DSInnovate MSME Report 2022

alfaqir.syaif@gmail.
com 2024-01-24 17:28
MSME
Empowerment
Report 2022
© Mar 2023
alfaqir.syaif@gmail.com 2024-01-24 17:28

1
Forewords
Micro, Small, and Medium Enterprises Looking ahead to the post-pandemic period,
(MSMEs) play a vital role in Indonesia's Indonesia's MSME sector is expected to
economy, contributing significantly to the recover and continue to grow. There will
country's Gross Domestic Product (GDP) be opportunities for MSMEs to adapt
and providing employment to a large and diversify to take advantage of new
portion of the population. However, MSMEs market trends, such as the increasing
in Indonesia often need help with access demand for digital products and services.
to finance and lack digital skills, which can To support this growth, the government
hinder their growth and development. and other stakeholders can take steps
such as providing access to finance and
Before the Covid-19 pandemic, Indonesia's training programs to help MSMEs build the
MSME sector showed steady growth. The skills they need to succeed in the digital
number of MSMEs in the country increased, economy.
and they made significant contributions to
the economy through the production and In summary, Indonesia's MSME sector
export of goods and services. There were has faced challenges and setbacks due to
also success stories of individual MSMEs the Covid-19 pandemic, but it is expected
that were able to grow and thrive in this to recover and continue growing in the
period. post-pandemic period. With the proper
support and resources, MSMEs in Indonesia
The Covid-19 pandemic significantly have the potential to make an even more
impacted Indonesia's MSME sector, with outstanding contribution to the country's
many businesses facing reduced demand economy and drive economic development.
and supply chain disruptions. The pandemic
disproportionately affected certain
MSMEs, such as manufacturing and service
sectors. In response to these challenges,
the Indonesian government implemented
measures to support MSMEs, including loan
guarantees and tax breaks.

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3
Contents
Forewords 1
Contents 3
01. Indonesia’s MSMEs Landscape 5
Indonesia’s MSME in Statistics 6
Distribution of MSMEs in Indonesia 8
The Government Encourages Digitalization of MSMEs 11
Government Support to MSMEs 11
Digital Adoption Journey in MSME 14
Post-Pandemic Condition 15
02. Opportunities and Challenges of MSME Digital Transformation 16
Survey to 1500 MSME Owners 17
Most Significant Challenge in Local MSME 23
Business Strategy 28
03. Digital Adoption in Indonesia’s MSME 33
Digital Awareness 34
Digital Tools Awareness 35
The Use of Digital Platforms 41
Social Media for MSMEs 50
Digitalization Impact 55
Participation in Government-related Program 59
04. MSME-Focused Digital Company Perspectives 60
05. Conclusion 77

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Executive Summary
MSME is the driving force of the nation's Digital marketing is the gateway to
economy. MSMEs are still essential digitization. Among the urgency of digitalization
to the Indonesian economic system, by MSMEs in Indonesia, digital marketing is the
contributing 60.3% to the national GDP. most chosen area to start. 78.1% have used
Its distribution can also absorb up to 97% various digital channels, including social media,
of the workforce. Nevertheless, several to increase their business presence online. The
fundamental challenges can still hamper following digitization priorities are payment,
the acceleration of the MSME business, product innovation, business operations, funding,
both in terms of operations, capital, and logistics, and increasing digital competency.
the ability to expand. An innovative and
affordable solution is needed to deal with Deeper utilization of social media. According to
these obstacles. a survey, 91.3% of MSMEs using social media use
the platform as a marketing medium. 81.9% use
Digitalization as an effort to accelerate it as a sales channel, and 72.5% as a medium for
business. The government is collaborating consumer interaction. The use of social media at
with various parties to increase the quality this advanced stage is also supported by service
and resilience of MSMEs to become a providers who continue to add features they have.
sustainable business ecosystem. The digital As done by TikTok, the TikTok Shop service allows
literacy index, which has reached 77%, is an MSMEs to increase their capabilities through
opportunity to look at in terms of market social commerce and live commerce features.
share and opportunities for merchants
to contribute to the digital economy. It Opportunity to take advantage of
is projected to be worth more than $130 entertainment platforms. According to the
billion by 2025. survey, 63.2% of respondents who use social
media have adopted TikTok, and 22.4% have used
The potential of digital transformation the TikTok Shop feature. Their goal is to gain
for MSMEs. Studies show that digitalization exposure using a virality strategy. TikTok has a
can close the productivity gap in MSMEs unique approach as an entertainment platform.
with a yearly productivity growth rate The algorithm allows anyone to become a rising
of 11%. Without digitalization, the star, including MSME players, to promote their
productivity growth index is only around products. It is a golden opportunity for product
5% annually. This fact encourages interest owners to stand out while taking advantage of
in digitization among business people; features that help them increase transaction
about 68% of MSMEs intend to carry conversions.
out digital transformation to increase
competitiveness. The digital ecosystem supporting MSMEs
continues to grow. Innovators have also
Understanding and implementation welcomed the need for digitizing MSMEs. Many
of technology for MSMEs. The survey in local startups are developing various MSME
this research series found that the level of services, including supporting operations, finance,
awareness of digitalization had reached and supply chain. The existence of an MSME
87%, an outstanding figure. It indicates that startup ecosystem also complements the existing
business people know digital services and product variants, which many giant companies
their potential to help businesses. However, previously provided from abroad. Local product
at the implementation level (technical innovation also allows for more personalized
aspect), MSMEs still need a lot of education solutions, focusing on paint points in Indonesian
to get the best usage scenarios and benefits MSMEs.
from the services provided.

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01
Indonesia’s
MSMEs
Landscape

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Indonesia’s MSMEs
Landscape
Indonesia's MSME sector plays a vital role in the
country's economy, contributing significantly to
employment and GDP. However, these micro,
small, and medium-sized enterprises (MSMEs)
often face challenges such as limited access to
finance and a lack of digital skills. The Covid-19
pandemic has only exacerbated these challenges,
with many MSMEs experiencing reduced demand
and supply chain disruptions.
In this section, we will discuss the overview and

the condition of MSMEs in Indonesia. Including
highlighting its developments during and after the
Covid-19 pandemic hit all regions in the world.
Indonesia’s MSME in Statistics

Micro, Small, and Medium Enterprises (MSMEs) MSME is driven by all levels of society, from people
are an essential part of the business structure in in large urban areas to residents in rural areas.
Indonesia. It is based on the proportion of existing Those who run a business fall into this category,
business categories—the data shows that most including pop-up store owners to hawker traders.
business units in this country fall into that group. It
is not a new phenomenon that has only occurred in
the last few years but has become a characteristic of
the foundation of the Indonesian economy.
Figure 01. Growth of MSME Player in Indonesia (2000-2020)

80
65,460,000
57,895,721
Count of MSME Player (in million)
60
53,823,732
47,017,062
39,784,036
40
20
0
2000 2005 2010 2015 2020
Source: Central Statistics Agency, ASEAN Investment Report (visualized by DailySocial.id)1
https://www.bps.go.id/indicator/13/1099/5/tabel-perkembangan-umkm.html; https://asean.org/wp-content/uploads/2022/10/AIR2022-Web-
1
Online-Final-211022.pdf

7
Before proceeding with a more detailed topic of MSMEs, it is necessary to understand the definition
of this term here. MSMEs talk about business size, with the primary determining variable being the
assets owned by the related company. The following table provides a detailed explanation of the
differences between MSMEs and corporates (big business):
Figure 02. Classification of MSME by Capital and Revenue
Company Size Max. Capital* Max. Revenue
Micro Max. Rp1 billion Rp2 billion
Small Rp1 billion - Rp5 billion Rp2 billion - Rp15 billion
Medium Rp5 billion - Rp10 billion Rp15 billion - Rp50 billion
*Excluding land and building

Source: PP No.7 2021 about Ease, Protection, and Empowerment of Cooperatives and MSMEs2
According to the Ministry of Cooperatives and Small and Medium Enterprises, there were 65.4 million
MSMEs in Indonesia, comprising 99.9% of all enterprises in the country. These MSMEs employed 114.7
million people, or around 56% of the workforce. MSMEs play a crucial role in Indonesia's economy,
contributing more than 60% to the country's GDP. This statistic is also the biggest when compared to other
regions in the Southeast Asia region.
Figure 03. Significance of MSMEs in ASEAN, 2021 (Thousands and per cent)
Country Number MSMEs as a Share of Share of Share of

of MSMEs share of normal Employment GDP (%) Exports
(Thousands) enterprises (%) (%) (%)
Brunei Darussalam 2.6a 97.3 35.4 35.5 2.8
Cambodia 512.9 99.8 52.5 58.0 12.1
Indonesia 65465.5 99.9 97.0 60.3 14.4
Lao People's 99.8 82.4 15.7 14.2

133.7
Democratic Republic
Malaysia 1226.0 97.4 48.0b 38.2b 13.5b
Myanmar 72.7c 99.1 76.0 69.3 23.7
Philippines 996.7 99.5 63.2 45.5 14.5
Singapore 279.0d 99.0 72.0 45.0 38.3
Thailand 3134.4 99.5 85.5 35.3 28.7
Vietnam 651.1 98.1 44.5 45.0 18.7
Source: ASEAN Investment Report 20223
https://peraturan.bpk.go.id/Home/Details/161837/pp-no-7-tahun-2021
2
https://asean.org/wp-content/uploads/2022/10/AIR2022-Web-Online-Final-211022.pdf
3

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The statistics above have explicitly proven that channels to be penetrated more broadly. On the
MSMEs are becoming the most critical aspect of the other hand, it means that the contribution of MSMEs
national economic system, directly impacting the to export value is still small.
resilience of the Indonesian economy—including
its relation to the recession. All parties are hoping Data from the Ministry of Cooperatives and MSMEs (a
for stakeholders in the MSME ecosystem amid an government unit specifically tasked with maintaining
unfavorable macroeconomic situation caused mainly the growth of MSMEs in Indonesia), the contribution
by external (global) factors. of MSMEs to total exports only reached 15.65%
in 2019, equivalent to IDR 2,167 trillion. While the
Confidence in MSMEs is big enough to survive remaining 84.35% still comes from corporations. This
the global economic shocks because most of the value rose 15.43% compared to the previous year.
transactions that occur in them are still used to meet It makes the government optimistic about setting a
the needs of the domestic market. Most business target of 17% for 20244. As a context, the contribution
actors still have a narrow market reach, limited to of export value by MSMEs in several countries:
one district/city or province—but the presence of the Singapore 41%, Thailand 29%, China 60%.
online marketplace has begun to open up marketing
Distribution of MSMEs in Indonesia

Referring to the "Satu Data portal initiated by the First, the Java island's distribution (61.48%) still
Ministry of Cooperatives and SMEs5", researcher is dominates the domiciles of registered MSMEs.
trying to map the distribution of MSMEs in Indonesia Specifically, West Java occupies the top position with
based on several criteria to see their distribution. the most number.
Figure 04. MSME Distribution in Indonesia by region
229,101
Aceh
595,779
Sumatera 76,217 7,588
Utara Kep. Riau Kalimantan 116,666
Utara Sulawesi
252,574 Utara 4,141
85,583 Maluku Utara
Riau 46,824
29,813 Kalimantan Gorontalo
Kalimantan Timur
296,052 Barat 6,606 29,706 4,604
Sumatera 57,597 3,077 Kalimantan Sulawesi Papua Barat
Barat Jambi Kep. Bangka Tengah 20,111 Tengah
Belitung Sulawesi 18,789
330,693 72,113 Barat
Sumatera Kalimantan 8978 Maluku
Selatan Selatan Sulawesi 3,932
658,365 268,299 Tenggara Papua
83,523 285,909 Sulawesi
Lampung DKI Jakarta
Bengkulu Selatan
1,153,576
Jawa Timur
339,001
Banten 40,764 287,882 81,742
1,457,126 Bali
Nusa Tenggara Nusa Tenggara
1,494,723 Jawa Tengah 235,899 Barat Timur
Jawa Barat Di Yogyakarta
Source: Ministry of Cooperatives and SMEs, visualized by DailySocial.id
https://www.ugm.ac.id/id/berita/21940-kontribusi-ekspor-umkm-masih-rendah
4
https://satudata.kemenkopukm.go.id/
5

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Second, regarding the type of business, several The following are the three most recorded categories:
categories are most in demand by MSMEs in
Indonesia. • Wholesale and Retail Trade; Car and Motorcycle
Repair and Maintenance (54.33%)
• Provision of Accommodation and Provision of
Food and Drink (20.21%)
• Processing industry (14.51%)
Figure 05. Distribution of MSME in Indonesia by Category
Household Activities As
Employers; Activities That
Produce Goods
110,650 Water Management,

Wastewater Management,
Agriculture,
Waste Management, and
Forestry, and
82,553 Recycling and Remediation
Fisheries
Activities
4,964,467
21,097
Wholesale and Retail
Trade; Car and Transportation
Motorcycle Repair and 525,520 30,463 & Warehousing
Other Service 101,403
Maintenance Activities Information &
Communication
Procurement of
18,909 Electricity, Gas, Steam/
Hot Water, and Cold Air
Professional, Scientific,
1,325,746 42,252 15,881
and Technical Activities
1,846,980 Processing
industry
Provision of
Accommodation and Leasing and Leasing 11,825
Provision of Food and 15,697 Construction
Activities Without Option
Drink Rights, Employment,
Travel Agents, and Other Arts, Entertainment,
Business Support and Recreation
655
6,422
5,257
Government 3,125 Mining &
Administration, Defense, 5,863
281 excavation
and Compulsory Social Education
Security
Financial &
Insurance Human Health
Activities of International Activities & Social
Activities
Agencies & Other Extra Activities
International Agencies 2,733
Real Estate

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Third, based on gender, the proportion of MSMEs Fourth, in terms of age category, Gen X (43.51%) still
in Indonesia is almost balanced. This percentage dominates the demographics of business actors,
is reasonable, in line with the many business followed by millennials (37.71) who are entering
categories accommodated in the MSME segmen. their productive age. The demographic bonus that
Indonesia is currently experiencing has the potential
to bring youth to take part in this MSME sector.
Figure 06. Demographic of MSME owner in Indonesia by Age and Gender
1.62%
Gen Z (1997-2012)
1.86%
Pre Boomer
0.1%
(before 1946) Post Gen Z (after 2013)
50.7%
15.2%
Baby Boomer (1946-1964)
37.71%
Milenial (1981-1996)
49.4%
43.51%
Gen X (1965-1980)

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The Government Encourages Digitalization of MSMEs

The digitalization of MSMEs in Indonesia has been other initiatives. For example, it has launched
a journey that has progressed in fits and starts over several programs and initiatives aimed at helping
the past several years. Despite being a nation of businesses build their digital capabilities, including
more than 273.8 million people, with a large and training programs and grants to help companies
diverse economy, Indonesia has historically lagged to develop e-commerce websites and online
behind other countries regarding digital adoption, marketing strategies. The government has also
particularly among MSMEs. However, in recent years, established some "digital hubs"7 throughout the
the government has made significant efforts to country, which provide businesses with access to
promote the digitalization of these businesses, and digital technologies, such as computers and internet
progress has been made in increasing the number of connectivity, also training and support.
MSMEs that have embraced digital technologies.
Despite these efforts, many challenges still face the
One of the main reasons for the slow adoption of digitalization of MSMEs in Indonesia. One of the
digital technologies by Indonesian MSMEs has been biggest challenges is the need for digital literacy
the need for more access to reliable and affordable among business owners and employees, particularly
internet connectivity. While Indonesia has a relatively in more rural and remote areas. Many businesses
high population density, many parts of the country need to gain the skills or knowledge necessary to
are still underserved by broadband infrastructure, effectively use digital technologies, which can make it
particularly in rural and remote areas. It has made difficult for them to take advantage of the benefits of
it difficult for businesses in these areas to take these technologies.
advantage of the benefits of digital technologies,
such as e-commerce and online marketing. Another challenge is the need for more access to
finance for MSMEs. Many businesses, particularly in
The Indonesian government has significantly rural and remote areas, need access to traditional
invested in improving internet connectivity and digital sources of finance, such as banks, which can make it
infrastructure to address this issue. In recent years, difficult for them to invest in digital technologies. The
it has rolled out some initiatives aimed at increasing Indonesian government has taken steps to address
access to the internet, including the "Connected this issue, including establishing special funds and
Village" program6, which aims to bring internet financing programs specifically for MSMEs.
connectivity to every village in Indonesia by 2024.
These efforts have helped to increase the number of Overall, the digitalization of MSMEs in Indonesia
MSMEs that can take advantage of digital technologies, has come a long way in recent years, but more work
but there is still more work to be done to ensure that still needs to be done. With continued efforts by
all businesses have access to the internet. the government and other stakeholders to improve
internet connectivity, build digital literacy, and
In addition to improving internet connectivity, provide access to finance, the number of MSMEs
the Indonesian government has also taken steps embracing digital technologies will likely continue to
to promote the digitalization of MSMEs through grow in the coming years.
Government Support to MSMEs

