Direktorat Jenderal Perimbangan Keuangan

This presentation introduces Indonesia's Village Climate Risk Index, a new tool designed to measure and tackle climate threats at the most local level of governance.
The Problem: High Risk &amp; Vulnerability
Indonesia faces severe climate threats, ranking as the third most disaster-prone country globally. Key risks include sea-level rise, extreme rainfall, warming oceans, and rising temperatures&#8212;leading to floods, erosion, loss of islands, forest fires, and drought. An estimated 75% of Indonesia's disasters are climate-related, affecting over 27,000 villages and causing annual economic losses of up to USD 1.9 billion. These disasters also deepen poverty.
The Solution: Local Action Powered by Local Funds
Indonesia is channeling resources directly to villages to build climate resilience. Through Village Funds (Dana Desa), money is transferred from the national treasury directly to village accounts&#8212;empowering the most affected communities when climate-related disasters strike. The average annual village budget has grown dramatically, from just under USD 2,000 to roughly USD 100,000, enabling significant local investment following the enactment of Law No. 6 of 2014 concerning Villages. These funds are allocated through a formula ensuring most villages receive support, with extra targeted grants for the poorest and most vulnerable communities.
The Tool: The Village Climate Risk Index (IRID)
This is the core innovation&#8212;a practical index designed to identify which villages need help most. The IRID score measures a village's combined Exposure, Sensitivity, and Hazards against its Adaptive Capacity. Villages are then classified into one of five risk categories: Very Low, Low, Moderate, High, or Very High. This score helps the government direct the Affirmative Allocation (AA) grant through the Village Fund, with 40% of this allocation now specifically reserved&#8212;for the first time in 2026&#8212;for villages with high or very high climate risk status, alongside existing affirmative support for underdeveloped regions.
The Goal &amp; The Challenge
The ultimate aim is to create "climate-responsive villages," in alignment with the National Medium-Term Development Plan. The main challenge lies in effectively guiding villages to use their funds for climate adaptation and risk-reduction projects, moving beyond traditional infrastructure spending. In essence, this presentation outlines a data-driven, funded national strategy to empower Indonesian villages&#8212;on the front lines of the climate crisis&#8212;to understand their risks and finance their own resilience. A sample integration of the IRID score with fiscal projects from Village Budgets in Bali is presented as a potential model for the future development and application of the index.