In the past five years, I have been working at a financial authority in Indonesia, where we have a mandate to regulate, supervise, and initiate a financial deepening program. At that time, I was exposed to the role of finance as the key enabler of social and environmental impact in Indonesia. Since our country is categorized as a developing country, it still faces social challenges, including accessibility and financial constraints. This gap can be filled by other parties outside the government, such as the private sector. This is where I began to think: where can I contribute to take tangible action to tackle the problem?
As I join the SIRI Practicum, the class can give me a sense of how to take tangible actions through real collaboration with a client. Hence, I am currently working with philanthropy advisors in the United States to address the societal challenges faced by Japan and my country, Indonesia. I am thrilled to conduct deeper research into the societal issues we face in Indonesia and Japan. After meeting with our client, I learn that there is a significant gap in the policy regulations in both countries. Japan allows philanthropy across a wide range of public-interest fields, however, obtaining tax-advantaged public-interest status is limited and requires rigorous certification and governance requirements. This process can create administrative burdens and limit the flexibility to mobilize public donations. Meanwhile, in Indonesia, there is an idea of digital philanthropy, operating as security crowdfunding, where anyone can invest as little as $10 to help local shops and small businesses grow. The return might not be that much, but the impact they made is significant. However, the regulation to create digital philanthropy is under the purview of two institutions, the Ministry of Social Affairs and the Financial Services Authority, which they see as a burden to fulfill.
In practice, the legal basis in both countries remains fragmented. This is something we would like to look into more deeply in our final project. Policy, as the basis for regulating everything, is the one that needs to be tackled. Our client agrees that this research should support the foundational issues. Philanthropies perform inadequately when there is no clear regulatory framework to serve as a basis. In addition, the absence of robust regulation, or even the existence of complex regulation, can hinder the acceleration of problem handling.
I am more than happy to examine the regulatory frameworks and policy gaps affecting philanthropy and blended finance in both countries. I aim to contribute actionable insights on how policy environments can be strengthened to mobilize catalytic capital. I expect this project will be read by many developing countries that face similar problems with the philanthropy ecosystem. The government fund is limited, therefore, collaboration with philanthropy is needed to address societal issues that developing countries suffer most from. Many small-scale industries, such as those producing sustainable products, are unable to access bank funding. Also, there are societal issues when the impact does not always quantify as a return on investment, but as a return in social welfare.