The Indonesian government is severe in helping the development of the MSME ecosystem in Indonesia,
one of which is shown by the existence of ministries and special units that have the main task of accele-
rating MSME. The support provided so far has also been based on fundamental issues experienced by
entrepreneurs. These initiatives include the MSME development program, tax incentives, access to finance,
and business incubation centers.
https://web.kominfo.go.id/sites/default/files/%5BFINAL%5D%20Annual%20Report%20KOMINFO%202021_24%2C8x17%2C8cm_EngVers_120821.pdf
6
https://dailysocial.id/research/lanskap-creative-hub-di-indonesia-2020
7

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The government has implemented several programs procedures. For example, the government has
and initiatives to support the growth and success implemented the One-Stop Service (OSS) program,
of Indonesian MSMEs. One of the most significant which streamlines starting a business and obtaining
initiatives is the People's Business Credit (KUR) necessary licenses and permits. As of 2021, the
program, which provides financing for MSMEs through OSS program has helped over 1.5 million MSMEs in
banks. As of 2022, the KUR program has provided Indonesia start and grow their businesses.
loans worth around Rp365.50 trillion to over 7.62
million MSMEs in Indonesia, helping these businesses The government has also implemented training
overcome their financial challenges and promoting and education programs to help MSMEs navigate
economic growth and job creation in the country. the business landscape and develop their skills.
For example, the government has established the
The government has also recognized the Micro, Small, and Medium Enterprises Development
importance of infrastructure development for Center (SMEDC), which provides training and
MSMEs and has recently allocated significant education programs for MSMEs and technical
funds for infrastructure projects. For example, assistance and business incubation services.
the government has allocated Rp480 trillion for
infrastructure development, including new roads, Researchers have also interviewed Rifan Ardianto,
bridges, and ports. This infrastructure investment the Director of Trade Through Electronic Systems
will benefit MSMEs and promote economic growth and Trade in Services, Ministry of Trade of the
and job creation in the country. Republic of Indonesia, to explore the issues
and potential of MSMEs in Indonesia from the
In addition to financing and infrastructure, the government's point of view.
government has simplified MSME regulations and
The Development of MSMEs

In his explanation, Rifan said that innovation is the Based on Rifan's observations, digital iteration
spearhead of the resilience of MSMEs. Looking at in Indonesia is currently high, with an index
the conditions of the last three years, including reaching 77%. However, some MSMEs still
when the Covid-19 pandemic reached its peak, some
need to adapt to digitalization. Therefore, it is
MSMEs were able to survive amidst the turbulence
by adopting technology. For example, MSMEs that
necessary to take steps to help these MSMEs
previously only operated offline managed to take switch to digitization, starting with digitizing
advantage of trading through the electronic system payments, using local digital platforms, and
during the pandemic. collaborating with other business actors
such as marketplaces. The example given
is the Ministry of Trade collaborating with a
"However, there are still marketplace in Bandung, which increased the
challenges for the older MSMEs' turnover quite a lot.
generation of MSMEs in accessing
The Ministry of Trade has a program to form
digitalization markets. Therefore, facilitators who will educate and train business
the government also needs to actors ready to switch to the electronic
think of ways to assist MSMEs in system. Then these facilitators will assist
transforming into the digital era." other business actors in stages. Over the
last three years, the Ministry of Trade has
formed around 740 educational facilitators
Rifan Ardianto for Trading Through Electronic Systems
The Director of (PMSE) who have coached around 1175 MSME
Trade Through business actors. In addition, the Ministry also
Electronic Systems works with marketplaces to incubate or assist
and Trade in MSMEs by teaching matters such as licensing
Services, Ministry procedures, how to sell online, and how to
of Trade of the manage products sustainably in marketplaces.
Republic of
In addition, the Ministry of Trade also helps
Indonesia
MSMEs take attractive product photos to sell
them more effectively in the market.
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Business Challenges and Digitalization of MSMEs

It was conveyed that each region has different "The Ministry of Trade is promoting
characteristics of MSMEs, which is a challenge the ‘Bangga Buatan Indonesia’
when conducting business incubation in that
area. One of the challenges is that business program to encourage domestically
people may need help understanding the value made products. One of the goals is
proposition of their products and the right also to help small businesses to be
target market for them. These factors make the
incubation program must also take into account confident in selling their products
that many business people are the younger online by maintaining product quality.
generation who need assistance in digital literacy. The Ministry of Trade also regulates
Another challenge is that most small businesses small businesses regulations through
only have one person who has to handle all PP 80/2019 and Permendag 50 of 2021
aspects of the business, including production,
marketing, finance, and others, so they become
to avoid unfair competition”8
multi-talented.
Rifan Ardianto
Director of Trade Through Electronic Systems
and Trade in Services, Ministry of Trade of the
Republic of Indonesia
Digitalization or trading through electronic systems Looking at 2023, we must strengthen domestic
is one way for MSME actors to market their products. trade because of the global recession. Therefore,
With digitization, MSME market access is unlimited business actors, especially MSMEs, must be able to
to local areas. The pandemic has also proven that dominate the national market. One way that can be
relying solely on conventional trading is not enough done is to promote their products through digital
to survive, so business actors must have the courage platforms. The government will also encourage the
to look for alternatives or innovations, including by "Bangga Buatan Indonesia" movement to promote
utilizing digital platforms. It is an added value for Indonesian consumers to buy online and offline
MSME products. domestic products to boost the national economy.
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Digital Adoption Journey in MSME

"Currently, internet penetration in Based on a qualitative study conducted by the
DSInnovate team in recent years on MSMEs in
Indonesian society reaches 73.7%. Indonesia, it is known that there are phases in their
And during the pandemic, MSMEs business digitization process. This phase begins when
used many marketplace networks MSME actors use smartphones to access internet
services, then use various online communication
to market their products. As many services such as email or messaging applications.
as 40% of MSMEs use social media, Email is the main entry point for various digital
38% use instant messaging, use services, including social media.
e-commerce 13%, and ride-hailing A deep understanding of communication tools and
at 5%."8 social media piqued their interest in optimizing these
services to help their business, starting from using it
as a communication tool with teams or partners to
Berry Fauzi using it as a medium for business promotion. Then,
The Head of the Ministry of Cooperatives enter the next gate, the online marketplace (including
and SMEs' Micro Business Ease e-commerce, food delivery, and other services
allowing MSMEs to transact online).
Figure 07. Phase of MSME Technology and System Implementation
Access to Email, Access to Social Media Early Digital

Messenger App (Facebook, TikTok,
Adopter
(WhatsApp) Instagram etc.)
Optimizing Messenger Getting Ready

and Social Media to to Digitization
Promote
In the next phase, MSMEs

implement a technology
Selling in Social Media Adopting Online
system as a whole, including
(Social Commerce) Marketplace
assisting with operations and
business expansion. There are
various Software as a Service
(SaaS) based products that
MSMEs can use to support
their business. This product
Tech-savvy also accommodates the
Enabling Digital Using SaaS
Merchant management of employees,
Payment Productivity Tools
raw materials, logistics,
supply chain, finance/cash
flow, and many more. And
most interestingly, many local
developers are also developing
Empowering SaaS—they understand the
The Next Phase
Automation
specific pain points experienced
by MSMEs in Indonesia.
https://aptika.kominfo.go.id/2022/10/digitalisasi-4-0-cara-efisien-tingkatkan-pasar-ekspor-umkm/
8

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Post-Pandemic Condition
Before the Covid-19 pandemic, Indonesia's MSME Figure 08. MSME Sales Decline in Pandemic by
sector was experiencing steady growth. Between Business Size
2015 and 2019, the number of MSMEs in the country
increased by 5.5%, and their contribution to GDP
rose by 6.1%.
Business Size Sales Decline
The Covid-19 pandemic has significantly impacted Ultra-Micro 49.01%

Indonesia's MSME sector, with many businesses
experiencing reduced demand and supply chain Micro 43.30%
disruptions. According to a survey by Indonesian
Institute of Sciences (LIPI)9, 94,69% of Indonesian Small 40%
MSMEs were affected by the pandemic experiencing
negative impacts on sales. The survey was conducted Medium 45.85%
in May 2020.
However, the impact of the pandemic has not been Figure 09. MSME Sales Decline in Pandemic by
uniform across all sectors and types of MSMEs. For Business Age
example, MSMEs in the manufacturing industry has
been more affected than those in the service sector.
Additionally, MSMEs in urban areas have been more Business Age Sales Decline
resilient than those in rural areas due to their higher
levels of digitalization. 0-5 years 23,27%
The decline in MSME performance nationally in 6-10 years 10,9%

the first year of the COVID-19 pandemic directly
impacted their contribution to GDP. 2020 was the More than 10 years 8,84%
lowest since the last decade. The contribution of
MSMEs was only 37.3% or decreased by 38.14%
compared to the previous year.
Figure 10. MSME’s Contribution towards GDP (2010-2020)
70
Contribution (%)
60
50
40
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Ministry of Cooperatives and SMEs, visualized by Lokadata10
https://www.thejakartapost.com/academia/2021/10/17/digitalization-shows-indonesian-msmes-the-way-to-recovery.html
9
https://lokadata.beritagar.id/chart/preview/kontribusi-umkm-terhadap-pdb-2010-2020-1611277587#
10

16
02
Opportunities
and Challenges
of MSME Digital
Transformation

17
Opportunities
and Challenges
of MSME Digital
Transformation
Digitalization in Indonesia's MSME is crucial for
many reasons. First and foremost, digitalization
can help them to increase their efficiency and
productivity. By adopting digital technologies such
as online marketplace, SaaS, and other digital
apps, MSME players can streamline their processes
and reduce the time and resources spent on
manual tasks. It can lead to cost savings and allow
them to allocate their resources more effectively.
Additionally, digitalization can help MSMEs to

access new markets and customers. With an Survey to 1500 MSME
online presence, MSMEs can reach a wider
This survey aims to provide in-depth
audience and sell their products or services
information about digital technology and
beyond their local area. It can be especially
services adoption for MSMEs and to provide
beneficial for MSMEs in rural or remote areas
information on how technology could enhance
with limited access to traditional markets.
the growth of mature MSMEs.
Digitalization can also enable MSMEs to
The MSMEs target segmentation includes:
compete better with larger companies. By
leveraging digital tools and technologies, • Non-digital MSMEs: Will cover MSMEs with
MSMEs can level the playing field and offer no previous digital experience to support
services and products that are on par with their their business.
larger counterparts.
• Early adopter MSMEs: Will cover MSMEs
Finally, digitalization can help MSMEs with simple digital solution experience
to improve their financial stability and to support their business. Marketplace,
sustainability. By using digital tools to manage logistics, and digital payment solution
their finances, MSMEs can gain greater visibility implementation are considered part of this
into their financial performance and make more segment.
informed decisions about their operations. It
can help them to manage their cash flow better • Advanced solution adopter MSMEs: Will
and reduce the risk of economic instability. cover MSMEs with advanced digital solution
experience to support their business. HR,
This section will explain the trend of digital payroll, payment gateway, and supply chain
adoption among Indonesian MSMEs. The data is digital solutions are considered part of this
supported by the results of a quantitative study segment.
conducted on 1500 survey respondents who
are business owners from various regions in
Indonesia.

18
Respondent Demographics
Figure 11. Overall Respondent Demographics
50
53.3% 43.1%
40
29.6%
30
21.9%
46.7% 20
10
5.4%
21-30 years old 31-40 years old 41-50 years old 51-55 years old
11.3%
Medan
2.0%
Deli Serdang
2.0%
Maros 11.3%
33.3%
Makassar
Greater Jakarta 14.7%
2.0% Surabaya
Bandung Barat 4.7%
Denpasar
14.7%
Bandung 2.0%
Sidoarjo 2.0%
Badung
The survey respondents are 1500 business owners or decision makers of MSMEs in Indonesia, of
which 33.3% had a business located in Greater Jakarta, then 14.7% in Surabaya or Bandung. Most
business owners are female (53.5%), aged 31-40 (43.1%).

19
According to their business category, almost The length of business running varied among
65% are micro-businesses. In tier 1, the companies. Micro and small businesses have
second rank of the business category is a small run for 1-3 years, while medium businesses
business (25.3%), but in tier 2 is a medium have run for 4-6 years.
business (18.0%).
Figure 12. Business Category (n=1500) Figure 14. Length of Business Running (n=1500)
80 40 38.9%
35.5%
64.0%
60 30
40 20
16.3%
24.0%
20 10
12.0% 7.1%
2.3%
0 0
Micro Business Small Business Medium Business < 1 years 1-3 years 4-6 years 7-10 years > 10 years
Figure 13. Business Category by Tier City Figure 15. Length of Business Running by Business
Category
0 10 20 30 40
80
69.3%
63.4% 2%
Micro 42%
60 Business 38%
(n=960) 13%
6%
40
4%
Small 36%
Business 34%
25.3% (n=360) 22%
20 18.0% 5%
11.3% 12.7%
Medium 0%
0 28%
Business
(n=180) 29%
Tier 1 Tier 2 26%
(n=1350) (n=150)
18%
Micro Business < 1 years 7-10 years
Small Business 1-3 years > 10 years
Medium Business 4-6 years

20
In this survey, 62.3% of companies are already using digital technology for business operations by
implementing digital solutions, and 37.7% just starting using it.
Figure 16. The need for digital technology in the company’s operations (n=1500)
62.3% 37.7%
Currently, companies Currently the company

are already using is starting to use
digital technology for digital technology for
company operations by company operations
implementing digital to implement digital
solutions solutions
The demographics revealed some interesting findings. First, most MSMEs are in the productive
age range, with most currently running micro-scale businesses. It opens up the potential for digital
transformation to occur more quickly, supported by their understanding of technology (millennials
tend to be more digital natives) and the business scale that is still small to adopt significant
changes.
Second, more than half of the respondents who have adopted digital services show a pretty good
trend regarding their openness to digital transformation. Judging from the age of the business,
most have been running for 1 to 6 years. In this phase, ideally, they have started to find a market
niche and product market fit for further escalation to a larger stage.
This demographic has attractive proportions that need to be explored more deeply to validate
how they do digital transformation and the extent to which they try to make their business
more agile. It is hoped that some business actors who have not digitized yet will be able to find
fundamental challenges that need to be of concern to stakeholders; Meanwhile, for those who
have digitized, the digital impact they have had can be assessed.

21
Business Profiles
This research involves MSMEs with various business backgrounds to provide a comprehensive
overview. The survey was conducted on multiple types of businesses, including culinary (37.9%),
fashion (17.6%), retail (16.6%), and many more.
Figure 17. Business Sector (n=1500)
17.6%
Fashion
16.6%
Retail
7.2% Beauty
37.9%
Culinary
6.0% Handicrafts
4.1% Digital
2.3% Agrobusiness
8.3% Other
The quantity of employees shows Figure 18. Amount of employees in the office (n=1500)
how big their business is. And the
research results show that more 50
45.8%
than 40% of their business has
employed 1-3 people, which is in
line with the company dominated by
40
micro businesses. Individuals are still
mostly chosen as the sales target of
the business (96.5%), while less than
20% target the government. 30 28.6%
Culinary is the most widely run

business category. And most
of them have run the business 20
as a team, meaning several job
descriptions are shared among
the members. At this stage, the 10.5% 10.5%
business owner will not only 10
focus on products and sales
but will start to get preoccupied 3.9%
with other operational activities, 0.7%
including personnel, payroll, and 0
collaboration management. Only 1-3 4 - 10 10 - 20 20 - 50 More than

yourself people people people people 50 people

22
As many as 36.2% of respondents also have Figure 19. Own branches/outlets (n=1500)
more than one outlet to help their business
expand its market share. At this point, they
will need more excellent resources and a
more structured management system.
YES
Most of the respondents run a business
for consumers (B2C). However, several 36.2%
businesses accommodate several segments
simultaneously for consumers, businesses,
government, or wholesalers. NO
63.8%
Figure 20. Sales target of business (n=1500)
Government (B2G)
Individual
17.5% 96.5%
Business (B2B)
27.9%
Wholesaler
54.8%
The challenge in reaching the consumer On the other hand, researchers also want to
segment is the relatively high cost of acquiring see digitalization efforts made for business
users. So the right strategy is needed to management and market share acquisition.
present the value proposition. Here one of the The broad categories of respondents are
researchers' goals is to deepen the process expected to provide a comprehensive picture
carried out by business people and see the representing the general picture of the MSME
main issues still hindering their growth. ecosystem in Indonesia.

