Financing for equity in primary and secondary education
1. Education resources to subnational governments
2. Education resources to schools
3. Education resources to students and families
4. Social policies and family support programmes
Introduction
In Indonesia, public education is jointly overseen by two ministries: the Ministry of Primary and Secondary Education (MPSE), which manages approximately 86% of schools, and the Ministry of Religious Affairs (MoRA), responsible for around 14% of religious education institutions. The system operates under a decentralised financing model, with resources flowing from multiple sources across national, provincial, district, and school levels.
A 2009 constitutional amendment requires both central and regional governments to allocate at least 20% of their budgets to education. MPSE channels roughly 60% of its budget to regional governments, which are responsible for planning and executing local education programmes. District governments primarily manage funding for primary and lower secondary education, while provincial governments oversee upper secondary, vocational, and non-formal education.
Central government transfers are the primary revenue source for sub-national education budgets. The General Allocation Fund (DAU) covers civil servant salaries, including teachers, while the Specific Allocation Fund (DAK) finances capital expenditures such as school construction and renovation. Additional mechanisms, including Special Adjustment Funds, De-concentration Funds (Dekon), and Co-administered Tasks (Tugas Pembantuan), support social assistance and capacity-building initiatives. At the school level, the School Operational Assistance (Dana BOS) programme and the Operational Assistance for Quality Management (BOMM) fund operational costs and activities aimed at improving education quality.
The World Bank provides an overview of the complexity of education fund transfers and flows in Indonesia.
1. Education resources to subnational governments
The General Allocation Fund (Dana Alokasi Umum) (DAU) is the primary mechanism for transferring funds to sub-national governments in Indonesia, constituting the largest single sources of revenue for districts. The legal and institutional foundations for fiscal decentralization were established between 1999 and 2001 with the passage of Law No. 22 of 1999 on Regional Government and Law No. 25 of 1999 on Sharing Finances between Central and Regional Governments. The DAU was established by Law 33/2004 on Fiscal Balance between Central and Regional Governments as the mechanism to provide subnational governments with resources to carry out newly devolved responsibilities. The DAU has undergone significant reforms with the passage of Law 1/2022.
Under Law 1/2022, the DAU aims to equalize fiscal capacities across regions by allocating funds based on each subnational entity’s estimated “per client” fiscal needs, rather than distributing a fixed amount per district as was done previously. The DAU is separated into general funds, which may be used at each government’s discretion, with allocations reflecting performance against minimum service standards, and specific funds, earmarked for education, health, infrastructure and contract staff.
2. Education resources to schools
School Operational Assistance (BOS)
Introduced in 2005, the School Operational Assistance (BOS) programme complements funding from the General Allocation Fund (DAU) and the Specific Allocation Fund (DAK). It provides per-student operational funding for all students in basic education, covering non-salary costs in both public and private primary and secondary schools. The BOS allocation formula does not account for difference in school operating costs.
To address gaps left by the BOS programme, regional governments introduced local school grants or BOS Daerah (BOSDA). The BOSDA Improvement Program, which began in 2010, is a partnership of the Ministry of Education and Culture, the World Bank, the EU, and the Dutch government. The programme developed a formula to help address financing inequalities between schools allowing that includes an equity allocation to address a school’s remoteness, its current state of repair and the socio-economic characteristics of its students. BOSDA is financed through regional governments.
3. Education resources to students and families
Bantuan Siswa Miskin Programme
Launched in 2008, the Bantuan Siswa Miskin (BSM) programme was Indonesia’s first targeted cash transfer initiative aimed at supporting poor students at all education levels. Its primary goal was to improve access to education and reduce dropout rates among children from low-income families. BSM provided annual cash transfers to cover school fees and other educational costs, including transportation and uniforms. Eligibility was based on holding a Social Protection Card, participation in the Family Hope Programme, or residence in social care institutions or orphanages. BSM laid the foundation for the later Programme Indonesia Pintar (PIP).
Programme Indonesia Pintar (Smart Indonesia Programme)
Introduced in 2014 as a refinement of BSM, the Programme Indonesia Pintar (Smart Indonesia Programme, PIP) is a nationwide initiative designed to remove financial barriers and improve educational access for children from underprivileged households. PIP operates through conditional cash transfers that cover tuition fees, books, uniforms, and transportation costs. The programme targets children aged six to twenty-one from households holding a Social Protection Card, participants in the Family Hope Programme, children living in orphanages, and other vulnerable groups, including street children, child labourers, and students with disabilities. To receive support, beneficiaries must be enrolled in an educational institution, which can include formal public or private schools, religious schools, community learning groups, and vocational training centres. The amount of financial assistance varies by educational level, with primary school students receiving IDR 450,000 per year, junior secondary students receiving IDR 750,000 per year, and senior secondary students receiving IDR 1,000,000 per year. Continued support is contingent on maintaining school enrolment, encouraging retention, while schools are responsible for identifying eligible students and verifying their eligibility.
Secondary Education Affirmation Programme
Complementing PIP, the Secondary Education Affirmation Programme targets students in 3T areas (frontier, outermost, and underdeveloped regions), special regions, and Papua. Established in 2013, the programme provides affirmative support to ensure students complete the full 13 years of compulsory education.
4. Social policies and family support programmes
The Family Hope Programme (PKH), administered by the Ministry of Social Affairs (KEMENSOS), is a conditional cash transfer initiative targeting the poorest nine per cent of households to reduce poverty and promote education and health outcomes. Eligible households include those with pregnant or lactating women, children under six, school-aged children (7–21), youth without basic education, severely disabled individuals, and elderly people aged seventy and above. Benefits are provided quarterly, ranging from IDR 1.9 million to IDR 3.7 million annually, and are contingent on compliance with programme conditions, including maintaining at least 85% school attendance for children. Beneficiaries are selected through the Social Assistance Unified Database, with eligibility reassessed every six years to ensure continued support and long-term investment in human capital.
5. School meal programmes
Between 2016 and 2019, the Ministry of Education and Culture provided limited support through the School Child Nutrition Programme (PROGAS), which delivered three meals per week for six months annually to elementary students in targeted geographic areas, supported by 128 district nutritionists.
In 2024, the incoming government announced plans for a nationwide free school meal programme aimed at improving child nutrition and reducing stunting among students and expectant mothers. The Makan Bergizi Gratis programme, launched on January 6, 2025, now operates over 14,000 kitchens serving more than 42 million beneficiaries, including schoolchildren, pregnant women, and recently expanded groups like older adults and street children, with a target of 82.9 million by early 2026. MBG addresses widespread child malnutrition by providing balanced meals in schools, targeting students, young children, and pregnant or breastfeeding women. The initiative integrates health, education, agriculture, and social protection, improving dietary habits, school attendance, and learning outcomes while supporting local farmers. Strict nutrition and food safety standards, combined with continuous monitoring and cross-sector collaboration, ensure quality and scalability.
In 2026, Indonesia will invest IDR 335 trillion in a nationwide Free Nutritious Meals programme, aiming to reach 82 million beneficiaries, improve nutrition, and stimulate local economies. The initiative guarantees upfront payments to meal service units, supporting small businesses, job creation, and regional investment, with quarterly disbursements designed to boost consumption and production.
