MSMEs Hold Significant Role in Indonesian Economy

Micro, Small and Medium Enterprises (MSMEs) are predicted to be the backbone of the economy during the pandemic. However, MSMEs also can’t avoid the severe impacts of Covid-19. Various efforts are needed to support the MSMEs to encourage them to level up, including by providing business capital for MSME owners.

A greengrocer harvesting chilies in the garden behind his house in Bekasi Regency. (ACTNews / Reza Mardhani)

ACTNews, JAKARTA - Micro, Small and Medium Enterprises (MSMEs) hold in important role in Indonesian economy despite their smaller scale. About 98.7% of the total Indonesian businesses are MSMEs. Its contribution to the workforce is 97%, creating 99% of total employment, and contributing 63% of the total Indonesian gross domestic product (GDP).

"Encouraging MSMEs to level up can reduce the poverty rate by around 20 percent, equivalent to getting 5 million people out of poverty,” explained Gadjah Mada University Economics lecturer Akhmad Akbar Susamto during a virtual discussion on Thursday (9/17).

Meanwhile, in the midst of a pandemic, 7 out of 10 micro and small business actors need business capital assistance. On the other hand, Akbar said, that their main problem is sales.

"We know that small businesses usually have small capital. If they can't sell [their products], they don’t earn much money. If this happen, they will run out of capital. Hence, even though the main problem is sales, they still need capital to maintain the businesses," he said.

Various steps have been taken to maintain the MSMEs, especially in relation to the pandemic. The government, for example, puts full priority in maintaining the sustainability of MSMEs through the People's Business Credit (KUR) program. Assistant Deputy for Capital Market and Financial Institutions, Coordinating Ministry for Economic Affairs, Gede Edy Prasetya, said that the government had issued four coordinating ministerial regulations for the economy.

"These ministerial regulations’ are a form of the government’s presence in fostering MSMEs. This is a policy aimed at MSMEs so they can mitigate risks and make businesses survive in the midst of a pandemic," said Gede during the Askrindo Webinar in Jakarta, Thursday (9/17).

NGOs like Global Wakaf - ACT also continue to contribute to micro entrepreneurs. Through the Waqf for Micro Business Capital program, Global Wakaf endeavors to empower business owners in the midst of these difficult times.

Based on the facts that we found on the ground, many micro and ultra-micro entrepreneurs are struggling to maintain their businesses in the midst of the pandemic. Many of them have gone out of business due to the low purchasing power of the community. It’s sad considering that MSMEs are considered as one of the main pillars of the Indonesian economy. In addition, the economy of our farmers, our food producers, have also slumped due to limited capital for agricultural production at a time when people need food. This is what drives us and Global Wakaf to initiate the Waqf for Micro Business Capital program," said ACT President Ibnu Khajar.

Susyanti, a grocer in South Kalimantan who received capital assistance from the Waqf for Micro Business Capital Program from Global Wakaf - ACT. (ACTNews)

Susyanti was among small business owners who have been severely impacted by the pandemic. She is a grocer in Karang Mekar Village, East Banjarmasin District, Banjarmasin City. She has been selling groceries for 22 years and the pandemic has really shaken her business. She often has to use the money for the capital to fulfill daily needs as she feels that her business is starting to falter.

For Susyanti, the Waqf for Micro Business Capital is help from Allah. "Right when my business started to fail and when I am left with no choice to run my business amid the pandemic, Alhamdulillah, capital waqf assistance was handed over to me,” she said. Thanks to the Waqf for Micro Business Capital, Susyanti can add more merchandise that she can sell.

To empower more micro entrepreneurs like Susyanti, Ibnu invited everyone to contribute to the Waqf for Micro Business Capital program with Global Waqf. "We believe that a widespread spirit of generosity will lead to economic recovery and will bolster this nation’s optimism. Together we must quickly work to make things better in these difficult times. ACT, through Global Wakaf, is inviting the community to contribute in supporting micro-businesses through the Waqf for Micro Business Capital," added Ibnu. []