Why Assistance in the Form of a Deposit
To improve the effectiveness of distribution, the government will provide social assistance as financial deposits. The reason for this is:
- Deposits are a form of productive activity.
- Deposits are part of a national strategy for financial inclusion.
- Improvements to the 2013 BLSM programs that only distribute cash.
- Reduce queueing times.
In addition to channelling funds as deposits, the government also uses distribution mechanisms in the form of Digital Financial Services (LKD) that are set by Bank Indonesia.
Reasons for using LKD:
- LKD uses non-cash deposits and financial transactions for which a person's cell phone number are also their deposit account.
- With LKD, people are not limited to the existence of a physical bank or ATM. Money can be sent through mobile phones and withdrawn as cash through designated agents.
- LKD agents can be shops, sellers of cell phone credit or even individuals in a community. As such, communities in areas far from bank branches do not have to travel long distances to access financial services.
- The use of LKD for distributing government social assistance was tested in 1,600 PKH recipient households in four provinces this year, and yielded good results.
- Encourages asset accumulation and facilitates financial management: assistance in the form of deposits encouraging the poor to not spend their full amount of assistance immediately.
- Convenience: It is easier to open an LKD account than a conventional savings account.
- Part of the national strategy for financial inclusion: LKD can act as a "gateway" to receive a wide range of other financial services, such as savings, money transfers (including the remittances of migrant workers), credit and insurance
- Provides security and comfort: In future, recipients will not need to queue, they can choose when they will withdraw their money and do not have to carry cash around after receiving assistance.
- Improves accountability: Assistance sent directly to private accounts will minimise the potential for corruption.
- Integrates various social assistance programmes is better: Allows for various types of assistance, according to recipients’ needs, such as assistance for fertilizers and fuel, help to fishermen, etc.
- Uses technology to reach a wider number of targeted beneficiaries across Indonesia.
- Increases the accountability of social assistance programmes.
- Encourages integration among individuals. Promotes further innovation if increasing numbers use LKD.
- Smaller distribution costs (in the long term), if assistance is channelled through savings. However, significant investment costs occur in the early stages.