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Jakarta Post

[INSIGHT] Digitalization challenges for women micro-entrepreneurs

  • The Jakarta Post

Jakarta   /   Tue, December 22 2020   /  01:00 am
Supporting local producers: Telkom president director Ririek Adriansyah (second left) along with Telkom Strategic Portfolio director Budi Setyawan Wijaya (second right) and Telkom Digital Business director Muhamad Fajrin Rasyid (left) inspect a booth displaying products manufactured by local micro, small and medium enterprises (MSMEs) after the launch of the PaDi UMKM digital platform on Aug. 17 in Jakarta.(Courtesy of Telkom/.)

 

 

The decrease in physical interaction and mobility resulting from the COVID-19 pandemic is affecting people’s livelihoods, especially women micro-entrepreneurs, who sell their products at mobile food stalls, warung (small kiosks) and tourist sites. 

Made, a craftswoman in her 50s from Gianyar, Bali, depends on selling small wooden decorations and bracelets for her living in Sukawati. Her income has decreased by 80 percent since Bali closed its doors to tourists. In December, her income has been slowly recovering but has yet to reach its pre-pandemic level. 

She has tried to sell her products through social media and e-commerce platforms. However, the results have not been as good as expected. She has found it difficult to be bound to her phone, to pay for phone credit, to take good photos of her products and to market them online.
Micro-entrepreneurs, according to Law No. 20/2008, have annual sales of no more than Rp 300 million with a maximum asset value of Rp 50 million, excluding land and buildings used for business. 

There is no publicly available data on the number of women micro-entrepreneurs like Made. In 2017, Seno-Alday and Bourne from the University of Sydney, using 2015 population data, estimated that the number was 24.7 million. 

A 2016 World Bank study affirms that the majority of women entrepreneurs fall into the micro category, often running workshops from their homes, making traditional food, handicrafts, and clothing.

Digitalization may be a solution for sustaining micro enterprises during the pandemic and beyond. Although economic growth is slowing, the number of online shoppers surged by 60 percent from before March 2020 to September 2020, according to a survey by McKinsey.

The Cooperatives and Small and Medium Enterprises Ministry and the Information and Communications Ministry followed this idea by designing programs that aimed to have 10 million MSMEs (micro, small and medium enterprises) go digital by the end of 2020. The programs cover training and marketing for government procurement, in cooperation with certain industries and e-commerce platforms.

In October 2020, the Cooperatives and Small and Medium Enterprises Ministry claimed to have surpassed the target with 10.25 million digitized MSMEs. However, no further details were provided about the proportions, such as the micro enterprise figure, how many were from rural areas, how many were from low-income households, etc. 

Assuming that micro enterprises account for 98.7 percent of MSMEs, we have 10.1 million micro enterprises that have gone digital. With 63.4 million micro enterprises now operating, based on Cooperatives and Small and Medium Enterprises Ministry data from 2018, digitizing more than 53 million micro enterprises is a huge challenge.

The next daunting task is helping women micro-entrepreneurs go digital. This is crucial because women have been disproportionately affected by the pandemic. 
Before the pandemic, women micro-entrepreneurs were already marginalized. Tambunan (2009) found that women micro-entrepreneurs often deferred to their husbands as the key decision makers for household matters, including the business. Women, especially in rural areas, are also bound by daily care work. Furthermore, micro enterprises are mostly run by entrepreneurs whose education level not higher than primary school (Bank Indonesia, 2015; Tambunan, 2009). 

Digital literacy will allow women micro-entrepreneurs to use digital platforms to sustain their businesses during and after the pandemic. There are two main steps the government can consider to support women micro-entrepreneurs.

First, the Cooperatives and Small and Medium Enterprises Ministry should take the lead in establishing a single database for MSMEs, especially micro-entrepreneurs. This intention is stipulated by Article 88 of the Omnibus Law on Job Creation, but the inclusion of gender-disaggregated data is missing. A more reliable and gender-sensitive dataset would be beneficial for designing a specifically targeted training program for women micro-entrepreneurs to adapt to technology. 

The ministry should cooperate with other stakeholders, such as Statistics Indonesia (BPS), as the main agency handling national data, the Finance Ministry, which handles the cash transfer program, the Communications and Information Ministry, as the lead sector in the digitization program, the State-Owned Enterprises Ministry and state-owned banks, which have support programs targeted for MSMEs.

Establishing a single database is pertinent, as Article 87 of the Job Creation Law suggests a new definition of MSMEs that will be included in prospective government regulations. In this matter the Cooperatives and Small and Medium Enterprises Ministry may prioritize designing digitization programs for women micro-entrepreneurs in rural areas and with digital literacy indexes below the national average. 

Second, the programs need continuity rather than one-time training, prioritizing quality over quantity. The training should avoid presenting theories online or distance learning methods. Instead, it needs to consider gradual learning by emphasizing practice. As happened in Sweden, program facilitators should be locals who are familiar with women micro-entrepreneurs. 

Lastly, simplifying registration and licensing procedures for online selling is imperative. In May, the Trade Ministry issued a regulation mandating that all entrepreneurs, including ones in the micro category, obtain a license to sell online. Entrepreneurs need to register and fill in required data and documents through the online single submission (OSS) platform. 

Although the OSS process looks simple, it will be followed by red tape to obtain other permits, such as  a permanent business trading license (SIUP), a food home industry license (SPP-IRT), an Indonesian National Standard (SNI) certification and a halal certification. The Job Creation Law guarantees a single license for micro- and small enterprises, but implementation in the field remains to be seen.

In fact, a 2016 International Finance Corporation study on women entrepreneurs found 33 percent of women entrepreneurs thought the registration and licensing process was too complicated, and 27 percent of women entrepreneurs did not see the benefit of obtaining licenses or registering their businesses.

 

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The writer is a researcher at the Center for Indonesian Policy Studies

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