There is no shortage of MSME development programs in Indonesia, especially in the capital city of Jakarta. These often take the form of business incubators, structured programs that provide early-stage enterprises with the support and services they need but find it difficult to access, such as networking opportunities and exposure to financing1. Other MSME development programs are business training run by corporations, financial institutions or the government, each set up with their own goals and objectives, while others offer resources and support exclusively for MSMEs in specific sectors. However, without diagnostic data on their effectiveness on supporting MSMEs, their impact risks being suboptimal.
There are several policies concerning MSME development programs given the myriad of programs that are currently available2. Before the issuance of the Government Regulation No. 7 of 2021 on the Ease, Protection and Empowerment of MSMEs (GR 7/2021), business incubators were regulated by the the Presidential Regulation No. 27 of 2013 on the Development of Entrepreneurship Incubator and its implementing regulation, the Ministry of Cooperatives and MSMEs Regulation No. 24 of 2015 on the Norms, Standards, Procedures and Criteria of Entrepreneurship Incubator Development. While the newly issued GR 7/2021 had introduced changes to the implementation of business incubators - such as the process of curating and ranking of incubators - not all of the changes pertaining to incubator development are included in the recently issued ministerial regulation3 4.
In the private sector, business training run by civil society organizations and large enterprises tend to be untracked and short-lived. They often do not use standardized curriculums and are often set up to meet the organizations’ own organizational goals. GR 7/2021 now mandates these organizations to inform and convey their plans, implementation, and outcomes to the Minister for Cooperatives and MSMEs5. Such a requirement is important because it can help the government to estimate each program’s impact on the growth and performance of MSMEs in a systematic way.
At the regional level, the Governor of DKI Jakarta Regulation No. 2 of 2020 on Integrated Entrepreneurship Development, which facilitates the flagship region-wide Jakpreneur program in DKI Jakarta, includes provisions on program monitoring and evaluation. Monitoring and evaluation are necessary to identify whether the program is successful in meeting their objectives, but at this time, there are little known indicators used to measure program success beyond the number of sign-ups.
MSME development programs must set success metrics, not only to understand how well they are performing, but also to identify whether there are gaps between the program they are delivering and the needs of MSMEs. First, categorizing the variations in MSME development program designs can allow policymakers to design key performance indicators (KPIs) that account for their differences. Second, developing metrics and milestones to identify success beyond sign-up numbers for business incubators and Jakpreneur will improve the value that the programs bring to its participants. Lastly, to ensure that the success measurement data on these programs can be easily accessed by relevant stakeholders, a digital platform can be set up to allow data input, and a dedicated team assigned to process the data.
In addition to the revision of existing regulations, the Ministry of Cooperatives and MSMEs may consider creating a separate operational regulation to encourage the business world and civil society organizations across the country to measure the impact of the myriad of business training they are currently running for MSMEs across the country. Such regulation should understand the priorities of the stakeholders involved and avoid becoming a red tape that disincentivizes them from running the programs.
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.