Micro, small and medium enterprises (MSMEs) have become an inseparable part of people's lives in various regions in Indonesia. Starting from food, stationery, services, and various other daily necessities, we can find them in various shops or kiosks around us. Even though we sometimes don't realize it because of its simple form of business, the role of MSMEs in our country is actually very large. From the review UKM Indonesia, the Indonesian Ministry of Cooperatives and SMEs reported that MSMEs had a share of around 99.99% (62.9 million units) of the total business actors in Indonesia in 2017. In addition, combined MSMEs absorbed around 97% of the national workforce. It is clear that MSMEs have a huge role in developing Indonesia.
Despite the extraordinary potential, MSMEs in Indonesia still have a number of obstacles.
For example, the city of Malang shows diversity in the country's MSMEs. Businesses in the fields of fashion, food, drinks and even crafts fulfill one of the country's tourist destinations. Even so, according to data from the Malang City Cooperatives and MSMEs Service, of the 70,000 MSMEs that currently exist, only 30% have go online. This means that even though technological development is progressing so fast, business actors are still not fully accessible to technology.
In 2014, DailySocial reviewed that many business people are still reluctant to understand technology internet to develop their business. Even though the use of technology, information and internet networks is increasingly easy to reach and use. Indonesian people have great creativity and potential to develop MSMEs that are able to compete. Even so, some do not know how to develop products and introduce them to the market using internet technology. A study by Saleh and Hadiyat (2016) found that the use of information technology among MSMEs in border areas is still not optimal. The results of this study, which was conducted in Belu Regency, NTT Province, illustrate that the use of technology among MSMEs has become popular in the community, both in terms of the business actors' ability to operate computers and in terms of accessing the internet. On the other hand, the use of computers and the internet to support the management of MSMEs appears to be relatively low. The ability to use information technology in MSMEs also seems to be closely related to the issue of the education level of these entrepreneurs.
Technology as a Solution to Various Business Problems
Despite the rapid development of technology, its use in Indonesia is not yet optimal. In fact, technology can be a solution to the problems of MSMEs that many business actors still face in the country. Quoting a review of an article from Kumparan, here are a number of problems that are still plaguing Indonesian MSMEs.
Issue #1: Capital
Many MSMEs believe that their businesses are able to grow and reach a wider market, but have limited capital. A number of MSMEs are still untouched by financial institutions, so many business actors choose to use microfinance institutions even though they carry quite heavy burdens and risks. In a report on Detik, Minister of Transportation Budi Karya Sumadi stated that only 5% of MSMEs in Indonesia had successfully go digital in 2019. Different from a number of our neighboring countries, there are still many who Business actors must improve to face today's digital era. The Head of the Digital Financial Innovation and Microfinance Development Group at the Financial Services Authority (OJK) also said that as many as 70% of MSMEs in Indonesia do not have access to financing. It is clear that MSMEs need support in this aspect. Technology could be one solution. Nowadays, there are many uses of technology in the financial sector, for example financial technology services, which are types of companies in the financial services sector that are combined with technology. Fintech is here to sharpen, change and accelerate various aspects of financial services through technology, including loans and raising funds for businesses. For example, fintech types of crowdfunding and peer-to-peer (P2P) lending are able to bring together parties who need funds with parties who provide funds as capital or investment, so that they can be used as options to support local businesses in the field of capital.
Problem #2: Goods Distribution
One of the other problems of MSMEs is the lack of efficiency and channels for distributing goods. Existing shops still rely on recommendations from friends or colleagues and word of mouth marketing. Apart from that, various kinds of local products from the regions need to go through various routes to reach their destination stores, so it takes a lot of time and costs a lot. This not only happens in Malang, but also in other areas. For example, the head of the Bank Indonesia representative office in West Kalimantan also said that the main obstacles for MSMEs in this area were distribution and inefficiency. Covered by BeritaSatu, this problem returns to the use of the internet, which, although increasingly easy to access, has not been maximized properly. Rather than just focusing on the quality of goods production, entrepreneurs should also open themselves to the use of technology. Through electronic commerce or e-commerce, the products offered are able to reach a wider market more quickly, so that distribution is more effective and sales can increase.
Issue #3: Licensing
Ownership of a legal entity is clearly only owned by a handful of MSMEs. Most MSMEs also do not have adequate knowledge regarding legal and licensing aspects, from the requirements to the processes followed in processing them. It is not uncommon for people to be reluctant to apply for their business permit because the procedure is considered troublesome. In fact, when entrepreneurs do not have an official business permit, new problems will arise. Businesses will be more difficult to develop, especially with obstacles to applying for capital. Quoting an explanation from OnlinePajak, it is important for business actors to have a Trading Business License (SIUP) which is issued based on domicile and business scale. This SIUP is useful as legal proof from the government to run a business. Fortunately, with technology, entrepreneurs can find the information needed to process permits, which can now also be done online. In a report on Republika in 2019, the Minister of Cooperatives and Small and Medium Enterprises (UKM) Teten Masduki also explained that the ease of obtaining business permits for MSMEs was in the process of being worked on through a Government Regulation (PP). By utilizing technology and synergy between the various parties concerned, business permits are easier to understand and obtain for business actors in Indonesia.
Problem #4: Manual Bookkeeping
Manual bookkeeping is still a method frequently used by MSMEs, despite its various shortcomings. In some conditions, a number of MSME actors do not even have records related to this matter. Difficulties in calculating turnover, gross profit and net profit often prevent MSMEs from being able to grow their business. Manual bookkeeping is also more susceptible to loss, damage and even wrong recapitulation. Even though it may seem that bookkeeping procedures are trivial, this task is a crucial task in business. The resulting data can be used to monitor conditions, measure success, and plan future business strategies. Therefore, MSMEs can utilize technology for this process. Now there is a lot of accounting software and cashier applications that are easy to use at a friendly cost, so that business processes can be supported with more detailed, practical and efficient methods.
Issue #5: Online Marketing
Every business certainly wants to reach the maximum market possible, so marketing issues are repeatedly raised. Online marketing is still a challenge for MSMEs today. The majority of MSMEs in various corners of Indonesia are dominated by generation X, most of whom still lack knowledge of the ability to adapt to the internet and technological developments. Indeed, several MSME players have placed their products online via social media and marketplace sites, but the practice is still not optimal. In terms of selecting information channels, creating content, and placing advertisements, the right implementation strategy is needed. Through the right strategy, sales results by MSMEs are able to grow, so that they can also bring greater benefits to the Indonesian people.
Of the five MSME problems above, does BossQ also experience them?
These five existing and interrelated challenges clearly show that many business actors are still unaware of the great need for technology. When used effectively and appropriately, technology can actually make our lives easier. Solving these various problems also requires synergy and collaboration, both from government, community, media, industry and academia. As reviewed by Kumparan, the #PahlawanDigital program initiated by the Indonesian web hosting company, Jagoan Hosting, could be an example. This is an opportunity for the younger generation to contribute to the country's MSMEs. #PahlawanDigital seeks to help MSMEs to go online so that President Jokowi Widodo's vision of making Indonesia the Digital Energy of Asia by 2020 can be achieved. By combining strengths and expertise, we are able to drive the growth rate of MSMEs and improve the quality of local businesses together.
In this digital era, none of us can stand alone. We need each other. The journey to success is still long, but through good collaboration, we are able to solve existing problems one by one. We are able to advance Indonesian MSMEs, as long as we are willing to open ourselves to change for the better.
So what, BossQ? Are you ready to become a more advanced MSME actor with technology?