Plugging the Leaky Bucket: Generating Experimental Evidence to Support Indonesia's Social Protection Reforms

The Government of Indonesia (GoI) is embarking on a radical shift in Raskin, Indonesia’s largest targeted social assistance program, moving from in-kind transfers run by the government to a novel delivery system: restricted electronic vouchers that can be redeemed at any registered private sector retailer. The key reason for this reform is to reduce the extensive leakages and corruption that occur during the current pubic distribution process. Our previous research has shown that poor households only receive approximately one-third of their subsidy, and the GoI believes this problem can be alleviated by changing the structure of the bureaucracy’s delivery mechanism so that private sector agents, rather than government officials, are the ones handling the last-mile of service delivery. Yet, outsourcing creates its own new set of governance challenges in terms of how the government structures and then monitors its program. We are working with the GoI to design three experiments to test interventions intended to strengthen the transition to vouchers and private sector agents: a) strengthening the supply side, to ensure the elimination of private monopolies and ensuring high quality service, b) providing a tool for monitoring fraud, and c) ensuring that beneficiaries can navigate the technological and bureaucratic hurdles of the new e-voucher system. In this proposal, we request funds for the first experiment, to determine how the government can recruit a network of retailers to ensure sufficient high quality service, and eliminate the monopoly power that could lead to leakages in the new privatized system.