Crowdfunding Schemes in the Capital Market Can Be an Alternative for MSME Capital

Crowdfunding schemes in the capital market or "securities crowdfunding" can be an alternative capital for MSMEs that do not meet banking requirements. This method is considered more accessible to MSME actors.

The following article was translated using both Microsoft Azure Open AI and Google Translation AI.

KOMPAS/HERU SRI KUMORO

SME products were sold in commercial areas around the Meruroah Hotel, the venue for the 42nd ASEAN Summit in Labuan Bajo, West Manggarai, East Nusa Tenggara, on Wednesday (10/5/2023).

BALI, KOMPAS — The Financial Services Authority or OJK encourages micro, small and medium enterprises or MSMEs to access alternative capital through a securities offering mechanism through crowdfunding services on the capital market or securities crowdfunding/SCF . This method allows MSMEs that do not meet bank credit requirements to obtain capital because the process is simple and can be accessed via a digital mobile application.

”SCF can be the right alternative solution for MSMEs that need capital, especially those who do not meet bank credit requirements (unbankable). Because this method can be accessed easily through a financial technology platform and without a complicated process," said OJK Chief Executive for Supervision of Capital Markets, Derivative Finance and Carbon Exchange Inarno Djajadi at the Socialization of Alternative MSME Funding via SCF in Bali, Friday (14/7 /2023).

SCF is a crowdfunded fundraising mechanism provided by financial technology (fintech) companies that bring together investors/funders with micro, small, and medium-sized enterprises (MSME) in need of funding. After being matched, the MSME then issues securities, such as stocks or bonds in the capital market. Investors who are interested in the performance and business potential of these MSMEs can buy these securities on the capital market. Fintech companies receive commissions from the transactions that occur between MSMEs and investors.

As of July 7, 2023, there are 16 tekfin companies as SCF organizers that have obtained permits from the OJK. In addition, there are 423 SMEs that have issued their securities and have attracted 156,632 investors. This activity has raised funds of IDR 911.35 billion.

Also read: ”Securites Crowdfunding” Encourages MSME Growth

Specifically in Bali, Inarno explained that there were 11 UMKM (small and medium-sized enterprises) that had issued securities through 5 fintech companies that organized the SCF (supply chain financing) program. The number of involved investors reached 5,025 with a total raised fund of IDR 24.03 billion.

Bali Governor Wayan Koster who attended the event said that he welcomed OJK's efforts to facilitate SMEs in Bali to access capital through the capital market with the SCF scheme. "UMKM actors not only need education and training in developing their business, but also easy access to capital," he said.

Wayan Koster added that Bali has several leading sectors, namely agriculture, marine and fisheries, manufacturing industry, and culture-based industries. In addition, the Bali Provincial Government is also encouraging the growth of the SMEs sector, cooperatives, creative and digital economy sectors, as well as the tourism sector.

MSME actors often do not meet the capital requirements of banks, namely lack of capital, no collateral, and their business character, capacity, and financial condition are considered inadequate.

When contacted separately, an observer of SMEs and a lecturer at the Faculty of Economics and Business at Gadjah Mada University (FEB UGM), Mudrajad Kuncoro, stated that one of the classic problems faced by SMEs is access to financing. They often do not meet the requirements for bank financing, such as having insufficient capital, no collateral, and their character, business capacity, and financial condition are considered inadequate.

This is partly because UMKM entrepreneurs have not properly recorded or documented the results of their business in a systematic and organized manner. UMKM entrepreneurs also often cannot differentiate between their personal and business accounts.

"With the increasing number of capital alternatives for SMEs, they can be facilitated in choosing capital according to their capacity. Because capital is one important element in driving the growth of their business capacity."

NINA SUSILO

One civil servant arranged UMKM products in Teluk Bintuni Regency, West Papua Province, Friday (14/7/2023). The products ranged from sago cakes, ant's nest tea, coffee, bags and t-shirts, to nutmeg oil.

Proudly made in Indonesia

In order to encourage MSMEs to produce local products, the government is campaigning for the National Movement (Gernas) Proud of Made in Indonesia (BBI) in line with the Proud to Travel in Indonesia (BBWI) movement.

In the BBI and BBWI campaign in Central Kalimantan on Friday, Minister of Cooperatives and SMEs Teten Masduki said that Gernas BBI and BBWI became a stimulus for ministries/agencies and state-owned enterprises (SOEs) to allocate 40% of their budget for domestic products. This can encourage the development of SMEs in the country.

Minister of Tourism and Creative Economy, Sandiaga Salahuddin Uno, stated that the National Movement of Indonesia's Local Products and Indonesian Creative Economy (Gernas BBI and BBWI) are efforts to build a strong and competitive Indonesia on the international scene. "By awakening the spirit of pride in Indonesian products and tourism, we strengthen the foundation of economic development, maintain environmental sustainability, and strengthen our identity as a creative and cultural nation," said Sandiaga Uno.

Bank Indonesia Governor Perry Warjiyo added that in efforts to advance the nation's economy, the role of micro, small and medium enterprises (MSMEs) cannot be underestimated. Hence, there is a need for capacity building, innovation, and creativity among MSME players. "Innovation and creativity are necessary for advancing the nation's economy and MSMEs. The aim is to make our flagship products competitive and marketable both nationally and internationally," he said.

The data from the Ministry of Cooperatives and SMEs in 2022 shows that 99 percent of all business units in the country are SMEs. SMEs contribute 60.5 percent to the gross domestic product (GDP) with a workforce absorption of 96.9 percent of the total national workforce.

Also read: Bank and FinTech Collaboration Expands MSME Funding