Unleashing The Philanthropy Fund’s Potential for A Sustainable Tomorrow: A Comprehensive Overview

Abstract

Indonesia’s dynamic philanthropic sector is pivotal for the nation’s progress and global leadership in philanthropy. Yet, its diversity and intricate regulatory landscape present challenges in maximizing the efficiency of philanthropic funds. Our extensive review highlights the imperative to bolster regulatory frameworks, enhance tax incentives, and elevate philanthropic governance. Strengthening regulations, improving tax incentives, and refining governance structures will create a more conducive environment for impactful philanthropy, empowering governments and stakeholders to drive sustainable development. These strategic actions lay the foundation for philanthropy to assume a more influential role in steering Indonesia’s path toward sustainable growth and societal well-being. By refining these essential elements, philanthropy can become a powerful catalyst in advancing Indonesia’s journey towards sustained prosperity and societal advancement.

Full text

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Indonesia’s dynamic philanthropic sector is pivotal for the nation’s progress and global leadership in philanthropy.
Yet, its diversity and intricate regulatory landscape present challenges in maximizing the eciency of
philanthropic funds. Our extensive review highlights the imperative to bolster regulatory frameworks, enhance
tax incentives, and elevate philanthropic governance. Strengthening regulations, improving tax incentives,
and rening governance structures will create a more conducive environment for impactful philanthropy,
empowering governments and stakeholders to drive sustainable development. These strategic actions lay the
foundation for philanthropy to assume a more inuential role in steering Indonesia’s path toward sustainable
growth and societal well-being. By rening these essential elements, philanthropy can become a powerful
catalyst in advancing Indonesia’s journey towards sustained prosperity and societal advancement.
Keywords: Philanthropy; Sustainable Financing; Sustainable Development; Governance
Sektor lantropi Indonesia telah berkembang pesat dalam beberapa tahun terakhir bahkan menjadi yang tertinggi
pada tataran global. Namun demikian, sektor lantropi Indonesia juga menghadapi tantangan, antara lain
kompleksitas regulasi yang dapat menghambat esiensi dan efektivitas penggunaan dana lantropi. Tinjauan
literatur yang kami lakukan menyoroti pentingnya upaya penguatan peraturan, pemberian insentif pajak, dan
peningkatan tata kelola lantropis. Seluruh inisiatif tersebut akan menciptakan lingkungan yang lebih kondusif
untuk lantropi yang semakin memberikan dampak yang lebih luas. Dengan menyempurnakan elemen-elemen
penting ini, lantropi dapat menjadi katalis yang kuat dalam memajukan Indonesia menuju kemakmuran
berkelanjutan dan kemajuan masyarakat.
Kata Kunci: Filantropi; Pendanaan Berkelanjutan; Pembangunan Berkelanjutan; Pemerintah
Copyright © 2023, Journal of Infrastructure Policy and Management
Unleashing The Philanthropy Fund’s Potential
for A Sustainable Tomorrow: A Comprehensive
Overview
ABSTRACT
Anton Abdul Fatah*, Novie Andriani**, Guntur Nur Hidayat*
* IIGF Institute, PT Penjaminan Infrastruktur Indonesia (PERSERO)
** The National Development Planning Agency (Bappenas), the Republic of Indonesia
*** The Ministry of Finance of the Republic of Indonesia
ISSN: 2599-1086 | e-ISSN: 2656-1778 | Vol. 6 | No. 2
Corresponding author:
Anton Abdul Fatah│Email: anton.abdul@iigf.co.id
SARI PATI

