Indonesia Project to Step Up Poverty Reduction Drive in Rural Villages

MANILA, PHILIPPINES - Indonesia, with support from the Asian Development Bank (ADB), is expanding its national poverty reduction program that will boost services and infrastructure and build social capital in some of the poorest rural communities in the country.

ADB Board of Directors have approved an $84.2 million loan that will expand its support for the National Program for Community Empowerment, PNPM Mandiri, one of the largest community-driven development projects in the world. The funds will finance capacity building and infrastructure improvements in about 1,500 villages in four provinces.

Indonesia has made major progress on poverty reduction over the past 40 years, reducing poverty incidence from 50% in 1970 to 14.2% by 2009. However 33 million people, most of whom live in rural areas, remain poor and nearly 50% of the population are ‘near poor’, living on less than $2 a day. The global economic crisis, which threatens growth and employment in the near term, is putting additional strains on the poor and near-poor.

The project targets improved access to services and infrastructure in poor villages in the provinces of Jambi, Lampung, Riau, and South Sumatra. Support will be provided to empower communities to identify and carry out development plans and block grants will be given directly to villages for priority infrastructure investments.

“Community-driven development is proven to be a successful approach to reduce poverty and improve basic service delivery and infrastructure. Improvements in basic infrastructure will increase the availability and accessibility of education and health services for the rural poor, and near poor. Overall, the investments are expected to benefit more than 1.5 million people in more than 300,000 households,” said Camilla Holmemo, Poverty Reduction Specialist in ADB’s Southeast Asia Department.

A key element of ADB’s assistance is its strong focus on promoting gender equity which includes specific measures, such as gender audits and separate women’s meetings, to ensure their needs are reflected in village plans and infrastructure investments. The capacity of local governments to support project villages will be built up, and measures will be taken to promote good governance.

ADB’s loan, from its ordinary capital resources, covers about 74% of the total project cost of $113.5 million, with the government financing around 19% and beneficiaries providing the balance in the form of counterpart contributions to community investments.

The Ministry of Public Works is the executing agency for the project, which is due for completion around March 2013.