Govt, private companies push for digital transformation of MSMEs. The government and private sector actors such as banks and financial start-ups are making fresh efforts to further promote the digitalization of micro, small and medium-scale enterprises (MSMEs), which have become the backbone of the country’s economy.
The Industry Ministry recently launched Startup4 Industry, an application that gives MSMEs easier access to affordable and feasible technological solutions from technology start-ups.
The program is one of several initiatives taken by the ministry in pushing for the digital transformation of MSMEs, which, due to their weak financial and technological capacity, are still unable to take advantage of digital technology to boost their businesses.
“Through Startup4Industry, technology start-ups can provide MSMEs with digital technology to solve managerial, production and marketing issues,” Industry Minister Airlangga Hartarto said during the launch of the application in Jakarta on Aug. 30
Meanwhile, the ministry’s MSMEs Directorate General Gati Wibawaningsih said the ministry would also cooperate with Bank Indonesia (BI) to provide MSMEs with easier access to funding.
“The ministry is discussing with Bank Indonesia how to help MSMEs get easier access to bank loans,” Gati told reporters. She said the ministry and the central bank would seek other financial alternatives for MSMEs in addition to subsidized micro credit program (KUR) loans. “Hopefully, the new funding initiative can be launched soon,” she said.
MSMEs, which also include companies involved in industrial activities, have become the backbone of Indonesia’s economy. According to data provided by Statistics Indonesia (BPS), their contribution to the country’s GDP reached 61.4 percent in 2017 while they also absorbed about 70 percent of the country’s workforce.
In addition to the government, a number of private banks and startups, including United Overseas Bank (UOB) Indonesia, agriculture start-up TaniHub and peer-to-peer lending platform Modalku, have launched their own applications to promote the digital transformation of MSMEs.
UOB Indonesia recently launched a cloud-based business management service called UOB BizSmart to help MSMEs expand their businesses. “BizSmart can help MSMEs to make their business activities more efficient through e-invoicing, accounting, human resources, management and customer management so that they can be more competitive and develop more effectively,” said UOB Indonesia president-director Kevin Lam during a separate press briefing held in Jakarta on Aug. 28.
Kevin said the bank also expected to see growth in credit disbursement to MSMEs thanks to its increased involvement in promoting the digital transformation of MSMEs. “We expect loan disbursement to MSMEs to increase by 7 to 9 percent, this year,” he added.
Meanwhile, through its online retail and financial platforms, TaniGroup is also promoting the digital transformation of MSMEs.
TaniGroup operates two business arms, e-marketplace TaniHub, which allows consumers to buy fresh products directly from farmers, and peer-to-peer (P2P) lending platform TaniFund, which provides farmers with an alternative and legally registered source of loans.
Established in mid-2016, TaniHub has partnered with over 25,000 farmers across the country and operates five distribution hubs around Java. The start-up also serves around 800 MSMEs.
TaniGroup CEO Pamitra Wineka said most MSMEs still preferred cash transactions because they lacked knowledge of digital technology. However, if there is demand for their products and someone can help them access digital platforms, they would surely take up the challenge, he added.
“For example, if we asked them to provide 100 tons of garlic per month, they would definitely go online,” Pamitra told The Jakarta Post on Wednesday.
Separately, local P2P lending start-up Modalku launched on Wednesday Modal Pasar, a lending service to help finance merchants in traditional markets. “Merchants can get loans without collateral of Rp 25 million through the Modal Pasar program,” said Modalku’s head of micro business and operations Sigit Aryo Tejo.
Sigit said that micro businesses should have the same opportunities to access funding, although bad cash flow remained a big challenge for small merchants in traditional markets.
Indonesia Cloud Computing Association chairman Alex Budiyanto said there were many kinds of technological solutions such as artificial intelligence (AI) to support MSMEs. “MSMEs can do many things with AI. There are various AI solutions that have been created by locals,” Alex said, adding that many MSMEs were still unfamiliar with such technology.
The true benefit of AI is seen in industries that require significant manpower for production, as despite the tendency for it to replace workers, new jobs are created, said Alex.
Although no data has been collected on the extent to which AI could improve the efficiency of MSMEs, Alex estimated that “AI could make production 30 percent more efficient.”
Schneider Electric Indonesia country digital transformation lead Fadli Hamsani acknowledged that technology was a key enabler for MSMEs’ business development. “However, many MSMEs have yet to absorb the idea of how digital transformation can be beneficial for their businesses,” he added. Govt, private companies push for digital transformation of MSMEs (asp/awa, The Jakarta Post)