Reforming Policies for Small and Medium-Sized Enterprises in Indonesia

by Nicholas Burger, Charina Chazali, Arya Gaduh, Alexander D. Rothenberg, Indrasari Tjandraningsih, Sarah Weilant

Small and medium-sized enterprises (SMEs) are critical for emerging economies like Indonesia but simultaneously challenging for policymakers looking to support their growth. SMEs — including micro firms — are responsible for more than 97 percent of total employment in Indonesia and represent 99 percent of all enterprises. The Indonesian government has sought to assist SMEs through programs, such as subsidised credit, one-stop shops to lower business registration costs, and government-sponsored trade fairs. However, there is little evidence on how effective these programs are or on ways to improve government policies aimed at helping SMEs. For this analysis, the authors conducted structured interviews with 192 firms across five provinces in Indonesia to investigate the constraints that firms face and how existing programs do — or do not — help reduce these constraints. Reforming Policies for Small and Medium-Sized Enterprises in Indonesia includes policy recommendations targeted at the Indonesian government and other stakeholders, focusing on the importance of credit and on the need to remove information barriers.

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Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Micro, Small and Medium-sized Enterprises in Indonesia

  • Chapter Three

    Qualitative Interviews with Small and Medium-sized Firms

  • Chapter Four

    Major Constraints Faced by Micro, Small and Medium-sized Enterprises

  • Chapter Five

    Policies to Reduce Informality in Indonesia

  • Chapter Six

    Recommendations for Improving Policies to Support Small and Medium-sized Enterprises

  • Chapter Seven

    Conclusion

  • Appendix A

    Interview questionnaire

  • Appendix B

    Interview debriefing form

  • Appendix C

    Interview fieldwork logistics

  • Appendix D

    Literature review: laws, policies and definitions

The research described in this report was conducted by RAND Labor and Population.

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