The International Labor Organization (ILO) launched the “Promise II Impact” second stage program to support small and medium enterprises (SMEs) to access financial services through entrepreneurship.
The Financial Services Authority (OJK)’s Board of Commissioners Chairman Mahendra Siregar officially launched the program in Jakarta on March 2, 2023, along with the Coordinating Ministry for Economic Affairs’ Acting Deputy for Microeconomics and Coordination of Finance Ferry Irawan, Deputy Ambassador of Switzerland to Indonesia Philippe Strub and ILO Director for Indonesia Michiko Miyamoto.
“One of ILO’s main agendas is to encourage the development of SMEs in Indonesia. SMEs are very important for creating decent and productive work,” Miyamoto said in her remarks, Antara news agency reported.
Facilitating SMEs
Funded by the Swiss State Secretariat for Economic Affairs (SECO), the Promise II Impact initiative strives to enhance the conditions that facilitate a financial sector that is accessible to SMEs, fostering economic expansion and the creation of job prospects, particularly in the aftermath of the COVID-19 pandemic, ilo.org reported.
This initiative also reinforces the Indonesian government’s efforts to advance the digital economy and is consistent with its policies and programs for post-pandemic economic recuperation by promoting digital modernization and amplifying financial inclusion, which encompasses funding opportunities for SMEs.
Benefits for SMEs
The Promise II Impact program enables SMEs to leverage Digital Financial Services and augment the worth of the new SME value chain ecosystem by implementing digital technologies that are custom-tailored for SMEs in the productive sector.
Moreover, this program enhances the competencies of and furnishes digital technology assistance to Regional Development Banks (BPD) and Rural Banks (BPR) as the primary beneficiaries, with secondary beneficiaries including SMEs and business development service providers.
“SMEs play an important role in achieving decent and productive work considering that they account for two-thirds of total employment and create many new jobs. Therefore promoting SMEs has become one of the ILO’s priorities to support them to increase competitiveness and productivity and accelerate business recovery through digitalization,” Myamoto said.
Promise II Impact Program Manager Djauhari Sitorus said through digital technology, access to financial services can reach people in rural and remote areas, including low-income groups and SMEs.
“The Swiss government is committed to supporting the development of SMEs – the backbone of Indonesia’s economy – by opening access to finance and encouraging digital transformation. We believe that Promise II Impact will make a significant contribution to Indonesia’s financial inclusion agenda and support SMEs to realize their growth potential,” said Strub.
Program’s strategies
The Promise II Impact focuses on four strategies to provide greater access to SMEs to digitalize. They are:
- Encouraging the use of digital technology to increase the productivity and business scale of SMEs
- Support digital technology adoption by BPD and BPR
- Improving the ecosystem bound in the eyes of MSME values through digitization, expansion of buyers and better access to finance
- Engage local administrations in supporting economic recovery policies and programs targeted at SMEs and financial service providers.
Development of SMEs in Indonesia
According to the Ministry of Cooperatives and SMEs, the number of micro, small and medium enterprises (MSMEs) in Indonesia totaled 65.47 million in 2019, a 1.98% increase from the previous year’s of 64.19 million.
This figure accounts for 99.99% of all businesses in Indonesia, while large-scale businesses constitute only 0.01% or 5,637 units. Specifically, 64.6 million of the MSMEs are micro businesses, making up 98.67% of the total MSMEs in Indonesia, DataIndonesia.id reported.Small businesses, on the other hand, constitute 798,679 units or 1.22% of the total MSMEs, while medium-sized enterprises make up only 65,465 units, contributing 0.1% to the total MSMEs in the country, according to DataIndonesia.id.
