As one of the most disaster-prone countries globally, Indonesia faces significant challenges in financing disaster resilience. Despite substantial progress, the current financial mechanisms remain insufficient to cover the extensive economic losses from disasters. This document, prepared by the Resilience Development Initiative (RDI) with financial support from the Centre for Disaster Protection (CDP), outlines Indonesia’s existing disaster risk finance (DRF) mechanism—strategies that help countries access funds quickly after a disaster to support recovery—identifies key constraints, and provides actionable recommendations for improvement.

The need for a comprehensive Disaster Risk Financing and Insurance (DRFI) Strategy in Indonesia became apparent after major disasters such as the 2018 earthquakes in Central Sulawesi and Lombok. Government funds allocated for disaster response, which ranged from USD90 million to USD750 million between 2014 and 2018, proved vastly inadequate compared to the actual losses incurred. In response, Indonesia has implemented various measures, including contingent credit lines, on-call funds, state-owned assets insurance, and the Disaster Pooling Fund. However, challenges persist, such as low market demand among micro, small, and medium enterprises (MSMEs) and structural issues stemming from low GDP per capita.

This research is supported by: Centre for Disaster Protection