23
Most Significant Challenge in Local MSME

The researcher begins by identifying In developing a MSME, the business owner
entrepreneurs' main issues in running a must hit some obstacles. In general, 70.2%
business. It includes how they deal with the had problems with product marketing. Then
crises they have gone through during and after followed by access to capital (51.2%).
the pandemic. Knowing the main problems
is hoped that a solution can be mapped
that will make it easier for them to increase
productivity and opportunities for expansion.
Figure 21. Obstacles in business activities (n=1500)

60 80
0 20 40
Product marketing
70.2%
Access to capital 51.2%
Fulfillment/availability of raw 46.3%

materials
Digital/Tech Adoption
30.9%
Transaction process 30.8%
Cash flow management 24.3%
Other 1.7%
In a more specific finding, according to the business location, MSMEs in tier 1 had more
problems accessing capital, while those in tier 2 lacked fulfillment/availability of raw materials.
The problem in tier 2 can be caused by long distances to reach sources of raw materials or the
source still centered in tier 1.
Figure 22. Obstacles in business activities by city tier
80
70.1% 70.7%
59.3%
60
52.0%
44.9% 44.0%
40
32.3%
32.0%
26.3%
21.3%
20
17.3%
6.7%
1.4% 4.0%
0
Tier 1 Tier 2
(n=1350) (n=150)
Product marketing Digital/Tech Adoption Cash flow management
Access to capital Transaction process Other
Fulfillment/availability of raw materials

24
Besides that, the existence of the pandemic was also a big hit for most businesses. 38.4% of
business owners said the pandemic's impact had reduced the transaction value by up to 25%.
Only 10.5% of businesses were unaffected/stayed stable.
Figure 23. The impact of the pandemic on business activities (n=1500)

0 10 20 30 40
Transaction value increases

0.5%
Unaffected/stayed stable 10.5%
Transaction value reduced by up

13.7%
to 10%
Transaction value reduced by up 38.4%

to 25%

to 50%
26.1%

to 75% 10.8%
Operational Challenges
The questionnaire results found some operational challenges faced by MSMEs in Indonesia.
Ordered from the most significant, here is the list: product marketing and fulfillment/availability
of raw materials. The following is the researcher's analysis of these problems:
1. Product Marketing Challenge

Marketing is essential to running a successful Another challenge that MSMEs may face is
business, but it can be challenging for MSMEs. the lack of a marketing budget. With limited
These businesses often need more resources financial resources, it can be difficult for these
and may need help to compete with larger, businesses to allocate funds toward marketing
more established companies. efforts, such as advertising or promotions.
One major challenge MSMEs face in product In addition, MSMEs may struggle with a lack
marketing is the need for a strong brand. of marketing expertise. Without a dedicated
Without a well-known brand, it can be difficult marketing team or access to professional
for MSMEs to attract and retain customers. marketing services, it can be difficult for these
It can be particularly problematic in crowded businesses to promote their products and
markets, where consumers have many options services effectively.
to choose from.

25
2. Fulfillment-related Challenge
One of the significant challenges that MSMEs In addition to raw materials, MSMEs may face
may face is the availability of raw materials. challenges in terms of production capacity.
These businesses may rely on a single supplier These businesses may have limited production
or a limited number of suppliers, making them facilities or equipment, making it difficult for
vulnerable to supply chain disruptions. For them to scale production to meet demand. It
example, if a supplier experiences delays or can be particularly problematic during increased
shortages can impact the MSME's ability to demand, such as during the holiday season.
produce and fulfill orders.
Figure 24. Overall Order Fulfillment Process
Forecasting
Production System Production

orders & Forecast
Production plans forecast
& forecast plans orders
Materials Production Order
Suppliers Inventory Planning, Processing
Control Scheduling & & Inventory Orders
Capabilities & Control Control
Constraints Capabilities &
Constraints
Stock
Stock Shop-floor status Shop-floor Despatch
levels
levels & capabilities decisions request
Finished
Materials
goods
Materials despatches Distribution &
Receiving & Manufacturing Deliveries
Stocks
Customers Stocks
Supplier Customers
Source: General Fulfillment Process in General; Mcfarlane, Duncan & Chang, YC & Matson, J & Shaw, A. (2011)11
Another challenge that MSMEs may face is the lack of fulfillment infrastructure. These businesses
may have access to different resources than larger enterprises, such as warehouses or
transportation networks. This condition can make it difficult for them to store and distribute their
products efficiently.
https://www.researchgate.net/publication/252265902_A_Production_Responsiveness_Audit
11

26
Financial Challenges
Many MSMEs in Indonesia also encounter problems related to finance, ranging from access to
capital, transaction processing efficiency, and cash flow management.
1. Access to Capital
Based on a current Bank Indonesia survey12, On the lender side, ex. banks and multi-finance
69.5% of MSMEs still have not received credit. companies also have several challenges in
This condition has led to a financial gap accommodating the needs of MSMEs. The
for MSMEs in Indonesia of Rp1,605 trillion problem is more complex for unbankable
because they have not been able to reach business owners because formal financial
financial support from banks or other financial institutions find it challenging to assess
institutions. The government aims to increase creditworthiness (credit scoring). This process is
the financial inclusion index to 90% and the necessary to ensure a reasonable rate of return.
MSME credit ratio to 30% in 2024.
Through the regulatory sandbox, the
This challenge arises from both the borrower government is working on an alternative credit
and lender sides. Low financial literacy is still a scoring model to optimize more varied data.
fundamental issue on the borrower's side. From The goal is that financial institutions have more
the latest survey conducted by the Financial capability to assess creditworthiness. Some
Services Authority13, the national financial literacy startups and technology companies are starting
index in Indonesia in 2022 will only reach 49.68%. to develop this service, including implementing it
Financial literacy is one's knowledge of financial in P2P lending, banking, paylater, etc.
products. It also includes the skills possessed to
use these various services.
Figure 25. Credit Scoring Model
Served by
Sistem layanan informasi keuangan (SLIK)
Conventional Regulator
Owned by the
User data Transaction data Buying trend company for
Internal internal use only
Credit history E-wallet Others
Provided by
registered
Financial Data PPOB Telco
3rd party
E-commerce E-money E-wallet

Alternative
Payment Bank and many more
Companies can combine these three models to strengthen their credit

scoring system
https://www.beritasatu.com/ekonomi/1009545/rasio-kredit-perbankan-untuk-umkm-dinilai-masih-rendah
12
https://kontak157.ojk.go.id/appkpublicportal/WebSite/ArticleList/View/10121
13

27
2. Transaction and Cash Flow Management

Digital penetration among consumers is starting will help entrepreneurs access a broader range
to form new patterns in transactions. The habit of financial services. For example, financial
of non-cash payments made at e-commerce or institutions require cash flow statements when
ride-hailing services is expected to be continued applying for People's Business Credit (KUR).
at offline merchants. This need is in line with
the support of the authorities through the Quick Poor cash flow can cause serious financial
Response Code Indonesian Standard (QRIS). The problems for a company, such as difficulty
problem is not all MSME owners are aware of paying debts, poor operations, and difficulty
this trend. growing the business. In more remote areas, one
of the main problems in MSME (especially retail)
On the other hand, manual transactions often cash flow management is overcoming accounts
lack intensive records. Thus providing a bad receivable (debt from customers) problems.
reporting system. More organized accounting
Digital Adoption Challenge

In particular, digital adoption is a challenge that they need to invest in digital technologies and
respondents also highlighted. This problem does infrastructure. According to a report by the
not only occur in MSMEs in Indonesia. As an International Finance Corporation, the lack of
overview, the researcher cites data from some access to finance is a major barrier to digital
sources to provide an overview of the common adoption for MSMEs in developing countries. The
challenges of digital adoption for businesses. report estimates that around 60% of MSMEs in
developing countries lack access to formal credit,
One of the most significant challenges for which makes it difficult for them to invest in
MSMEs in digital adoption is access to finance. digital technologies.
Many MSMEs struggle to secure the funding
Source: SME Digital Transformation Study14
https://www.digitalnewsasia.com/digital-economy/singapore-smes-who-embrace-digital-transformation-see-average-revenue-gains-26
14

28
Another major challenge for MSMEs is a lack or the hardware to use digital technologies.
of digital skills and expertise. Many MSMEs According to a report by the International
are run by individuals who may not have the Telecommunication Union, around 51% of the
knowledge or training needed to use digital population in developing countries lacks internet
technologies effectively. According to a report access, making it difficult for MSMEs to take
by the European Commission, around 33% of advantage of digital technologies.
MSMEs in the European Union lack the digital
skills needed to fully benefit from the digital The last major challenge is security, and it could
economy. This lack of digital skills can make it be a big concern for MSMEs as they might not
difficult for MSMEs to use digital technologies have the expertise or the budget to implement
to improve their operations and compete in the security protocols that protect their digital
marketplace. assets. A Small Business Association study
states that 44% of cyber attacks happen to small
A third major challenge for MSMEs in digital businesses. That’s why a lack of knowledge of
adoption is a lack of reliable digital infrastructure. cybersecurity threats and funds to implement a
Many MSMEs, particularly in rural areas, may plan can put MSMEs at significant risk.
not have access to reliable internet connectivity
Business Strategy
This survey also highlights the strategies undertaken by MSMEs in Indonesia in supporting their
business activities. The questionnaire focused on four things, including how they get capital,
communicate, reach online presence, and anticipate economic crises.
Financing
Business owners need the capital to create the product and operational needs to run the business.
The survey results show 80.4% source of business capital/ funding is bootstrapping (self-funded),
followed by bank loans (54.0%), and capital from the family (38.7%).
Figure 26. Source of business capital/funding Figure 27. Source of business capital/funding by
(n=1500) business category
0 25 50 75 100 0 25 50 75 100
Bootstrapping 80.4% 82.4%

Micro 50.9%
Business 37.1%
(n=960) 13.3%
Bank loan 54.0% 9.4%
5.1%
Capital from the family
0.3%
38.7%
Loans from friends or 80.3%

relatives 14.2% Small 60.0%
Business 40.6%
(n=360) 16.1%
Loans from non-
10.3%
6.4%
bank institutions 9.1% 0.0%
(cooperatives, other non-
bank financial institutions)
70.0%
P2P fintech loans 5.1% Medium 58.3%
Business 43.3%
(n=180) 15.0%
5.6%
Other 0.2% 2.2%
0.0%
Bootstrapping Loans from non-bank

institutions (cooperatives, other
Bank loan non-bank financial institutions)
Capital from the family

P2P fintech loans
Loans from friends or
relatives Other

29
Half micro and small businesses own According to 1007 respondents who made capital
business capital/funding from bank loans. loans (debt), most used it to buy raw materials for
More than 60% of business owners have production and product development.
applied for a loan for their business activities.
Figure 28. Ever applied for a loan for business Figure 29. The main reason apply for a business loan
activities (n=1500) (n=1007)
0 20 40 60 80
Purchase of raw
materials
64.4%
Product development/ 61.1%

innovation
YES Purchase of production

54.2%
equipment
32.9%
Technology adoption 29.8%
Incentive, salary or
NO bonus payments 24.3%
67.1% 16.5%
Place rental fee
Utility costs
(electricity, water, 15.6%
internet)
Other 0.6%
Figure 30. The main reason apply for a business loan by city tier
80 75.6%
63.4%
62.0%
60
54.9% 51.2%
46.5%
40
31.4%
24.2% 25.6%
20 17.0%
12.8% 15.1%
15.6%
10.5%
0 0.7% 0.0%
Tier 1 (n=921) Tier 2 (n=86)
Purchase of raw materials Technology adoption Utility costs (electricity, water, internet)
Product development/innovation Incentive, salary or bonus payments Other
Purchase of production equipment Place rental fee
One of the specific loan products designed by the government for MSME capital is the People's
Business Credit. Distribution through banking. According to data from the Credit Program
Information System from the Ministry of Finance15, in 2022, KUR distribution reached more than
Rp356.32 trillion to 8.25 million people. Around 66.29% of KUR distribution goes to the micro
business sector, 31.95% to small businesses, 1.75% to super micro businesses, and 0.01% to
Indonesian migrant workers (PMI).
https://databoks.katadata.co.id/datapublish/2022/12/22/penyaluran-kredit-usaha-rakyat-tembus-rp356-triliun-di-penghujung-2022
15

30
Communication & Device

Operational things that businesses use include According to the business category, micro and
communication and payment devices or tools. medium businesses used phones/smartphones,
There are 8 of 10 business owners used phones/ while small businesses used chat platforms.
smartphones to support business processes,
followed by chat platforms, social media,
e-commerce, and EDC/other payment services.
Figure 31. Communication devices or tools used to support business processes (n=1500)
0 25 50 75 100
Phone/smartphone 82.3%
Chat Platform 75.3%
Social Media 70.0%
E-commerce 50.5%
EDC/other payment machines 42.4%
Computer/laptop 37.5%
E-mail 18.7%
Website 16.3%
No technology used 4.9%
Other 0.4%
Figure 32. Communication devices or tools used to support business processes by business category
100 Phone/smartphone
87.4%
Chat Platform
78.1% 76.7%
76.4% Social Media
75 70.9% 74.7% 66.7%
57.2% E-commerce
55.6%
51.3% 47.5% 52.8% EDC/other payment machines
50 50.6%
40.4% 44.4% 48.9% Computer/laptop
38.9%
34.5%
21.1% E-mail
25 21.1%
19.0% 16.7%
16.1% 21.1% Website
15.5%
2.3% 3.9% No technology used
0 0.5% 0.3% 0.0%
Other
Micro Business Small Business Medium Business
(n=960) (n=360) (n=180)
"For digitalization, what we do is still limited to using messaging

applications. We also haven't entered the online marketplace because our
production is still small. But currently, the market coverage is not wide,
only around friendship networks and local businesses"
Farida Tirmihadini
A bag craftsman from Surabaya

31
Online Presence
The survey also found that most MSMEs have Figure 33. The business have an online store or
started to explore or use online mediums to online presence (n=1426)
increase their brand and business presence. It
is supported by the increasingly massive use of
technology and the internet.
NO
29.9%
YES
70.1%
Dealing with Crisis

Because of the pandemic's impact, business the market. By business category, medium
owners arrange strategies to maintain or businesses prefer to increase capital through
increase their businesses. The primary strategy loans, while other businesses look for cheaper
of business owners does access the broader raw materials/material prices. So, micro and
market through technology (61.5%), which small businesses can minimize operational
shows that there is a change from the traditional costs in the current economic conditions.
way of business to being more digital to access
Figure 34. Strategies to maintain or increase business in the current economic

conditions (n=1500)
0 20 40 60 80
Access wider market through

61.5%
the use of technology
Try new product innovation 51.2%
Looking for cheaper raw

44.1%
material/material prices
Carry out cost efficiency

43.9%
through the use of technology
Reduce production quantity 32.9%
Increase capital through loans 31.5%
Carry out labor efficiency 24.1%
Other 0.4%

32
Figure 35. Strategies to maintain or increase business in the current economic conditions by
business category
100
64.5%
59.2%
75
52.1% 48.9% 51.1%
43.9% 48.3% 50.0%
43.8% 46.9% 38.3%
50 37.2% 37.2% 38.9%
32.1% 31.9%
29.2% 27.8% 32.2%
27.8%
25 22.0%
0 0.5% 0.0% 0.6%

(n=960) (n=360) (n=180)
Access wider market through the use of Carry out cost efficiency through the use Carry out labor efficiency
technology of technology
Other
Try new product innovation Reduce production quantity
Looking for cheaper raw material/ Increase capital through loans

material prices

33
03
Digital Adoption
in Indonesia’s
MSME

34
Digital Adoption in
Indonesia’s MSME
MSMEs are the backbone of many
economies around the world, providing
goods and services, creating jobs, and
driving innovation. However, many MSMEs
need more digital capabilities to stay
competitive in today's digital age. To remain
viable long-term, it is becoming increasingly
crucial for MSMEs to undertake digital
adoption or transformation.
Digital adoption integrates technology into all automating repetitive tasks, MSMEs can free up
aspects of a business to improve operations, time and resources for more strategic activities,
increase efficiency, and stay competitive. It such as product development or customer
can involve a wide range of activities, such service. Additionally, data analysis tools can
as automating processes, implementing new help MSMEs gain insights into customer
software and systems, and improving the digital behavior, allowing them to make data-driven
capabilities of employees. decisions about product development,
marketing, and other business strategies.
One of the key benefits of digital transformation
for MSMEs is the ability to reach new customers Digital transformation also helps MSMEs in
through digital channels. With a robust online cost reduction. Through SaaS, MSMEs can
presence, MSMEs can tap into new markets reduce their operational costs and increase
and reach customers they may have yet to be efficiency. For example, cloud-based accounting
able to reach through traditional channels. In software can significantly reduce the time and
addition, digital platforms such as e-commerce effort required to manage financial records.
websites and social media allow MSMEs to sell Automating the invoice process can save time
their products and services 24/7, increasing and reduce the risk of errors.
sales and revenue potential.
This section will discuss the extent to which
Another benefit of digital transformation for MSMEs in Indonesia are implementing digital
MSMEs is the ability to improve operations adoption. The survey also explores the digital
through automation and data analysis. By services used and their user preferences.
Digital Awareness
According to the data provided, 87% of respondents are aware of digital services provided by
local startups or technology companies, while 13% are not aware. This data suggests that a large
majority of the surveyed population is familiar with the digital solutions offered by local startups
or technology companies.

