Technology Can Save MSMEs

Kompas/Bahana Patria Gupta

Diah Arfianti recorded the production of her Surabaya Nastar House cake to be supported at social media in Ketandan Village, Genteng District, Surabaya, East Java, Wednesday (24/6/2020). To survive in the midst of the many SMEs that stopped operating due to a pandemic, he was more creative in promoting his cake products.

JAKARTA, KOMPAS — The Covid-19 health crisis has paralyzed the country’s micro, small and medium enterprise (MSME) sector by causing a sharp decline in trading activities. However, some businesses have survived thanks to digital technology.

The pandemic has forced small businesses to adapt to the new pattern of consumption, as many people are afraid to leave their homes or handle cash.

"Under this condition, MSMEs need to be more aggressive in online promotion, selling their products quickly through home delivery systems, and promoting the health protocols," said project management head Djauhari Sitorus of the National Council for Inclusive Finance (DNKI) on Tuesday.

Digital technology has been proven to help MSMEs survive amid the social restrictions.

As many as 300,000 MSMEs have opened online stores since May 2020, which account for 13 percent of the 64.19 million MSMEs in the country. This has brought the number of digitally connected businesses in the country to around 8.3 million. Digital technology has been proven to help MSMEs survive amid the social restrictions.

Also read: Pandemic: From Health, Economy, to Politics

A survey on 195,009 MSMEs conducted by the Cooperatives and Small and Medium Enterprises (SMEs) Ministry on 10 June 2020 shows that at least 40 percent of MSMEs could close down if the Covid-19 epidemic is prolonged. The causes of these business closures range from decline in trade (23.10 percent), distribution disruption (19.50 percent) to lack of capital (19.45 percent).

KOMPAS/TOTOK WIJAYANTO

Kurnia Jaya welding workshop MSME workers fired iron when completing the construction of Pertamina Peduli\'s portable sink in Pondok Labu area, Cilandak, South Jakarta, Sunday (10/5/2020).

The founder and CEO of The Goods Dept, Anton Wirjono, said that online sales had covered the losses incurred from closing its physical outlets. The digital ecosystem can also be used to improve promotion, sales distribution and the payment system.

Ismiyati, who sells bread made with rice bran from Semarang, is one of many MSME owners who have benefited from the digital ecosystem. Her business has survived because she is able to sell her bread through an online store she opened before the health crisis.

Yafeth has been using social media to sell coffee since 2016. Using the business feature on social media platforms has enabled him to grow his business quickly.

The same thing holds true for Yafeth Steven Wetipo, 32, who owns the Highland Roastery in Jayapura, Papua. Digital technology has enabled him to sell his products as well as communicate and complete transactions with his customers remotely. Yafeth has been using social media to sell coffee since 2016. Using the business feature on social media platforms has enabled him to grow his business quickly.

Considering that only 13 percent of all 64.19 million MSMEs in the country are operating online stores, more assistance and training is needed to help other small business owners take advantage of digital technology.

A number of companies are offering such training programs. WhatsApp and UKM Indonesia are providing a joint digital training program called Digital Literacy Education for the Acceleration of MSME

Development. The three-day program, which is targeting 3,600 MSMEs in 12 cities, teaches participants how to capitalize on services and features specifically designed for businesses.

Presidential assistance

To help MSMEs become sustainable, the government is providing working capital assistance to at least 12 million businesses. Under the cash aid program, each micro and small business is to receive Rp 2.4 million (US$170). The money is expected to help MSMEs improve their businesses so they can survive the epidemic.

Also read: Weak Supply Chain Hampers Food and Beverage Industry

Some micro and small businesses have already received the cash assistance. On Tuesday (7/21), for example, President Joko Widodo personally handed the cash assistance to 60 micro and small businesses from several regions in Jakarta, including Thousand Islands regency. The President handed over the cash assistance in a simple ceremony, which was held under strict health protocols in the central courtyard of Merdeka Palace in Central Jakarta.

The President acknowledged that he was well aware of the difficulties business owners were facing during the Covid-19 health crisis, which had caused a sharp fall in their businesses’ sales turnover.

"I know the current situation is not like in the past, when the daily sales turnover could reach Rp 600,000 or Rp 800, 000. Now it is only Rp 200,000 or even less. All are feeling the impact, and not just small businesses. Big businesses are also affected," said the President.

KOMPAS/TOTOK WIJAYANTO

Akbar from UMKM Agusta Dryer shows the workings of a simple ventilator which is still in the form of a prototype in his workshop in the area in Kebayoran Lama, South Jakarta, Tuesday (14/4/2020).

The handover of the working capital assistance began on 13 July at the presidential palace compound in Jakarta. A second handover ceremony to distribute the assistance was held on 15 July, when 60 small business owners received the cash assistance.

A total of 180 business owners have received the working capital assistance as of Tuesday. (ERK/SHR/NTA