Reforming Indonesia's Policies Towards Small and Medium Sized Enterprises

Small business in Indonesia

Project Summary

RAND's objective is to foster awareness and consensus within the Government of Indonesia for key reforms toward a more comprehensive and coherent development strategy and policies for Small and Medium Enterprises (SME) at the national level.


Small and medium sized enterprises (SMEs) are an integral part of Indonesia's economy, accounting for more than 95 percent of total firms. SMEs are responsible for more than 90 percent of Indonesia's employment. Increases in output growth and productivity improvements could raise the wages paid by SMEs and lift millions out of poverty. However, SMEs face a number of constraints that inhibit their growth and, unfortunately, there is a surprising lack of understanding about the effectiveness of SME support programs, both in terms of their direct and indirect impacts.


RAND and AKATIGA, a social policy research institute based in Indonesia, will assess the gap between existing SME support programs and SME needs. The project team will provide analysis, recommendations, and broad-based support to the World Bank Group and TNP2K. Using data from structured interviews administered to SMEs in different industries and regions, we will conduct a mixed-methods analysis of the operating environment for SMEs and use this to provide support for policy recommendations.

Support for this project was provided by the Australian Government through the Poverty Reduction Support Facility (PRSF). Additional support was provided through the World Bank Group by the Swiss State Secretariat for Economic Affairs (SECO) and the Government of the Netherlands.