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INTRODUCTION
Indonesia has set ambitious goals to achieve
per capita income levels comparable to those of
developed countries, with the primary objective
of escaping the Middle-Income Trap (MIT). To
turn this vision into a reality, the Indonesian
government has introduced the National Long-
Term Development Plan (RPJPN) for the period
2025-2045, driven by the “Golden Indonesia
2045” vision (Bappenas, 2023). This plan marks
a fundamental shift in Indonesia’s approach
to national development, from a reform-
oriented focus to a transformative one. This
transformation encompasses three key domains:
economic, social, and governance (Ibid). Within
this framework, sustainable economic growth is
pivotal to achieving the dened targets, with a
growth target ranging from 5.7% to 6% annually
(Ibid, p. 70). Only through such robust economic
growth can Indonesia hope to overcome the MIT
in the next two decades.
Indonesia is well-positioned to realize this
ambitious vision. With the world’s fourth-largest
population, the country boasts a workforce of
139.2 million individuals (Sari et al., 2023).
Additionally, Indonesia is currently experiencing
the Peak Demographic Bonus phase (Ananta,
2021), marked by an exceptionally low
population dependency ratio. This represents a
unique and invaluable opportunity for Indonesia
to maximize its potential and escape the MIT in
the next two decades (Saputra and Hutajulu,
2020). Hence, it is imperative for Indonesia to
capitalize on its current demographic advantage
and implement the RPJPN eectively.
Despite Indonesia’s promising economic growth
prospects, realizing its ambitious development
vision is a complex challenge. Several signicant
hurdles must be addressed, including high levels
of economic inequality, subpar infrastructure,
environmental concerns, and disparities in
access to education and healthcare. According
to the 2020-2024 National Medium-Term Plan,
the realization of planned development projects
necessitates an investment of IDR35,455.6
trillion, of which the government can only
contribute approximately 8.4 to 10.1 percent
(Bappenas, 2019). State-owned enterprises
(BUMN) and regional-owned enterprises
(BUMD) are expected to contribute an additional
8.5 to 8.8 percent, leaving more than 80 percent
of the total investment funds to be secured from
other sources (Ibid).
In response to these challenges, the government
is exploring more optimal funding alternatives,
and philanthropy has assumed a prominent role
in this context (Ananta, 2021; Montgomery et
al., 2008; Dabbas, 2021). Philanthropy extends
beyond nancial contributions to diverse
development sectors; it also encompasses
the stimulation of innovation, promotion of
collaboration, and facilitation of positive social
transformation (Chitwood, 2020).
The 2020-2024 RPJMN outlines non-government
funding sources that can be harnessed for
development, including Government and
Business Entity Cooperation (KPBU), Business
Entity Funding, Corporate Social Responsibility
(CSR), Philanthropy, and Religious Funds
(Presidential Decree 18/2020). The RPJMN
narrative document denes philanthropy
as “an activity conducted by individuals or
foundations for the benet of the public or
society, driven by the common good, and
nanced through voluntary personal or group
contributions” (p:IX.17). It further emphasizes
that “Philanthropists’ activities may involve
the development of social and environmental
infrastructure, provision of essential aid,
empowerment of communities, and advocacy”
(p:IX.17).
In the realm of philanthropy, individuals and
organizations aspire to become proactive agents
in addressing societal inequalities, encompassing
issues like poverty, discrimination, and limited

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access to essential resources (Chen, 2021).
Philanthropy contributes to the establishment
of a fair and equitable society by oering
resources and support to specic communities
or individuals (ibid). Moreover, philanthropic
endeavours do not solely aim to alleviate the
symptoms of socioeconomic issues or other
societal challenges; they also seek to address
the underlying causes of these issues in a
sustainable manner (Parr, 2015).
One denition of philanthropy, articulated by
Harvey (2019), characterizes it as the voluntary
contribution made by individuals or corporate
entities to support charitable objectives, projects,
and organizations. Importantly, the donors or
aliated parties do not receive direct benets or
compensation from their contributions (Harvey,
2019). This denition underscores the altruistic
nature of philanthropic actions, setting them
apart from pursuits driven by personal gain.
Philanthropists, whether individuals or
institutions, invest their resources in causes
they believe in, particularly those aimed at
benetting others or society (Chen, 2021).
However, it is worth noting that philanthropy
is a mutually benecial endeavour. Both parties
involved gain from philanthropic engagement:
the recipients benet from the resources
provided by the philanthropist, and the donors
experience satisfaction from contributing to a
cause they support (Chitwood, 2020).
The allocation of philanthropic funds
encompasses not only soft nancing, such as
scholarships and research grants, but also hard
nancing, including infrastructure development
projects. A study conducted by Montgomery
et al. (2008) revealed that community-led
infrastructure development, supported by
philanthropic funds, has a direct impact on
local economic development, poverty reduction,
social inequality mitigation, and environmental
enhancement. Such initiatives demonstrate the
commitment of philanthropic entities to invest
their resources in infrastructure development,
thereby directly inuencing the well-being of
the communities they serve (Ibid).
In Indonesia, philanthropic funds have played
a signicant role in developing various types
of infrastructure across dierent sectors, often
initiated by local communities. This has been
particularly vital in areas where public facilities
are lacking, and government budgets are limited
(Rochani et al., 2021). Community engagement,
including philanthropy, can be a highly eective
tool for bridging infrastructure gaps, promoting
more ecient and inclusive development
(Dabbas, 2021). According to data from the
Indonesia Philanthropy Outlook for 2022,
philanthropic funds disbursed in Indonesia in
2020 amounted to IDR15.4 trillion (Indonesian
Philanthropy, 2022). The total cumulative
value of philanthropic fund disbursements
between 2018 and 2020 reached IDR39.6
trillion, beneting 91.7 million people (Ibid).
Philanthropy is a powerful force for good, and
it can play a vital role in addressing the world’s
most pressing societal challenges. Supporting
philanthropic initiatives contributes to the
creation of a more just and equitable world for
everyone.
METHODS
This article presents an excerpt from an
extensive edited volume titled “Dana Filantropi
untuk Pembangunan di Indonesia” (English
trans.: “Philanthropic Funds for Development
in Indonesia”) scheduled for publication by the
end of 2023. The authors of this article serve
as the editors of this comprehensive book,
which encompasses ten main articles along
with introductory and concluding chapters. The
overarching objective of this book is to delve
into strategies for leveraging philanthropic
funds to drive sustainable development in
Indonesia. Within this volume, diverse chapters
predominantly employ literature reviews as
their primary methodology. This particular

