Impact the Financial Crisis for SMEs in Indonesia

Ign. Wahyu IndriyoBina Swadaya

Indonesia Micro Entreprises & SMEs Composition

LargeScale

4,527 units2,520,707 employees

Medium 120,253 units4,720,006 employees

Small2,017,926 units9,970,664 employees

Micro47,702,310 units77,061,669 employees

Source : BPS – Statistics Indonesia 2007

Share to GDP (2007)

Large 46%

Small 38%

Medium 16%

Bina SwadayaBina Swadaya Development of Microfinance : 13 MFI

Branches, 5 Rural Bank, 12 koops Society Empowerment : Empowerment

Community based organization (Self Help Groups), Community Health, and Sanitation, Environment/Agriculture, Employment.

Agribusiness Development Services: center for agriculture information and offering various services such as agricultural library, training, CD and VCD, Agriculture products and marketing accessories.

Communication Media for Development : publishing agriculture books, skill books, health, language, management, and applied technology.

Understanding Financial Crisis

'Financial global crisis is difficult to be understood. If the situation is crisis, why many consumers still want to buy our product ? Domestic market still give good prospect' (a handicraft businessman in Klaten, Central Java).

The phenomena of financial crisis for micro enterprise

& SMEs :

Increasing of production cost & living cost (fuel price, imported raw material price – flour mills, pesticide, food, transportation, etc -)

Impact of Financial Crisis for Micro & Small Medium Entreprises

Increasing of production cost :

- Imported raw materials (flour, corn, wheat,

soybean, etc)

- Imported machine & production equipment

Decreasing of demand : handicraft ( 50%), palm, dairy milk.

Unregulated market create more vulnerable condition : salt trader (imported salt).

Politics of Food security Vs term of trade for more than 38 million farmer households.

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2007 2008

Food

Jewelry & Accessories

Fisheries

Handycraft

Balm

Leather Product

Medical Equipment

Office Equipment

Rizoma Oil

Herbal

Indonesia - 10 potential product dominated by micro enterprises & SMEs, (high number of employees, creativity, cultural and traditional wisdom, domestic & international market)

Sources : BPS – Statistics Indonesia 7

Export 2007 & Target 2008 (US $ Billion)

Strategy to survive :

Substituting the raw materials. Lessen quality & size of the product. Lessen employee. Innovation to create value added → creative

industry

Recommendation Regulating and facilitating to protect micro & small,

medium enterprise. Indonesia case :

a) The strength of local (domestic) market → 70% GDP = households consumption.

b) Creative economy = 8% GDP and absorb 7.4 million employees.

Main creative industry in Indonesia : Fashion, art & handicraft, television, radio & cinematography, print & publishing, computer & software, interactive game, music & showbiz.