TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
MSMEs to be massed into ‘holding company’
The government has prepared a five-year road map to nurture the development of Indonesia’s micro, small and medium enterprises (MSMEs) with the principal aim of improving their ability to export products
Change Size
T
he government has prepared a five-year road map to nurture the development of Indonesia’s micro, small and medium enterprises (MSMEs) with the principal aim of improving their ability to export products.
According to the road map, the government aims to increase MSME exports from 18 percent in 2020 to 30 percent by 2024. The contribution of MSMEs to gross domestic product is also expected to increase from 61 percent next year to 65 percent by 2024.
Speaking at a national gathering of waqf microbanks in Jakarta, President Joko “Jokowi” Widodo expressed his desire to see the country’s MSMEs clustered into a larger group in order to achieve the economic scale required to access the global market.
“I have already seen the establishment of business clusters. As I said to the coordinating economic minister [Airlangga Hartarto], the clusters need a bigger umbrella akin to a holding company so that going forward we have a corporation of MSMEs that can easily access national and global marketplaces,” Jokowi said in Jakarta on Tuesday.
He added that the government wanted to empower the MSMEs to grow and that he was regularly monitoring updates from the microloan schemes currently in operation.
According to data from the Cooperatives and Small and Medium Enterprises Ministry, 63.35 million businesses were categorized as microbusinesses last year. Microbusinesses are those with less than Rp 50 million (US$3,570) in assets and less than Rp 300 million in annual revenue. The figure represented 98.68 percent of total businesses in the country.
Only about 5,550 businesses were categorized as big businesses with more than Rp 10 billion in assets and more than Rp 50 billion in annual revenue, representing only 0.01 percent of total businesses in the country.
To accelerate the development of MSMEs, the government has designed microloan schemes to provide MSMEs access to capital.
The schemes include the Mekaar program from state-owned microfinance firm Permodalan Nasional Madani (PNM), waqf microbanks (Bank Wakaf Mikro) developed by the Financial Services Authority and the government’s microcredit program (KUR). The schemes offer microloans with low interest rates and simpler collateral terms than traditional bank loans.
Airlangga said separately that the government would use an “ecosystem approach” to spur the development of the MSMEs.
“We’re trying all types of ecosystem synergies, including village funds and the family hope program [PKH], so that PKH recipients will be waqf microbank users and further upgrade to KUR,” he said.
The government provides social aid to the country’s poorest families through the PKH program as part of its efforts to alleviate chronic poverty.
Waqf microbanks offer the smallest-scale loans, with a maximum of Rp 5 million in noncollateral loans. PNM’s Mekaar offered loans between Rp 2 million to Rp 10 million. KUR will offer a loan ceiling of up to Rp 50 million per borrower for its KUR scheme in 2020, up from the current Rp 25 million.
A collective Rp 31.5 billion of loans were disbursed through waqf microbanks as of October this year. KUR disbursement was Rp 127 trillion over the same period, and Mekaar loaned a total of Rp 32 trillion to 5.9 million
borrowers.
The government has increased the KUR value ceiling for 2020 to Rp 190 trillion from 2019’s Rp 140 trillion. The amount is set to gradually increase to Rp 325 trillion by 2024. KUR’s interest rate will also be cut by 6 percent starting next year.
On top of the financing schemes available to the MSMEs, the government is also drafting an omnibus law on MSME empowerment. Airlangga said the omnibus law would address the ease of doing business for MSMEs and would relax capital requirements for the establishment of limited liability companies.
The lack of coordination in the multiple financing schemes was one of the government’s weaknesses despite longstanding affirmative policies aimed at developing small businesses, said Center of Reform for Economics (CORE) Indonesia research director Piter Abdullah.
“Each program should have a clear target so they won’t overlap,” the CORE researcher said.
