MANILA, PHILIPPINES - The Asian Development Bank (ADB) is providing Indonesia with a $100 million loan to finance community-driven projects that upgrade basic infrastructure in rural villages and improve sanitation services in poor urban neighborhoods.

The loan will expand ADB's support for the National Program for Community Empowerment (PNPM Mandiri) for poverty reduction by providing direct assistance to poor communities.

While Indonesia has made significant progress in fighting poverty and achieving the Millennium Development Goals (MDGs), about 31 million people, many of them in rural areas, remain trapped in poverty. The causes of poverty include lack of access to basic services, absence of economic opportunities, limited access to capital, and poor rural connectivity and infrastructure.

About half of rural villages are not connected by asphalt road, and one in every ten villages are inaccessible at certain times of the year. In addition, only about half of the national population has access to improved sanitation. Consequently, some 30% of Indonesians suffer from water-borne diseases, including diarrhea and typhoid fever, that are linked to the use of untreated water and poor sanitation.

"The project will provide block grants directly to the communities to improve basic infrastructure facilities and sanitation services, including the construction of public baths, toilets and washing facilities, as well as waste treatment and disposal systems," said Wolfgang Kubitzki, ADB Principal Social Sector Economist.

"Around 1.3 million people in rural communities and urban neighborhoods in nine provinces in Indonesia will benefit from the project," he added.

The project will also improve the capacity of the communities to carry out their own design and implementation of the projects to ensure that the investments reflect the need of the communities and are sustainable.

The ADB loan, from its ordinary capital resources, covers about 73% of the total project cost of $135.6 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 2015.

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