35
The data also indicates a growth in the number Figure 36. Awareness of any digital service provided
of startups in Indonesia that are developing by local startup/tech companies that aim to help
solutions for MSMEs. This is an encouraging MSMEs (n=1500)
trend, as it suggests that more and more
local startups and technology companies are
recognizing the needs and challenges of MSMEs
and working to develop digital solutions to help NO
them succeed. 13%
This development of solutions for MSMEs by
local start-ups can be a great help for MSMEs to YES
digitalize their business. 87%
Digital Tools Awareness

From respondents who are aware of This is a good signal when local innovators
digital tools that support their productivity, develop many solutions for MSMEs. Because
researchers explore the service variants used developers will better understand the
and their preferences. As is known, currently, fundamental issues faced by businesses in
many digital platforms make it easier for their area so that they can present a hyperlocal
MSMEs to carry out their business operations. platform. On the other hand, the existence of
similarities in language and culture makes the
Startups that develop services for MSMEs educational process smoother.
are getting good growth in Indonesia. Our
internal data shows that in 2022 there will be
investments by 19 business SaaS developers
with a nominal value of $188.5 million.
Figure 37. VC funding trend by the business vertical 2022

2000 40
34
1500 30
Funding amount (in $ million)
1000 20
19
17
15
14
12
500 10 10
9
8 8
7 7
6 6 6 6
5 5
4 4 4 4
3 3 3 3 3 3 3
2 2 2 2 2 2
1 1 1 1 1 1 1 1 1 1 1 1 1 11 1 1 1
0 0
E-commerce Enabler
Online Grocery
Food Tech
New Energy
E-commerce
Job Marketplace
Cryptocurrency
Research Platform
Brand Aggregator
Green Energy
Game Dev
Fintech
OTA
SaaS
Logistic
Car Marketplace
Social Commerce
Blockchain
Wealthtech
Aquatech
Digital Signature
Agritech
Beauty Tech
Insurtech
Online media
Proptech
B2B Commerce
OTT
Healthtech
Edtech
Electric vehicle
Biotech
Wellness
Waste Management
Crowdfunding
Loyalty
Climate Tech
Construction
Web3
Esports
New Economy
Mobility
Automotive
Community Platform
D2C
Femtech
Manufacturer
New Energi
Parenting
Trash Management
Artificial Intelligence
Smart City

36
Online Marketplace Awareness

Online Marketplace is a derivative of The online-to-offline (O2O) model is also a
e-commerce services with a C2C business business concept that is quite popular in
model. The community acts as a seller Indonesia. Empowered by online marketplace
(merchant) and a buyer (customer). MSME owners, O2O enables connectivity between
players who want to sell their products online traditional retail and e-commerce. The aim is to
can fill this merchant category. As many as allow conventional retail owners (micro-small
1305 respondents have used this service to size) to expand the scope of services by selling
help them increase their online presence. various digital products and gaining supply
chain access through e-commerce catalogs.
The following is a list of online marketplaces with the highest level of awareness from
respondents:
Figure 38. Online Marketplace that can help MSMEs (n=1305)
100 94.5%
89.7%
82.2%
71.6%
75 68.4%
50
25
2.0% 0.8%
0
Others None
The following are the O2O marketplace platforms most widely known by survey
respondents:
Figure 39. O2O Marketplace that can help MSMEs (n=1305)
100
86.8%
78.9%
74.1%
75
57.9% 56.4%
50
25
4.5%
0.5%
0
Mitra TikTok Others None

Shop

37
Digital Payment Awareness

Several fintech apps can also help MSMEs, one Meanwhile, digital wallets are one of the
of which is a payment gateway. This service favorite options for payment instruments. The
allows business owners to provide cashless interoperability is also improving with QRIS,
payment options for their customers. The which is now widely applied to merchants,
use of payment gateways can take two forms. enabling them to accept payments from
First, it is integrated into the e-commerce site various platforms with a single code. The
that they develop in-house—second, utilizing following is a digital wallet service with a high
payment links to facilitate payments on social level of awareness in the survey—some of
commerce channels. these MSMEs also use it as a QRIS provider to
receive payments.
The following are payment gateway services that have the highest level of awareness in
the survey:
Figure 40. Payment product that can help MSMEs (n=1305)
50
40.0% 42.1%
40
30 26.7%
23.4%
20
15.6% 15.1%
10
0.5%
0
Others None
Figure 41. Digital wallet/QRIS that can help MSMEs (n=1305)
100 94.4% 93.6% 90.3% 89.0%
75.3%
75
50
25
0.4% 0.3%
0
Others None

38
Point of Sale Awareness

A point of sale (POS) app can provide many A POS app can help MSMEs in Indonesia
benefits for MSMEs in Indonesia. Some main increase efficiency, improve customer service,
benefits include increased efficiency, improved and make better decisions based on real-time
inventory management, better customer data. It eliminates the need for expensive
service, easy access to sales data, and hardware and software and can be accessed
cost-effectiveness. remotely, allowing MSMEs to manage their
business operations from anywhere.
The following are the most widely known POS services by survey respondents:
Figure 42. Point of Sales that can help MSMEs (n=1305)
50
42.9%
40 36.2%
31.1%
30
25.0%
24.6%
20
15.6%
10
0.7%
0
Others None
Fintech Lending Awareness

Peer-to-peer (P2P) lending is a form of online P2P lending in Indonesia has been
lending that allows individuals and small instrumental in helping MSMEs access the
businesses to borrow money directly from funding they need to grow their businesses.
other individuals or institutions. P2P lending MSMEs often need more collateral and credit
in Indonesia is a relatively new but rapidly history to obtain financing. P2P lending
growing industry. According to a report by the platforms, on the other hand, offer a more
Financial Services Authority (OJK), the total accessible and flexible alternative, allowing
value of P2P lending in Indonesia reached MSMEs to borrow smaller amounts of money
Rp3.5 trillion (about $250 million) in 2019, at a lower cost and with fewer requirements.
and it is projected to reach Rp13.5 trillion This can help MSMEs overcome the financial
(about $940 million) by 2023. This represents a constraints they face and invest in expanding
compound annual growth rate of about 50%. their businesses.

39
As of January 2023, 102 fintech lending companies registered with OJK. From this list,
the following platform brands are most widely known by MSMEs in Indonesia:
Figure 43. Fintech lending that can help MSMEs (n=1305)
50
42.5% 43.4%
40
30
24.0%
21.5% 20.6%
20
12.0%
10
0.2%
0
Others None
SaaS Productivity Awareness

Software as a Service (SaaS) makes it easier for businesses to digitize their operational systems.
SaaS variants that exist today and are developed by local startups are very varied, ranging
from accounting services, stock management, human resources, digitizing logistics, etc. The
SaaS model is identical to the subscription business model. MSME players can use the service
according to their business scale (usually calculated based on the size of the transaction or the
number of employees).
Following are some of the SaaS for MSMEs that have the highest level of awareness from
the survey conducted:
Figure 44 SaaS product that can help MSMEs (n=1305)
50
43.3% 43.1%
39.9%
40
30
20
14.4%
11.0% 10.3%
10
0.2%
0
Others None

40
Digital Logistics
Digitalization in logistics refers to using digital well as the use of data analytics and artificial
technologies to improve and automate various intelligence (AI) to optimize logistics operations.
processes in the logistics industry, such
as transportation, warehousing, inventory Digitalization in logistics can lead to improved
management, and supply chain management. It efficiency, cost savings, better tracking and
can include the use of software systems, mobile visibility, and increased agility in the supply
apps, and internet-of-things (IoT) devices to chain. It can also enable new business models
track and manage the movement of goods, as such as on-demand delivery, predictive
maintenance, and real-time monitoring of goods.
The following are some brands of local logistics companies that MSMEs are most widely
known in Indonesia according to the survey:
Figure 45. Logistic product that can help MSMEs (n=1305)
100 92.2%
84.3%
75
63.4%
50
28.4% 28.0%
25
2.9%
1.1%
0
Others None
Omnichannel
Omnichannel is an integrated dashboard service that helps SMEs manage their sales channels
in one place. Several local omnichannel developer startups have developed platforms that
can connect online marketplace management systems to facilitate stock management and
transaction processes.
The following are some services that survey respondents widely know:
Figure 46. Omnichannel that can help MSMEs (n=1305)
60 55.3%
40 33.9%
20 17.0% 16.2%
13.0% 12.0%
0.2%
0
Others None

41
The Use of Digital Platforms

Using digital platforms for MSMEs can bring digital platforms effectively. It can make it
some benefits. One of the most significant difficult for them to set up an e-commerce
advantages is the ability to expand the reach site, run digital marketing campaigns, or even
of a business beyond its local market. By create a website. Additionally, MSMEs may
creating an online presence, MSMEs can target need more access to digital tools and software,
customers worldwide, potentially increasing which can further limit their ability to take
their revenue and customer base. Additionally, advantage of digital platforms.
digital platforms can help MSMEs to streamline
their operations and reduce costs. For example, Another obstacle that MSMEs may face is a
using digital tools for inventory management need for more funding. Many digital platforms
and accounting, MSMEs can save time and require significant time and money to set up
money on manual tasks. and maintain. It can be challenging for MSMEs,
particularly those just starting out or with
Another benefit of using digital platforms limited resources. Also, MSMEs may have access
for MSMEs is accessing a wide range of data to a different level of funding or investment
and analytics. It can help businesses to make than larger businesses, making it difficult for
data-driven decisions and understand their them to compete in the digital landscape.
customers better. For example, an e-commerce Finally, MSMEs may need more digital literacy
platform can provide insights into products amongst their customers, employees, and
selling well and not. This information can owners, which can make it difficult for
be used to make informed decisions about businesses to leverage digital platforms'
inventory management, marketing, and other advantages fully.
business areas. Additionally, digital platforms
can help MSMEs to improve their customer The survey also highlights the level of adoption
service and build stronger relationships with of technology services for MSMEs in Indonesia
customers through features such as live chat to validate the use of digital platforms. Of
and social media integration. the respondents who were previously aware
of digital services for MSMEs (1305 peoples),
But there are also several obstacles that 83.8% of them admitted that they had utilized
MSMEs may face when trying to adopt digital technology to support their business operations.
platforms. One of the main obstacles is a need
for more technical knowledge and expertise. Almost all respondents who have used digital
Many MSMEs may need more resources or services agree that technology has positively
in-house expertise to navigate and utilize impacted their business productivity
Figure 47. The business use digital services to Figure 48. The business productivity increased after
support the operational activities (n=1305) using digital services for MSMEs (n=1094)
NO
NO
0.9%
16.2%
YES YES
83.8% 99.1%

42
Several operational areas are the main focus of MSME actors in digitalization. According to the
survey, the marketing area has adopted the most digital (78.1%), followed by the transaction or
payment area (55%) and the product innovation area (49.1%).
Figure 49. The priority sector when decide to use digital services for MSMEs (n=1094)
0 20 40 60 80
Product/Digital Marketing 78.1%

bbbbbb
Consumer transaction
payments
55.0%
Creation/development of
49.1%
innovative products/services
Business operations 44.8%

bbbbbbbbbb
Business funding 41.0%

bbbbbbbbbbbb
Delivery of goods 36.0%

bbbbbbbbbbbb
Education/capacity building to
31.8%
improve business acumen skills
From several existing services, the following categories of applications are widely used by
survey respondents to assist their business operations:
Figure 50. Digital services have used to support business operations (n=1094)
80 72.7%
68.0%
60
39.9%
40
21.0%
18.3%
20
13.5% 11.3%
3.7%
0.4%
0
Electronic Shopping Delivery Payment Go digital Business Accounting, Others Don’t

Money for goods and delivery Points (POS) support Funding Tax, HR know at
(e-commerce) services (Fintech) (SaaS) all

43
Following are the details for each category of digital platforms used by MSMEs in Indonesia.
Digital Payment
Using digital payment platforms can greatly Figure 51. The business accept digital payment,
benefit MSMEs by providing them with a more including electronic money payments/digital wallets/
efficient and secure way to process payments. bank transfers (n=1426)
Digital payment platforms such as e-money,
payment gateway, and QRIS allow businesses
to accept various payment methods, including
credit and debit cards, e-checks, and mobile
payments. It can make it easier for businesses
to sell their products or services online and can NO
also help to increase sales by making it more
convenient for customers to make purchases.
7.2%
Additionally, digital payment platforms can help
reduce the risk of fraud and chargebacks, saving
businesses time and money in the long run. YES
According to the survey, most MSMEs aware 92.8%
of digitalization have utilized digital payment
services to support their business operations.
These digital payment services include e-money,
digital wallets, and bank transfer platforms.
However, cash is still the most widely used payment option on the consumer side. The potential
for digitization is still huge. It is supported by increasingly mainstream e-commerce services and
the government's push to improve cashless payment services in the community.
Figure 52. Most used payment method by customers (n=1324)
60
50.1%
40
24.6%
23.6%
20
1.7%
0.1%
0
Cash Digital wallet (Gopay, Bank transfer Electronic money Others

OVO, Dana, etc.) (e-money, flash,
Brizzi, etc.)

44
Figure 53. Most used payment method by customers by business category
60
55.5%
50.0%
40 37.7%
35.5%
25.9% 24.6%
22.6% 21.2%
20 21.2%
1.4% 2.1% 2.2%

0 0.1% 0.0% 0.0%

(n=860) (n=326) (n=138)
Cash Electronic money (e-money, flash, Brizzi, etc.)

Digital wallet (Gopay, OVO, Dana, etc.) Others
Bank transfer
Server-based digital wallets or e-money are the most popular digital payment platforms.
Currently, there are dozens of service providers registered with Indonesian banks. However, the
survey found some of the most popular digital wallet brands that MSME players often use to
make transactions through applications, websites, or QRIS.
Figure 54. Digital wallet/QRIS applications/websites used in the last 6 months for business purposes (n=795)
100
86.0% 85.8%
73.0%
75 66.4%
50
39.6%
25
0.8% 0.5%
0
Others None

45
Figure 55. Digital wallet/QRIS applications/websites used in the last 6 months for business purposes by
business category
100 96.6%
85.7% 85.7% 88.6%
84.9% 83.2%
73.2% 72.4%
75 72.7%
72.4%
64.4% 64.8%
50 44.4%
38.9%
33.0%
25
1.2%
1.0%
0.4% 0.0% 0.0%0.0%
0

(n=511) (n=196) (n=88)
OVO GoPay ShopeePay Dana LinkAJa Others None
Payment Gateway/Aggregator
Fintech payment gateways are a vital tool Fintech payment gateways also provide MSMEs
for MSMEs as they provide an easy and with valuable insights and analytics on their
efficient way for businesses to process online transactions, which can help them better
transactions. These gateways offer a secure understand their customers and make data-
and convenient way for MSMEs to accept driven decisions. Additionally, these gateways
customer payments via various channels, such often offer fraud detection and prevention
as credit cards, debit cards, and digital wallets. services, which can help protect MSMEs from
It allows MSMEs to expand their customer financial losses due to fraudulent activities.
base and reach a wider audience, as they can
process payments from customers anywhere
in the world.
The following are payment gateway services most used by respondents in the survey:
Figure 56. Payment applications/websites used in the last 6 months for business purposes (n=795)
50 48.6%
40
30
27.3%
25.3%
21.6%
20
14.5%
12.3%
10
1.5%
0
Others None

46
Point of Sales
Point of Sale (POS) app allows MSMEs to efficiently process sales and accept payments from
customers using their mobile devices or tablets, eliminating the need for traditional cash
registers and other hardware. It saves MSMEs money on hardware costs and allows them to
take their business on the go and process sales in various locations.
POS apps provide MSMEs with valuable features such as inventory management, customer
tracking, and detailed sales reports. MSMEs can easily track their inventory levels, monitor
sales trends, and identify their most profitable products. Additionally, POS apps can integrate
with other business tools, such as accounting software, which can help MSMEs streamline their
financial operations and make more informed business decisions.
From some POS platforms developed by local startups, the following are the most used by
survey respondents:
Figure 57. Point of Sales applications/websites used in the last 6 months for business purposes (n=230)
48.3%
50 47.8%
40
34.3%
30.4%
30 26.5%
20
10 8.7%
2.2%
Others None
Fintech Lending
Fintech lending (including peer-to-peer lending, Fintech lending platforms use advanced
invoice financing, paylater, etc.) is increasingly technologies such as big data analytics,
important in addressing the funding and machine learning, and artificial intelligence
capital gap for MSMEs in Indonesia. Traditional to evaluate loan applications and determine
lending institutions such as banks have creditworthiness. It allows them to make
been criticized for their rigid lending criteria lending decisions much faster than traditional
and lengthy application processes, making banks and with a more comprehensive
it difficult for MSMEs to secure funding. understanding of the borrower's
However, fintech lending platforms have creditworthiness. Additionally, fintech lending
emerged as an alternative solution by offering platforms often offer smaller loan amounts
a more flexible and streamlined process for and more flexible repayment terms, which can
MSMEs to access capital. better suit the needs of MSMEs.