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article aims to provide an overview of the
main objectives and signicant contributions
encapsulated within this substantial work.
The edited volume book’s primary contribution
lies in its comprehensive and well-researched
analysis of philanthropy in Indonesia. The
majority of chapters employ a rigorous literature
review methodology, providing readers
with a solid foundation for understanding
the philanthropic landscape, its challenges,
and its opportunities. The book also oers
valuable insights into the challenges and
opportunities inherent in maximizing the
potential of philanthropic funds for sustainable
development. It delves into issues surrounding
governance, transparency, and accountability
in philanthropy, providing a comprehensive
overview of the challenges that philanthropic
organizations face in Indonesia. Furthermore,
the edited volume book contributes signicantly
to the broader discourse on sustainable
development by highlighting the critical role
of philanthropic funds. It emphasizes that
sustainable development is not merely the
responsibility of governments and international
organizations but is a shared commitment.
The book showcases the philanthropic sector
as a powerful ally in achieving the Sustainable
Development Goals (SDGs) within the
Indonesian context.
RESULTS AND DISCUSSION
1. Philanthropy’s Contribution to
Expanding Development Funding
Philanthropy, at its core, is a form of charitable
giving. In the narrative document of the
2020-2024 RPJMN (National Medium-Term
Development Plan), philanthropy is dened as
«an activity carried out by a group of people
or foundations for the benet of the public or
society in the spirit of common good through
personal or group funds collected voluntarily»
(Presidential Decree 18/2020, p:IX.17).
Indonesia has consistently ranked highest in the
World Giving Index for ve consecutive years,
demonstrating its unparalleled generosity. In
2022, Indonesia maintained its top spot with
an index score of 68%, indicating that 68% of
Indonesians actively engage in philanthropic
activities. This is further evident in the country’s
remarkable donation rate of 84% and willingness
to volunteer, standing at 63%—both of which are
the highest in the world.
The culture of philanthropy in Indonesia,
which encompasses charitable giving and
volunteerism, is deeply rooted in its cultural
heritage. Several factors contribute to
Indonesia’s global leadership in philanthropy,
including:
• Religious teachings: Faith plays a pivotal
role, emphasizing the signicance of giving
and helping others. This is often channelled
through religious institutions and places of
worship (Kasri and Ramli, 2019). Indonesia’s
abundance of places of worship further
facilitates these faith-driven acts of charity.
For example, data from the Ministry of
Religion reveals an impressive 299,644
registered mosques across the nation (Simas.
kemenag.go.id, 2023).
• “Gotong Royong”:The deeply rooted culture
of mutual cooperation, known as gotong
royong, entails assisting neighbours and
fellow community members without
expecting any reciprocation (Hakim,
2021). Slikkerveer (2019) goes so far as
to assert that gotong royong is an integral
aspect of Indonesian village identity and
a fundamental driver behind the success
of the “bottom-up” approach to Integrated
Community-Managed Development (ICMD)
in the country (p. 307).
Indonesia is actively engaged in multifaceted
development eorts, focusing on bolstering
economic growth and promoting equitable

