Cover: Reforming Policies for Small and Medium-Sized Enterprises in Indonesia

Reforming Policies for Small and Medium-Sized Enterprises in Indonesia

Published Jul 20, 2015

by Nicholas E. 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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