University Support for MSME Growth and Digitalization
By: Mastur Jaelani *)
Micro, Small, and Medium Enterprises (MSMEs) have long been the main pillar of the Indonesian economy. With a significant contribution to job creation and poverty reduction, this sector plays a strategic role in national economic development. However, the various challenges faced by MSMEs require innovative solutions and support from various parties, including academics. In this context, cross-sector collaboration involving universities is a strategic step that needs to be strengthened to ensure the sustainability and competitiveness of MSMEs at the national and global levels.
One of the concrete steps taken by academics is the holding of a national seminar with the theme “The Role of the BPK in Increasing Transparency of Financial Management and Efforts to Encourage MSME Sustainability” held by Prof. Dr. Moestopo University (Beragama). This seminar became an important discussion space that discussed the various challenges and opportunities faced by MSMEs as the driving force of the national economy. The Chancellor of Moestopo University, Dr. FX. Sugiyanto, highlighted that one of the main challenges for MSMEs in Indonesia is the separation between business capital and household needs. Without good management, it is difficult for MSMEs to develop optimally and make maximum contributions to the economy.
In the seminar, the Director of Postgraduate Studies at Moestopo University, Prof. Dr. Ir. Triyuni Soemartono, emphasized the importance of the role of MSMEs in the economy, especially in developing countries like Indonesia. Based on World Bank data, MSMEs cover 90% of the total global business and absorb more than 50% of the workforce. With the projection that the world will need 600 million new jobs by 2030, MSMEs are at the forefront of creating these opportunities. In Indonesia itself, the growth of MSMEs from 2015 to 2020 recorded a significant increase, namely from 59.26 million to 64.2 million units. However, the majority of these MSMEs (99.62%) are still on a micro scale with an annual turnover of below IDR 2 billion. Another major challenge is the financing gap that hinders the sustainability and growth potential of MSMEs.
Data from the Financial Services Authority (OJK) shows a slowdown in MSME credit growth. Until September 2024, banking credit growth for MSMEs only reached 5.04% annually, much lower than the growth of 8.34% in the previous year. In addition, the Non-Performing Loan (NPL) rate in the MSME sector also increased from 3.88% in September 2023 to 4% in 2024. The high credit risk has made banks increasingly selective in distributing financing. This condition requires new, more targeted policies to support MSMEs. Head of Subauditorate II.C.2 of the State Financial Auditorate II of the BPK RI, Indra Kumbara Wedha, recommended a revision of the policy on interest subsidies or margins for Non-KUR MSMEs to be more effective, accompanied by more adequate validation of micro-business data.
Digitization is also one of the strategic solutions proposed by academics to help MSMEs move up a class. Darto, a lecturer at the University of Muhammadiyah Jakarta, stated the importance of utilizing technology for market access and operational efficiency. Digitalization not only allows MSMEs to reach a wider market but also helps increase competitiveness through business process efficiency. In addition, human resource development through continuous training and the application of the value chain-based “factory sharing” concept are important steps to increase the competitiveness of MSMEs. Access to more affordable subsidized financing is also needed to support the growth of this sector.
Meanwhile, the University of Indonesia (UI) is expanding its study of finance and MSMEs through collaboration with the Jameel Poverty Action Lab (J-PAL) Southeast Asia. J-PAL, based at MIT, is a global network of professors who conduct randomized evaluations to answer important questions in combating poverty. In Indonesia, J-PAL SEA has conducted more than 20 randomized evaluations covering the financial, social protection, education, and MSME sectors. This collaboration produces scientific evidence that can be used to formulate data-based policies to address the various challenges faced by MSMEs. UI Vice Chancellor for Academic and Student Affairs, Prof. Ir. Mahmud Sudibandriyo, emphasized that ethical-based research is very important to ensure results that are relevant and beneficial to the wider community.
In order to maximize the role of academics in the growth of MSMEs, the government through the Ministry of MSMEs is collaborating with universities and the private sector to recruit young entrepreneurial talents through the establishment of Campus-Owned Enterprises (BUMK).
