Volume 8, Issue 8, August 2023 International Journal of Innovative Science and Research Technology

ISSN No:-2456-2165

Empowering Indonesian MSMEs: An Examination

of the Pivotal Role of Universities
Yanto1, Warsid2
University of Jenderal Sudirman, Central Java, Indonesia

Abstract:- This manuscript endeavors to furnish a précis Research shows that MSMEs in Indonesia are resilient and
of the present circumstances of MSMEs in Indonesia and able to improve their performance during economic crises.
scrutinize if the Indonesian economy can profit from aid This is due to their focus on consumer goods, reliance on non-
from universities. We employ a qualitative technique, banking financing, specialization in certain products, and the
encompassing perusing scholarly literature and other formation of new MSMEs as a result of layoffs in the formal
resources, carrying out concentrated group discussions, sector. However, limited capital and access to finance remain
and utilizing a subjective methodology to examine extant major obstacles for MSME development.
data. The outcome discovery is that MSMEs’ actors in
Indonesia aspire to obtain capital aid from the Study AKATIGA, CEMSED, and CESS in 2000 shows
government. We recommend additional investigation into that MSMEs in Indonesia are resilient and able to improve
the government’s initiatives for MSMEs in Indonesia. their performance during economic crises. This is due to their
focus on consumer goods, reliance on non-banking financing,
Keywords:- MSMEs, Indonesian economy, benefit, specialization in certain products, and the formation of new
assistance, campuses. MSMEs because of layoffs in the formal sector. However,
limited capital and access to finance remain major obstacles
I. INTRODUCTION for MSME development.
 MSMEs in Indonesia generally produce consumer goods,
During the pandemic, Small and Medium Units in
especially non-durable ones, and rely more on non-
Indonesia showed that a significant decline in production and
banking financing for business funding.
marketing activities. Turnover decreased drastically, from
 They tend to specialize in certain products or services.
millions of Rupiah per day to hundreds of thousands. This
was partly due to a lack of raw materials for production,  The establishment of new MSMEs is often a consequence
which also affected marketing distribution. This affects their of layoffs in the formal sector.
management and ability to adopt new technologies, hindering  MSMEs are required to make changes to improve their
their development and competitiveness. Micro and Small competitiveness in the face of global economic crises and
businesses also have limited business networks and struggle free trade agreements such as the WTO, AFTA, APEC,
with market penetration due to limited product innovation and the ASEAN Economic Community.
and less competitive quality. Empowerment is achieved
Most entrepreneurs use their own capital to run their
through training, with capital and marketing being key factors
businesses. MSMEs often face a lack of capital because they
for the sustainability of MSME prospects. are private or closed enterprises that rely on limited own
II. MSME THEORY AND RESEARCH capital. Borrowing from banks or other financial institutions
PROPOSITIONS can be difficult due to administrative and technical
requirements. Empowerment is achieved through training,
MSMEs are crucial to examine because they have a with capital and marketing being key factors for the
substantial impact on both national and regional economic sustainability of SME prospects. SMEs are important to study
growth. They account for 90% of all businesses globally and because they play a significant role in national and regional
are a major source of employment. In Indonesia, MSMEs economic growth, contributing 90% of the total business
play a vital role in the economy and industrial growth. The worldwide.
National Long-Term Development Plan (RPJPN) for 2005-
2025 aims to enhance domestic competitiveness through the MSMEs contribute to the absorption of labor and play
growth of MSMEs. Presidential Instruction Number 6 of an important role in the economic and industrial growth of a
2007 further reinforces the importance of MSMEs in national country. Empirical studies show that MSMEs are a source of
development policies. The challenge lies in effectively job creation on an international scale. The contribution of
implementing these policies to enable MSMEs to contribute MSMEs to employment, both in developed and developing
to the strengthening of the domestic economy. A study countries, including Indonesia, is significant in overcoming
conducted by HSBC in 2007 revealed that MSME the problem of unemployment.
entrepreneurs in Indonesia are optimistic about the continued
This article employs a qualitative research approach and
growth of their businesses.
it is a study of secondary data that examines literature on the
MSMEs in Indonesia are a barometer of the country’s support provided to MSMEs by universities in Indonesia. The
economic health, playing a significant role in job creation and article is constructed through in-depth literature studies and a
GDP growth. In 2006, MSMEs contributed 53.3% of the through analysis methodology, which includes critical
national GDP, with a growth rate of 5.40% from 2005-2006. reflection on the issues raised. Critical reflection is also

