Does Village Direct Cash Assistance ( <i>BLT Dana Desa</i> ) Reduce Poverty? Evidence From the Village Fund Program in Indonesia

ABSTRACT The Indonesian government implemented a community‐based targeting approach of unconditional cash transfer for villages, namely the Direct Cash Assistance‐Village Funds ( BLT Dana Desa ), to complement the limitations of the existing poverty program targeting. This paper examines whether the program improves targeting and reduces poverty. We employed benefit incidence analysis, matching difference‐in‐differences methodology and utilized both the National Treasury and Budget System (SPAN, administrative data) and Indonesia socio‐economic survey (SUSENAS). Our results suggest that BLT Dana Desa compensates for exclusion errors arising from other social safety net programs, and it has significantly affected the people's well‐being in villages. It improves food expenditure for the poor and lowers the probability of being poor. However, we find the rich still receive the program, although it also benefits their consumption. It indicates the importance of continued better targeting of poverty reduction programs.