Digital Literacy and Access Main Challenges of Small Businesses

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.

JAKARTA, KOMPAS – Social restrictions, including the curbs on movement and the requirement to keep a physical distance due to the Covid-19 pandemic, have created a new routine that has led to the birth of the "stay-at-home economy". New opportunities arise due to major changes in consumer behavior, namely from the path outside the network, or offline, into the network, or online, which is supported by digital technology.

That change offers wide opportunities for the country’s 64 million micro, small and medium enterprises (MSMEs), which employ about 116.98 million workers. However, due to problems related to digital access and digital literacy, small businesses are often unable to take advantage of the opportunities.

Also read : Technology Can Save MSMEs

Izzudin Al Farras, a researcher at the center of innovation and digital economy of the Institute for Development of Economics and Finance (Indef), said in Jakarta on Monday that the empowerment of MSMEs in the midst of the pandemic could not be separated from the use of digital technology. However, there was currently a gap in the mastery and access of digital technology between small businesses in villages and in cities and between those in Java and those outside Java.

Data from the Cooperatives and Small and Medium Enterprises (SMEs) Ministry indicate that only about 13 percent or 8 million of the country’s MSMEs have used online marketplaces to sell their products. The government is targeting that, by the end of 2020, 10 million MSMEs can enter the digital ecosystem.

According to Farras, the government cannot just encourage MSMEs to sell through online marketplaces without providing a supportive policy. Many problems should be addressed, such as the gap in telecommunication infrastructure, the high cost of internet access and the lack of capability of the MSMEs to operate online businesses.

Also read: Pandemic: From Health, Economy, to Politics

KOMPAS/TOTOK WIJAYANTO

A worker carries trays of freshly made tofu to the packaging section of a small tofu producer on Thursday (23/7/2020) in Pancoran, South Jakarta. As of July 21, the government has disbursed Rp 11.84 trillion in working capital for cooperatives and micro, small and medium enterprises (MSMEs) through national economic recovery program. The figure is 9.59 percent of the Rp 123.46 trillion fund for cooperatives and MSMEs.

In line with this, a survey conducted by Kompas’ Research and Development from 9-12 June 2020 with 995 respondents in 32 provinces showed 68.5 percent of MSMEs were dissatisfied with the government\'s assistance program to MSMEs during this pandemic.

Assistance that is urgently needed by MSMEs includes access to capital, training and the mastery of the digital technology to sell through online marketplaces, as well as support to open networks and access new market niches.

Affected by a pandemic

A survey conducted by the Center for Economic Research of the Indonesian Institute of Sciences (P2E LIPI) in 24 provinces recently found that 94.69 percent of 679 respondents suffered a decline in sales. Only 2.65 percent of the respondents said their sales were stable or had increased. "The biggest decrease was experienced by MSMEs that rely on physical stores," the head of the P2E LIPI , Agus Eko Nugroho, said on 29 June.

According to the survey, ultra-micro and micro companies that have been in operation for up to five years and have relied mainly on physical sales require special attention from the government. About 55.2 percent of the companies involved as respondents in the survey are less than five years old.

Also read : Government Guarantees MSME Working Capital Loans

KOMPAS/TOTOK WIJAYANTO

Cooperatives and Small and Medium Enterprises Minister Teten Masduki

Cooperatives and SME Minister Teten Masduki said that, although MSMEs were mostly affected by the Covid-19 pandemic, some of them could survive and even grow, especially those that have been connected to the digital ecosystem and have successfully adapted and innovated.

"Luckily, there has been a rapid development of internet network infrastructure, including physical infrastructure, during the last five years. Data of e-commerce managers indicate that 97 percent of Indonesia have been reached by online marketplaces, only 3 percent are not yet connected, "Teten said.

Also read : The Long Road to Economic Recovery

Separately, Communications and Information Minister Johnny G Plate said the existing telecommunication infrastructure was able to support economic activities conducted from home. However, Indonesia still needed to build telecommunication infrastructure, especially for “middle and final distances”. "Of the 83,218 villages in Indonesia, 12,548 villages have not been reached by the 4G signal," he said. (AGE/ CAS/JUD/ SHR / ERK )