heard from the neighborhood leader that PNPM Urban provided a revolving loan fund. I requested to register and filled in the form. Now I have received the fifth round of loans, first receiving Rp 250,000 (approximately $20), and the amount increased every year until it is rp. 2 million (approximately $170).”