Micro, Small, and Medium-Sized Enterprises (MSMEs): The Significant Role and Challenges in Indonesia's Economy

Abstract

Abstract: Research Aims: The study aims to investigate how MSMEs—micro, small, and medium-sized enterprises—substantially impact Indonesia's economy. Methodology/design and approach: The design, methodology, and approach of this research entail an investigation of the noteworthy impact that micro, small, and medium-sized enterprises (MSMEs) have on Indonesia's economy. The strategy uses data to back up the assertion that MSMEs are the engine of Indonesia's economy, employing more than 97% of the labour force and adding more than 61% to the nation's GDP. The categorisation of companies based on their size and assets is investigated, demonstrating the numerical dominance of micro businesses to shed light on the structure of MSMEs in Indonesia; it emphasises how MSMEs perform comparatively poorly in exports, underscoring the necessity of improving their integration into international supply networks. Most of Indonesia's economic environment comprises Micro, Small, and Medium-Sized Enterprises (MSMEs), making this sector a powerful force. This article explores how MSMEs significantly influence Indonesia and provides data to support this claim. MSMEs are the backbone of Indonesia's economic activity, employing over 97% of the country's workforce and providing more than 61 per cent of the country's GDP. Their share of the economy may appear little initially, even though they comprise 99 per cent of all businesses. Still, their reputation as crucial economic agents is cemented by their indispensable role in delivering basic commodities and services to urban and rural communities. The framework of MSMEs in Indonesia is further clarified by examining how businesses are classified according to their assets and size. Larger organisations have more resources and clout, while micro businesses predominate numerically. However, MSMEs need help beyond their financial relevance. It is imperative to address integration hurdles to promote innovation and productivity and to increase MSMEs' contribution to Indonesia's economic growth; policymakers can ensure that MSMEs continue contributing to Indonesia's financial resilience and prosperity by realising their critical role and tackling current obstacles. It will allow MSMEs to reach their full potential.