Cash Injection Alone is not Enough

KOMPAS/TOTOK WIJAYANTO

An attendant offers bags to visitors at the Indocraft 2020 event at the Jakarta Convention Center, Jakarta, Friday (13/3/2020).

Economic recovery efforts through cooperatives and MSMEs requires more than just cash injection. Demand problems must also be addressed soon.

JAKARTA, KOMPAS — Amid the threat of economic recession due to the Covid-19 outbreak, the nation relies on its cooperatives and micro, small and medium enterprises (MSMEs) for economic recovery. However, a more comprehensive and properly targeted aid scheme is needed to drive this sector.

Previously, President Joko “Jokowi” Widodo ordered the acceleration of relaxation and liquidity aid distribution to cooperatives and MSMEs to prevent them from being further affected by economic slowdown due to the pandemic. It is also hoped that the sector will be the main driver of the national economy.

Also read: Strengthening Economic Leverage

The liquidity assistance is part of the National Economic Recovery program for cooperatives and MSMEs, with a total budget of Rp 123.46 trillion (US$8.48 billion). Other than liquidity assistance, the budget is also distributed through the KUR micro credit subsidy program and the placement of government funds in banks for MSME loan restructuring.

The financing program must also be accompanied by marketing and guidance for business players.

International Council for Small Business (ICSB) organization affairs head Samsul Hadi said on Friday (24/7/2020) that funding and financing assistance for MSMEs should not be the sole solution to empower MSMEs. The financing program must also be accompanied by marketing and guidance for business players.

“The root problem is not funding, as all business players are facing turbulence of market and demand. It is better if [the financing assistance] is accompanied by accelerated government and people’s spending,” Samsul said.

The willingness to empower MSMEs as drivers of the economy is often constrained by database and improper distribution. “The program is there and the funding is huge, but to whom is it distributed? This is the question as we have no data. Eventually, [the aid] is distributed everywhere and it is not properly targeted,” Samsul continued.

This crisis should serve as an opportunity to improve the database. Detailed database on the distribution of informal businesses, cooperatives and MSMEs nationwide is an old issue that has remained relevant nonetheless.

Parahyangan University economic faculty lecturer and Akatiga Center for Social Analysis researcher Indrasari Tjandraningsih said the most important thing in empowering informal businesses and MSMEs would be a consolidation of national database. “Weakness in data remains an issue as we do not know who [is in it], how many [they are], where [they are] and what the demographic looks like,” Indrasari said.

Through cooperatives

The President has requested that distribution of aid be accelerated so that Indonesia does not lose its momentum to bolster its economic growth. Economic growth in the fourth quarter of 2020 highly depends on conditions in July, August and September. It is hoped that the economy will move again if more capital is distributed immediately for cooperatives and MSMEs.

KOMPAS/ISMAIL ZAKARIA

A woman arranges a display of locally produced coffee on Thursday (23/7/2020) at a business meeting on micro, small and medium enterprises (MSMEs) in Mataram, West Nusa Tenggara (NTB). Local MSMEs have developed superior products from the NTB administration’s economic assistance for earthquake-affected communities. Today, MSMEs in Lombok have said they have been encouraged by the transition to the “new normal” phase of the Covid-19 mitigation measures.

Around 99 percent of businesses in Indonesia are MSMEs. “MSMEs have the highest probability of driving the economy as big businesses are facing more difficult situations,” Cooperatives and SME Minister Teten Masduki said.According to him, aid for MSMEs can at least prevent spikes of unemployment and poverty. However, the realization of funding aid for cooperatives and MSMEs has remained lacking. As of 21 July, funding distribution through the National Economic Recovery program for cooperatives and MSMEs only reached Rp 11.8 trillion or 9.58 percent of the total allocated amount of Rp 123.46 trillion.

“We are evaluating this. We have received complaints on financing aid for MSMEs and cooperatives as it is not easy [to access it],” Teten said in a written statement Kompas received on Friday.

Also read: Revving the Engine of Economic Growth

The Cooperatives and SME Ministry sees that cooperatives, most of which have MSMEs as members, can serve as government partners in distributing cheap financing. “The cooperatives can be production-based, savings and loans, Sharia-based, BMT (Islamic baitul maal wat tamwil), service-based and other types,” Teten said.

Regarding whether cooperatives are reliable to distribute aid, People’s Cooperatives Association (Inkur) director and Strategic Socio-Economic Cadres Association (Akses) chairman Suroto said that, learning from the 1998 crisis, the same question should be given to banks. He said the government should put trust in cooperatives, instead.

Tourism

Regarding economic recovery in MSMEs, the Tourism and Creative Economy Ministry has opened registration for the Government Incentive Assistance (BIP) program, which will be held from July 9 to August 7. The program is in the form of investment or working capital funding assistance to improve the business capacity of MSMEs in tourism and creative economy.

KOMPAS/BAHANA PATRIA GUPTA

Visitors see a number of handicrafts for sale at the Mlaku-Mlaku Nang Tunjungan Event on Jalan Tunjungan, Surabaya, on Sunday (18/11/2018).

The assistance will be distributed to six subsectors of tourism and creative economy, namely food and beverage, fashion, handicrafts, applications, game makers and film, animation and videos.

Deputy Tourism and Creative Economy Minister Angela Tanoesoedibjo said MSMEs had an important role in economic recovery. During the 1998 crisis, MSMEs were “heroes” that salvaged the nation from protracted recession.

Now, amid the threat of pandemic and recession, the government has refocused its attention on MSME growth. However, funding access remains an obstacle for MSMEs to grow. “Other than assistance in funding access facilitation, there is also assistance in market expansion, intellectual property assistance and business registration facilitation,” Angela said.

The BIP program will be in effect on November 1 to 2. For the regular category, the aid will be Rp 200 million at max per beneficiary. For the affirmative category, it is Rp 100 million per beneficiary. The aid will be distributed through direct transfers to the beneficiaries’ bank accounts. (AGE/CAS)