47
In January 2023, there were 102 fintech lending companies registered with OJK. Most of them
have loan products aimed at MSMEs. The following are the most widely used fintech lending
platforms for MSME financing according to a survey conducted:
Figure 58. Fintech lending applications/websites used in the last 6 months for business purposes (n=148)
80
68.2%
66.2%
60
52.0%
49.3%
45.9%
40
20
4.7%
None
SaaS Accounting Software

Digitizing accounting for MSMEs is becoming Another reason MSMEs need to digitize their
increasingly crucial for some reasons. One accounting is that it can help them save time
of the main reasons is that it helps MSMEs and money. Digital accounting software
to streamline their financial operations and automates many of the manual processes
make more informed business decisions. associated with traditional accounting, such as
Using digital accounting software, MSMEs data entry, invoicing, and financial reporting.
can easily track their income and expenses, It can significantly reduce the amount of time
generate financial reports, and monitor their and resources MSMEs need to devote to their
cash flow in real time. It allows them to quickly accounting and allow them to focus on other
identify areas of inefficiency and make data- aspects of their business. Additionally, digital
driven decisions to improve their financial accounting software eliminates the need
performance. for paper records, saving MSMEs money on
storage and filing costs.
The following are accounting SaaS services that survey respondents widely use:
Figure 59. SaaS applications/websites used in the last 6 months for business purposes (n=124)
80 71.0%
68.5%
60
48.4%
45.2%
40.3%
40
20
5.6%
1.6%
0
Others None

48
Online Marketplace
The online marketplace provides an easy and to a large production run or investment. The
cost-effective way for businesses to reach a platform also provides a dashboard with
wider audience and increase their revenue. valuable insights and analytics on sales and
The platform allows MSMEs to set up an online customer behavior, which can help them
store and sell their products to customers better understand their target audience and
worldwide. It will enable MSMEs to expand make data-driven decisions.
their customer base and reach new markets,
which can help to increase their revenue and Apart from specially developed online
grow their business. marketplace services, there is currently a
social commerce model, a combination of
Another key advantage, the online marketplace social media and e-commerce. This model
provides a low-cost and low-risk way to test the provides a seamless experience by adopting
market for new products or services. MSMEs an online buying and selling process like in a
can list their products on the marketplace and marketplace.
gauge customer interest before committing
The following are several platforms that are most in demand by MSMEs in the survey:
Figure 60. Online Marketplace applications/websites used in the last 6 months for business purposes (n=744)
100
87.1%
75
58.2%
50 44.8%
37.8%
22.6%
25
7.9%
1.2%
0
Others None
"Having an online marketplace and food delivery service has helped

me increase my sales reach. I'm willing to pay for digital services that
can improve business operations because I'm already experiencing the
benefits. The plan is to adopt a digital logistics service that can support the
delivery of frozen food products out of town.
Yeni Rohimah
A culinary micro-entrepreneur from Bandung

49
Meanwhile, most of these online marketplace providers also present the O2O concept to help
traditional retailers transform their businesses. Of the existing platforms, the following are
most used by respondents:
Figure 61. Marketplace applications/websites used in the last 6 months for business purposes (n=744)
80 75.7%
60
50.4%
41.0%
40 34.9%
20 17.7%
12.2%
2.8%
0
Mitra TikTok Shop Others None
Logistics
Digital logistics apps allow MSMEs to track real-time tracking, and automated notifications.
and manage their deliveries, shipments, and MSMEs can optimize delivery routes, track
inventory levels in real time using their mobile shipments in real-time, and be notified of any
devices or tablets. It eliminates the need for delays or issues. Additionally, digital logistics
manual processes and paper-based record apps can integrate with other business
keeping, which can save MSMEs time and tools, such as accounting software and
resources. online marketplaces, which can help MSMEs
streamline their financial and sales operations.
Digital logistics apps also provide MSMEs
valuable features such as route optimization,
The following are a number of B2B and B2C logistics services that are widely used by
survey respondents:
Figure 62. Logistic applications/websites used in the last 6 months for business purposes (n=437)
100
87.2%
78.9%
75
53.3%
50
27.5%
21.7%
25
3.7%
1.6%
0
Others None

50
Omnichannel
An omnichannel platform is a system that enables businesses to sell their products or services
across multiple channels, such as online marketplaces, social media, and their own website.
This allows customers to engage with the business and make purchases through the channel of
their choice while providing a consistent and seamless experience across all channels. It typically
includes inventory management, customer relationship management, and order fulfillment tools.
The following are omnichannel services from local developers that survey respondents
most widely adopt:
Figure 63. Omnichannel applications/websites used in the last 6 months for business purposes (n=200)
60 57.5%
43.5%
41.0%
40
34.0%
31.5%
21.5%
20
0.5%
0
Others None
Social Media for MSMEs

Social media allows businesses to create and respond to customer inquiries and
an online presence, connect with potential feedback. This can create a loyal customer base
customers, and promote their products or and increase customer retention. According
services. According to a survey by We Are to a survey by Nielsen17, 84% of consumers
Social and Hootsuite16, as of 2021, there are trust online reviews as much as personal
over 132 million active social media users in recommendations.
Indonesia, representing a significant market
opportunity for MSMEs. The same survey also Social media platforms also provide analytics
shows that Facebook is the country's most tools to help businesses measure their
popular social media platform, with over 120 performance, which can help them understand
million active users. MSMEs can reach a wide their customer and improve their business
audience and increase brand awareness by strategy. For example, TikTok Insights can
creating a presence on Facebook and other provide data on post views, reach, and
social media platforms. engagement, which can help businesses to
optimize their content and improve their
In addition to reaching new customers, social marketing strategies.
media can also build relationships with existing
customers and create a sense of community This research also explores how MSMEs in
around a business. MSMEs can use social Indonesia optimize social media to help their
media to share updates about their products business.
or services, offer promotions and discounts,
16
https://wearesocial.com/uk/blog/2021/01/digital-2021-the-latest-insights-into-the-state-of-digital/
17
https://www.nielsen.com/insights/2013/under-the-influence-consumer-trust-in-advertising/

51
Social Media Utilization

Even though the use of social media is Figure 64. Leveraging social media to improve the
extensive among consumers, not all MSMEs business (n=1500)
have succeeded in utilizing social media to
impact the development of their businesses
positively. According to a survey conducted in
this research, 78.2% of respondents have used
social media in their business operations.
NO
21.8%
MSMEs may face obstacles in optimizing
their social media presence such as lack of
resources, lack of knowledge, and high level
YES
of competition. These can make it difficult for 78.2%
them to consistently create and post engaging
content, reach their target audience, and stand
out among other businesses on social media
platforms.
The Objective with Social Media

According to the survey, most MSMEs that have used social media focused their goals on three
main things: marketing, sales, and interaction with customers.
Figure 65. The models for using social media for the business (n=1173)
0 25 50 75 100
Marketing Channel 91.3%
Sales Channel 81.9%
Customer Interaction
Channel 72.5%
Other 0.1%
1. Marketing
Social media can help MSMEs in their marketing efforts by providing a cost-effective way to
increase brand awareness, connect with potential customers, and track the performance of
their marketing strategies. The marketer can target specific demographics and run targeted
advertising campaigns using social media. It also allows businesses to track metrics such as
engagement, reach, and conversions, which can help MSMEs evaluate their marketing efforts'
performance and make data-driven decisions to optimize their strategies.
Additionally, social media also allows MSMEs to build a community around their brand, fostering
customer loyalty and creating a positive image for the brand. Based on a survey among
respondents, the following are social media that MSMEs most widely used in Indonesia for
marketing activities.

52
Based on a survey among respondents, the following are social media most widely used
by MSMEs in Indonesia for marketing activities:
Figure 66. The digital platform/social media used as a marketing medium (n=1071)
100
80.1%
77.6%
75
50 45.5%
31.8%
25
12.0%
9.2%
6.9%
Others
2. Selling
Social media can also be used as a sales channel. Especially with a marketplace feature that
allows businesses to make sales transactions. For example, through the TikTok Shop feature,
businesses can include product information in their exciting content. Followers can immediately
place orders and payments without having to switch applications.
The following are popular social media that many MSME players use in surveys to help sell
their products:
Figure 67. The digital platform/social media used as a selling medium (n=961)
80 79.3% 75.7%
60
45.1%
40
29.6%
20
11.2% 9.9%
7.5%
Others
“We make 80% of our sales through online social media channels and Etsy
marketplaces. Our market focus is export; in the last four months, we
have completed 70 transactions. We have also started using a cash flow
management application to facilitate operational recording. As for the
challenge, we must search for what outsiders need and see the market
trends. So I use Google or Pinterest to see product trends.”
Diayani
A knitting entrepreneur from Makassar

53
3. Interacting
Interacting with customers through social media can provide several benefits for MSMEs. One of
the key benefits is the ability to gather valuable customer feedback. MSME players can also gain
insight into what customers like and dislike about their products and what they would like to see
in the future. Additionally, they can build trust and credibility with their audience, create a sense
of community around their brand, and increase customer retention.
The following are social media that many respondents use to interact with their customer
base:
Figure 68. The digital platform/social media used as a customer-interaction medium (n=850)
79.4% 78.9%
80
60
37.6%
40
23.5%
20 15.4%
7.8%
4. Paid Feature
In the survey, researchers also asked respondents' preferences for paid services charged by
platform developers. Most respondents said they were willing to pay for the premium features
presented. It indicates that the benefits derived from social media have a good impact on MSME
actors to support their businesses.
Figure 69. Used digital platform/social media, even when you have to pay more for its use (as usual with
advertising and others) (n=1173)
NO
8.1%
YES
91.9%

54
Benefit of Social Media

The survey also presents an open question for respondents who have used social media for their
business. We found the ten main benefits that many MSME actors felt from optimizing social
media from the answers. Here's the complete data:
Figure 70. TOP 10 benefits from digital platform/social media optimization (n=1173)
0 5 10 15 20
Increase in turnover 19.4%

Have a wide scope/marketing 17.6%
Get many customers/new
customers 13.1%
Increase in the number of 9.5%

customers or new orders
Easiness for product

marketing 9.3%
To become more popular or

8.5%
known by wide society
Easiness to interact 6.6%

Able to promote sales 5.7%
Able to expand business/lots

of marketing 5.5%
Media to promote the product 5.1%
TikTok for MSMEs

TikTok can help MSMEs in Indonesia grow their content, including the number of views, likes,
business by reaching new audience by creating and shares. This can help MSMEs understand
engaging and creative videos and a buzz around their content's performance and make
their brand. TikTok offers several features that adjustments as needed.
can support MSMEs to promote and sell their
products. Some key features include Hashtags, Additionally, TikTok offers an advertising
Challenges, Shopping features, Live streaming, platform, TikTok Ads, that allows MSMEs to
and In-app analytics. reach a wider audience and promote their
products to a specific target audience. This
Hashtags are a powerful way to increase the feature allows MSMEs to create sponsored
visibility of MSMEs' content. Using relevant posts, videos, and in-feed ads to reach a broad
hashtags, MSMEs can increase the chances audience and generate leads.
of their content being seen by potential
customers. Challenges are a great way to create TikTok is a new player in Indonesia compared
viral content and increase engagement. MSMEs to other popular social media because it only
can create challenges related to their products officially existed around 2017. Nevertheless,
and invite their followers to participate. TikTok has a fast growth rate. The interactive
video-based content was well for Indonesian,
The shopping feature enables MSMEs to link especially millennials and gen-Z. In particular,
their products to their videos, allowing users to the researchers also highlighted the use
purchase the products directly from the app. of TikTok for MSMEs. As many as 63.2% of
Live streaming enables MSMEs to interact with respondents claimed to have used TikTok, with
their audience in real time, answer questions 22.4% also optimizing the TikTok Shop as a
and showcase their products. In-app analytics sales tool.
provide MSMEs with detailed analytics on their

55
Figure 71. Used TikTok services for social media strategy (n=1173)
Don’t use TikTok

36.7%
Using TikTok only
40.8%
Using TikTok and
TikTok Shop
22.4%
Some benefits are obtained by MSME players who have adopted the TikTok service for their
business. Here are the ten most widely felt benefits:
Figure 72. TOP 10 benefits get from using TikTok in business social media strategy (n=742)
0 5 10 15 20
Increasing sales 17.1%

As a promotion/marketing 12.5%
media
To be more popular or known 8.6%

by public
Wider sales or get new market 8.2%
Get new customers 7.7%
Specific for young people 7.3%
Easiness to marketing the

5.8%
products
Attract more consumers 5.8%

Get more viewers 5.1%
Get many application users 4.6%
Digitalization Impact
Digitalization has significantly impacted Digitalization has made it easier for MSMEs to
MSMEs by providing them with new tools reach a wider audience and increase brand
and opportunities to grow their business. awareness. According to a report by the APJII19,
According to a study by the World Bank in the number of internet users in Indonesia is
202118, digitalization has increased access to projected to reach over 210 million by 2022,
markets for MSMEs, with e-commerce sales providing MSMEs with a significant opportunity
expected to reach $4.9 trillion by 2021. It also to reach a wider audience through digital
found that MSMEs that use digital tools are platforms such as social media, e-commerce, and
2.5 times more likely to increase their sales search engines. Additionally, digitalization has
than those that do not. Furthermore, the study made it easier for MSMEs to access information
revealed that MSMEs that use digital tools are and resources, such as market research,
more productive and have higher levels of business training, and financial services.
innovation, which can help them to increase
their competitiveness in the global market.
https://www.worldbank.org/en/country/indonesia/publication/beyond-unicorns-harnessing-digital-technologies-for-inclusion-in-indonesia
18
https://apjii.or.id/survei/surveiprofilinternetindonesia2022-21072047
19

56
Pain Points Before Digitalization Figure 73. The main problems faced before using a
marketing-related digital service (n=1173)
The survey also explores the pain points
many MSMEs in Indonesia face when carrying
out traditional and manual operations. Six
fundamental problems are often encountered: 64.6%
marketing, fulfillment of raw materials, payment Difficulty
transactions, capital, ordering, and shipping. marketing
Specifically, the survey explores the most products
disruptive crucial things in producing more with a wider
range
efficient business processes. 34.6%
Difficulty getting
knowledge
about business
competition
Figure 74. The main problems faced before using digital services related to the provision of raw materials
(n=1173)
0 10 20 30 40 50
Lack of knowledge to compare prices

between a supplier 43.1%
Limited ability of employees regarding

19.9%
procurement of goods
Long procurement process 19.3%
Limited payment options 16.6%
Other 1.2%
Figure 75. The main problems faced before using digital services related to payment transactions (n=1173)
0 10 20 30 40
High risk of human error 30.0%
Manual transactions are quite time

consuming 24.7%
Limited payment options 17.6%
Long payment process 14.3%
Difficulty managing transactions in 12.3%

business branches
Other 1.0%

57
Figure 76. The main problems faced before using Figure 77. The main problems faced before using a
digital services related to funding/business capital digital service related to shipping goods (n=1173)
(n=1173)
2.6% 50.8% 41%

Other
Difficult Inefficient time
administrative to arrange
process delivery of
goods
58.1%
Lack of knowledge
46.6% to compare prices
Loan interest is between a delivery
too expensive service
Figure 78. The main problems faced before using digital services related to bookkeeping/operations/
employment (n=1173)
0 10 20 30 40 50
Lack of knowledge about 44.5%

bookkeeping/employment
Long process due to manual work 31.5%
High risk of human error 23.3%
Other 0.7%
Impact After Digitalization

After digital transformation, either wholly or partially, MSMEs in Indonesia has had many positive
impacts on their business. From the answers in the survey, there are four most felt impacts
related to business development, including increased sales, increased operational effectiveness,
expanded market share, and reduced operating costs.
Figure 79. The main benefits got from digitizing the business (n=1054)
100
84.2%
73.1%
75
62.8%
50.7%
50
25
Sales increase Operational effectiveness Market expansion Cost reduction

58
Digital Transformation Consideration

The survey also explores the considerations of MSME actors who have used digital products to
help their productivity. Following are the ten main reasons MSME players adopt digital tools
to help accelerate their business:
Figure 80. Considerations for using digital products (n=1054)

0 20 40 60 80
Products that are easy to

understand and use 59.1%
As needed 58.9%
Provides potential benefits 58.8%
Safe and reliable product 57.2%
Saving time 55.1%
Service alternative 49.5%
Complete and clear product

45.2%
information
Complete product variant 41.2%
Famous products 37.5%
Other people’s recommendations 29.1%
Digital Transformation Plan

Several MSME players also said they plan to adopt some technology products in the future as part
of their digital transformation strategy.
Figure 81. Digital services have not used but feel necessary to support business operations (n=1054)
0 10 20 30 40
Payment Points (POS) 30.1%

Accounting, Tax, HR (SaaS) 21.2%
Go digital support 19.9%
Delivery and delivery services 16.3%
Business Funding (Fintech) 14.8%
Shopping for goods (e-commerce) 14.4%
Electronic Money 8.6%
Don’t know at all 23.0%