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Volume 8, Issue 8, August 2023 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
utilized as a means of interpreting the problems and theories Java. The results showed that the potential for MSMEs in
employed. Central Java lies in the processing industry, agriculture,
forestry, fisheries, and animal husbandry sectors.
III. INTERNAL PROBLEMS (BASIC)
MSMEs face challenges in innovation and adaptation.
The inquiry in the Ministry of State UMKM and BPS The creative processing industry is a key sector due to its low
(2003) disclosed that 72.47% of MSMEs encountered rate of imitation by competitors and its potential to become
business impediments, while the residual 27.53% did not. The an iconic product or brand. MSMEs encounter difficulties in
impediments identified were: capital (51.09%), marketing expanding their market, accessing financial services from
(34.72%), raw materials (8.59%), employment (1.09%), banks, and developing their human resources. In summary,
transportation distribution (0.22%), and others (3.93%). the issues faced by MSMEs include marketing, capital,
innovation, use of information technology, sourcing of raw
Widiyanto’s (2010) study aimed to examine the materials, production tools, employment, and business
adoption of technology, working capital, marketing, development planning.
innovation, entrepreneurship, and access to working capital
in order to develop a strategy for MSME growth in Central

Capital Marketing
The Raw Materials The Employments
Distribution and Transpotation Others

0.3472

0.0859

0.0109
0.0022
0.0393

0.5109

Fig. 1: Pursuant to inquiry conducted by Wahana Visi Indonesia (WVI) from May 12-18, 2020, a survey of 900 households and
943 children across nine provinces in Indonesia, including rural (88.1%), semi-urban (4.1%), and urban (7.8%) areas,
demonstrated that MSMEs affected by the pandemic necessitate aid from external parties such as the government, private sector,
and non-profit organizations. The most needed aid for MSME actors is capital aid (44%) and marketing support (16%) for their
products and services

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Volume 8, Issue 8, August 2023 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165

T H E N E E D S O F S M E S I N I N F R A S T U C T U R A L FA C I L I T I E S

The capital assistances

The marketing supports

Access to resource production

The health insurance

Others
The respondents did not
answer the questionaire The improvement of skills
The improvement of skills 7%
5% The respondents did not answer the
questionaire

Others The capital assistances

17% 44%

The health insurance

2%
The marketing supports
16%
Access to resource
production
9%

Fig. 2: MSME actors require various forms of assistance, including help with accessing production sources (9%) and improving
their business knowledge and skills (5%). The types of assistance needed by MSME actors encompass capital assistance,
marketing support, access to production sources, and support for enhancing their business knowledge and skills.

IV. RESEARCH METHODS quantitative data is obtained from calculations involving

objects and respondents in this study.
This article is based on observations of phenomena in
the author’s environment and employs two research methods: For instance, in an article that examines the contribution
a literature review and data interpretation from observations. of universities to the growth of MSMEs, the number of
The literature review aims to identify reliable reference interviewees is used to obtain quantitative data.
sources to support the theory used in this writing, including Observational and research data is merged with data from a
articles, journals, books, and official websites such as literature review, providing two benefits: confirming the
government and educational web pages, both nationally and accuracy of the library data and filling in gaps in the library
internationally. This method enables the author to locate data with empirical data collected in the field.
material relevant to the topic under discussion.
The research methods employ tracking academic
In addition to the literature review, this article also literature and related reading materials, conducting a
engage data interpretation from observations, including both literature review, analyzing documents and data, writing
qualitative and quantitative research data. Qualitative data is research reports, and focusing on group discussions to obtain
derived from interviews with individuals who have feedback on the study examine. A subjective approach is
experiences related to the topic under discussion, while utilized by researchers to examine existing data and materials.

