Recent evidence of the development of micro, small and medium enterprises in Indonesia

Tulus Tambunan

doi:10.1186/s40497-018-0140-4

Abstract

This paper examines the development of micro, small and medium enterprises (MSMEs) in Indonesia. It has three research issues, namely the role of MSMEs, their constraints, and the importance of MSMEs for the creation of business opportunities for women. More specifically, the study aims to answer the following research questions. First, how important are MSMEs in Indonesia? Second, what are their main constraints? Third, how important are they, especially micro and small enterprises (MSEs), for the creation of business opportunities for women? Fourth, is the growth of MSEs a sign of increased entrepreneurial spirit or a reflection of poverty? This study adopted descriptive analysis using secondary data. It shows that MSMEs in Indonesia are dominated by MSEs, and accounted for almost 100% of all existing firms but only contributed between 58 to 61% of gross domestic product (GDP). About 42.84% of MSEs are owned by women, although the ratio of female to male entrepreneurs in MSEs varies by province. Poverty seems to be the main force behind the growth of MSEs. This study ends with some policy recommendations that the government should: (i) conduct trainings that focus on online marketing, entrepreneurship, management, and improving the quality of product and business efficiency; (ii) provide alternative funding facilities with low interest rates and non-burdensome requirements; and (iii) provide assistance directly in the production site for new entrepreneurs in their first years of running businesses. In addition, all gender discrimination treatments that have been burdensome for women to run own businesses must be eliminated. This study has, however, several limitations, especially with respect to the third and fourth research questions. Secondary data used does not have information about the main/initial motivation of MSME owners to run their own business and their socio-economic profiles.

Highlights

It is widely stated in the literature that micro, small and medium enterprises (MSMEs) in developing countries are important socially and economically for a number of reasons, which include: (i) their wide dispersion across rural areas and they are very important for rural economic development; (ii) their ability to absorb a significant large number of workers; (iii) their role as a place for entrepreneurship and business skill development, especially in rural areas; and (iv) as a source of businessTambunan Journal of Global Entrepreneurship Research (2019) 9:18 opportunities for women
Development of MSMEs One characteristic of the Indonesian economy is that domestic economic activities are dominated by MSMEs; the ratio of MSMEs to Large enterprises (LEs) varies across different economic sectors
Many MSMEs had to stop operating at that time because it was hard to get bank loans as the national bank hit by the crisis

Summary

Introduction

It is widely stated in the literature that micro, small and medium enterprises (MSMEs) in developing countries are important socially and economically for a number of reasons, which include: (i) their wide dispersion across rural areas and they are very important for rural economic development; (ii) their ability to absorb a significant large number of workers; (iii) their role as a place for entrepreneurship and business skill development, especially in rural areas; and (iv) as a source of businessTambunan Journal of Global Entrepreneurship Research (2019) 9:18 opportunities for women. The measures include the issuance of a number of regulations in the past two decades especially to facilitate MSMEs in the marketing and procurement of raw materials, and in funding by launching a public non-collateral credit guarantee scheme, well-known as Kredit Usaha Rakyat in 2007 (Tambunan, 2018). Based on this background, the main objective of this study is to examine the development of MSMEs in Indonesia with the emphasis on the following three issues: (1) the role of MSMEs; (2) their main constraints; and (3) the importance of these enterprises, especially micro and small enterprises (MSEs), for the creation of business opportunities for women. Fourth, is the growth of MSEs a sign of increased entrepreneurial spirit or a reflection of poverty?

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Results

Conclusion