The category of MSMEs is basically based on the size of the business capital at the time of establishment. If the business capital reaches a maximum of one billion rupiah (excluding the land and building of the business premises), it is categorised as a Micro Enterprise class. Enterprises with a business capital of more than one billion rupiah up to five billion rupiah are categorised as Small Enterprises. Businesses with a capital of more than five billion rupiah up to ten billion rupiah are categorised as medium-sized enterprises. Larger than this, it becomes the Large Business class.

MSME Challenges

The future challenges of MSMEs that must be addressed together by all relevant stakeholders include innovation and technology, digital literacy, productivity, legality or licensing, financing, branding and marketing, human resources, standardisation and certification, equitable distribution of guidance, training and facilitation, and a single database.

Currently, Kadin Indonesia and the Government of Indonesia are pushing to improve the performance of national MSMEs through a strategy of implementing digitalisation to increase competitiveness, become global players and export-oriented. 

The government and Kadin continue to encourage micro, small and medium enterprises (MSMEs) in Indonesia to enter the digital ecosystem. The Ministry of Cooperatives and SMEs targets MSMEs that can enter the digital market to rise to 24 million units by 2023 and will increase to 30 million units by 2024.

In order to achieve this target, Kadin supports the government's programme to initiate the digital transformation of MSMEs through various programmes, including the wikiwirausaha platform in line with the Ministry of Cooperatives and SMEs which opens an integrated business service centre.

 Industri Mikro Kecil (IMK)

In 2023, the Micro and Small Industry (IMK) business grew positively in every quarter, with an average growth rate of 2.55 per cent. The apparel industry group (Klasifikasi Baku Lapangan Usaha Indonesia/KBLI 14) became the industry group with the second largest value-added contribution growing over time, with an average growth increase of 3.02 per cent. The food industry (KBLI 10), as the industry group with the largest value-added contribution, experienced a slowdown in growth with an average decrease of 0.003 per cent. Meanwhile, the tobacco processing industry (KBLI 12) and the base metal industry (KBLI 24) contracted considerably with average growth falling by 39.82 per cent and 29.13 per cent respectively.

Entering the third quarter of 2023, after the month of Ramadan and Eid, IMK production experienced a decrease in production by 0.11 per cent. The decline in demand for food industry products (KBLI 10) by 1.06 per cent was the main cause of the decline in IMK production in the third quarter of 2023, because the food industry (KBLI 10) contributed the largest production value added, namely 26.91 per cent of the national IMK value added. The apparel industry (KBLI 14), which made the second largest contribution of 11.68 per cent, also experienced a decline of 3.89 per cent. The pharmaceutical, medicine and traditional medicine industry contracted the most, at -21.07 per cent. In contrast, the tobacco processing industry (KBLI 12) grew the highest at 54.64 per cent after two previous quarters of decline because the tobacco industry is highly dependent on the harvest season. Several other industries still grew positively in Q3-2023, including the printing and recording media reproduction industry (KBLI 18) and the machinery and equipment industry (KBLI 28) grew by 11.32 per cent and 7.88 per cent respectively.

During 2023, the IMK business showed impressive performance through a trend of positive growth figures. On the island of Java, the provinces of DKI Jakarta, West Java, DI. Yogyakarta, and East Java are stable with positive growth throughout 2023. Meanwhile, outside Java, 19 provinces are stable with positive growth. This phenomenon reflects the comparison between regions, IMK business activities in Java and outside Java have increased in line with the improvement of the Indonesian economy over the past few years.