Hello, OptiMIST People!
Back at it again with KaMIST! Your weekly dose of insights into the latest marketing trends. In this week’s KaMIST we’ll dive more into how MSMEs affect Indonesia’s economy.
MSMEs make up the largest group of businesses in the Indonesian economy and have shown to be resistant to various sorts of economic crisis shocks. According to Law Number 20 of 2008, Micro Enterprises are profitable companies owned by people or legal organizations that adhere to the law’s definition of a microbusiness. A small business is an independent, profitable enterprise operated by a person or a business entity that is not a branch of a company owned and controlled directly or indirectly by medium-sized businesses or large businesses that meet the criteria of Small Businesses as referred to in this Act. Medium Enterprises are independent, productive economic activities run by people or companies that are not owned, controlled, or joined, directly or indirectly, with Small Businesses or Large Businesses, with a total net worth or annual sales proceeds that meet the requirements of this Act.
MSMEs play a significant number of crucial roles in maintaining the stability of Indonesia’s economy. According to data from the Ministry of Cooperative Spaces and Small-to-Medium Enterprises, it has identified 64.2 million MSMEs in the first quarter of 2021. These MSMEs have contributed to around Rp. 8,573 trillion or 61.07% of the country’s GDP. In addition, the COVID-19 pandemic shifted consumers’ purchasing behavior from offline to online and has helped MSMEs to gain more traffic than before. However, the pandemic also exposed certain areas where MSMEs need to improve, such as digital technology adaptation, utilizing digitization properly, and effective product marketing.
Effectively utilizing digitization properly can lead to many new opportunities for MSMEs. One, in particular, has showcased a number of remarkable outcomes, e-commerce. The adoption of e-commerce has become more crucial than ever for MSMEs. It has helped businesses in various aspects such as sales growth, cost efficiency, improved service, etc. According to the Ministry of Communication and Information, only 7.4% of all MSMEs in Indonesia, or 4.7 million of them, used digital platforms in 2017. Although few MSMEs have adopted e-commerce, the rate of growth of e-commerce adopters is impressive. In 2018, this figure increased by 104.4 per cent to 9.61 million. These numbers show that MSMEs are very eager to connect online and conduct business.
In the upcoming years, inclusive growth will continue to be significantly influenced by the global digital economy. Digital tools can increase access to the market, and customers’ preferences, including employment for better efficiency and services – since almost 60% of the population is connected through the internet. Adopting digital tools in their business strategy will increase productivity and enhance socioeconomic results. According to research conducted by the World Economic Forum, Indonesia’s digitalization could boost national productivity to $120 billion by the year 2025.
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