SERANG, Indonesia (Reuters) - Indonesia, on alert against rising militancy, will boost the state funds it sends directly to thousands of villages across the Muslim-majority country to reduce poverty and counter radicalism, a senior cabinet minister said on Monday (Feb 29).

Indonesia has cracked down on suspected radicals after a militant attack rocked the capital Jakarta last month and announced the presence of Islamic State in Southeast Asia for the first time.

The government has more than doubled its budget allocation for the so-called village fund this year to 47 trillion rupiah (S$4.93 billion). The fund is aimed at leapfrogging bureaucratic hurdles to transfer money directly to villages.

"This programme will reduce poverty and with it the desire for people to engage in radical activities because it will create job opportunities," chief security affairs minister Luhut Pandjaitan told government and security officials in Banten province, which shares a border with the capital Jakarta.

"We know that terrorism and radicalization are tied to poverty. So our thinking is that with the village funds we can reduce inequality and...the potential for radicalism here,"Pandjaitan said.

Experts said the move could help contain the spread of radicalism but pointed to widespread corruption and continuing discrepancies in the disbursement of funds.

"The government has to combat the extremist ideology behind attacks and attacking the roots of poverty is important," said Jakarta-based political analyst Paul Rowland. "But one significant issue is that money is disbursed to villages without regard to their population so it's not equitable."