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wealth distribution. These endeavours
necessitate substantial investment. As per data
from the 2020-2024 National Medium-Term
Plan, the estimated total investment required
amounts to IDR35,455.6 trillion. However, the
scal capacity of both the government and state-
owned enterprises (BUMN) can only cover 8.4-
10.1% and 8.5-8.8% of these needs, respectively
(Presidential Decree 18/2020). This underscores
the importance of soliciting more than 80%
of the investment requirements from public
and private sources. To meet these critical
investment needs, the government is actively
exploring various avenues, with philanthropy
emerging as a noteworthy alternative funding
source.
The articles in our book highlight the immense
potential of philanthropy to bolster development
around the world, with a particular focus
on its role in Indonesia. In Indonesia, as in
many Southeast Asian nations and beyond,
philanthropy is predominantly driven by
individual giving, often rooted in personal
beliefs and preferences (Kasri and Ramli, 2019).
Between 2018 and 2020, the total cumulative
value of philanthropic fund distribution reached
IDR39.6 trillion, beneting 91.7 million people
(Filantropi Indonesia, 2022). The utilization of
philanthropic funds is on the rise both globally
and in Indonesia, encompassing an expanding
range of elds and sectors.
For example, as of 2023, Indonesia is home to
39,220 Islamic boarding schools (pesantren),
which serve as Islamic philanthropic entities
dispersed throughout the country. This number
increases signicantly when considering the
various educational infrastructure components
associated with pesantren, from early childhood
education (PAUD) and kindergartens to
primary and secondary levels, along with
tertiary institutions (Ma’had Aly). In addition
to education, many pesantren also have health
infrastructure, including clinics and hospitals,
such as the Assuyuthiyyah Hospital at the
Raudhatul Ulum Islamic Boarding School in Pati,
Central Java, and the Hasyim Asy’ari Hospital
(RSHA) at the Tebuireng Islamic Boarding
School in Jombang, East Java. Moreover,
philanthropic institutions of various types,
including those associated with conglomerates,
corporations, and individual philanthropists,
are numerous and have signicant potential to
support development endeavours in Indonesia.
Philanthropic funds are not simply distributed
as charity; they are a powerful tool for
addressing diverse social challenges. Several
chapters in this book underscore the critical
role of philanthropy in fostering social
inclusion. This aligns with the fundamental
premise that philanthropic activities represent
concrete steps taken by individuals and entities
to provide solutions to societal inequalities,
such as poverty, discrimination, and limited
access to essential resources (Chen, 2021). It is
therefore not surprising that BAZNAS (National
Alms Agency) and all zakat managers, Islamic
philanthropic institutions in Indonesia, have
succeeded in reducing national poverty by 1.76%
(Zaenal et al., 2022). In 2022 alone, BAZNAS and
Local Alms Agencies (LAZs) successfully lifted
463,154 mustahik (those entitled to receive
zakat) out of poverty across Indonesia (Ibid).
Furthermore, the inclusive nature of
philanthropic fund allocation aligns with
the principles of «green» or environmentally
friendly and sustainable development.
Numerous philanthropic institutions, both in
Indonesia and globally, focus their programs on
addressing environmental issues, such as waste
reduction, promoting a circular economy, and
facilitating the adoption of renewable energy
sources. These initiatives not only directly
combat environmental challenges but also create
numerous employment opportunities within
the communities where these philanthropic
organizations operate.

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Additionally, there is a growing trend of
philanthropists worldwide adopting the
Sustainable Development Goals (SDGs) as a
«universal language.» Many philanthropic
entities nd the SDGs framework highly valuable,
especially when demonstrating the alignment
of their initiatives and programs with those of
other donors. The SDGs framework not only
oers a platform for cross-sector collaboration
but also encourages philanthropic actors to
share their organizational or program goals,
facilitating the establishment of partnerships
with similar objectives (Longley, 2022).
2. Philanthropy’s Global Footprint in
Development
In an increasingly interconnected world,
philanthropic funding has emerged as a
major driver of development endeavours
and initiatives aimed at enhancing people’s
quality of life across social, economic, health,
and environmental domains (Chen, 2021).
Philanthropic foundations wield signicant
inuence in sustainable development by
mobilizing nancial resources and functioning
as development stakeholders, including the
facilitation of multi-stakeholder partnerships
(OECD, 2023).
A comprehensive study has revealed that over
40 non-governmental philanthropic foundations
contributed to a range of initiatives, amassing
a total funding value of $10 billion, equivalent
to approximately IDR155.8 trillion, in 2020. This
gure increased to $11 billion or approximately
IDR171.4 trillion in 2021. The OECD study
further highlights West and East Africa, along
with South Asia, as the regions that received the
highest levels of philanthropic funding globally.
The sectors that philanthropic institutions have
predominantly targeted include health, poverty
alleviation, and gender equality.
The landscape of global philanthropic
activities and programs encompasses an
array of initiatives, spanning from multi-party
partnership endeavours to disaster management
and broad-impact development investments.
A discernible trend over the past two decades
indicates an increasing inclination among
philanthropists to collaborate with a diverse
range of stakeholders, including governments,
corporations, civil society organizations, and
academic institutions (Powel et al., 2021). This
burgeoning trend broadens access to resources
and yields a far more substantial impact
compared to pursuing initiatives independently
(Yawson et al., 2020).
The allocation of philanthropic funds in Asia,
Africa, and Europe assumes a pivotal role
in instigating positive change and fostering
development. Philanthropic institutions
have demonstrated their capacity to address
a multitude of social challenges, spanning
education, healthcare, environmental
sustainability, and economic empowerment. A
prime illustration is the Azim Premji Foundation
in India, which stands as one of the largest
philanthropic organizations in the country. This
foundation is dedicated to enhancing education
in rural areas by providing nancial support
to government-owned schools, oering teacher
training, and facilitating the development
of educational facilities and infrastructure
(Sidel, 2020). The Azim Premji Foundation’s
initiatives have left a resounding positive impact
on millions of students and teachers across
virtually all corners of India. They have not only
expanded educational opportunities but also
elevated the quality of education in the sector,
particularly in rural areas.
China is home to the Alibaba Foundation, an
organization established by the e-commerce
giant Alibaba Group, which is dedicated to
advancing environmental sustainability and
providing aid during times of disaster (Chen,
2021). One of their key initiatives is the «Green
Action Plan,» designed to promote eco-friendly

