The Micro, Small, and Medium Enterprise (MSME) sector has long been a key component of the Indonesian economy. Under the leadership of President Prabowo Subianto, the government is committed to making MSMEs the engine of the economy.

During the Red and White Cabinet inauguration, President Prabowo stated a grand vision for taking MSMEs to the next level. This vision is realized by overcoming various obstacles that have hindered small business development, including access to financing.

In support of the President's vision, Minister of MSMEs Maman Abdurrahman acknowledged the challenges faced by MSMEs, identifying access to finance as a major concern. MSME stakeholders frequently report significant difficulties in obtaining adequate capital, which impedes the growth of their businesses.

Minister Maman states that for MSMEs to truly act as the backbone of the national economy, President Prabowo wants to establish a strong supply network that connects small, medium, and large companies. "We will encourage MSMEs to level up by creating strong integration throughout the supply chain," Maman continued.

To support the government achieve its goal, the Financial Services Authority (OJK) is working on a specialized credit stimulus program for MSMEs, which is set to be implemented in 2025. This stimulus aims to accelerate the credit growth rate for MSMEs currently facing considerable sluggishness.

Credit Growth

As of November 2024, the total value of MSME loans stood at Rp1,405.1 trillion, with a year-on-year (YoY) growth rate of only 3.7 percent, down from 4.6 percent in October 2024.  Dian Ediana Rae, the Head of Banking Supervision at the OJK, states that the new OJK Regulation (POJK) will facilitate loan access for MSMEs from banks and non-bank financial institutions.

"This new OJK regulation will oversee the complete cycle of MSME credit distribution, encompassing strategies to accelerate business processes alongside numerous other conveniences," Dian remarked.

Furthermore, this policy will be tailored to meet the needs of MSME enterprises, enhancing its application and relevance. Based on a  report by Bank Indonesia (BI), credit to MSMEs was slowing by the end of 2024, . For instance, the micro business credit, amounting to Rp638 trillion, showed a year-over-year growth of only 3.1 percent, compared to 4.4 percent in October 2023.

Similarly, medium-sized enterprise loans witnessed a contraction of -0.9 percent, with total financing reaching Rp307.5 trillion. Small business loans, totaling Rp459.6 trillion, grew at a consistent rate of 7.5% year-on-year.

From a utilization standpoint, the increase in investment credit for MSMEs was 11.9 percent. Conversely, working capital loans exhibited a slight increase of only 0.9 percent.

A New Path for MSMEs

The government seeks to create an ecosystem that fosters the sustained growth of MSMEs through strategic initiatives, which include enhancing access to capital, streamlining the financing process, and integrating the supply chain.

Along with supporting MSMEs in survival, President Prabowo's administration seeks to foster their growth into competitive commercial entities in both domestic and international markets.  In an effort to promote economic integration, the government encourages collaboration between MSMEs and major industrial sectors.

With strong government commitment, MSMEs are expected to play a larger role in building Indonesia's future economy. In President Prabowo Subianto's administration, MSMEs are considered not just part of the average person's economy but also a strategic element necessary to build a strong, fair, and sustainable national economy.

Together, with thoughtful policies and strong support, we can uplift MSMEs and turn this collective goal into a beautiful reality we all aspire to achieve.

Writer: Firman Hidranto

Editors: Ratna Nuraini/Taofiq Rauf/Siti Chodijah

Translator: Aisah Amanda