Issue operational regulations to facilitate MSME financing

Policies Involved

Innovation

Ministerial Regulations on Financing Options and Incentives for MSMEs

Challenge

Government Regulation No. 7 of 2021 looks to increase the ease of obtaining financing and incentives for micro and small enterprises. However, to date, operational regulations have not yet been issued by relevant ministries to implement the financing options and incentives outlined by GR 7/2021.

Current Policy

In GR 7/2021, micro and small enterprises are eligible for financing and incentives from stakeholders such as national and regional governments, state-owned enterprises and large businesses in the forms of:
- Regional tax reduction or relief;
- Regional fee reduction or relief;
- Subsidized loans;
- Capital support for enterprises with innovative products or that are technology-based;
- Support for research and development.

While the regulation comprises several financing provisions that can encourage the growth of local MSMEs, operational regulations in the form of ministerial regulations are currently absent.

Action

Establishing operational regulations is necessary to reduce the difficulties and problems associated with implementation in the field. To achieve this, the policy needs to firstly align with the targets and objectives of the 2022 work plans of relevant ministries - such as the Ministry of Finance - since most financing programs by the Ministry of Cooperatives and MSMEs are in the form of social assistance. Furthermore, segmenting financing characteristics of MSMEs and matching them with the available provisions ensures that the beneficiaries are receiving the options that are best suited for them. Lastly, such policy actions should be communicated to the regional governments, who are directly responsible for the development of micro and small enterprises in their respective regions.

action points

parties involved

Align policy with the relevant ministries' work plan for 2022

Ministry of Cooperatives and MSMEs (Deputy of Financing)

Ministry of Finance

Ministry of Home Affairs

Ministry of National Development Planning

Segment MSME financing characteristics and matching them with suitable financial instruments

Research organizations or higher education institutions

Business associations

Entrepreneurship communities

Delegate authority and responsibilities for implementation

Regional governments

Provincial Government of DKI Jakarta

Indicator of Success

Number of MSMEs that access financing outside of their personal sources

Proportion of MSME credits outside of all outstanding debts

Number of financing partners engaged by MSMEs

Number of financing partnerships between MSMEs and other stakeholders

Average duration of financing partnerships between MSMEs and other stakeholders

Incentivize collaboration in MSME training and mentorship

For many entrepreneurs, the decision to turn into innovations depends on the ease to adopt technology, trained workforces, and multiple sources of finance. Yet, navigating the complex regulation is a major challenge for most lay business people. To expedite the economic recovery post-pandemic recession, the stakeholders in the ecosystem are urged to formulate the right policy to simplify such challenges.

— Kariem El-Ali, Senior Policy Advisor

Quantitative Demographics

Gender Distribution

Highest Education Attainment

Owner's Age

Marital status

Number of Dependent(s)

Qualitative Demographics

Education

Gender

SEC

Industry

Size

Age

Codesign Demographics