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living and sustainable development. This plan
encompasses awareness campaigns on the
environmental impacts of food consumption,
energy usage, water conservation, and more
(Han and Wang, 2022).
In Africa, specically Nigeria, the Tony Elumelu
Foundation, founded by Nigerian entrepreneur
Tony Elumelu, focuses on empowering local
entrepreneurs, both men and women, and
fostering economic growth across the continent
(Adewoye et al., 2023). Their entrepreneurship
program provides training, coaching, and
funding to numerous African entrepreneurs,
equipping them with the necessary skills and
resources to establish sustainable businesses,
thereby contributing to local economic
development (Emeh et al., 2020).
Europe is home to notable philanthropic
foundations, including the Siemens Foundation
and the Wellcome Trust. The Siemens Foundation
(Siemens Stiftung), established by Siemens
AG, is committed to promoting sustainable
development through projects in education,
healthcare, and social entrepreneurship (Borde
et al., 2022). On the other hand, the Wellcome
Trust, a global charitable foundation, is
renowned for its support of medical research
and initiatives aimed at enhancing public
health (Dogson and Gann, 2020). Its funding
has led to signicant breakthroughs in medical
science, treatment development, and global
health challenges like infectious diseases and
antimicrobial resistance (Kupferschmidt, 2020).
In North America, philanthropic organizations
have become integral to the democratic fabric of
the region’s countries. Data from the National
Philanthropic Trust (2018) reveals that in 2022,
the total contributions to philanthropic funds
in the United States reached $499.33 million
donated to various charitable causes. Individual
donations represent the largest share of charitable
giving in the United States, accounting for 64%
of all donations. The top ve sectors receiving
philanthropic funding in the United States in
2022 were religious organizations (27%), social
services (14%), education (13%), grant making
(11%), and the healthcare sector (10%). Higher
education institutions in the United States also
actively contribute to preparing individuals
who aspire to manage non-prot organizations.
Over 340 programs across various universities
oer curricula and learning opportunities
related to non-prot institution management
and philanthropic governance (Mirabella et al.,
2019).
Philanthropic funding has the potential to play
a transformative role in addressing the world’s
most pressing challenges, including poverty,
inequality, climate change, and global health.
From these brief examples, it becomes evident
that philanthropic funds play a vital role in
supporting development worldwide. These funds
not only provide nancial resources but also
assume a leading role in development initiatives,
actively contributing to addressing a multitude
of social and environmental challenges.
3. Philanthropy in Indonesia: A Cultural
Legacy and a Force for Development
Indonesia is a global leader in philanthropy,
consistently ranking at the top of the World
Giving Index (WGI). In 2022, Indonesia
maintained its lead with a generosity score of
68%, surpassing countries like Kenya (61%),
the United States (59%), and Australia (55%).
This generosity is evident in both monetary
donations and volunteer engagement, with
Indonesia scoring an impressive 84% and 63%,
respectively.
Indonesia’s philanthropic landscape is diverse,
encompassing two main types of organizations:
secular and values-based (including religious
organizations). Secular philanthropies include
corporations, media outlets, and family
foundations, while values-based philanthropies

