Regulatory Reform for the Philanthropy Ecosystem (ID0155)

Project Overview:

This commitment seeks to drive the transformation of philanthropy governance in Indonesia by emphasizing the strengthening of public protection and participation in social philanthropy activities. It is aligned with advocacy efforts undertaken by civil society networks related to philanthropy regulations in Indonesia. The commitment aims to advance regulatory reform in the philanthropy sector, particularly to reposition the role of the state in strengthening a philanthropy ecosystem grounded in social justice and human rights, in support of sustainable social development in Indonesia.

Targeted Issues

Inadequate philanthropy regulations constitute a major challenge in philanthropy governance in Indonesia. In practice, the existing regulatory framework—Law No. 9 of 1961 on the Collection of Money or Goods, Law No. 23 of 2011 on Zakat Management, and Government Regulation No. 29 of 1980 on the Implementation of Donations—has hindered the growth and development of Indonesia’s philanthropy ecosystem due to its continued reliance on traditional paradigms (occasional giving), bureaucratic and restrictive approaches, and inconsistent implementation. In contrast, contemporary global philanthropy paradigms and trends emphasize ecosystem-based and transformational approaches, characterized by multi-stakeholder collaboration that activates collective creativity. Several impacts of the current philanthropy regulations include: (1) overlapping authorities among government institutions, resulting in conflicts of interest; and (2) reduced public participation due to complex and bureaucratic licensing procedures for philanthropic organizations, particularly small- and medium-scale entities. As a result, programs designed by civil society organizations (CSOs) tend to be limited to social charity and/or short-term activities, rather than being oriented toward long-term impact. Furthermore, the existing regulatory framework poses structural constraints on rapid response efforts, particularly in the event of natural disasters or humanitarian crises, as it hampers the efficient distribution of aid. In other words, the consequences of weak philanthropy regulations in Indonesia have constrained civic space and public participation in actively engaging in poverty alleviation efforts. Moreover, the potential of philanthropy to support sustainable development in Indonesia remains limited due to the suboptimal collection and utilization of donations, including funds, goods, and services.

Causes of the Problem

Current philanthropy regulations in Indonesia have constrained citizens’ democratic rights in the realization of civil rights, which can be described as follows: 1.Law No. 9 of 1961 on the Collection of Money or Goods restricts civic participation and efforts to achieve sustainable development goals, including poverty alleviation, due to bureaucratic licensing requirements for the collection of money or goods (PUB) with short validity periods. Findings by YAPPIKA indicate five interrelated issues arising from PUB licensing regulations: (1) unclear timelines for the PUB licensing process; (2) lengthy and multi-tiered licensing mechanisms from district/city to provincial and national levels; (3) a short PUB license validity period of three months; (4) numerous and bureaucratic requirements to obtain a PUB license; and (5) inconsistencies in PUB licensing services. Beyond licensing issues, Law No. 9 of 1961 and its implementing regulations do not provide legal safeguards for personal data protection or the right to information on the impacts of donations, including transparency in the utilization of contributions. These challenges are further exacerbated by limited efforts by the government and philanthropic institutions to educate and socialize donors regarding their rights. 2.Law No. 23 of 2011 on Zakat Management assigns multiple functions to a single institutional unit, including regulatory, guidance, supervisory, and implementing roles. This concentration of roles creates conflicts of interest, particularly in the process of issuing recommendations for Zakat Management Organizations (LAZ), thereby hindering public participation in zakat management. 3.The implementation of Government Regulation No. 93 of 2010 remains ineffective and is not widely accessible to civil society organizations, philanthropic institutions, or donors. The regulation is inadequate due to its limited scope of objectives or areas and low caps on deductible donations. Ambiguous provisions result in tax deductions that are often disproportionate to the efforts required to obtain them (Hartnell, 2020).