59
Participation in Government-related Program

The survey also highlighted respondents' Figure 82. Ever participated in an MSME empowerment
participation in the government's program from the government (n=1500)
incubation and acceleration programs.
Of the respondents, 60% claimed to have
participated in the program.
The programs most attended were

workshops with various topics (71.5%). It was
NO
continued with business funding programs 60%
(62%), one of which was KUR. And product
exhibitions that are regularly held in various YES
cities in Indonesia (37%). 40%
Figure 83. Government programs ever participated in (n=600)
80
71.5%
62.0%
60
37.0%
40
19.7%
20
0.3%
0
Workshop Access to capital Exhibition Competition Other

60
04
MSME-Focused
Digital Company
Perspectives

61
MSME-Focused Digital
Company Perspectives
To get an in-depth perspective on digitization in
the MSME sector, we interviewed local technology
service developers whose target users are MSME
players. In the qualitative interview session, the
researchers highlighted the pain points they saw,
the technological innovations, and the challenges
of digital transformation for MSMEs. The
researcher chose one resource person (C-level) to
represent each service type.
Financing Innovation for MSMEs
MSMEs play a vital role in Indonesia's economy In addition to these challenges, MSMEs in
as they make up most of the country's Indonesia also face a lack of awareness and
businesses and employ a large portion of the understanding of the various financial products
workforce. However, these businesses often and services available to them. Research by
face significant challenges when it comes to OJK21 showed that about 60% of MSMEs are not
financing. One of the main issues is the lack of aware of the various financing options available
access to formal lending for molestations, such to them.
as banks.
Seeing this gap, Andi Taufan Garuda Putra tries
According to the government20, in 2022 only to bring digital innovation to meet the financing
20% of MSMEs in Indonesia already have access needs of MSMEs through the fintech lending
to bank loans, while most MSMEs rely on platform. Researchers interviewed him to get
internal funds or loans from friends and family a complete perspective on financing issues in
to finance their business. This lack of access to MSMEs in Indonesia.
formal lending institutions can make it difficult
for MSMEs to obtain the necessary funding to
start or grow their businesses.
MSME Condition
According to Taufan, inclusive financial services have great potential to be developed in
Indonesia. Financial services have not touched more than 30 million MSMEs in Indonesia.
MSMEs also have strong resilience so that they can recover after a pandemic. The opportunity
for inclusive financial services like Amartha to reach millions of other MSMEs is enormous so
that Indonesian MSMEs can compete and expand their market globally.
Amartha and Katadata Insight Center (KIC)22 researched the level of financial inclusion and
digital adoption for MSMEs. The survey was conducted in November 2021 with 402 respondents
in several regions in Indonesia. The research results show that MSMEs have a good level of
financial inclusion, but only a few have used digital channels to develop their business. A low
score on the digital financial product adoption dimension indicates this. In addition, the majority
of MSMEs still use cash. Amartha seeks to support the acceleration of MSME digital adoption
through the Amartha+ application and education for MSME players.
20
https://bisnis.tempo.co/read/1665920/pemerintah-jelaskan-penyebab-baru-20-persen-umkm-yang-miliki-akses-ke-kredit-perbankan
21
https://ojk.go.id/id/berita-dan-kegiatan/publikasi/Documents/Pages/Kajian-Bersama-Bagaimana-UMKM-dan-Perbankan-Dapat-Sukses-di-Era-
Disrupsi-Ekonomi-dan-Digital-2020-(OJK-BCG)/Kajian%20Bagaimana%20UMKM%20dan%20Perbankan%20Dapat%20Sukses%20di%20Era%20
Disrupsi%20Ekonomi%20dan%20Digital.pdf
22
https://katadata.co.id/yuliawati/digital/62da94ab04c11/riset-kic-amartha-banyak-umkm-terhambat-jualan-online
62
Andi Taufan Garuda Putra

Founder & CEO of Amartha
PT Amartha Mikro Fintek (Amartha) was founded in 2010 as

a microfinance company. In 2016 Amartha transformed into
a financial technology company and had a license under the
supervision of the Financial Services Authority (OJK).
Amartha has channeled a working capital of more than Rp10

trillion to more than 1.5 million women micro-entrepreneurs
in 35,000 villages in Indonesia.
Inclusive Lending
Regarding products, Taufan explained, Amartha In 2022, Amartha channeled capital to
provides safe and comfortable access to capital more than 1.3 million women ultra micro-
for MSMEs. The platform offers profitable entrepreneurs in 24 provinces in Indonesia.
investment alternatives for funders and The company targets the ultra-micro segment
strengthens the informal economy for villages. at the bottom of the pyramid, and more than
In fundraising, Amartha optimizes individual 98% of its partners are women. This segment
and institutional funding channels. Individual experiences difficulties accessing formal
lenders can directly select borrowers according financial services because it needs an adequate
to the risk they are comfortable with through credit history. They generally still use physical
the mobile application. Banking institutions money in their transactions, making it difficult
include private banks, state-owned banks, and to get loans through formal financial services.
rural banks, also have access to thousands of Therefore, Amartha provides inclusive financial
MSME for them to fund. As of October 2022, 23 services so this segment can gain access to
banking partners have joined Amartha. capital to develop their business.
Product Distribution
Amartha uses a hybrid system (a combination of online and offline methods) in providing
inclusive financial services. Field teams in more than 35,000 villages support this effort,
providing financial assistance, financial and digital literacy education, and mentoring for ultra-
micro entrepreneur partners. This system has managed to maintain performance and loan
quality, with stable NPLs below 0.5%.
Figure 84. The Amartha’s Social Impact Framework
Sustainable
Impact
Business Empowerment Health & Livelihood Empowerment
Entrepreneurship Financial Digital Health Quality of Public Facility

Literacy Literacy Check Life
Financial Service for Unbanked Women

63
Amartha reaches MSMEs in 24 provinces in Indonesia, especially in rural areas. The company's
positive performance was supported by the performance of MSMEs in Sumatra and Sulawesi,
where capital distribution in the two regions increased 2x compared to the same period last
year. As of the third quarter of 2022, Amartha has disbursed funding of 3 trillion rupiahs or
growing 88% (YoY). Amartha has also managed to maintain loan quality with an NPL of 0.5% and
a TKB-90 of 99.62%.
MSME Resiliency
Taufan also observed the condition of MSMEs To provide ongoing support, Amartha will
during and after the pandemic. In 2020, expand its market reach to the ultra-micro
MSMEs suffered due to Covid-19. However, segment by using AI technology to measure
88% of Indonesian MSMEs have improved the credit score of ultra-micro businesses.
until December 2021 and continue to show Ascore.ai, the service provides AI-based tech-
good growth until Q2-2022. At Amartha, nology in measuring financing risk for the
partner income has increased by 10.5% in the MSME sector. Ascore.ai23 Ascore.ai is built with
pandemic year and 37.5% in 2021. Usually, technology that has been used by Amartha
Amartha partners can increase their income for risk measurement in channeling loans to
by 2x-7x after joining. MSMEs have had a more underserved segments at the bottom of the
stable performance outside of Java during the pyramid. With holistic services, Ascore.ai is
pandemic, and their repayment rates have expected to reach a more massive market
been reasonable. It is due to the support of segment and help financial inclusion.
banking partners and the pandemic conditions,
which are not as severe as in Java.
Managing Cash Flow and Inventory

Sourcing Better
Cashflow and inventory sourcing are critical for their business growth. This is because when
MSMEs because it allows them to manage their a business has a steady inflow of money and
business operation more efficient. A good cash efficient inventory management, it can invest in
flow means a business has a steady inflow of new opportunities and expand its operations.
money, which can be used to cover expenses, It includes hiring more employees, opening
invest in growth, and even pay off debt. Mean- new locations, or investing in new equipment.
while, a good inventory management ensures Furthermore, a good cash flow and inventory
MSMEs to always be stock-ready, increase sourcing also helps a business to be more
stock level of products for their business and resilient during challenging times, such as an
maximize daily sales. economic downturn, by providing a buffer of
funds to draw on.
Having a good cash flow and iventory
management also help MSMEs to accelerate
Gabriel Frans
Co-Founder & CEO CrediBook
Founded in early 2020, CrediBook (PT Ruang Dagang
Internasional) is a digital ecosystem, with a purpose to level
up SMEs business by providing daily operations technology,
includes: bookkeeping app, B2B Commerce CrediMart, and
social-commerce enabler CrediStore.
Currently, CrediMart is available in 40 cities in Indonesia,

helping more than 10,000 retailers to source inventory more
efficiently. CrediMart also provides a buy-now-pay-later
payment scheme and next-day delivery service for the retailers.
Meanwhile, CrediBook bookkeeping app has 700+ thousand
users across the nation.
https://en.dailysocial.id/post/amartha-luncurkan-ascore-ai-layanan-skoring-kredit-alternatif-untuk-individu-dan-institusi
23

64
Cash Flow & Inventory Sourcing Management App

The condition above is also the background evaluate sales. It is equipped with services
for Gabriel Frans and his team to develop that make managing products and categories
Credibook. When he started the platform, easier. It was designed to make the work more
he saw that digitalization opportunities efficient with product management. Keep a list
were getting closer, and the MSME market of your product, categorize, and set the capital
was more prepared than in previous years. cost and selling price to calculate profit margins
There he and the founder team decided to automatically.
start a startup by launching a digital financial
recording application. Credibook services continue to be extended to
advanced functions. The company also develop
CrediBook's bookkeeping app can be used for CrediMart (B2B Commerce) to help retailers
MSME actors to manage cash flow, products, and wholesalers source inventories, access
and payables. The features allow users to productive loans through BNPL, and next-day
record every income and expense, which will delivery service in one platform.
later be collected in a report to help them
According to Gabriel, digitization for MSMEs in every operational areas and works with
is accelerated through the use of digital communities, governments, and universities.
payments and social media. Social media is
beneficial and makes marketing strategies Credibook is also faced with unique
easier for Credibook. Including to conduct challenges in penetrating services due to
digital and financial literacy education to this the existing geographic setting. According
segment. Literacy, both digital and financial, is to Gabriel, MSMEs in tier-1 cities usually
considered very important for MSMEs today. have better digital literacy. Tier-2 has some
However, Gabriel feels that the literacy level areas with better technology acceptance
could be more optimal. What he and his team rates. However, behavior and acceptance of
did to deal with this challenge was mentoring technology vary by level and province.
and education. CrediMart's sales team assist
MSME Resiliency
Gabriel also highlighted the dynamic by around 20% during the crisis, technology
economic conditions due to the ongoing services can increase their productivity and
global crisis. According to him, the resilience develop their business based on data.
of the MSME business can protect the
economy from the turbulence that occurs. In the future, CrediBook will deepen
However, digitalization should play a more digitalization support for MSMEs, specifically
significant role, thereby increasing the fighting by strengthening the role of B2B Commerce
power of MSMEs. CrediMart through BNPL/productive loans.
Currently, CrediMart has disbursed more than
According to him, maintaining productivity is 700 billion productive loans to wholesaler-
essential for MSMEs to survive a recession. retailers, in partnership with Fintech lending
Minimum costs and maximum revenue must partner. Payment due (or term of payment)
accompany the productivity process. Even among retailers has become a common
though the average MSME sales decreased practice.

65
Digitizing MSME Transactions
MSMEs face challenges in managing their Researchers interviewed Adi Wahyu Rahadi, the
businesses and competing with larger founder of the majoo SaaS service. In particular,
organizations. SaaS (Software as a Service) majoo serves MSME retail, including F&B, stalls,
applications offer solutions to these challenges and services. This service is offered using a
by providing MSMEs with cost-effective, monthly subscription business model. Majoo
scalable, and flexible technology solutions. services consist of POS features, inventory
These applications are hosted and maintained management, and employee attendance.
by a third-party provider, allowing MSMEs Other features, such as an online store and
to focus on their core competencies without integration with Bukalapak, Shopee, Tokopedia,
worrying about the maintenance and upgrading GrabFood, and GoFood, help manage your
of software systems. business and its growth.
Adi Wahyu Rahadi

Founder & CEO Majoo
majoo (PT Majoo Teknologi Indonesia) is a comprehensive

omnichannel MSME solution that helps businesses reach their
full potential through convenient and accessible features within
sales and operations. Established in 2019, majoo has succeeded
in acquiring over 35 thousand MSMEs in 600 cities around
Indonesia.
MSME Condition
Adi believes that there are already a lot of The majoo team also sees differences
MSMEs in Indonesia that are ready to be between MSMEs in tier-1 cities and
digitized. He sees the rapid development outside the area. In tier-2 and tier-3 cities,
of the last three years and the pandemic as digitalization socialization needs to be
a catalyst for digitization. Meanwhile, the carried out by inviting business people to
digitization of MSMEs is supported by many see first-hand how technology can work
startups that play in various verticals. It shows and help them. For this reason, continuing
the great potential of this sector and the grow educational and mentoring activities must
ing trend of digitalization of MSMEs. Even still be held evenly.
though there is a decrease in micro or macro
crises throughout 2022, the digitalization
industry will continue to grow.
SaaS Adoption
According to data compiled by Statista24, the potential revenue generated from the SaaS
business will reach $409 million, with an exponential growth trend in the future. After a wave
of digital transformation in corporations, the next target for SaaS adopters is MSMEs. Even
though global market size giant tech players control the SaaS platform, local startup players
still have the opportunity to serve the local market by presenting unique and specific services.

66
Figure 85. Potential revenue generated from SaaS business
800
700
634.50
600 570.90
515.80
500 462.80
in $ million
409.40
400
326.70
300 277.60
231.50
197.10
200
155.10
120.40
100 80.02
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
With 345.3 million mobile connections in 202125, technology product adoption can be done
quickly, accompanied by education to increase digital literacy. However, Indonesia also has
unique challenges caused by geographical conditions that create a gap between people in
urban areas and those in rural areas.
On the SaaS product side, the categorization also starts to be broad and specific. From the
records of DailySocial.id, currently, several variants of SaaS services are widely sold for
MSMEs, including:
Adi said SaaS service education requires According to him, this approach is considered
extra effort with the existing conditions necessary because we are transitioning from
and characteristics. At majoo, they have the traditional to digital, so we have to use two
"majoowira" program, a series of workshops channels to reach the MSME population, both
and seminars to improve entrepreneurial traditionally and digitally. Majoo will continue
skills, including digital marketing and to consistently run digital campaigns for
accounting. Every week there are special areas with a good mindset about digitization.
sessions for customers, including mentoring However, traditional segments must still be
and competitions, which are held once every assisted with an extraordinary approach.
three months.
MSME Resiliency
When the Covid-19 pandemic hit massively, majoo is committed to continuing to focus
majoo noted that transactions at their on supporting MSMEs in Indonesia. The
assisted MSMEs fell by almost 40% -60% next innovation that will be presented is the
but did not reach 0. Then in less than three loyalty point system. This platform can help
months, we have seen traffic return to businesses know their customers better. The
normal as before the pandemic. So precisely hope is that the business will see the class of
during the pandemic, majoo adoption grew customers and how to deal with them better.
by almost 800%. The resilience of MSMEs in Loyalty points are given to improve service to
dealing with crises is very high. All they need customers.
to do is adapt to the new conditions they
encounter. With their agility, it usually doesn't
take a long time.
24
https://www.statista.com/outlook/tmo/public-cloud/software-as-a-service/indonesia#revenue
25
https://datareportal.com/reports/digital-2021-indonesia

67
Increasing Digital Presence
With the rise of digital technology, having a essential for MSMEs because it provides a
solid online presence has become necessary cost-effective way to reach a wider audience,
for MSMEs to reach a wider audience and stay increase brand awareness, and access valuable
competitive. A digital presence allows MSMEs to data analytics.
reach a broader audience beyond geographical
borders, take advantage of cost-effective Mulyono said Desty started by creating a
marketing strategies, improve customer platform that helps merchants manage their
experience, increase brand awareness, and businesses. This platform consists of the
access valuable data analytics. Desty Page as an online profile for merchants;
Desty Store for selling products; Desty Menu
A well-designed website, social media presence, for restaurants; Desty Omni to manage stock
and other digital platforms allow MSMEs to and orders from multiple marketplaces in one
create a strong brand image, reach a wider consolidated dashboard; and Omnichat to
audience, and improve customer satisfaction. manage messages from various platforms such
By leveraging digital technology, MSMEs can as Tokopedia, Lazada, and Shopee. This aims to
increase efficiency, make informed decisions, make it easier for sellers to manage transactions
and grow their businesses in today's fast-paced and create a digital customer experience.
digital world. In short, digital presence is super
Mulyono Xu
Co-Founder & CEO Desty
Desty was founded in 2020 to provide a full-stack e-commerce

solution to make it easier for merchants to operate their
businesses efficiently through one dashboard. Desty was
founded by experts from Indonesia and China who have career
backgrounds from Alibaba, Facebook, Google, JD, Canva, and
other leading technology companies.
MSME Condition
In his explanation, Mulyono talked about the MSMEs in Indonesia also have characteristics
trends he caught after the pandemic. Before that service developers need to understand.
the pandemic, many people felt that selling According to Desty's internal data, more than
online or digital tools were not mandatory. 50% of users are outside tier-1 cities. The
But now everyone knows that digital presence primary and second-tier cities had similar
and tools are a must. There is no longer any customs and patterns, the main difference
doubt about selling on online platforms, being size. MSMEs at tier-1 that adopt digital
including social media. platforms have larger business sizes. This
measure includes the number of followers
that support their online presence.