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include religious organizations that manage and
distribute funds like zakat.
Within the realm of secular philanthropy,
Indonesia hosts several prominent institutions
that have made substantial contributions to
the nation’s development. These institutions
are typically associated with inuential
conglomerates. Notable examples include the
Djarum Foundation, the Putera Sampoerna
Foundation (PSF), and the Tanoto Foundation,
all of which are linked to conglomerates engaged
in diverse sectors such as tobacco, banking,
agriculture, property, and e-commerce.
The Djarum Foundation, backed by the Djarum
Group, operates in ve main areas: education,
social services, environmental initiatives,
culture, and sports. The Putera Sampoerna
Foundation focuses on four pillars: quality
education for underprivileged students,
entrepreneurship development for job
creation, women’s empowerment to enlighten
the public, and disaster relief programs. The
Tanoto Foundation, linked to the Royal Golden
Eagle (RGE) Group, is committed to enhancing
education quality, nurturing future leaders, and
conducting research in the health sector.
From an institutional standpoint, organizations
like the Djarum Foundation and the Putera
Sampoerna Foundation operate as distinct legal
entities, capable of receiving contributions
from various local and foreign donors. These
philanthropic foundations complement corporate
social responsibility (CSR) initiatives funded
directly from their parent companies’ budgets.
Indonesia’s vibrant philanthropic landscape
is also evident in the realm of value-based
philanthropy, particularly within the religious
context. In recent years, there has been a
remarkable surge in both the number of
charitable organizations and the total funds
amassed. Islamic philanthropy, deeply rooted
in the principles of zakat (obligatory alms) and
voluntary contributions such as alms, infaq
(voluntary donations), and waqf (endowment),
has ourished through religious institutions,
primarily mosques and Islamic boarding
schools, with historical origins dating back to
the 15th century.
Even during the Dutch colonial era, the
government had established guidelines
regarding mosque funds between 1901 and
1931, stipulating limits on their utilization.
This included directives not to allocate mosque
funds for purposes such as street lighting and
renovations. Additionally, the Dutch colonial
government issued Bijblad in 1893, which
regulated the collection of zakat by local leaders
and religious gures. This regulation was
widely perceived as an attempt to undermine
the economic empowerment of the population
through zakat management.
In contemporary times, the Indonesian
government has taken steps to fortify zakat
institutions. This is exemplied by the
enactment of Law No. 23 of 2011, which
specically addresses zakat management.
Furthermore, various religious philanthropic
entities are harnessing the capabilities of the
Internet of Things (IoT) across the spectrum,
from collection to management, distribution,
and transparent reporting. Notably, the amount
of zakat collected by the Zakat Management
Institution (LPZ) in Indonesia exceeded IDR12
trillion in 2020, marking a 10% increase from the
previous year. These funds have been disbursed
to over 16.5 million beneciaries.
Moreover, according to the 2022 Zakat and
Poverty Alleviation report, BAZNAS, along with
all zakat management bodies in Indonesia,
has made signicant contributions to reducing
national poverty by 1.76%. This underscores
the pivotal role of zakat in ameliorating poverty
within Indonesia.

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4. Philanthropy Funds as Catalysts for
Infrastructure Development: A Case
Study of Indonesia’s Islamic Institutions
The data from Indonesia Philanthropy Outlook
2022 reveals that the philanthropic funds
disbursed in Indonesia surged to Rp15.4
trillion in 2020 (Filantropi Indonesia, 2022).
From 2018 to 2020, the total aggregated value
of philanthropic fund disbursements reached
Rp39.6 trillion, benetting a staggering 91.7
million individuals.
Philanthropy funds stand as a formidable
force capable of catalysing infrastructure
development. These substantial disbursements
represent an opportunity to fuel progress by
investing in various forms of infrastructure.
Whether it’s the establishment of educational
facilities, healthcare institutions, or critical
infrastructural improvements like roads
and water access, leveraging philanthropic
funds strategically can serve as a catalyst for
comprehensive and sustainable development
across Indonesia.
Islamic philanthropy, particularly through zakat,
has garnered signicant attention in Indonesia,
with scholars advocating its optimal utilization
to address national challenges. Notably, the
issuance of MUI Fatwas reects a concerted
eort to harness zakat’s potential as a pivotal
contributor to societal development. The MUI
Fatwa No. 001/MUNAS-IX/MUI/2015 stands as
a testament to this vision, urging BAZNAS to
channel zakat, infaq, sadaqah, and waqf funds
towards crucial infrastructure needs. This Fatwa
specically advocates for the development of
clean water and sanitation facilities across
21 locations, spanning West Nusa Tenggara,
Gorontalo, to Bangka Belitung. Such initiatives
not only alleviate immediate community needs
but also lay the groundwork for sustainable
development, enhancing public health and well-
being.
Moreover, the 1982 MUI Fatwa on the
Management of Zakat Funds underscores the
breadth of zakat’s applicability for public welfare.
It authorizes the allocation of zakat funds for
essential public interests, including hospitals,
roads, and even railway lines for specic non-
commercial purposes, emphasizing the broader
societal impact beyond individual aid. These
Fatwas signify a paradigm shift in how zakat, a
religious obligation for Muslims, can transcend
traditional charity and be strategically employed
for long-term infrastructure development. By
aligning philanthropic eorts with pressing
societal needs, zakat becomes a catalyst for
sustainable progress, fostering infrastructural
growth in critical sectors like healthcare,
transportation, and sanitation.
The strategic deployment of philanthropy
funds, particularly zakat, serves as a potent
catalyst for infrastructure development. Notably,
investments in critical infrastructure, such
as hospitals, roads, and clean water facilities,
catalyse socio-economic growth by improving
accessibility to essential services and fostering
healthier, more connected communities. By
leveraging zakat for infrastructure, it not only
addresses immediate needs but also lays the
groundwork for enduring societal advancement,
creating a ripple eect of progress that extends
far beyond initial investments.
Islamic philanthropy’s potential is also deeply
intertwined with the pivotal role of mosques,
which transcend their identity as mere places of
worship, emerging as vital agents in managing
and fostering philanthropic endeavours within
their communities. Mosques serve as dynamic
hubs orchestrating various philanthropic
sources, including zakat, infaq, shadaqah, wakaf,
sponsorships, mosque-owned enterprises, and
more. Their strategic role in channelling these
resources towards community development is
integral to Indonesia’s societal progress.

