A narrative study: The challenges for ‘MSMEs go-digital’ movement amidst the Covid-19 pandemic in Indonesia
In Indonesia, the first Covid-19 cases were discovered on the 2nd of May 2020. Since then, the Indonesian government issued ‘Lockdown initiatives’ policies in the mid of march in some cities which had a high risk such as Jakarta and Batam, thus slowly implemented to all high-risk cities in Indonesia. This lockdown initiative, or local call it PSBB (Pembatasan sosial berskala besar), forces street vendors and traditional markets to be closed down for more than 3 months. Due to this lockdown, around 39% trade turnover for SMEs was dropped and 29% of small traders had to stop their operations . This circumstance pushed the Ministry of Trades to take a quick decision to save the SMEs’ performances for H2 2020. One of the solutions which is widely discussed amidst the Covid-19 outbreak is to push SMEs’ to go-online through e-commerce. This essay would be discussing the government challenges to implement ‘MSMEs go-digital’ movement. Is it helpful to boost economic growth amidst the pandemic situation? What are the challenges that we should be aware to make this movement successfully applied in Indonesia?
Pandemic impact on MSMEs financial condition
The economy is the biggest sector after healthcare that is highly impacted by the pandemic. In the 4th months of Covid-19 pandemic survival timeline, BPS Indonesia had released the QoQ economic growth in 2020 was contracted up to -4,19% or -5,32% YoY — which, theoretically Indonesia is already into the technical recession. This economic contraction was caused by the domino effect that started by the health condition which impacted the low household consumption and the sluggish trade in the MSMEs due to PSBB.
A study by Soetjipto (2020), found that 68% MSMEs owner in East Java felt their revenue was loss due to the massive layovers which impacted to the lower people purchase power, where 46% MSMEs owner felt the revenue loss was account for the fear from the customer of being exposed to the Coronavirus. This study also found that during the outbreak disease, 33% research subject decide to do an ‘off-order’ which means stopping the production line, spend inventory stock and change to made-by-order business model to reduce the financial burden.
To leverage the economic condition and stimulating the number of household consumption, Indonesia’s government had released the ‘emergency’ policies to boost the economic condition which one of them related to urged MSMEs owners to switch their business model from offline to online. This government policy is understandable as SMEs are economic pillars in Indonesia. With the total number of SMEs in Indonesia is 62,9M, this number is representing 99,99% of total enterprises in Indonesia . The government believed that the online market will accelerate economic recovery process during the new normal adaptation era thus keeping the physical distancing as health protocol between seller and buyer .
One of the biggest campaigns which Indonesia’s government did since the end of July 2020 is the BBI (Bangga buatan Indonesia) campaign, BBI is a national movement which built to stimulating 64 million SME with total budget expenditures up to Rp 123,46T or USD 950M. This campaign is focusing on the digital onboarding process for MSMEs to go-online, with three main programmes such as digital talent scholarship, MSMEs scaling-up, and English & digital marketing study to prepare the MSMEs to expand their business scope and leverage their market level. However, there is still confusion about whether this kind of movement could be helpful for the MSMEs especially in the foremost, underdeveloped, outermost area or 3T (terdepan, tertinggal, terluar).
Digital talent scholarship is a comprehensive training which includes seven kinds of digital training such as Vocational school graduate academy, fresh graduate academy, coding teacher academy, online academy, thematic academy, regional development academy and digital entrepreneurship academy. Most of the training provided was targeting the scholars, except the digital entrepreneurship academy. In this essay, we will focus on the digital entrepreneurship academy, which targeted the MSMEs owner. This programme aims to give 22,500 MSMEs owner 2 days intensive training to prepare them to face the industry revolution 4.1. Whereas the MSMEs scaling up in this programme is referred to another government programme named ‘UMKM Go-Online’, this programme was launched in 2018 and included on BBI programme in 2020 to accelerate the ‘go-online’ movement.
Go-digital movement challenges for MSMEs
Although the government has launched the ‘MSMEs go-digital’ campaign, it seems that there are some challenges that Indonesia is still facing. As the other organization development process, the digital movement for MSMEs in Indonesia has also considered the major part of development: infrastructure and people. Infrastructure on this essay included the internet availability and individual facilities such as gadget and laptops. Whereas people will be more focused on the MSME’s human resources aspects such as knowledge, commitment, and MSMEs capability.
Thaief (2014) stated in his research that in order to adopt the e-business system, MSMEs need government intervention to get affordable and easy internet access to start their global market. In fact, in some areas, especially in the 3T areas there are still some villages which are not yet electrified and connected to the internet network. Until Q2 2020, the number of areas which have not yet electrified is 433 villages and there are still 12,548 villages which still not connected to the internet network . Rudiantara explained that “It is difficult to build internet connection in the 3T area. I was going to Ende, East Nusa Tenggara, there were some schools and public health centres which already connected to the internet. We need two months to establish the connections there, however, it depends on whether they were already electrified or not. If not, then we have to build the power lines first and it will require one year to establish the connection” .
