Development of SME and Women Entrepreneurs in a Developing Country: The Indonesian Story

Abstract

In Indonesia the government has been trying to support the development of small and medium enterprises (SMEs) as these enterprises are expected to play a crucial role, not only in employment creation, GDP formation, and export development, but also especially as a means to developed women entrepreneurs, particularly in rural areas. This paper examines the current developments of SMEs, constraints on their current development, the involvement of women as entrepreneurs in SMEs, and the effectiveness of government SME development programs in Indonesia. The paper identifies some important facts. First, SMEs are of overwhelming importance in Indonesia, as they account for more than 90% of all firms outside the agricultural sector. Second, the main constraints faced by small entrepreneurs are cumbersome and onerous business regulations and restrictions, lack of finance, and limits in human resource and technological capabilities. Third, the representation of women entrepreneurs is still relatively low which can be attributed to factors such as low level of education and cultural or religious constraints. Finally, the government has been the most important supporting agency for SMEs. However, evidence on the effectiveness of government programs to support SME development is mixed.