MSMEs are a fundamental pillar in Indonesia’s economic structure, representing the courage, creativity and resilience of our society.
From the margins of traditional markets to the modern digital landscape, micro, small and medium enterprises (MSMEs) continue to transform, drive innovation and create jobs.
This article will take you through the world of MSMEs, starting from the definition, criteria, and their vital role in the national economy.
Then, it shows how this type of endeavor is not just about business, but also about stories of struggle and hope that inspire us all.
Check out the full explanation below!
What are MSMEs?
MSME stands for Micro, Small and Medium Enterprises, which is a term that we often hear. In general, MSMEs are defined as businesses that are small to medium in scale, both in terms of assets, turnover, and the number of workers involved.
On an economic scale, MSMEs serve as the backbone that drives a country’s economic growth.
Its presence is vital, given that MSMEs are able to make a significant contribution to Gross Domestic Product (GDP) and employment.
In Indonesia, the definition of MSMEs has been regulated in more detail through Law No. 20 of 2008. It states that MSMEs consist of 3 criteria, namely micro businesses, small businesses, and medium businesses.
Characteristics of MSMEs
Before learning more about what an MSME is, it’s good to recognize its characteristics. Here are the eight main characteristics that this type of business usually has:
- The asset size and turnover of MSMEs tend to be small, in accordance with the classification set by the government.
- The initial investment and working capital required is relatively small, making it more accessible to new entrants.
- MSMEs are usually managed simply, often by the owners themselves without a complex organizational structure.
- The business relies heavily on labor from the neighborhood, helping to reduce local unemployment.
- Tends to have a limited market, often focusing on local consumers.
- With a simple structure, it is able to adapt quickly to market changes.
- Despite their small capital, many MSMEs are able to innovate their products or services.
- Generally privately owned and managed by individuals or families, it often combines professional and personal aspects in its management.
MSME Criteria: Micro, Small, and Medium
Understanding the criteria of MSMEs is not only important for business owners, but also for those of you who want to dig deeper into Indonesia’s micro-economy.
These criteria not only determine the scale of the business, but also access to capital, taxes, and government facilities. Let’s take them one by one.
1. Micro Business
Micro enterprises are the smallest criteria in the MSME category. Its main characteristic is that it has total assets of a maximum of IDR50 million, excluding the land and building of the business premises. In addition, its annual turnover cannot exceed IDR300 million.
Microenterprises are usually run by individuals or families and tend to operate in a very local setting. Examples include grocery stalls, sewing businesses, or home-based food sales.
2. Small Business
Furthermore, there are small businesses that have a larger scale than micro businesses. Their assets range from Rp50 million to Rp500 million, excluding land and buildings.
The annual turnover of this type of MSME is in the range of Rp300 million to Rp2.5 billion. The business starts to have a more defined organizational structure, and can operate in a wider market, both locally and regionally.
3. Medium-sized Enterprises
Finally, medium-sized businesses are the largest criteria in the MSME category. With assets between Rp500 million and Rp10 billion, excluding land and buildings. Medium-sized enterprises have various annual turnover, ranging from IDR 2.5 billion to IDR 50 billion.
Medium-sized enterprises often already have wider distribution networks, more complex operations, and can participate in larger supply chains.
What’s an Example of a Business?
After understanding the criteria and meaning of MSMEs, you might be wondering, what are the businesses that fall under this category? The following list provides an overview of the promising diversity of MSMEs that exist in Indonesia:
- Food stalls
- Grocery store
- Clothing convection business
- Beauty salon
- Motorcycle workshop
- Laundry services
- Coffee shop
- Book and stationery store
- Photography business
- Music studio
This list is only a small part of the variety of MSMEs that you can find around you. With the development of technology and market access, opportunities for MSMEs continue to expand, contributing significantly to the Indonesian economy.
Principles and Objectives of MSMEs Under the Law
In Indonesia, the Law on MSMEs is not just a rule, but a foundation that directs how these businesses thrive and contribute to the economy. Let’s take a look at the principles and objectives that MSMEs carry under this Law.
MSME Principles
- Independence
- Sustainability
- Kinship
- Simplicity
- Justice
- Equality
MSME Objectives
- Increase business capability and scale
- Empowering the community economy
- Increase the contribution of MSMEs to GDP
- Increase the participation of MSMEs in job creation
- Improving the competitiveness of MSMEs
- Supporting innovation and technology in MSMEs
- Creating a conducive business climate for MSMEs
These principles and objectives guide all parties, both government and businesses, in developing MSMEs in Indonesia.
The hope is that MSMEs can continue to grow and play a greater role in driving an inclusive and sustainable Indonesian economy.
So, MSMEs are at the core of a dynamic populist economy, and now is the time for them to leverage technology to optimize their businesses.
Labamu comes as an innovative solution in recording transactions and finances, helping MSMEs manage financial aspects more efficiently and professionally.
Armed with a POS Kasir feature that makes it easy to accept payments digitally, Labamu is the partner you need to take your business to the next level.
Visit your Lab page page and discover how this app can transform the way you manage your business finances. Don’t miss the opportunity to optimize your sales process, download the Labamu application now.
With a subscription fee of only Rp116 thousand per month, all of Labamu’s advanced features can help you manage your finances in a more detailed and professional manner.
Together with Labamu, let’s advance Indonesian MSMEs towards a brighter and more sustainable future.
