From digital identification systems to artificial intelligence, Indonesia is using technology to modernize public services and create new opportunities for millions of people. Despite recent progress, poverty remains a challenge, with 8.57% of the population living in poverty. As Indonesia works to reduce poverty, digital innovation has become an important tool for expanding access to economic opportunities.

Through digital identification systems, electronic payments and other digital technologies, Indonesia is modernizing the delivery of social assistance and public services. These innovations are improving efficiency, strengthening transparency and connecting more people with the resources they need. This article explores how digital transformation is supporting poverty reduction in Indonesia.

Digital Technology Is Improving Public Services

Indonesia is using digital technology to make government services and social assistance programs more efficient. By making government services easier to access and improving the delivery of social assistance, e-government systems ensure that support reaches vulnerable households.

E-government systems use digital technologies to provide public services and information to citizens, businesses and government agencies more efficiently. These systems offer an easier way for people to access services like tax filing, health care, financial aid and other government programs.

A key part of Indonesia’s e-government system is its digital identification program. In 2011, Indonesia introduced its digital identification system, centered around the electronic identity card (e-KTP). The system links with official records, including family cards, birth certificates and other identity documents. Now, it has been distributed to 170 million residents and is foundational to government and private-sector transactions.

By allowing citizens to verify their identities digitally, the e-KTP improves access to government services and social assistance while reducing administrative errors and fraud.

The World Bank is working on the “ID for Inclusive Service Delivery and Digital Transformation Project” to improve and increase the use of digital identification systems in Indonesia. The project aims to expand these systems in 12 more provinces.

By expanding digital identification systems, Indonesia improves access to essential public services and social assistance, helping more people, especially those in underserved communities, receive the support they need and contributing to long-term poverty reduction in Indonesia.

How Digital Innovation Is Expanding Economic Opportunities

In addition to improving public services, digital innovation is expanding economic opportunities across Indonesia by increasing access to financial services and digital commerce. Digital payment systems and other financial technologies help more people participate in the formal economy, particularly those in underserved communities.

Digital public infrastructure (DPI) refers to the foundational digital systems that allow governments and businesses to deliver services at a large scale, including digital identification, digital payment systems and secure data exchange.

One of the main ways Indonesia is expanding economic opportunities is through digital financial services (DFS), an important component of DPI. These include a variety of financial tools and services, such as digital wallets, electronic payment platforms, savings accounts, loans, insurance and investment products.

These investments have already contributed to greater financial inclusion. Today, 88.7% of the population has access to formal financial services, with the government aiming to increase that figure to 93% by 2029.

These digital payment methods are more inclusive and accessible, particularly for people with limited access to traditional financial services. By reducing geographical barriers and enabling remote transactions, digital financial services make it easier for individuals to save money, receive payments, access financial products and participate more fully in the formal economy.

These benefits are especially significant for rural producers, who often face greater barriers to accessing markets and financial resources. Hengky Kohan, a consultant specializing in data and artificial intelligence, told The Borgen Project in an interview that digital innovation can improve economic opportunities for rural producers by making them more visible within digital supply chains. He said, “A farmer who exists in a traceable digital supply chain can be paid more fairly, qualify for certification premiums and access financing based on verifiable production records.”

How Digital Governance Strengthens Poverty Reduction

Beyond improving public services and expanding financial inclusion, digital innovation is also strengthening governance in ways that can support poverty reduction. By improving how information is collected, shared and analyzed, digital technologies help governments make more informed decisions and deliver resources more efficiently. Kohan explained that the Indonesian government has begun treating “data as national infrastructure” rather than simply as isolated information. He added that integrating data systems can strengthen policymaking, improve public services and support economic development.

He also noted how stronger digital governance improves transparency and efficiency. For example, digital reporting systems for exports help reduce revenue leakage and provide governments with more accurate information about economic activity. He told The Borgen Project, “The poverty connection is fiscal: every dollar of leakage that better data recovers is a dollar available for health, education and social assistance.” By reducing revenue losses and improving data accuracy, policymakers can make more informed decisions and allocate public resources more effectively. By strengthening digital governance and improving access to reliable information, Indonesia is building a more efficient public sector that can better support economic development.

Conclusion

While challenges such as digital literacy and unequal access to technology remain, Indonesia’s investments in digital innovation demonstrate how technology can support long-term poverty reduction in Indonesia. By improving access to public services, expanding financial inclusion and strengthening government transparency, digital transformation is helping create greater economic opportunities and build a more inclusive future for communities across Indonesia.

– Michelle Kurniali

Michelle is based in Dallas, TX, USA and focuses on Good News and Technology for The Borgen Project.

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