68
Creating Online Presence

Desty's initial product is Desty Page, a link- The online presence service is expanded
in-bio to help sellers develop an online by presenting the omnichannel feature
presence. With this service, MSME actors can (Desty Omni) and e-commerce builder
create an online page (single-page website) (Desty Store). The goal is to make it easier
that can connect customers to their channels, for sellers to manage online stores in many
including social media, marketplaces, or places, including product catalogs and
contacts. Interestingly, Desty also embeds a order management. This platform has been
digital payment feature that allows businesses integrated into almost all major marketplace
to generate sales from the web page. platforms in Indonesia and social commerce
services.
The analysis feature is also expected to
help MSMEs get to know their customers There was also the Menu by Desty, designed
better, including finding out what channels to help F&B businesses manage orders. The
they prefer. MSMEs can increase customer way it works allows a shop owner to create an
retention and loyalty by personalizing services order page that can be accessed via a QR code
based on consumer characteristics. or a unique link. This system accommodates
the needs of dine-in and delivery orders.
The Desty platform has been used by more than 1 million users and continues to grow very
fast. Its services target MSMEs in various categories, including retail, F&B, and hospitality.
Mulyono said the main challenge faced in penetrating products is the awareness and ability of
small and medium sellers to adopt new digital technology. Micro entrepreneurs need further
guidance and training to operate the available digital products.
The following is a map of the distribution of Desty users summarized by the East Ventures-
Digital Competitiveness Index 2022 report26:
MSME Resiliency
Mulyono also highlighted how MSMEs could Online presence and digitization can increase
survive during an economic crisis. According the resilience of MSMEs during a crisis by
to him, MSMEs have higher flexibility than allowing them to reach a more extensive
large companies in finding new solutions. customer base, adapt quickly to changes,
This is also an added value for Desty because improve efficiency, manage finances better,
they can help them overcome problems in and make informed decisions using data
difficult times like today by providing products analysis. These combined factors can help
and technologies that can improve business MSMEs become more agile, adaptive,
efficiency. and resilient, enabling them to withstand
economic shocks and continue to grow and
thrive.
https://east.vc/id/evdci-id/desty-mendorong-umkm-naik-kelas-dalam-pertumbuhan-ekosistem-commerce-indonesia/
26

69
Winning in Social Commerce Era
Social media helps MSMEs as a platform to Researchers discussed with representatives of

reach and engage with a large audience on TikTok in Indonesia to explore how social media
a global scope. It enables MSMEs to build can better impact MSMEs. TikTok is currently a
brand awareness, connect with customers, phenomenal social media in society, especially
and expand their reach beyond geographical now that they have a TikTok Shop service that
boundaries. Another benefit is to showcase blends e-commerce capabilities.
their products and services, drive traffic to their
website, and gather customer feedback and
insights to improve their offerings.
TikTok Mission in Empowering MSMEs Social Commerce Support

The representative said their mission at We've seen success in how TikTok Shop
TikTok is to inspire creativity and bring joy. has supported MSME's in scaling their
Powered by our community, TikTok, through brand and growing their community. As an
its integrated e-commerce arm, provides e-commerce platform fully integrated into
a holistic ecosystem to democratize social TikTok, TikTok Shop enables sellers to tap into
commerce for businesses of all scales, a whole commerce experience, through the
including MSMEs. The holistic ecosystem Shoppertainment concept, with the capability
is combined with the Shoppertainment to upload products and manage everything
approach, where entertainment content from shipping to fulfillment and point of
comes first and commerce later. purchase, all within TikTok.
The holistic ecosystem will help businesses Users can easily discover select products
in all stages, from raising brand awareness while they watch, create, and share content
with ad solutions in TikTok For Business, on TikTok, and at the same time, shop directly
engaging with consumers through shoppable with ease via shopping carts embedded in
livestreams and video content and providing short videos, live streams, and creators'
a seamless purchase experience in-app with profiles without leaving the TikTok app. From
TikTok Shop. TikTok also organizes several initial user engagement to final purchase
initiatives to empower sellers, including and product shipping, TikTok Shop brings a
MSMEs, to thrive on the digital platform seamless, on-platform shopping experience
by organizing several campaigns like that can shorten customer journeys, help
MajuBarengTikTok, Follow Me Program, and businesses thrive, inspire creativity, and
TikTok Shop Summit. maximize the power of branding.
Program for MSMEs

TikTok Indonesia has conducted several also ensure that our features can support
programs specific for MSMEs, including the the MSMEs business, including the newly
#MajuBarengTikTok. This program provides launched Shopping Center, where they give
workshops on digital marketing and utilizing vouchers for purchase and logistics.
the TikTok platform for business. There's also
"Follow Me," a regional program that appoints TikTok Shop has created a partner ecosystem
several successful MSMEs to be mentors for that offers a range of platform services and
fellow MSMEs who want to be successful on tools to assist merchants in selling their
the platform. And an event for all sellers, products on the TikTok Shop platform.
including MSMEs like TikTok Shop Summit and With the help of this ecosystem, merchants
TikTok Shop Seller Conference, that provides can simplify the process of setting up and
insights and networking opportunities for managing their online stores, allowing them
brands, sellers, partners, and creators. to focus on creating engaging content and
promoting their products. This ecosystem
Regularly, TikTok team also assists the provides various resources to help merchants
sellers, including MSMEs players, through maximize their sales potential on TikTok,
regular webinars on how to fully embrace making it easier than ever to reach and
the Shoppertainment concept and utilize the connect with customers on this popular social
holistic ecosystem that TikTok provides. They media platform.

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The 2022 TikTok Shop Summit Conference which was opened directly by the Minister
of Tourism and Creative Economy of the Republic of Indonesia, Sandiaga Uno
Case Study
Bio Herbal and VIP Collagen joined TikTok which enabled him to build more factories to
in 2020 during the pandemic as a pivot to cater to the demands of TikTok users.
approach more consumers through digital
platforms. The brand's owner, Arbert, who Another example is from Roughneck 1991,
participated in the first #MajuBarengTikTok a local apparel brand. During the 10.10
program, decided to start promoting the shopping festival, Roughneck conducted a
brand in TikTok through short videos and 10-day live stream on TikTok Shop. From the
ads. He then began collaborating with TikTok live stream, Roughneck was able to maintain
creators to review the product and now engagement with the audience and increase
utilizes the TikTok Shop platform. From that sales up to 10 times more than the normal
point onward, his profit increased by 300%, period.
Managing E-commerce Better
Research from the World Bank advises MSMEs Since its inception, SIRCLO has taken a position
to adopt e-commerce to increase resilience as an e-commerce enabler, helping businesses
to crises. It is evident from the results of of all sizes to embark on their online selling
the studies they conducted27. Most of the journey, whether through self-managed
businesses already present in e-commerce were website channels, online marketplaces, or
mainly able to survive during the pandemic, and social commerce. It offer solutions targeted
profits that had decreased could recover more at entrepreneurs through SIRCLO Store, as
quickly. While e-commerce was undoubtedly an well as enterprise businesses through SIRCLO
essential way for Indonesian entrepreneurs to Commerce and Swift by SIRCLO. The researcher
survive the economic downturn, they need help interviewed Brian Marshal to understand the
from the public and private sectors to achieve impact of e-commerce enabler platforms on
their fullest potential. MSMEs more deeply.
https://blogs.worldbank.org/eastasiapacific/why-e-commerce-key-indonesias-small-businesses
27

71
Brian Marshal
Founder & CEO SIRCLO
SIRCLO Group is the leading omnichannel commerce enabler

in Indonesia. Its mission is to maximise the potential of people
and businesses through integrated technology solutions, as a
means to enable them to make a leap into the future. SIRCLO’s
super ecosystem serves a wide array of stakeholders, including
enterprise businesses, small and medium businesses, new retail
and micro businesses, as well as millions of end consumers.
MSME Condition
Marshal thought that the current digitalization SIRCLO's internal research results state there are
has succeeded in providing more open and two underlying issues that need to be addressed
efficient access for MSMEs in various ways, such in helping MSMEs adopt digitalisation: ability
as enabling businesses to be connected to the and willingness. Ability related to the digital
logistics system in processing online orders. literacy of MSMEs in learning new ways to sell
According to him, technology should be seen as online; as well as willingness related to their
a tool to save cost—even though there is a fee interest to adopt digitalization in running
for the Internet, it is smaller and cheaper than their business. Though there has been an
not using technology at all. increase in willingness from MSMEs to undergo
digitalization during the pandemic, the problems
still remain.
How does an e-commerce enabler work?
As an omnichannel commerce enabler today, The platform can also provide analytics
SIRCLO helps businesses to sell their products and insights to help businesses better
through multiple channels—be it online or understand their customers and optimize
offline. SIRCLO provides businesses with a their sales strategies.
unified platform to manage their sales across
multiple channels, including their online store, Brian also said that online and offline
social media, marketplaces, and brick-and- channels were not integrated in the past,
mortar locations. but now the need for integration has
become increasingly essential. On that basis,
By using the enabler, businesses can innovation continues to be intensified, such
manage their inventory, process orders and as continuing to upgrade SIRCLO’s own
payments, and fulfill shipments from a single warehousing and distribution system. In fact,
platform, ensuring that their customers have innovation happens more behind the scenes
a seamless shopping experience, regardless than through features that customers or
of the channel they use to make a purchase. merchants immediately feel.
During the pandemic, as e-commerce adoption increased, platform enablers also experienced
rapid growth. The joining of Orami and Warung Pintar28 to the group of companies is also
considered to add to the market segment that Sirclo can accommodate. For example, with Orami,
SIRCLO Group is now helping empower mompreneurs through a social commerce business model.
By 2022, more than 25 million end consumers have been reached by SIRCLO through the 150
thousand brands it serves. Collectively, SIRCLO’s product distribution was carried out through 80
points spread across various provinces in Indonesia.
SIRCLO also observes differences in the characteristics of MSMEs in each region. Internet access and
all kinds of things in tier-1 cities are more advanced compared to tier-2 and tier-3 regions. Moreover,
more players are attuned with digitalization in tier-1 cities, with many having been educated about
digital technology. These conditions point to more opportunities to develop digital solutions in tier-2
and tier-3 because there is still room for growth.
https://blogs.worldbank.org/eastasiapacific/why-e-commerce-key-indonesias-small-businesses
28

72
Brian also mentioned that in tier-1 cities, price competition and service fees are very competitive
because many players are involved. On the other hand, for tier-2 and tier-3 regions, modernization is
still needed to allow businesses to experience efficiency in many aspects, such as its logistics system.
MSME Resiliency
The COVID-19 pandemic has had a profound To mitigate the impact of the pandemic,
impact on Indonesian MSMEs. With lockdowns Indonesian MSMEs had to quickly adapt to
and social distancing measures in place, many changing circumstances and find new ways
MSMEs have seen a significant drop in revenue to reach customers, such as through online
as customers stay away and supply chains are channels. Despite these challenges, many
disrupted. In addition, access to financing and MSMEs have shown remarkable resilience. They
support services has become more complex, have taken advantage of government support
making it challenging for MSMEs to continue programs and digital tools to overcome the
operations and meet their financial obligations. difficulties posed by the pandemic and maintain
their operations.
Digitizing F&B Business
Indonesia's Food and Beverage (F&B) sector Digitalization has the potential to improve
is essential to the national economy. In the F&B businesses in Indonesia significantly.
primary sector, the production of raw materials By leveraging technology and digital tools,
for the F&B industry by agriculture, plantation, businesses can streamline operations, increase
and fisheries accounted for around 13% of efficiency, and reach new customers. For
Indonesia's GDP in 2019. In the secondary example, businesses can use online platforms
sector, manufacturing of F&B beverages for marketing their products, accepting
accounted for 6.4% of GDP and 29% of all orders and payments, and managing their
manufacturing output. Overall, F&B-related supply chain. Digital tools can also be used to
services contributed around 2% of GDP29. analyze customer data and gain insights into
customer preferences, helping businesses to
This sector has seen significant growth in recent make informed decisions about their product
years, driven by a growing middle class and offerings and marketing strategies.
increasing urbanization. The country has a
large and diverse population with a wide range Essence Solusi Buana (ESB) tries to bring
of culinary traditions and tastes, making it a innovation to accommodate digital
promising market for F&B businesses. However, transformation needs for F&B businesses in
competition in the sector is also increasing, Indonesia. Researchers talked with ESB Founder
making it more critical for F&B businesses to Gunawan Woen to explore his company's vision.
find new ways to stand out and grow.
Gunawan Woen
Co-Founder & CEO Esensi Solusi Buana (ESB)
Established in 2018, PT Esensi Solusi Buana (ESB) is Indonesia’s

leading restaurant technology that makes it easy for our
customers to manage their F&B business. The platform caters
to all F&B businesses, whether small or large-sized restaurants,
cloud kitchens, food stalls, or hotel food services. ESB provides
the client with one platform that does it all.
https://business-indonesia.org/food_beverage
29

73
MSME Condition
Gunawan talked about the beginning of ESB when it was founded in 2018. At that time, he saw
that Indonesia's F&B business had outstanding potential. For example, the total transactions
successfully recorded as a whole have reached $60 billion, and it is projected that by 2022 it will
have touched more than $70 billion. In 2022, after recovering from the pandemic, although facing
recession and other economic turmoil, Gunawan sees F&B merchants still able to record an
average growth of 9.5% consistently.
Digitizing F&B Business

The ESB product roadmap rests on two main pillars: to increase operational efficiency and
sales. The current product details include ESB POS (online cashier), ESB Order (order & payment
management), Ayomakan (culinary website), ESB Core (enterprise resource planning), and ESB
Goods (B2B marketplace).
With the existing product ecosystem, ESB services have been used by more than 20 thousand
users, dominated by 70% of large-scale F&B businesses. The rest are small and medium-scale F&B
businesses. Gunawan emphasized that the service is not limited to the scale of the business it
uses, but ESB is specifically designed for businesses in the culinary field.
According to Gunawan's experience, the main encouragement from the government and
challenge to entering the MSME segment is the private sector and market conditions that
their distribution, including those in rural areas. forced F&B players to enter digitalization. From
There are nearly 7 million micro-businesses the data he cited, 60% of transactions used cash
in the F&B sector, spread all over Indonesia, before the pandemic, but at the end of 2021,
but their technological literacy still needs to the number of cash transactions was only 18%.
improve. In the end, what has to be done is
to conduct training involving various parties, ESB extends beyond serving only their
including local governments, to socialize the current main markets around Jabodetabek
importance of digital transformation. and Bandung. Gradually they carried out
onboarding evenly throughout Java, Kalimantan,
According to Gunawan, digitalization that many Sulawesi, and Papua. However, the challenges
MSMEs are eyeing is related to payments by are different in big cities and small towns. In
optimizing QRIS, e-money, and other support small towns, transactions are still manual, so
systems, so that transactions that used to excess functionality in POS is unacceptable and
use cash turn into non-cash. This was due to unfamiliar.
MSME Resiliency
For Gunawan, F&B is a business that is easy to open and close. The pandemic first affected the
traditional F&B business, where almost half of these MSMEs went out of business. However, after
going through the pandemic, MSMEs F&B became more competent and started storing customer
data, telephone numbers, and creating social media. Even though there is a recession, the F&B
industry can still survive and is expected to increase this year. F&B is still needed because people
will still need food, regardless of good or bad economic conditions.

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Streamlining Supply Chain
A B2B commerce platform can help MSMEs MSMEs to make informed decisions about
in Indonesia access a better supply chain in their supply chain. The platform also provides
several ways. Firstly, the platform provides a central platform for MSMEs and suppliers
MSMEs access to a broader pool of suppliers, to collaborate and communicate, which can
allowing them to compare prices and products help to improve supply chain coordination and
and find the best deal. By automating many of reduce the risk of supply chain disruptions.
the manual processes involved in procurement,
such as purchase orders, invoicing, and GudangAda is trying to play in this area by
shipment tracking, B2B e-commerce platforms presenting a comprehensive platform for MSME
make it easier for MSMEs to manage their procurement. Researchers discussed with their
supply chain. Founder & CEO, Stevensang, to explore the
role of B2B Commerce in the Indonesian MSME
In addition, B2B e-commerce platforms can ecosystem.
provide real-time data on supplier performance,
inventory levels, and shipment status, helping
Stevensang
Founder & CEO GudangAda
Launched in January 2019, GudangAda is a B2B e-commerce

application that connects wholesalers and retailers
throughout Indonesia—providing technology solutions
that help MSMEs ranging from product search, sales and
purchase management, logistics services, and payments.
Now GudangAda has connected more than 1 million MSME
businesses in 500 cities in Indonesia.
MSME Condition
Citing the results of internal research conducted by his company, Stevensang said that around
70-80% of young people had replaced their parents in managing their stores, so they are ready to
adopt the technology. From there, they saw that there was about 40-50% readiness to embrace
technology, and many expressed a desire and interest to start carrying out technological
transformation. In addition, there is also a willingness to adopt the technology. Around 48-62% of
traditional traders state that they are willing and willing to adopt the technology.
Supply Chain in MSME

The supply chain challenge in MSMEs, especially retail businesses such as stalls, is a matter of
transaction speed. Retail owners need fast fulfillment for certain FMCG FMCG and other goods due
to consumer demands. The system designed by B2B Commerce must accommodate this so that
fulfillment center innovations and logistics efficiency are born. Delivery quality is the primary key
in this business. At GudangAda, on average, 98% of goods deliveries from the fulfillment center are
carried out within 1x24 hours. As much as 15% can do same-day delivery. However, the players in
this segment still do education because 2-3% have failed delivery or incomplete transactions.
B2B technology companies also offer solutions to overcome the challenges of reaching small
merchants scattered in various locations. Platforms like GudangAda help reach 90-95% of these
small shops by providing all the solutions needed in one place. Thus, small traders do not need to
wait for each brand's distributor to come or look for products manually. It reduces the time and
effort required to reach small traders, thereby increasing business efficiency and profitability.

