“In 2008, the Government of Indonesia asked the Islamic Development Bank (IsDB) to support the country’s poverty reduction efforts by joining PNPM-Mandiri, a community-driven development (CDD) program that was launched in 2006. IsDB joined the following year, seeking to reduce poverty in Indonesia through integrated CDD (ICDD) projects, where members of local communities – male, female, youth, the marginalized, the private sector, local administrators and civil servants – all played the role of developers, as part of a grassroots network and as active agents of change. CDD programs in Indonesia have empowered communities to engage in targeted infrastructure, helping to improve livelihoods and the local economy.”
CDD is essentially “an approach that gives control over planning decisions, implementation and investment resources to community groups and local governments”. In 2008, the Government of Indonesia requested that IsDB support the country’s poverty reduction efforts by joining one such CDD program, PNPM-Mandiri, launched in 2006. Thus, in 2009, IsDB’s journey for poverty reduction through CDD began in Indonesia through integrated CDD (ICDD) projects, where members of local communities – male, female, youth, the marginalized, the private sector, local administrators and civil servants – all played the role of developers, as part of a grassroots network and as active agents of change.
Building community capacity
Based on the success of the ICDD Phase I and Phase II projects, IsDB, in partnership with the Islamic Solidarity Fund for Development (ISFD), continued to support the Indonesian government in reducing poverty through ICDD Phase III. The ICDD Phase III project was fully aligned with the government’s development plans and those of IsDB Group. It touched at the heart of IsDB’s 1440H Vision, which espouses comprehensive human development, and addressed multiple strategic thrusts including alleviating poverty, promoting health, providing universal education, bringing prosperity for the people and empowering women.
The project was designed to create an independent community that could work together with the government to improve lives. Community members were trained and helped to: decide on their priorities; plan and develop proposals; and implement activities, while also managing and monitoring progress. They worked in partnership with local government, facilitators, the Ministry of Public Works and Housing and project consultants.
Coverage and scope
The project operated in 4,441 urban wards (kelurahan) in 99 districts across 13 provinces of western Indonesia (including all provinces in Sumatra, West Java, Banten, Jakarta and West Kalimantan). The male to female ratio was 1:1 and the poverty incidence varied from 9% to 40%. It was estimated that the project would directly benefit about one third of the total population in the kelurahan (approximately 17 million people, or 3.4 million households).
The goal of the ICDD Phase III project was to achieve sustainable improvement in the well-being of poorer communities through community empowerment. The scope consisted of providing block finance to cover developing community activities (be they physical, economic or social); building community institutions; generating knowledge and reverse linkages; and supporting project management.
The total estimated cost of this project was USD 254.01 million, of which IsDB contributed USD 205.00 million (80.7%) through the IsDB Istisna’a, Istisna’a Jeddah Declaration, ISFD Loan and Service Ijara financing. The Government of Indonesia and the community financed the remaining portion. In terms of human and technical resources, the project management unit (PMU) at national level was mainly responsible for the management, coordination and monitoring of project activities.
The 13 provincial PMUs and 99 district PMUs were responsible for providing social, technical, economic and financial assistance to communities through empowerment and development activities, as well as supporting ground-level project management, supervision and monitoring. The 4,441 communities from the kelurahan were key resources in planning and implementation.
Context of change
The grassroots approach of the ICDD model allowed communities to work together with local governments in the planning, implementation and monitoring of development projects in their locality. Community members became agents of positive change. This was an early, and continuing, example of mobilizing a network of developers for mainstream development operations.
From beneficiaries to partners
Often, donor interventions are viewed as handouts. Communities are merely sidelined beneficiaries: the government decides what is required and communities sit back and wait to receive the benefits. While such programs may help reduce inequality through poverty alleviation, they can create a crutch mentality among recipients. However, under the ICDD model, the support provided to the communities helped them stand on their own feet. The communities, especially their committees and self-help groups, became partners in planning, implementation and management – all drivers of change.
Independence and self-reliance
To use a fish and fishing rod analogy, in ICDD Phase III, community members decided they wanted to be fishers to improve their lives. They were given capacity building on how to fish, and partial funds to buy the fishing rod. They bought the rod, caught and sold the fish themselves, and then shared benefits with the entire community.
Following a few cycles of community funding of this kind, under ICDD Phase III, the community contribution could, in some cases, match the project funding for a particular activity. The microfinance or revolving fund beneficiaries, mainly women, became independent and job creators within their own microenterprises.
Stronger community participation and ownership
Given the opportunity to play an active role in their development, communities embraced the idea that they could make a positive change to their lives and the lives of their neighbors. The people took this opportunity seriously and worked together to ensure that the village development plan, which they had agreed on, was implemented to a high standard and in a timely manner. There was therefore a strong sense of ownership in the community. The communities exuded positive pride in their achievements, and in the fact that they have been an integral part of the improvement.
