Access sector-first insights from 2,939 Cambodian microfinance clients Download sample report

Mastercard Report: Indonesian Micro and Small Enterprises ’23-24

60 Decibels spoke with owners, or senior executives, directors, or managers of 835 micro and small enterprises from November 2023 to January 2024. The businesses that participated are dispersed across location, size, sector, tenure, and gender of business owners.

Small businesses are the driving force behind Indonesia’s economy, contributing to growth and employment. Around 64 million small businesses employ 97% of the total domestic workforce and contribute 61% of the Gross Domestic Product (GDP). However, they face significant challenges, including limited connectivity, financial barriers, and a lack of digital skills.

By 2025, Mastercard Strive Indonesia aims to empower 300,000 Indonesian micro and small businesses to succeed in the digital economy. As part of this work, 60 Decibels partnered with Strive Indonesia to run a study on Indonesian micro and small enterprises, hearing from them directly to understand their business challenges and hopes for the future. This report aims to provide insights for public and private stakeholders dedicated to helping small businesses flourish.

Research has shown that public-private partnerships are key to giving MSEs the access to capital, incentives and ecosystem that MSEs need to digitize. While public actors provide beneficial policy frameworks and infrastructural development, private actors are able to implement more localized, agile programmes. Similar benefits can be reaped from such collaborations in other critical areas, such as access to credit. Whether public or private, organizations must engage in active conversations to share lessons and resources, reduce redundancy, and coordinate better.

Explore the full report

11 things we learned from Indonesian Micro and Small Enterprises

  • Business performance is mixed among Indonesian MSEs

    The proportion of businesses we spoke to who reported that their revenues had either gone up or down in the last 12 months was roughly equal, at 40-42% in each direction respectively. The remaining 18% saw no change.

  • Employment growth amongst MSEs was minor

    A small 7% of businesses reported an increase in number of employees, with double that number reporting a decrease (14%). Overall, a majority of businesses (80%) report no change in the number of employees in their businesses.

  • Indonesian MSEs are roughly twice as economically resilient compared with the wider population

    Only 4% of businesses say they would not be able to cover a reasonable but generally not catastrophic emergency expense of ~3.5M IDR, This compares to roughly 8% in the wider Indonesian population.

  • However, MSEs have a relatively low appetite for credit

    Two-thirds of MSEs report that they have not used credit or loans in the last 12 months. Of these the primary reason for not using credit was cited as not needing credit (62%), followed by being unable to afford credit (28%). When MSEs do access credit, most select their credit source based on its ease of application. Correspondingly, most MSEs chose to receive credit from a formal finance institution.

  • When it comes to digitalization, size matters

    Small enterprises are more likely to report being more proficient with technology, both in terms of their adoption of, and ability to use, digital tools.

  • Women-led businesses do not appear materially disadvantaged

    Across multiple metrics such as revenue, financial resilience, growth expectations, customer retention, and employee growth, there was little difference in the outlook of women-led businesses compared with their male-led counterparts. This is a marked improvement for the position of Indonesian female entrepreneurs, who have been historically disadvantaged.

  • Indonesian MSEs value support, but aren’t getting enough of it

    Roughly 70% of MSEs consider support services like business, finance, digital and human training important for their business growth. MSEs are clearly eager to access such support for their business. Nevertheless, there remains a sizeable gap in access to this support, with two-thirds of businesses not accessing any such services in the past 12 months.

  • Indonesian MSEs are positive towards digital tools, but this doesn’t mean they use them well

    With two-thirds of businesses using digital tools such as mobile wallets and e-commerce platforms, MSEs seem to be fans of digitalisation. Businesses display both confidence and eagerness to use more digital tools, with 7 in 10 MSEs saying they are confident in their ability to utilize digital tools to enhance their operations. Yet this confidence does not seem to equate to proficiency. 64% of MSEs say they don’t know which digital tools/services are right for thei businesses.

  • Lack of digital skills is the main barrier to digitalisation

    It wasn’t surprising to see that a lack of digital literacy skills was the top reported barrier to improving business operations. More than half of MSEs we spoke to say they don’t have the requisite digital skills to use digital tools. This inconsistency between confidence and lack of practical skills could indicate a low awareness of how digital tools can be used in their businesses.

  • Whilst not exactly upbeat, Indonesian MSEs are at least mildly optimistic

    Two thirds of businesses expect moderate growth in the next 12 months. This aligns with 3 in 5 MSEs expecting revenue increases and 62% expecting an increase in customers.

  • The primary challenge to MSEs seems to be internal rather than external forces

    59% of businesses cite a lack of marketing knowledge as their biggest challenge in the next 12 months. Further access to inputs that MSEs lack include supply chain disruptions (29%) and access to capital (20%).

Who did we listen to?

The data found within the report is from 60 Decibels conducting phone interviews with owners, senior executives, directors, or managers of 835 Indonesian micro and small enterprises from November 2023 to January 2024. The businesses that participated are dispersed across location, size, sector, tenure, and gender of business owners.

  • Business Location: Businesses are mostly located in West Java (30%), East Java (24%) and Central Java (23%).
  • Business Ownership: Nearly nine out of ten MSEs own their respective businesses, reflecting a strong culture of entrepreneurship and independent enterprise ownership.
  • Business Size: 95% of respondents are classified as microenterprises, with one to four employees; 5% are small enterprises, with 5 to 19 employees. Notably, 57% of micro enterprises operate as solo entrepreneurs.
  • Business Tenure: A majority of businesses (81%) have been in operation for more than two years.
  • Business Leadership by Gender: 50% of MSEs are run by women, 35% are run by men, and 15% are run jointly.
  • Business Sector: For this report, we focused on sectors of interest to the Strive Indonesia program. 62% of MSEs are in the food and beverage sector, 27% are in fashion, and 13% are in the craft sector. 26% of businesses are in the tourism value chain i.e. they sell mostly to tourists or on a tourist site.
  • Business Model: 70% of businesses sell their products/services through physical stores; 30% use both physical stores and online platforms to sell their products. Less than 1% are fully online.
  • Annual Revenue: 66% of MSEs report annual revenues above 25 million Indonesian Rupiah, while 17% generated between 12.5 and 25 million Indonesian Rupiah, and 15% report revenues below 12.5 million.

Let's talk

We help you understand your social performance by listening to your customers, suppliers, employees, or beneficiaries.
Get in touch

Latest Insights

Quirky, informative, and a little bit nerdy - sign up for The Volume

Priority access to our favorite monthly finds, alongside 11,361 other data geeks

By signing up to the 60 Decibels mailing list, you consent to your data being collected and stored in line with our privacy policy