Indonesia: World Bank Approves $123 Million for Poverty Alleviation & Local Level Governance in Third Kecamatan Development Program

Press Release No:2007/352/EAP

JAKARTA, April 26, 2007 - The World Bank Board today approved the disbursement of a special US$123 million interest-free credit to sustain and expand the activities of the Third Kecamatan Development Program (KDP3), Indonesia's best known community-driven poverty alleviation program.

KDP works nationwide to provide funds to rural communities so they can make poverty-reducing investments based on their own plans and management. From covering 28 villages at its start in 1998, the program now covers 34,000 villages in 30 out of Indonesia's 33 provinces. In the nine years of its existence the Program has generated 55 and a half million workdays resulting in the creation of over 31,000 roads, over 8,000 bridges, over 9,000 sanitation and irrigation units each, 3000 health posts and 5,000 schools.

"Indonesia has changed the paradigm of development by making the poor the drivers, not the recipients, of development activity," said Acting Country Director for Indonesia, Joel Hellman. "International audits and studies show this world class community driven development program provides higher rates of return, greater transparency and sustainability. In fact, this model is also working effectively for sustainable reconstruction in Aceh and elsewhere in Indonesia where natural disasters and conflict have affected poor communities."

In responding to the changing political landscape following decentralization, KDP3 will focus on reducing poverty in several ways: building channels for community participation at the local government level (b) building cost-effective social and economic infrastructure (c) strengthening the capacity of micro-finance institutions to manage funds (d) reconstruction of communities in areas affected by natural disasters.

The KDP3 builds on an existing US$1.45 billion program that has empowered communities to build their own village level infrastructure while improving capacity and providing employment. The funds will be used to scale up the KDP program to cover 36,000 villages in 1,800 districts or more than a half of villages in Indonesia.

The funds are provided by the International Development Agency of the World Bank, which gives concessional credits or interest free loans to the world's poorest nations and poverty reduction programs where repayments are stretched over 35-40 year, with an initial grace period of ten years.

"KDP shows what a rich resource Indonesia has - not just its forests, its minerals, or its energy, but in the villages and hamlets where people yearn to take development forward," says Scott Guggenheim, Social Development Sector Coordinator, World Bank, Indonesia. "KDP gives these communities a chance to show what they can achieve. And in KDP, they achieve a lot. High-quality studies of KDP have showed that corruption is low, participation of women and the poor is high, and the quality of infrastructure impressively good."

The extended program will help KDP incorporate lessons learned from field evaluations, such as the importance of training for facilitators, better systems for managing information, and strengthening the roles played by local governments. Sentot Satria, the World Bank's deputy team leader for the KDP project, noted that "KDP is now entering a new stage of professional standards, where expectations are high and all participants must work even harder than before to make the project a success."

Going forward, the long term sustainability of Indonesia's community driven development programs - now being studied and emulated in several countries including the Philippines, China, Khyrgistan, Azaerbaijan, Afghanistan and other countries that have visited KDP in the past - will also depend on creating a "governance infrastructure that will support community participation in planning, procurement and implementation of development projects under decentralization," said Susan Wong, Senior Monitoring and Evaluations Advisor, World Bank, Indonesia.