Closer partnership between local government and the community
The community empowerment model introduced greater transparency and accountability, as well as a bottom-up, consultative planning approach in Indonesia that allowed for more targeted, relevant development interventions. Given the strong emphasis on full disclosure of all accounts and activities, the community trusted the project, as well as the local government. The local and federal governments also realized the strengths of the program and the power of the community. As a result, they initiated a dialogue with the community on how they could improve their districts, while also allocating more funds to complement the IsDB financing. This has led to a significant increase in government contribution of about USD 49 million – 23% of the financing provided by IsDB.
The project provided infrastructure and skills. From this foundation, communities created partnerships with the private sector, non-governmental organizations and local government institutions to develop similar self-help programs. For example, communities approached local governments to finance house upgrading for dilapidated houses and approached non-governmental organizations for healthcare and education for the poor. The communities also took it upon themselves to maintain and service the various infrastructure assets.
Improving lives and livelihoods
Better achievement of poverty alleviation
Based on baseline survey data collected in IsDB project locations, the average number of poor households from the 273 villages sampled was 25.7% in 2013. During the preliminary impact survey, this number was reduced to 21.6%. Hence, there was a 4% reduction in poverty over the three-year period (2013 to 2016).
Compared to national poverty rates, ICDD locations showed better poverty reduction. Based on the preliminary impact evaluation, the poverty rate in 2016 was 10.86% – 0.62% lower than that of 2013, which was 11.37%.
Better quality and cheaper construction
The number of infrastructure projects in poorer areas increased from 25% to 42%. More than 60% were rated as good quality, and the figure rises to 95% if infrastructure assets rated as satisfactory are included. The cost of construction was also significantly less than if it were done through commercial contractors, since the community and self-help groups contributed labor, and materials to support the activities at cost.
Good management of revolving funds
Block investments for economic activities through revolving funds were sustainable, with about 40.5% demonstrating more than 90% repayment rates. That figure increases to 60% for funds with repayment rates of more than 80%. This is impressive considering that they were managed by communities that had no previous experience in microfinance. Communities used management information systems to ensure accurate accounting of these revolving funds.
Increased livelihood enhancement activities
More than 215,000 self-help groups started economic livelihood activities. This represents about 43% of all self-help groups under the project, up from 23.37% (the baseline). Of these, 25% of businesses have started to market their products outside the village.
Good financial performance at pilot business development centers
Of the 15 pilot business development centers established under the project, 12 reported good financial performance. Innovative products were chosen based on their comparative advantage, and the business development centers acted as traders to help the self-help groups market these products outside their villages. The centers have been successful at marketing the products nationally and, in some cases, products have been sold to neighboring Malaysia and Singapore.
Mainstreaming of ICDD successes nationally and replication internationally
The IsDB-funded livelihood enhancement program has been replicated by the Indonesian government in PNPM-Mandiri locations funded by the World Bank. It has inspired similar ICDD interventions supported by IsDB in Gambia and Sierra Leone, as well as provided the basis for ISFD’s flagship Sustainable Villages Program. The Government of Indonesia has also become a hub for best practices of community-driven development, and IsDB has facilitated learning exchanges with delegations from Sierra Leone, Gambia, Sudan, Uganda and Côte d’Ivoire. There is great potential for this grassroots development model to be further transposed, with customization and reverse linkages, to other IsDB member countries.
Encouraging self-reliance key to success
Community involvement and trust were essential to the success of the program. The government engaged the communities at all stages of the project, and genuinely considered their inputs. Furthermore, accountability and good governance (such as weekly public disclosure by the committees and complaint-handling systems) enabled trust and motivated the communities to do and provide more.
Capacity development through continuous training given to the communities, as well as technical support (e.g. for construction and business development) helped to develop better change agents.
Expanding economic activities enhanced community empowerment – through developing a social support structure of village committees and self-help groups. While infrastructure activities facilitated access, income-generating activities were very important for long-term sustainability.
Enhancing outreach to the poor and women, including their involvement in community meetings, was essential for achieving equitable participation. Most economic self-help groups were also formed by less impoverished women who had some expertise in producing some products (e.g. handicrafts, foodstuff).
Efficiency was improved by introducing information technology. This enabled communities themselves to report their activities via a computer, freeing up much needed time for the facilitator. A management information system was also introduced to enhance the accounting and reporting of the revolving funds.
Business development centers supported the 215,000 small businesses started by the project. Without any support in marketing, these businesses were likely to struggle and remain small.
The process of enabling communities to become a network of developers has led Indonesia to become the global expert in CDD and community empowerment. The country has become a laboratory for pilot activities facilitating partnerships between public and private stakeholders with the community not as mere beneficiaries, but as agents of change.