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The sheer scale of mosques across Indonesia,
numbering 299,644 as of 2023, is emblematic
of their extensive reach and inuence. Among
these, 242,520 congregational mosques, serving
residential areas and managed collaboratively
by local residents, constitute the majority. This
multitude of congregational mosques directly
correlates with the substantial accumulation
of philanthropic funds managed, emphasizing
their pivotal role as reservoirs for community-
centric philanthropy. Mosques, operating as
centres for collective action and social cohesion,
leverage their communal management to
eciently collect and disburse philanthropic
funds. They serve as catalysts for grassroots
development, responding directly to the needs
of their surrounding communities. Through
strategic allocation of resources, mosques
spearhead a range of initiatives addressing
diverse societal challenges, from poverty
alleviation and education to healthcare and
infrastructure development.
The strategic deployment of philanthropy funds
through mosques serves as a catalyst for holistic
infrastructure development. These entities, by
harnessing the collective generosity of their
congregants, facilitate a bottom-up approach to
infrastructure development. By directing funds
towards critical needs such as building schools,
healthcare facilities, sanitation systems,
and communal infrastructure like roads and
community centres, mosques play a pivotal role
in fostering sustainable growth.
Islamic philanthropy in Indonesia also operates
symbiotically with pesantren institutions,
serving as pivotal vehicles for managing
philanthropic funds and spearheading
infrastructure development. The historical
signicance of pesantrens in shaping Muslim
education in Indonesia, dating back to the
16th century, solidies their role as essential
agents in philanthropy and infrastructure
enhancement. With a current count of 39,220
Islamic boarding schools dispersed throughout
Indonesia, pesantrens function as epicenters
for various philanthropy-driven initiatives.
These institutions play a fundamental role in
constructing diverse educational infrastructure,
catering to students from early childhood
education, such as PAUD and TK, up to
universities like Ma’had Aly, accommodating
tens of thousands of students. Beyond education,
pesantren philanthropy funds are instrumental
in fostering other crucial infrastructure projects.
Illustratively, in Koto Tangah, West Sumatra,
collaborative eorts involving pesantrens,
local government bodies, and state-owned
enterprises led to the construction of roads
in the Lori area. These roads connected Darul
Ulum pesantren with neighboring pesantrens
and the agricultural community, signicantly
improving accessibility and connectivity in the
region. Moreover, Pesantren Hidayatullah and
Pesantren Wihdatul Ummah in Poso Regency,
Central Sulawesi Province, successfully
undertook initiatives to establish clean water
and sanitation infrastructure, elevating living
standards in the area.
Healthcare facilities funded by pesantren
philanthropy funds also contribute substantially
to community welfare. Examples like RS
Assuyuthiyyah in Pesantren Raudhatul Ulum,
Pati, Central Java, and Rumah Sakit Hasyim
Asy’ari (RSHA) in Pesantren Tebuireng,
Jombang, East Java, certied as type D hospitals,
stand as a testament to the impactful role of
philanthropy funds from pesantren institutions
in bolstering health infrastructure, beneting
both students and the broader community.
The integration of philanthropy funds within
pesantren initiatives showcases a potent synergy,
utilizing these funds not only for educational
advancements but also for addressing crucial
societal needs. This collaborative approach
highlights how Islamic philanthropy, managed