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According to Stevensang, Indonesia's market demand for B2B commerce services with these
(retail) structure consists of several layers, advantages is very high. Traditional traders also
for example, from traditional traders and look for ways to learn technology and digital
minimarkets to supermarkets. Meanwhile, because they need access to competitively
traditional traders such as minimarkets still priced goods.
dominate 80% of FMCG product distribution.
Supermarkets only reach 20% and only in big From these conditions, the challenge is to
cities. prepare them to understand the process of
using technology. Then, because this is FMCG,
Meanwhile, tier-1 retailers are ready for the stock and price fluctuations are quite intense,
technology, in contrast to tier-2,3,4. But at so they must be ready every day or every hour
all levels, there is always a need for quick to see stock updates.
access to goods and competitive prices, so the
MSME Resiliency
For GudangAda, FMCG and daily goods will always be needed because people will always buy
everyday products. People will switch to cheap brands. It will cause people to look for cheap items
or smaller packaging. This product includes a primer, so it will not experience extreme changes.
In the future, people will be more economical and look for ways to streamline processes with
technology. Platforms like GudangAda want to be a solution. MSMEs will benefit if they can use
technology.
Human Resources Management for MSMEs
Human resource management (HRM) is a packages, training and development programs,

critical aspect of any business, including MSMEs and poor working conditions. As a result,
in Indonesia. However, MSMEs in Indonesia MSMEs in Indonesia struggle to attract and
face several unique challenges in HRM. One retain skilled workers, leading to difficulties
of the biggest challenges is the lack of HR in maintaining and growing their businesses.
expertise and knowledge among the owners Moreover, the informal nature of many MSMEs
and managers of MSMEs. It often results in and the lack of regulations and laws protecting
inadequate HR policies and practices, leading to workers' rights exacerbate the HRM challenges
high turnover rates, low employee morale, and these businesses face.
difficulty attracting and retaining top talent.
AdaKerja tries to take one of the HRM paths to
Another major challenge MSMEs face in help MSMEs solve personnel issues, especially
Indonesia is the limited financial resources recruitment-related ones. The researcher spoke
for investment in HRM. This often leads with AdaKerja's CEO, Ashwin Tiwari, to discuss
to inadequate compensation and benefits the fundamental problems in HR management.
Ashwin Tiwari
Founder & CEO AdaKerja
AdaKerja is an online job search platform focusing on
Indonesia's blue-collar sector. Since its launch in 2019,
this platform has had more than 10 thousand monthly
users. One of the focuses of AdaKerja is helping MSMEs in
Indonesia to get skilled workers in various fields. Currently,
the platform is also equipped with other HR services, such as
attendance and payroll, to make it easier for businesses to
manage their employees.

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MSME Condition HR Management in MSME

According to Ashwin, the existence of local With a matching algorithm and
technology giants such as Gojek or Grab is recommendation system, MSME can leverage
very helpful in forming people's understanding the job marketplace platform to find suitable
of how technology plays a role in advancing candidates. The flow is by creating a job
business. MSMEs are now more open to digital description and posting vacancies to the
transformation, including using the internet to application. The system will present several
support business. candidates according to the recommendations
in a relatively short time.
Ashwin's experience working at LinkedIn
provides knowledge about the gaps in the On the other hand, employee turnover is
recruitment system for middle to lower-class a common issue for MSMEs in Indonesia.
workers. Platforms such as LinkedIn are widely The trend is influenced by factors such as
used to accommodate the needs of middle and the competitive job market, strong labor
above jobs. So he initiated AdaKerja to focus on laws, and economic conditions. MSMEs can
bridging blue-collar workers with their industrial need help to retain employees who seek
ecosystem, in this case, the majority on the better opportunities and benefits. According
MSME scale. to a survey by the Indonesian Ministry of
Manpower, Indonesia's average employee
turnover rate was 12.5% in 2020.
Ashwin realizes that the job marketplace AdaKerja serves users from anywhere; it even
segment has a lot of competition in business has users from Aceh to Papua. Some of them
and innovation. It includes competing with know AdaKerja online. Ashwin said, AdaKerja
traditional methods that many MSME players certainly doesn't have salespersons traveling
have applied annually. In addition, there are around Aceh and Papua who want to do
challenges caused by economic competition business, so online marketing is one of the
and customer retention. AdaKerja's strategy essential keys. And he agrees that opportunities
focuses on products and ensures application in the MSME segment may be more lucrative
services are smooth to use. beyond tier one.
AdaKerja has embraced at least 40 thousand MSMEs in various regions in Indonesia.
MSME Resiliency
According to Ashwin, the digitization of MSME may be independent of the continued existence
of digital tools. The current situation will affect businesses trying to move users to the feature to
make a profit. The biggest challenge is whether these digital products will still exist in the next
two years.

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05
Conclusion

78
Conclusion
From the results of desk research,
quantitative studies, and qualitative
interviews that have been conducted, the
researchers conclude that MSMEs will
still play a very crucial role in the national
economy. Digitalization still has a lot of room
for business acceleration and expansion.
MSMEs, governments, innovators, and other
stakeholders can work together to create a
more conducive MSME ecosystem.
In detail, the following are the points of conclusion from this study:
1. MSMEs remain the backbone of the economy

MSMEs remain a crucial component of the One of the primary keys to strengthening
Indonesian economy and must ensure they MSMEs is strengthening the domestic market,
have access to the resources they need to which can absorb domestic products and
grow and develop. Despite the challenges services. MSMEs can also serve as a means
posed by various factors, the strength of for empowering underserved populations,
MSMEs has been consistently validated by such as women entrepreneurs and individuals
statistical data. in rural areas. This aspect requires attention
from various stakeholders, including efforts to
In recent years, the Indonesian economy faced increase financial and digital literacy to create
a crisis that directly impacted some MSMEs, a more skilled workforce.
particularly those in the micro and small
business classes. However, the recovery rate By fostering a supportive environment for
of MSMEs was relatively quick, mainly due to MSMEs, Indonesia can continue strengthening
their agility in adapting to changing market its economy and empowering its citizens.
conditions. This highlights the importance of
MSMEs in the economy and their ability to
adapt and thrive in challenging situations.
2. Digitalization strengthens the MSME business

The survey found that the main challenges for MSMEs has seen significant progress
faced by MSMEs include product marketing, over the past decade and can now assist
access to funding, logistics systems, and MSMEs in all operational aspects. The next
transaction processes. step is to encourage MSMEs to embrace
digital transformation and maximize the
Several factors hinder the efficiency of MSMEs, opportunities provided by technology,
such as limited outreach due to geographical especially the internet.
barriers and low financial literacy, which limits
their access to formal financial services. The This study sheds light on the challenges
study highlights the need for improvement in MSMEs face and technology's potential role
these areas. in overcoming these challenges. The survey
findings can inform the development of
However, technology is starting to play a initiatives to support MSMEs and promote
role in bridging this gap. Digital innovation their growth and success.

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3. Digital awareness in MSMEs continues to increase

87% of respondents are aware of digitalization, But access to digital services that are more
83.8% have started implementing technology open needs to be balanced with strengthening
in their business systems. digital literacy to be able to reduce risks that
have the potential to harm businesses due to
The positive impact of digitalization has misuse or inefficiency.
been seen clearly by various entrepreneurs,
especially when dealing with the pandemic The digital products offered have also been
crisis. On the other hand, education regarding expanded to accommodate specific business
technology platforms for businesses continues needs. Supported by an affordable business
to intensify, both by service developers and model, these services have the potential to
the government. Equal access is also being reach a wider market share and have a better
pursued by encouraging every technology impact on the MSME ecosystem in Indonesia.
service to be penetrated outside of tier-1 cities.
4. Support from local innovators that continues to deepen benefits MSMEs

MSMEs have become a key focus for innovators in Indonesia's startup ecosystem. This trend
has been fueled by venture capital investment, with software-as-a-service (SaaS) offerings
for businesses receiving the highest funding in recent years. It presents an opportunity for
significant economic growth and value creation.
The digitization of MSMEs has advanced beyond the early stages of online marketplaces and
ride-hailing services. Innovative products are being developed to improve these businesses'
operational efficiency, financial management, and logistics systems, offering disruptive and
profitable solutions.

Success stories
“TikTok is definitely the best marketplace for small businesses like

Oktaviana mine. I’ve been so grateful and overwhelmed with the huge number
Tas Grosir of orders coming in from TikTok every day - we’ve had to open 3
extra warehouses since then and expanded our staff, but it’s still
Indonesian retailer bags 28x ROAS* with first not enough!”
TikTok Shop purchase campaign
Regina
Owner and founder of Oktaviana Tas Grosir
The Objective The Solution

Indonesian fashion retailer Using Video Shopping Ads and
Oktaviana Tas Grosir first LIVE Shopping Ads, the brand
stepped into the world of
digital commerce through an
organic TikTok channel. Offering
targeted females in Indonesia
of all ages above 18. The broad
targeting, coupled with their
28x >34K >3.3M
ROAS on VSA** Total products sold Total reach
affordably-priced and trendy eye-catching creatives and
handbags, the brand quickly engaging livestreams, helped
saw increasing organic sales Oktaviana to reach new users
performance and wanted to who may not have heard of the
explore digital advertising for brand. Interested users would
the first time to drive even more be led to check out their brand
brand awareness. Through profile and TikTok Shop, which
advertising, they also hope to showcased their attractive
maximise the potential of their products. Users who were
sales on TikTok Shop. interested in making a purchase
could then seamlessly complete
their orders within the TikTok
app, boosting greater sales for
the brand.
The Results
The combination of LSA and VSA proved to be successful in driving
greater brand awareness. Apart from a high ROAS of 28x recorded
and the high volume of products sold, the brand also received more
than 180k profile visits and gained over 25k followers through both
campaigns. The soaring popularity of their products also helped the
business expand its operations and scale of its business – prompting Click video to go to Oktaviana Tas Grosir on TikTok
the opening of 3 extra warehouses – helping what was a small
business imprint a larger footprint amongst the country’s independent
fashion retailers.
Condiment brand spices up video content and livestreams to

Eatsambel win over new followers and 11x ROAS
The Objective The Solution The Results

For many communities in The brand used a combination The campaign was a success in
Asia, spicy condiments are of Video Shopping Ads (VSA) helping the brand drive greater
a must-have complement to and LIVE Shopping Ads (LSA***) engagement with their audience
local dishes. Eatsambel is an in their campaign to showcase and increasing product sales.
Indonesian business who puts their wide range of products and The VSA alone recorded over
a creative spin to the popular boost sales. As the brand had 3M in reach, more than 9.9M
sambel condiment that can existing video content which video views and more than 9k
be found in many Indonesian were performing well organically, products sold with a 9.6x ROAS.
dishes, such as adding toppings they used them as creatives The LSA, as an even more
like chicken, salted fish and for Video Shopping Ads and in engaging ad format, recorded
garlic into the sauce. Through addition applied a product card over 214k effective LIVE views
developing creative recipes and product links to the ad. This with a high CVR of over 31.5%
and producing entertaining allowed Eatsambel to drive more and 13.3x ROAS from products
videos to introduce their viewers, who are captivated by sold. Overall, both ads drove
variety of products, Eatsambel their interesting creatives, to more than 190k profile visits
has established an organic their TikTok Shop and further and over 22k new followers to
presence in the Indonesian explore their range of products. the brand’s TikTok account. The
community on TikTok. The brand new product that was heavily
wanted to keep the momentum
going and drive greater sales,
The effectiveness of their
original creatives would also
featured in their creatives also
became the brand’s second
>11x
along with the launch of a new help the brand to conceptualise most popular product by the end Overall ROAS
product – Ayam Suwir Icikiwir. their LIVE sessions, where of the campaign.
To ensure that they are able to they mirrored similar content
closely engage their viewers
and driver greater traffic to their
styles by enticing viewers to
“feel” the hot sensation of their
Beyond the performance metrics
of this campaign, the growth >3.1M
TikTok Shop, Eatsambel chose products through the livestream. in Eatsambel’s community Average reach
to deploy Shopping Ads using To boost the visibility of their on TikTok would become an
‘Product Sales’ as the objective. livestream on the ‘For You’ page invaluable customer base that
they can continue to engage
of users, Eatsambel ran LIVE
Shopping Ads, optimising it for
Clicks (i.e. traffic to their TikTok
with and seek feedback about
their products to drive further
19.2%
Average CVR****
Shop) and Initiate Checkout (i.e. business success in the future.
conversions).

*ROAS (Return on Ad Spend) measures the effectiveness of advertisement spends. **TikTok VSA (Video Shopping Ads) allows users to make TikTok in-feed
video ads shoppable. ***TikTok LSA (LIVE Shopping Ads) allows users to turn TikTok Live Shopping content into in-feed ads. ****CVR conversion rate. Click video to go to Eatsambel on TikTok
DS/innovate is a Jakarta-based innovation

consultant and research firm.
We help companies and enterprises

connect to Indonesia’s startup ecosystem
through advisory, research, hackathons
and incubators/accelerator programs.
Engage with our team to discuss how
innovation ecosystem can benefit your
company both short and long term.
Contact us to know more:

bizdev@dailysocial.id

DSInnovate MSME Report 2022

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alfaqir.syaif@gmail.

com 2024-01-24 17:28

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TikTok is the leading

TikTok has global offices

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In this section, we will discuss the overview and

Indonesia’s MSME in Statistics

Figure 01. Growth of MSME Player in Indonesia (2000-2020)

Source: Central Statistics Agency, ASEAN Investment Report (visualized by DailySocial.id)1

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Figure 02. Classification of MSME by Capital and Revenue

Company Size Max. Capital* Max. Revenue

Micro Max. Rp1 billion Rp2 billion

Small Rp1 billion - Rp5 billion Rp2 billion - Rp15 billion

Medium Rp5 billion - Rp10 billion Rp15 billion - Rp50 billion

*Excluding land and building

Country Number MSMEs as a Share of Share of Share of

Brunei Darussalam 2.6a 97.3 35.4 35.5 2.8

Cambodia 512.9 99.8 52.5 58.0 12.1

Indonesia 65465.5 99.9 97.0 60.3 14.4

Lao People's 99.8 82.4 15.7 14.2

Malaysia 1226.0 97.4 48.0b 38.2b 13.5b

Myanmar 72.7c 99.1 76.0 69.3 23.7

Philippines 996.7 99.5 63.2 45.5 14.5

Singapore 279.0d 99.0 72.0 45.0 38.3

Thailand 3134.4 99.5 85.5 35.3 28.7

Vietnam 651.1 98.1 44.5 45.0 18.7

Source: ASEAN Investment Report 20223

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Distribution of MSMEs in Indonesia

Figure 04. MSME Distribution in Indonesia by region

Source: Ministry of Cooperatives and SMEs, visualized by DailySocial.id

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Figure 05. Distribution of MSME in Indonesia by Category

110,650 Water Management,

Source: Ministry of Cooperatives and SMEs, visualized by DailySocial.id

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Figure 06. Demographic of MSME owner in Indonesia by Age and Gender

Source: Ministry of Cooperatives and SMEs, visualized by DailySocial.id

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The Government Encourages Digitalization of MSMEs

Government Support to MSMEs

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The Development of MSMEs

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Business Challenges and Digitalization of MSMEs

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Digital Adoption Journey in MSME

Figure 07. Phase of MSME Technology and System Implementation

Access to Email, Access to Social Media Early Digital

Optimizing Messenger Getting Ready

In the next phase, MSMEs

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The Covid-19 pandemic has significantly impacted Ultra-Micro 49.01%

The decline in MSME performance nationally in 6-10 years 10,9%

Figure 10. MSME’s Contribution towards GDP (2010-2020)

Source: Ministry of Cooperatives and SMEs, visualized by Lokadata10