A Synergy between Fintech and Government for COVID-19 Social Aid (Bansos) in Indonesia
A Synergy between Fintech and Government for COVID-19 Social Aid (Bansos) in Indonesia
Indonesia has suffered from uneven distribution of social aid ever since the pandemic started. From corruption scandals to missed targets of aid recipients, the Indonesian government received criticisms addressing the inadequacy of the COVID-19 task force. According to The Indonesian Ombudsman, the Indonesian public is not satisfied with the slow rate of social aid disbursement, in addition to a lack of clarity from both the central and regional government about the program.
One of the main problems that hindered the program's success is the lack of accurate data from the government, ministries, and state agencies. Inaccurate data has been a problem for various institutions in Indonesia, a country with over 260 million people where each region uses different data management tools and verification processes. It has been reported that many citizens are not getting their benefits because they're not registered; even the registered ones often haven't received the promised aid for reasons not known to them.
To avoid these obstacles recurring in the next batch of disbursement, Indonesian officials through the Ministry of Social Affairs have come up with a plan to launch a new initiative, collaborating with Bank Indonesia and OJK alongside financial technology companies (fintechs), with the hope to distribute social aid throughout the country more seamlessly.
Expediting Social Aid Disbursement through Digitalization
Minister of Social Affairs of Indonesia, Tri Rismaharani, stated the ministry's keenness to utilize fintech in distributing government relief funds. With manual transactions facing multiple problems, fintech is expected to fill those blind spots with greater convenience and facilitate the monitoring of disbursements to recipients.
Through the Government-to-people (G2P) 4.0 program, the Ministry of Social Affairs, along with Bank Indonesia, aims to accelerate the digitalization of social aid program (bansos) disbursements. This initiative will depend on five measures to strengthen various aspects of the payment system that prioritize speed, convenience, affordability, security, and reliability. First, strengthening payment system infrastructure to support social aid program (bansos) disbursements. Second, interconnected payment services through digital payment and agent/merchant channels. Third, ensuring security by protecting the access to funds by two-factor authentication, namely username and password, utilizing a combination of characters and biometric data. Fourth, multi-channel utilization across various instruments and channels, such as card-based or mobile phones as well as Quick Response Code Indonesian Standard (QRIS). Fifth, expansion of outlets offering bansos transactions, including branchless banking or digital financial services (DFS), merchants, and ATMs.
Bank Indonesia is eager to invite fintech players in Indonesia to participate in this program by accelerating QRIS implementation and connecting the banking and fintech industries through Open API Payment Standards. Fintech players in several verticals such as e-wallet and P2P lending are appointed with specific tasks to help the government relief program. LinkAja, a long-time partner of the government, has been appointed to assist the disbursement of social aid. OVO, another e-wallet giant, will disburse the government's electricity subsidy working alongside state-owned PLN for 100.000 families in Indonesia. The government has also allocated the national recovery fund for Investree, a P2P Lending provider, to disburse to small business recipients.
How Does Fintech Assist Government Relief Distribution?
With the myriad advantages of using fintech, many are still skeptical about the security of utilizing them in this massive program involving public data and government funds. The Ministry of Social Affairs official ensured the security of recipients' data, pointing out that, with fintechs, every transaction is recorded, a feature lacking in the current manual distribution. Involving fintech also leads to avoiding any mistargeting, a problem that has been recurring due to incomprehensive data. With Bank Indonesia's support, banks and fintech will pull together data to determine the government's aid recipient adequately.
Banking is known for having a comprehensive accountability system when it comes to profiling creditors. This can be applied to decide which residents are entitled to the relief packages while fintech is responsible for distributing and monitoring the spending of benefits to selected recipients. Fintech in Indonesia has been able to tap the unbanked population by targeting the growing number of mobile users. By accessing the fund through their mobile app, recipients are expected to receive the aid more easily while monitoring the distribution process as well.
Another concern that surfaced is the uneven internet infrastructure in Indonesia, especially in rural areas. With a new scheme fully digitizing social aid distribution, experts are concerned internet connection limitation would exclude rightful recipients. For now, the Ministry of Social Affairs directed their effort to reach inaccessible regions with PT Pos Indonesia handling manual distribution. Acknowledging the inequality of internet access, the government affirmed that accelerating the technology infrastructure building would be their priority.
A collaboration between fintechs and government agencies related to social welfare aid has been implemented by other countries in the world. India, through their Aadhaar program, successfully connected 339 million citizens to banks with complete biometric data such as fingerprint and iris identification as well as comprehensive data collection including name, address, birth date, and mobile phone number. The Aadhaar program has proven to lower the corruption rate of the fund as recipients receive their benefits directly from the system, minimizing the chance of misappropriation by officials. The government's collaboration with fintechs also helped reduce response time and easier withdrawal for the recipients.
Every concern regarding the effectiveness of fintech's involvement in government refund aid needs to be addressed both by the government and by the fintech companies themselves. With careful measures taken, digitalizing social aid disbursement is believed to be the solution to improve Indonesia's lackluster COVID-19 relief fund distribution.
