The SUAR Team, through the Business Universe Survey, explores the perspectives of business leaders, regulators, and economic observers on how to strengthen micro, small, and medium enterprises (MSMEs). The key findings are as follows:
- The vibrancy of MSMEs has supported many families and contributed to national economic growth. The Ministry of MSMEs of the Republic of Indonesia states that, based on data from the Central Statistics Agency, the current number of MSMEs is 65.5 million units, capable of absorbing 119 million workers. This number represents more than half of Indonesia’s workforce, which totals 153 million people. The MSME sector contributes 61.9% to the Gross Domestic Product (GDP).
- Nevertheless, MSMEs still face major challenges, one of which is access to financing for business development.
- The survey conducted by the SUAR Team revealed that, in general, MSME actors find it relatively easy to access financing (60%). However, 40% believe that MSMEs still face difficulties, and in some cases, significant challenges in accessing financing.
- MSMEs have long supported millions of families and contributed substantially to national economic growth. According to the Ministry of MSMEs, citing Central Statistics Agency data, Indonesia currently has 65.5 million MSMEs employing 119 million workers, representing more than half of the country’s 153 million-strong workforce. The sector contributes 61.9% of GDP.
- Difficult regulations or administrative procedures are also cited as reasons (13.3%), ranging from complicated requirements to long credit disbursement times. Other emerging reasons include businesses being deemed unfit, limited resources, and legal issues that prevent banks from trusting them (13.3%). Additionally, some banks are overly selective in distributing credit, along with high interest rates (10%).
- To overcome these financing access limitations, respondents agreed that regulatory reform is necessary. In addition, MSMEs need to partner with large companies (as mentors) to facilitate obtaining bank credit. Another solution is to diversify collateral to make it easier for MSMEs to secure financing.
- Property assets, motor vehicles, and machinery or production equipment are the top three types of collateral that can be pledged to banks. However, for flexibility, other items that can serve as collateral include products or projects from the MSME itself, as well as invoices or sales orders. Academic degrees are also suggested as potential bank guarantees.
- The Business Universe Survey concludes that there are three main factors driving MSME growth. First, promotion, marketing, and market expansion strategies (26.7%). Second, ease of access to financing or obtaining credit for business expansion (23.3%). Third, effective business management by MSME actors (16.7%).
Efforts to develop MSMEs are a continuous endeavor that has been ongoing for a long time. Given the significant potential of MSMEs, building and developing them means building Indonesia’s economy.
Read more here. Enjoy reading, Chief.