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89 - 102
through pesantrens, serves as a catalyst for
comprehensive infrastructure development,
positively impacting various facets of Indonesian
society.
In the forthcoming section, this article will delve
into several policy recommendations aimed
at strengthening the role of philanthropy in
Indonesia, fostering sustainable development,
and harnessing the potential of philanthropic
funds to further bolster infrastructure initiatives
across the nation.
POLICY IMPLICATION
Philanthropic funds play a vital role in
supporting development initiatives around the
world. By providing nancial resources and
expertise to organizations working in areas
such as education, healthcare, and poverty
alleviation, philanthropic actors can help to
make a real dierence in the lives of millions
of people. However, ensuring that philanthropic
funds are used in the most eective and ecient
way possible is essential. This requires a strong
regulatory framework, tax incentives, and
eective governance mechanisms.
One way to strengthen the regulatory
framework for philanthropic funds is to
establish clear and transparent guidelines for
the operation of philanthropic organizations
(Wiepking et al., 2021). These guidelines
should cover issues such as the registration
process, nancial management, and reporting
requirements (Wible, 2021). By ensuring that
philanthropic organizations are accountable to
the public, regulators can help to build trust and
condence in the sector (Cordery dan Deguchi,
2018). In addition, tax incentives can also be
used to encourage philanthropic giving. For
example, governments can oer tax deductions
or exemptions for charitable donations.
This can make it more nancially attractive
for individuals and businesses to support
philanthropic causes. Finally, it is important to
have eective governance mechanisms in place
to ensure that philanthropic funds are used in
a responsible and ethical manner. This includes
having clear policies and procedures in place for
the allocation of funds, as well as mechanisms
for monitoring and evaluation. By having strong
governance in place, philanthropic organizations
can help ensure their funds are used to achieve
their desired impact.
The following are some specic recommendations
for strengthening the regulatory framework,
tax incentives, and increasing governance of
philanthropy:
• Strengthening the regulatory framework:
this could involve establishing clear and
transparent guidelines for the operation of
philanthropic organizations, covering issues
such as the registration process, nancial
management, and reporting requirements
(see: Cordery dan Deguchi, 2018)).
• Providing tax incentives: this could involve
oering tax breaks for charitable donations,
reducing tax burdens on philanthropic
organizations, and simplifying the tax ling
process for donors.
• Increasing governance of philanthropy: this
could involve establishing guidelines for
good governance practices, promoting the
adoption of self-regulatory mechanisms, and
strengthening the capacity of philanthropic
organizations to manage their funds
eectively.
By implementing these recommendations,
governments and other stakeholders can help
to ensure that philanthropic funds are used in
the most eective and ecient way possible to
support development initiatives.
CONCLUSION
Indonesia’s aspirations to elevate its per capita
income to levels akin to developed nations are
underscored by its eorts to evade the Middle
Income Trap. To this end, the government has

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outlined the National Long-Term Development
Plan (RPJPN) spanning 2025-2045, focusing
on comprehensive economic, social, and
governance transformations. Central to
escaping this trap is sustaining economic
growth, with a target range of 5.7% to 6%
annually. Leveraging its sizable population and
favorable demographic advantage remains a
key opportunity. Nevertheless, the nation faces
challenges encompassing economic disparity,
infrastructure limitations, environmental issues,
and educational and healthcare disparities.
In response, philanthropy has emerged as
a signicant funding avenue, contributing
to social and environmental infrastructure
development and addressing societal disparities.
It’s a mutually benecial endeavor beneting
both recipients and donors. Philanthropic
endeavors have notably bolstered infrastructure
development, particularly in regions with
constrained government budgets, exemplifying
their impactful role in societal progress.
This article is an excerpt from a comprehensive
edited volume exploring the potential of
philanthropic funds in fostering sustainable
development in Indonesia. The book examines
diverse dimensions of philanthropy in the
country, elucidating its various actors and their
roles, while highlighting the intrinsic connection
between philanthropy and sustainable
development outcomes.
Philanthropy, dened as voluntary contributions
for societal benet, thrives in Indonesia, with
the nation consistently ranking high in the
World Giving Index. Motivated by religious
teachings and the ingrained cultural ethos of
mutual cooperation (“gotong royong”), 68% of
Indonesians actively engage in philanthropic
activities. Recognizing this generosity, the
government is exploring philanthropy as an
alternative funding source. Philanthropic funds
in Indonesia address social challenges, prioritize
poverty reduction, and align with Sustainable
Development Goals (SDGs), emphasizing
environmental concerns.
Globally, philanthropic foundations drive
development, mobilizing resources and fostering
partnerships for sustainable initiatives. A study
revealed that in 2021, over 40 non-governmental
philanthropic foundations contributed $11
billion, predominantly focusing on health,
poverty, and gender equality in regions like
West and East Africa and South Asia. Numerous
institutions, from the Azim Premji Foundation
in India to the Wellcome Trust in Europe, have
made substantial contributions to education,
entrepreneurship, and public health. In North
America, individual donations fuel charitable
giving across sectors like religious organizations,
social services, education, grantmaking, and
healthcare.
Indonesia stands out globally in philanthropy,
embracing both secular and value-based
institutions. Islamic philanthropy, rooted
in zakat, has thrived through religious and
government entities, signicantly impacting
poverty reduction. Regulation and eective
governance are vital to maximize the impact
of philanthropic funds. Clear guidelines,
tax incentives, and improved governance
mechanisms can ensure these funds contribute
optimally to societal advancement and
environmental sustainability.

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