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Finance Ministry supports SMEs in reaching global markets
The PKE UKM program is a form of the government's presence through the Ministry of Finance of the Republic of Indonesia, provided to LPEI as a form of support from the state budget for export-oriented business players.
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(Courtesy of Finance Ministry)
T
he PKE UKM program is a form of the government's presence through the Ministry of Finance of the Republic of Indonesia, provided to LPEI as a form of support from the state budget for export-oriented business players. With PKE UKM, export-oriented SMEs have easier access to financing, export guarantees, export insurance, and consulting services," explained Maqin U. Norhadi, the Director of Business Development at LPEI.
Tulus Tambunan wrote in his book, Usaha Mikro, Kecil, dan Menengah di Indonesia (Micro, small and medium enterprises/MSMEs in Indonesia), that during the 1997-1998 global economic crisis, Indonesia's MSME sector was able to survive even though the country experienced severe inflation.
With MSMEs making up 99 percent of all businesses in Indonesia, it is imperative for the government to encourage the development and invigoration of the MSME sector as the engine of the people's economy.
As the backbone of the national economy, the small and medium enterprise (SME) sector plays an important role in creating jobs, increasing income and diversifying the economy. The government has put a spotlight on programs that support MSMEs, including those implemented during the pandemic as well as new and sustainable programs, in the hope that the sector's revival can boost economic growth and accelerate national economic recovery.
The 2024 state budget (APBN) serves as an important instrument to support various development agendas, including accelerators for economic growth and prosperity, such as export development. Increasing SME exports is a clear example of how the government is using the 2024 APBN to provide financial resources to SMEs.
With its effective role in allocating APBN resources to encourage SME exports, the government has the potential to make a significant and positive impact on economic growth, job creation and SME development assistance so they can compete in an increasingly complex global market.
For this reason, the government is continuing the Special Export Assignment (PKE) program for use by export-oriented businesses in order to drive greater export growth.
"The PKE UKM program is a form of the state’s presence, through the Ministry of Finance, which has been given to the LPEI [Indonesia Eximbank] as a form of the APBN’s support for export-oriented business actors. With the PKE UKM, export-oriented SMEs have easier access to financing, guarantees, export insurance and consulting services," said Maqin U. Norhadi, managing director of business development at Indonesia Eximbank.
From 2021 to September 2023, the state budget has provided funding through the PKE UKM program of up to Rp 924 billion (US$59 million), which has been used by more than 120 SMEs to market more than 30 products to over 40 export destination countries. The program is continuing in 2024, and is expected to provide maximum benefits to local communities.
Specifically designed to support export-oriented SMEs, the PKE UKM program can help overcome capital constraint, a frequent and key obstacle for SMEs. Under the program, SMEs are expected to build their competitiveness in international markets to become part of the global value and supply chains.
One export-oriented SME entrepreneur who has benefited from the PKE UKM program and succeeded in entering the export market is Astin Atsna, owner of CV Hugo Inovasi. Starting out in the construction business, Astin switched to building a coconut sugar exporting business in 2019.
Astin's experience in the coconut sugar industry began in 2012, when she began helping local coconut farmers in improving their competency so they could increase production and ultimately increase their income.
As time passed, Astin identified better business opportunities. She realized that coconut sugar could not only fulfill local market demands, but also had the potential to penetrate the export market. Drawing on her mentoring experience, Astin finally founded CV Hugo Inovasi in 2019 with an aim to deliver its first export shipment.
"Currently, we are providing assistance to around 1,000 farmers, providing support in the forms of training and production equipment, in the hope that farmers can diversify their products and increase the quantity and quality of their products," she said.
Astin's assistance has yielded very positive results. Farmers that previously produced only raw goods in the form of sap are now also capable of producing value-added products such as molded sugar, liquid sugar and crystal sugar.
To succeed in penetrating the export market, Astin pays constant attention to the quality of her products. She has built a quality control system tasked with maintaining product quality and directly monitors production conditions at the farmer level, while providing the necessary assistance to ensure that product quality is maintained.
"In addition to providing assistance, we hold regular meetings to share knowledge and insight with farmers to maintain product quality. The assistance we provide can also increase the income of coconut sugar farmers by up to 30 percent," she explained.
As a result, Astin's coconut sugar products are in high demand in the international market. From Banyumas, Central Java, CV Hugo Inovasi’s coconut sugar products have been distributed to 10 countries: Australia, Bahrain, Ghana, Hong Kong, Malaysia, Saudi Arabia, Singapore, South Korea, Spain, the United Kingdom and the United States. To date, exports contribute more than 90 percent to the company’s overall sales.
Astin said CV Hugo Inovasi’s success was inseparable from her ability to spot business opportunities, hard work and collaboration with various parties.
This included funding assistance from Indonesia Eximbank through the PKE UKM program, which she used as working capital so CV Hugo Inovasi could meet the demands of overseas buyers and increase its production capacity.
"The presence of Indonesia Eximbank among SMEs like us is very helpful. Apart from receiving financing from Indonesia Eximbank, we can also consult it, for example, on how to prepare good financial reports," said Astin.
She expressed her hope that the support CV Hugo Inovasi received from Indonesia Eximbank by LPEI could expand her business’s capacity as well as market access, so she could continue in her efforts to reach more local farmers and grow their welfare.
Source: The Finance Ministry
