Funding Indonesia

How World Bank’s US$ 250m Investment Will Fuel Indonesia’s Digital ID Revolution

The World Bank Group is issuing US$250 million to Indonesia as part of a wide-ranging move to strengthen the country’s digital identity, or ID, systems in what could see sweeping changes to how people can access (and make payments, among other things) services across both the public and private sectors.

Despite its sprawling geography with islands of various sizes and population densities, Indonesia sports a comprehensive 97% adoption rate for its national ID numbers, NIK, and electronic ID cards, e-KTP.

There is a lively digital economy in Indonesia, but it is mostly centred around urban hubs while much of the country’s 273.8 million people are located around rural outlying areas, prone to adverse climate changes, lack of digital infrastructure, and natural disasters.

Tackling geographical and inclusion shortages

The World Bank’s International Bank for Reconstruction and Development (IBRD) tendered the US$250 million grant to promote digitised identities as a means to overcome the geographical shortcomings and to help tackle a gender divide in financial inclusion efforts in the country.

88.4 percent of those aged 17 and under already have birth certificates, but the project information document for ‘ID for Inclusive Service Delivery and Digital Transformation in Indonesia’ outlines the intention is to improve “population and civil registration and increase usage of digital identification” across all stratas of Indonesian society.

This includes increasing birth registrations and creating a replacement automated biometric identification system (ABIS).

image via Unsplash

Indonesia in the financing spotlight

The project information document spells out the five key areas needed to inculcate an improved digital ID ecosystem in Indonesia. The IBRD financing was justified as Indonesia, Southeast Asia’s largest economy, had been sustaining strong economic growth and reducing poverty levels in the decade before the pandemic, and had rebounded strongly in the aftermath, with the economy estimated to record 5.1% growth rate in 2022 following a 3.7% growth spurt in 2021.

But the recurring natural crises impacting the rural areas have seen disproportionate numbers of rural poor to migrate to metropolitan areas, overtaxing centralised services in those areas while poor connectivity and limited economic prospects continue to plague the outlying rural areas.

Better opportunities afforded by social governance initiatives and better access to digital government and private services can be unlocked to serve this growing populace with a foundational digital ID system, which has yet to be met in Indonesia as the NIK, e-KTP, and birth certificates have not been digitised enough “due to the lack of ICT infrastructure to service national-scale real-time usage.”

5 components to make up digital ID ecosystem in Indonesia

Hence the first of the project development objectives is to improve the population registration (PR) and civil registration (CR), which are the foundational ID systems in the country presently. This development will be particularly essential in lesser-developed provinces and for more vulnerable populations, with digital ID systems making identification processes more resilient and helping generate vital data from those regions to aid with better civil planning.

Image from ‘ID for Inclusive Service Delivery and Digital Transformation in Indonesia’ project, World Bank

The second component would be to upgrade the existing ICT infrastructure nationwide, including building out the internal capacity of Indonesia’s PR/CR authority, Ditjen Dukcapil, to feature the “effective and responsible use of biometric technologies, including to strengthen personal data protection and to reduce exclusion and vendor and technology lock-in.”

The third phase would involve the actual adoption of identity verification technologies including biometric e-KYC, digital IDs, along with secured, transparent data exchange to facilitate improved access and delivery of digital services from select private and public sector organisations.

This component has already witnessed some progress as it would include around 5,400 institutional users who have cooperation agreements with Ditjen Dukcapil and had carried out more than 7 billion real-time verification requests by September 2022, as per the World Bank report.

“For example, financial services providers have used this service to comply with know-your-customer (KYC) requirements in anti-money laundering (AML) regulations more efficiently, and the Ministry of Social Affairs has used this service to ‘seed’ NIKs in the Integrated Social Welfare Database (DTKS) and thus clean it of ghost, duplicate, and deceased beneficiary records.” outlined the project information document.

The fourth component addresses regulatory and legislative framework reforms to make digital ID verification legally recognised throughout Indonesia, as well as how it would impact and enhance human capital, such as by streamlining how the workforce gets upskilled.

The final level would entail the project management to ensure smooth project implementation, along with risk management, monitoring and evaluation “to proactively and comprehensively manage social, environmental, climate-related and other risks related to the Project”.

Digital ID next step for Indonesia

This would mean consultation with not only the public and private sectors but academic observers as well, to ensure the performance of the project measures up and feedback from users is adequately addressed.

Indonesian internet users are the fourth-highest in the world and the average Indonesian internet user is online for more than eight hours a day, the ninth-highest globally.

This level of penetration showcases the potential in Indonesia for significant online transactions to be performed in the coming years, with the World Bank study highlighting that it “creates a key enabling environment for reducing inequities in access to services and economic opportunities through increased online transactions with the public and private sectors.”

Indonesia is not the only country where the World Bank is financing and supporting digital ID initiatives, with the Philippines and Nigeria two other developing countries where foundational digital identification projects are being explored.

Featured image credit: edited from Unsplash