Proposed Solutions

In addressing the challenges of philanthropy regulation in Indonesia, regulatory reform is required to make the framework more adaptive to the needs of modern philanthropy and technological developments. Such reform should involve multiple stakeholders, including civil society organizations (CSOs) and philanthropic institutions, donors, beneficiaries, academics, and other relevant actors. In addition, the government needs to provide more attractive tax incentives for donors and philanthropic institutions, as well as develop regulations that support innovation, including the use of digital technology in fundraising activities. Following regulatory reform, collaborative research involving the government, CSOs and/or philanthropic institutions, and academia is needed to measure and evaluate the impacts of innovations and/or programs implemented, both for philanthropists and beneficiary communities. In simple terms, the proposed co-creation commitment includes the following: Developing the concept of a Philanthropy Advancement Bill to replace Law No. 9 of 1961. The development of this bill would entail revising related and implementing regulations, namely: Revision of Government Regulation No. 29 of 1980 on the Implementation of Donation Collection; Revision of Government Regulation No. 93 of 2010; and Revision of Minister of Social Affairs Regulation No. 8 of 2024 on the Administration of the Collection of Money or Goods. Providing inputs for the revision of Law No. 23 of 2011 and its implementing regulations, including: Government Regulation No. 14 of 2014 on the Implementation of Law No. 23 of 2011; and Minister of Religious Affairs Regulation No. 19 of 2024 on Zakat Management Organizations. Note: This revision process will also await the decision of the Constitutional Court on the judicial review of the Zakat Management Law, which is currently ongoing. Conducting collaborative research to evaluate and measure the impact of improvements in philanthropy regulations within the framework of achieving the Sustainable Development Goals in Indonesia.

Relevance to the 5 Strategic Issues of OGI

Reforming philanthropy regulations in Indonesia will create a philanthropy ecosystem that is more adaptive, participatory, and inclusive, while generating broader and more sustainable impacts. Philanthropy regulatory reform grounded in human rights and social justice paradigms will: (i) strengthen the role of civil society and philanthropy as democratic actors and pillars of sustainable development; (ii) reinforce guarantees of citizens’ rights to participate in sustainable development through donation and fundraising activities; (iii) provide safeguards for the right to seek, receive, and utilize financial support from others, particularly domestic sources; and (iv) respect diversity, empower humanity, support the achievement of peace, and ensure that welfare is attained in a fair manner, with the ultimate goal of achieving justice for all.

Relevance to the Government's Priority Agenda

1.Reforming philanthropy regulations in Indonesia is one of the measures to optimize and synergize development financing sources in support of achieving the Eight Asta Cita, particularly in addressing extreme poverty and reducing unemployment rates. 2.Philanthropy regulatory reform can serve as a sustainable alternative source of funding for civil society organizations (CSOs) and philanthropic institutions in Indonesia, while also contributing to the strengthening of civil society equality as part of efforts to achieve National Priority 1. 3.More specifically, reforming the regulatory framework for zakat governance in Indonesia can enhance the mobilization of Islamic social funds to support social protection and the national economy, in line with efforts to achieve National Priority 2

Expected Outcomes

The expected outputs to be produced, the scale or scope of change to be achieved, and the targeted changes should be described in an evaluable and measurable form, such as changes at the institutional level, changes in behavior, systems, and practices, or regulatory changes The co-creation and implementation of this commitment will reform philanthropy regulations to strengthen an inclusive, participatory, and accountable philanthropy ecosystem. Such regulatory reform is also expected to: (i) strengthen public participation and civic solidarity in development; and (ii) increase the potential for innovative and alternative financing to support the achievement of sustainable development in Indonesia, ultimately delivering long-term benefits for Indonesian society and the global environment. The impacts of these policy changes can be supported by collaborative research involving the government, civil society organizations, philanthropic institutions, and academia.

Commitment Plan

Results Indicators | Output | Timeline

The development of policy recommendations on the philanthropy ecosystem in Indonesia through joint formulation by policymakers and civil society | Study on the Philanthropy Ecosystem in Indonesia Civil Society Draft Paper on the Urgency of Revising Technical Regulations Related to the Philanthropy Ecosystem Advocacy Report on the Revision of Laws Related to the Philanthropy Ecosystem Collaborative Research Report on the Impact of Improvements in Philanthropy Regulations within the Framework of Achieving the Sustainable Development Goals in Indonesia | Estimated final output for year 1 (M-12) and year 2 (M-24)