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.

Access to Financing

According to data from the Indonesian Joint Funding Fintech Association (AFPI), in 2020 there were around 46.6 million out of a total of 64 million MSMEs in Indonesia that did not have access to capital from banks or non-bank financial institutions. The financing constraints experienced by MSMEs are the basis for the Government to provide support for other financing facilities, including through the partnership and community development programme (PKBL), Mekaar PNM, Micro Waqf Bank, Ultra Micro Financing (UMi), and People's Business Credit (KUR).

This financing scheme can be accessed by MSMEs according to their class as the MSME business level develops. Since 19 January 2022, the KUR scheme consists of KUR Super Mikro, KUR Mikro, KUR Kecil, KUR Khusus, and KUR PMI. For KUR Super Mikro and KUR Mikro, no additional collateral is required.

The development of MSME loans itself continues to increase and NPLs are maintained stable. MSME loans continued to increase to reach Rp1,275.03 trillion or grew 16.75% (yoy). NPLs are maintained at around 4%, where the latest position in April 2022 NPLs were recorded at 4.38%, lower than the same period last year which was at 4.41%.

MSME export contribution

The total contribution of MSME exports increased from 14.37% in 2020 to 15.69% in 2021. One of the efforts to improve the competitiveness of SMEs is to utilise opportunities for their integration into the global market through the Global Value Chain (GVC) and Global E-Commerce (GEC). The integration of SMEs into GVCs can be done in the form of indirect exports through domestic aggregators or foreign affiliated companies.

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.