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Indonesian SMEs to level-up in the midst of the covid-19 pandemic

Heaptalk Team, economy . 10 Aug 2021
Indonesian SMEs

Heaptalk, Jakarta – The wake of the Covid-19 pandemic has destroyed the world economy that brought destruction to the lives of million of people. In order to revive the situation, President Joko ‘Jokowi’ Widodo delivered instruction to strengthen the small-medium enterprises (SMEs) rapidly. SMEs that have dominated around 88% to 89% of the national economy and have the ability to hire about 51% to 91% of employees across ASEAN made the business becomes the backbone of the national economy.

However, the alteration of people’s behavior to adapt to the pandemic situation and the strict curb applied by the Government to reduce the rise of the covid-19 infectious rate has hindered SMEs from survival. The problem is worsened since the highly transmissible delta variant arrived and fueled the surging infections to the country. As a response to the current condition, last night (09/08), the Government was forced to extend the existing multi-tiered public activity restriction (PPKM) until 16th August. The limitation, further, made the entrepreneurs screamed out in fear due to the regulation has brought a severe impact on their earning. As a result, thousand SMEs that deal with these challenges should walk breathlessly, where many of them shut down their business in the end.

The Cooperative and Small Medium Enterprises (SMEs) Minister Teten Masduki, in a statement, said that the only way to address the situation is by pulling the SMEs out from their comfort zone to keep up with the situation namely by expediting digital transformation and enhancing business literacy. The Government is claimed it has carried out efforts to drive SMEs to be more resilient, such as escalating digital literacy and business quality and capacity. In 2021, the World bank revealed that 80% of SMEs that conducted digital transformation has a higher resistency. By initiating the “Proud to made in Indonesia product” campaign and PaDI, SMEs Digital Market, the Government endeavors to enlarge the digital market for SMEs. The authority also pledged to distribute cash transfers to assist SMEs’ capital to have resistance in battling the issue. Previously, the Government has distributed the presidential assistance to 12.8 million SMEs of 15.3 trillion rupiah (US$1 billion) and people’s business loan (KUR) to 3.95 million SMEs of 146 trillion rupiah (US$10.1 billion).

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The capital assistance, yet, is perceived insufficient, so the access to the financial institution is an urgent necessity. A further obstacle appears as the public viewed that the process of obtaining capital from a financial institution is convoluted and difficult to be penetrated. The President Director of BRI Sunarso emphatically refuted the view by stating that the news spread is entirely wrong. The public has believed in the statement even though they have not applied for the loan yet. For this reason, Sunarso concluded the point that should be highlighted to promote SMEs’ growth is business literacy, not advocacy.

Knowledge about entrepreneurship spirit, information access, business administration and management, and business sustainability is the major capital of any business segment to develop and be resilient. The motivation to generate creative and innovative products, good business management, and the maturity of a business continuity plan will help SMEs to level up.

The implementation of the knowledge will jack up their value and affirm their position before the financial institutions. Instead of under the lender, Sunarso added that SMEs’ position would be regarded equal to borrower, and this advantage will become the special attraction for the financial institution to provide easy access to SMEs toward financing. At this point, the borrowers will compete to lower their interest rate and simplify the credit process. (WLN)