Gov’t to Maintain MSMEs’ Role as Economic Backbone

By Office of Assistant to Deputy Cabinet Secretary for State Documents & Translation     Date 24 Agustus 2022
Category: News
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Sri Mulyani on the sixth episode of Cabinet and Cabinet Secretariat’s Podkabs (Photo by: PR of Cabinet Secretariat/Agung)

The Government continues to develop and empower micro, small, and medium enterprises (MSMEs) which serve as global economic backbone, Minister of Finance Sri Mulyani Indrawati has said.

The Minister made the statement at the 6th Annual Islamic Finance Conference held online on Wednesday (08/24).

“They (MSMSEs) contribute 90 percent to business activities and contribute more than 50 percent to job creation across the globe. In developing countries, formal MSMEs contribute approximately 40 percent to the gross domestic product (GDP). This contribution is actually much bigger if we include informal MSMEs, which are mostly not registered,” she said.

The Minister further stated that the recovery of MSMEs is one of the factors of economic recovery and performance in Indonesia. Therefore, the design of the national economic recovery program positioned MSME recovery as one of the most important pillars besides healthcare and social protection.

“Indonesia has 64 million MSMEs that represent 99 percent of the total business activities. In fact, they create 97 percent of jobs and contribute 60 percent to our GDP,” she said.

Nevertheless, Sri Mulyani pointed out that MSMEs still encounter a number of challenges, including the lack of access to markets, the lack of skilled human resources, the lack of advance technology use, and limited access to financial services, which are also worsened by inadequate infrastructure in remote areas.

“To tackle those challenges, the priority of the Indonesian Government in developing and empowering MSMEs is to overcome all aspects of those weaknesses,” she said.

The Minister went on to say that the Government maintains the role and growth of MSMEs with four strategies.

The first strategy is to develop infrastructure that not only includes main roads, railways, bridges, and airports but also digital connectivity infrastructure.

“We allocate quite a huge budget to ensure that approximately 20,000 villages in Indonesia will be connected through Palapa Ring Satellite and Base Transceiver Station (BTS), so everyone in remote areas will be connected digitally,” she said.

The second strategy is financing program.

According to Sri Mulyani, around 18 million MSMEs in Indonesia have no access to formal financing yet and 46 million MSMEs still require additional financing for business capital and investment. Thus, the Government provides People’s Business Credit (KUR) program and Ultra Micro (UMi) business credit program to support MSMEs.

Third, the Government continues to support digitalization of MSMEs by targeting to digitalize 40 million MSMEs by 2024. As of January 2022, as many as 17.2 million MSMEs have been digitalized.

Finally, the Government also improves synergy and coordination between the Central Government and stakeholders, including state-owned enterprises, regional governments, and private sectors for a fruitful and effective result of MSME empowerment.

“The Government’s support alone is not enough to support and empower MSMEs. For this reason, we need to formulate strategies and enhance synergy and coordination between public sectors, the academia, and private sectors, including to develop sharia financing scheme for MSMEs,” she remarked. (PR of Ministry of Finance/UN) (DH/MUR)

The official website of Ministry of Finance can be accessed here.

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