Besides the government infrastructure, the needs of individual infrastructure such as laptops and gadgets could also be the challenges for any digital movement. In 2017, there were 33,69% of people in Indonesia who didn’t have a smartphone, whereas, in a rural area, there were only 50% of people who have smartphones at that time . Furthermore, only 23% of people who did online transactions through their smartphones. Based on my research study using interview methods, I find that 2 from 3 MSMEs owners in their late 20s outside Jakarta and surrounding areas are only using their smartphone for communication through messenger application or social media.
The quality of human resources at SMEs is another important factor which directly affected the government campaign’s result. Often MSMEs are managed by families with a one-man-show standing concept, which is very dependent on a particular person so that the sustainability of the company depends on figures, not the system (Bi,2015).
There are at least three aspects which apprehend people’s readiness. The first thing is the marketing method used. MSMEs owners in Indonesia still rely on word of mouth methods to market their products rather than using internet networking (BI,2015). Therefore, when the MSMEs owner used the word of mouth method, the product marketing scope would be solely stuck at the local market near the MSMEs main location. My research found that MSMEs market in rural areas tends to merely have a local market with door-to-doors or word of mouth methods.
“Usually, I ride the bicycle to sell my products around my neighbourhood. It needs a 4-5 hours ride until my products sold out. I sometimes got an order from my family’s acquaintance through WhatsApp” – (Asih, 2020)
Secondly is the digital content knowledge, in the digital world content is the main feature which should be optimized to change leads to convert. Content in this context covered product photography, caption making, product branding. The evolution of social media has changed the perspective of marketing which is getting more targeted based on the customer criteria. According to Plessis (2017), the content must be captivating enough to generate conversations between the brand owner and community. Whereas 10 from 15 MSMEs owners which I interviewed said that they were not aware of the importance of their content at their social media business account, even 3 from 10 still mixed the business content with private content as they still used their private account to promote their business.
Third, the product standardisation awareness to go into the global market. The global market is a demanding marketplace, and MSMEs products should comply with the rapid demand change in order to lead the competitive environment in a broader market. LPPI and Bank Indonesia (2015) stated that product standardisation products in MSMEs based on commodity aspects have some characteristics such as non-standardized raw material due to source differentiation without a standard quality control procedure and handmade product which made the quality was not standardized. Those 2 non-standardized elements could be caused by the lack of knowledge, experiment and capacity from MSMEs. Furthermore, Susanto et al (2016) said at his research that there are four factors which significantly affect the implementation of product standardisation in MSMEs, which are MSMEs commitment, customer demand, innovation and product sales value, sequentially.
These theories had been strengthened by the collected responses that we conducted through the MSMEs community, named Kembang in 2020, this experiment was finished through spreading the questionnaire through social media (Twitter and Instagram). We found that there are four major reasons which were picked by our respondent as the response of ‘why you’ve not started your business by online’, 71% from 90 MSMEs located in Java, said that they are not familiar with the technology. They knew that there was some technology such as marketplace and internet marketing, but they didn’t have anyone to ask to use the technology. One of the respondents said that “I already have an account on e-commerce, however, I never upload any kind of my products there,” (Asih, 2020), the other said “It was difficult to find someone who knows about the system around me,’.
table 1. reason why MSMEs not started their online business
Reason #MSMEs %
Not familiar with the technology 64 71%
Afraid of fraud 17 19%
I don’t know how I manage the digital financial for my SMEs 6 7%
others 3 3%
‘Not familiar with the technology’ at this study pointed out two main factors which are e-commerce technology and the digital marketing strategy.
Government campaign for offline to online movement to intensify the economic condition of MSMEs has an implication to the people readiness challenges. Based on the challenges explained above, the government campaign seems merely to tackle the people readiness problem amidst the outbreak. There are no sectors at infrastructure development which are explained in the programme. However, it is substantively enough to help MSMEs to survive in a pandemic situation in urban areas. For rural areas, the infrastructure is more urged to solve prior to the people’s readiness problem.
To ensure the movement can be successful, the government have to had a continuity plan to train and monitor the MSMEs target. This not merely giving them a one-time webinar or training but also doing the monitoring progress to measure the condition before and after joining the training. Furthermore, the material planning to give to the MSMEs also have to be packed as the most-needed lesson to the less-needed. During the pandemic, whereas we want to move to the digital market, government must prioritize digital marketing, digital content planning, product standardisation and MSMEs financial plan.
These are the reasons for the importance of government intervention in MSMEs resources preparation in SMEs. One of the things that the government can do is to conduct a series of intensive training related to online business for the MSMEs owner and closely monitor them in the defined time.
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