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Volume 8, Issue 8, August 2023 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
V. DISCUSSION Support and empowerment: Universities can arrange
support and empowerment activities for MSMEs.
 Research Questions;
Encouragement: The goal of these activities is to
A. Is it essential for universities to offer support to Micro, provide encouragement and advice for the growth of MSMEs
Small, and Medium Enterprises? during challenging times.
The COVID-19 pandemic has had a significant impact on
Micro, Small, and Medium Enterprises (MSMEs), with a C. If MSMEs do not agree with assistance, what are their
revenue decline of 84.20%. Large Medium Enterprises also obstacles to accepting external assistance from
saw a decrease in revenue of 82.29%, causing MSMEs to universities?
reduce their workforce in order to sustain production. The Micro, Small, and Medium Enterprises (MSMEs)
rate of layoffs in Micro and Small Enterprises was 33.23%, anticipate solutions from the government and other
while in Large Medium Enterprises it was 46.64%. In August stakeholders to enhance their competitive advantage in the
2020, the Central Statistics Agency (BPS) reported an global market. SME respondents agreed that the government
increase in Indonesia’s unemployment rate by 2.67 million should increase security standards for shipping goods from
people, leading to a decrease in Indonesia’s economic growth companies to markets, as crime poses a significant threat to
to 3.49% in the third quarter. MSMEs. The government should maintain the sustainability
of MSMEs by creating more programs across regions and
This highlights the role of universities in supporting sending civil servants to assess the condition of MSMEs to
Small and Medium Enterprises (MSMEs) during the COVID- develop effective programs. One solution is to establish a
19 pandemic. MSMEs require a robust institutional separate institution specifically for fostering the potential of
framework, technological adaptation, and product SMEs, represented by special institutions in each region as a
diversification to recover from the pandemic’s impact. forum for MSMEs to consult and find solutions to their
Various stakeholders, including government agencies, local problems. It is also important for the government to conduct
communities, financial institutions, and media outlets, can regular evaluations of the program to assess its performance
assist MSMEs in their recovery efforts. The government can and effectiveness in aiding MSMEs.
provide aid, communities can oversee aid distribution,
financial institutions can promote economic inclusion for MSMEs in Indonesia face financial challenges and
MSMEs, and media outlets can disseminate information require more soft loans with simple application requirements
about MSMEs. Through collaborative efforts, MSMEs and for MSME credit schemes. The government should protect
the economy can achieve development and growth. the price of primary goods, as it affects the prices of other
materials. MSMEs agreed that the government should abolish
B. If an MSME agrees to receive assistance of external , what the permit fee for opening a new business, as it is considered
the type of assistance that is needed by MSMEs’ actors? expensive. The government should revise this policy to
This study can aid government initiatives aimed at support MSMEs. In order to eliminate financial obstacles, the
empowering MSMEs as a cornerstone of the Indonesian government should stabilize the rupiah currency and regulate
economy. energy prices such as electricity and fuel. Additionally, the
government should support technology through the provision
The study revealed that MSMEs encounter ten of soft loans and provide land leases or strategic locations for
primaries challenges: barriers to competition, access to MSMEs at affordable prices. The government must also make
finance, costs, technology, inefficient production expenses, efforts to eradicate corruption and provide supporting policies
economic factors, managerial abilities, processes, market to help MSMEs survive, including strict sanctions for
limitations, and raw materials. The majority of MSMEs state bureaucrats who collect illegal levies from MSMEs.
that the government should put more effort into removing
these handicaps through measures such as enhancing security MSMEs hope that the government will implement
standards, implementing development programs, establishing serious programs to help them grow in the global market
sound financing policies, adopting sensible energy policies, without incurring significant costs. This may encompass
conducting ongoing performance evaluations, committing to training in international marketing, the development of skills
eradicating corruption, and providing other support programs and knowledge, and instruction in entrepreneurial motivation.
required by MSMEs.
VI. CONCLUSION
Development of skills: The MSME mentoring program
is a development model for MSMEs that aims to enhance the The Indonesian MSMEs development program, entitled
institutional system and managerial aspects of MSMEs The Role of University Innovation for Processing, has
through continuous and intensive efforts, with the active produced significant outcomes in terms of economically
involvement of professional MSME consultants. empowering MSMEs in Indonesia. This empowerment has
led to increased production, improved marketing, and
Guidance and training: These consultants provide enhanced knowledge and procedures in business ethics.
guidance and training, particularly in relation to the day-to- Innovation and adaptation are crucial for the creative
day operations of MSMEs. processing industry, which has a low replication rate among
competitors and can establish product branding.

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Volume 8, Issue 8, August 2023 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
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