Indonesia is a populous country located in Southeast Asia with more than 17,000 islands and 300 ethnic groups. According to the World Bank, Indonesia is classified as an upper-middle-income country (UMIC). Using the World Bank’s UMIC poverty line, 68.3% of Indonesians are classified as poor. Poverty limits access to education and economic opportunity, slowing long-term development.

Understanding Poverty

The World Bank measures poverty using three international poverty lines: $2.15 per day for extreme poverty, $3.65 for lower-middle-income countries and $6.85 for UMICs. These figures are calculated using purchasing power parity, which adjusts for differences in cost of living across countries.

Poverty is especially common in rural areas, where limited access to education and economic opportunity can hinder long-term development. Dompet Dhuafa, a nonprofit organization in Indonesia that aims to empower the underserved, spoke with The Borgen Project. The nonprofit said poverty must be viewed from multiple perspectives, not only income, but also accessibility, quality of life, resilience and sustainability. The organization categorizes poverty into material, spiritual, cultural, geographic and thematic dimensions, highlighting how financial hardship intersects with limited infrastructure, education and social support.

Poverty and Education in Indonesia

Poverty in Indonesia continues to shape access to education by limiting resources and creating unstable home environments that hinder learning and early childhood development. Government data from BPS–Statistics Indonesia shows the national literacy rate reached 97.10% in 2025, with a 3.12% gap between urban and rural areas. However, literacy does not necessarily reflect functional literacy. Only about 10% of Indonesians read books regularly and the national reading interest remains extremely low (0.001%).

Student achievement data further highlights these challenges. In 2025, literacy competency reached 71.81% among primary students, 72.07% in middle school and 72.89% in high school, while vocational high schools lagged behind at 66.02%. Numeracy rates were slightly lower across all levels. Limited educational quality, unequal access to school facilities and reading materials and increased reliance on digital media continue to affect learning outcomes.

Dompet Dhuafa told The Borgen Project that limited education reduces job opportunities, while limited job opportunities make education harder to afford, creating a cycle that can persist across generations. Although Indonesia provides free primary and secondary education, the organization notes that persistent challenges in curriculum quality, teacher capacity and infrastructure continue to hinder progress toward high-quality education.

Education Empowerment Programs

To address these barriers, Dompet Dhuafa runs education empowerment programs such as SMART Ekselensia Indonesia, YouLead, Ethos ID and Sekolah Literasi Indonesia. These initiatives aim to expand access to quality education while developing leadership and life skills. As of the 2023–24 academic year, Dompet Dhuafa’s education programs reached more than 53,000 beneficiaries, demonstrating the importance of investing not only in access to education but also in its quality.

Government initiatives also play an important role. The Smart Indonesia Card (Kartu Indonesia Pintar (KIP) provides financial assistance to children from low-income families through the Smart Indonesia Program (Program Indonesia Pintar (PIP). By 2025, the program had reached more than 2.6 million students, helping families cover school expenses such as books, supplies and tuition. For many families, this support makes continuing education possible, including a girl named Fedia.

Fedia is an 18-year-old girl with a dream to be an interior designer studying at Setia Budhi Community Learning Activity Center (PKBM) in Pati Regency. As a recipient of PIP aid funds, Fedia uses her funds to buy books and other school necessities. She then continues her learning to pursue her dream and enter college, majoring in interior design. As a result, Fedia’s family felt aided through PIP, especially her mother, who hopes that her child can continue studying to turn her dream into a reality.

This demonstrates how poverty impacts low-income communities—including students—and how nonprofit and governmental initiatives help relieve these hardships through community empowerment and financial aid. By expanding education access, individuals and communities receive an increase in potential earnings and reduce unemployment rates, directly contributing to national productivity tied to economic growth. Together, nonprofit and government efforts highlight the importance of sustained investment in education to break the cycle of poverty and expand long-term economic opportunity.

Economic Opportunity

Poverty in Indonesia not only affects access to education but also limits economic opportunities later in life. Limited access to quality education and skills training often results in lower-paying and unstable employment. In rural and low-income communities, individuals may enter the workforce early to support their families, reducing long-term earning potential. Dompet Dhuafa told The Borgen Project that despite ongoing empowerment efforts, internal and external challenges remain, including financial sustainability, policy dynamics, human resource capacity, governance and program development. The organization explained that “economic opportunities require human resources with sufficient knowledge and skills. However, the majority of Indonesia’s workforce still has only secondary education or lower, meaning access to economic opportunities is limited to only a small portion of society.”

These barriers contribute to the growth of informal employment, low wages and limited social mobility, allowing the cycle of poverty to persist across generations. Informal employment typically refers to work without formal contracts or legal protections, including self-employment, casual labor and unpaid family work. Data from Indonesia’s Central Statistics Agency (BPS) shows a strong link between education level and informal employment. Individuals without schooling have a 93% likelihood of working in the informal sector, compared with 17.3% of university graduates. As education levels rise, the proportion of informal employment declines, highlighting the role of education in improving economic stability.

In addition, organizations such as Dompet Dhuafa focus on economic empowerment programs that provide vocational training, entrepreneurship support and community development initiatives. Through the use of zakat, infaq, alms and waqf (ZISWAF), the organization aims to promote long-term economic independence. Dompet Dhuafa stated that these initiatives seek to build a more inclusive economy by equipping vulnerable communities with vocational skills, business knowledge and long-term support, enabling mustahik (recipients) to eventually become muzakki (donors). Increasing access to economic opportunities is essential for sustainable development. When individuals gain stable employment and financial independence, communities experience improved living standards and reduced vulnerability to poverty.

Conclusion

Poverty continues to shape access to education and economic opportunity in Indonesia, creating barriers that can limit long-term development. When these barriers persist, governmental programs such as the KIP, PIP and nonprofit organizations like Dompet Dhuafa step in to address these challenges. Through educational access, vocational empowerment and community-based development, these initiatives aim to break intergenerational poverty and create long-term social and economic resilience in Indonesia.

Continued investment in education and economic empowerment will be essential to ensuring that future generations have the opportunity to break the cycle of poverty and contribute to Indonesia’s long-term growth.

– Bianca P. Gunawan

Bianca is based in Jakarta, Indonesia and focuses on Good News and Global Health for The Borgen Project.

Photo: Flickr