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Why Indonesia’s MSME digitalisation needs to be a collaborative effort

In early October, the United Nations Industrial Development Organization (UNIDO) ran a survey that suggested 60 percent of Indonesian micro-, small- and medium-sized enterprises (MSMEs) might only survive another six months under current pandemic restrictions. The subsequent announcement by the government to ease restrictions in Jakarta was timely, but overall, this underlines how challenging the year has been for the country’s MSMEs.

MSMEs form the lifeblood of the Indonesian economy. They employ 97 percent of the workforce and contribute nearly 61 percent of GDP according to Bank Rakyat Indonesia. Empowering them through digitalisation is critical for short- and long-term economic sustainability. With Indonesia currently in its economic recovery phase, now is the time to focus on MSME empowerment initiatives; helping them get back on their feet can also help jumpstart the national economy.

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Levelling the playing field

In our experience, Indonesian MSMEs are aware of the importance of digitalisation but face barriers to entry, such as the lack of digital skills and knowledge, setup cost and inconvenience. They do not have access to the same resources that larger companies do to help them overcome these barriers. Any empowerment strategy thus needs to concentrate on filling these unmet digitalisation gaps, and for maximum output, this must be supported by the entire ecosystem.

The adage of ‘show, don’t tell’, is exactly what we need to do to get MSMEs on board with digitalisation. First, we need to address their pain points and show them how going digital solves these issues. For instance, MSMEs lack access to quality Internet data and use entry-level smartphones, so their accounting processes are still pen and paper-based, are highly inaccurate and can take eight to 10 hours per week. But with BukuWarung’s proprietary digital bookkeeping solution, they save hours of time by being able to easily record their sales and expenses, send bills and create business reports on their phones.

Besides the obvious productivity benefit, digitalisation also improves the financial visibility of MSMEs, which opens their access to credit and enhances their ability to scale – a crucial development as 74 percent of MSMEs in Indonesia currently lack credit access. These advantages can be made even more accessible by simplifying the adoption process, which in turn further increases MSME appetite for digital solutions. While this is a good start, these advantages can be amplified much further if they are done in collaboration with other initiatives across the ecosystem for maximum integration.

The value of partnerships and collaborations

Transformation is not a vision that can be realised alone. To that end, we recently announced our partnership with Warung Pintar to create a collaborative ecosystem of solutions focused on digitalising Indonesian MSMEs. Like us, Warung Pintar’s solutions are uniquely focused to address MSME needs; they help MSMEs gain access to a fair and transparent supply chain through smart distribution and operation services.

Under this collaboration, BukuWarung merchants will leverage Warung Pintar’s strong supply chain capabilities to source goods at competitive bulk prices and have them delivered straight to their stores. Meanwhile, Warung Pintar’s merchants will be introduced to our digital bookkeeping solution which has been tailored with the user experience of MSME owners in mind. This is merely the first step; our immediate plans are to introduce more digital solutions tailored to the SMEs to help them close their digitalisation gap.

The next step of our partnership will focus on helping Indonesia’s MSMEs digitalise holistically. On our end, BukuWarung introduced a digital payments facility to meet the demand for FinTech solutions tailored to MSMEs. While this facility is initially aimed at helping accelerate the merchants’ process of paying suppliers and collecting money from customers, our greater aim is to help raise the usage of non-cash transactions – especially since handling cash in today’s environment has become riskier. Within six weeks of this facility’s launch, we achieved 60 million in annualized total payment value (TPV), which bodes well for the proliferation of digital finance solutions by Indonesia’s MSMEs.

We are very excited about this collaboration because it allows us to create a much bigger impact. By working together, we can amplify our reach and our message by tapping into a broader audience, which fosters greater digital inclusion of Indonesia’s MSMEs. On a wider scale, we can also support ongoing government initiatives to boost the productivity and competitiveness of our MSMEs, which takes us one step closer towards achieving our ultimate goal of a digital-ready MSME sector.

Planning for the future

Our partnership with Warung Pintar is just the first step of a grander plan. We envision building a nationwide digital infrastructure that can help Indonesia’s MSMEs tap into the opportunities presented by the digital economy. The potential for a digital-savvy MSME sector is nearly limitless – they will no doubt be the key drivers of Indonesia’s future growth, and we are eager to see both them and the country grow from a developing market to a regional leader.

But to realise this vision, we must work together. We will continue to work on collaborative solutions to further stimulate the digitalisation of our MSME sector, and we are always on the lookout for other partners in the ecosystem whose vision aligns with ours. Warung Pintar already has over 60,000 MSMEs on board, while we have served over 1.5 million MSMEs across 750 locations nationwide. Think of what we could do with more partners on board!

We are now having many conversations around closing the digitalisation gap. That is a good start, but we can, and should, think bigger as our efforts now will set the stage for our growth for decades to come. Besides a holistic, dedicated approach to digitalisation, having the support of all stakeholders in the ecosystem is also crucial for us to push forward together into the new digital age – and we are ready to answer the call.