Micro, Small and Medium Enterprises bear the brunt of the COVID-19 pandemic in Indonesia

January 21, 2021

Making handicraft in Yogyakarta (2019). Photo credit: Bastian AS / Shutterstock.com

Jakarta, January 21st 2021 – Nine out of ten micro, small and medium enterprises in Indonesia experience falling demand for their products during the COVID-19 pandemic while more than 80 percent have recorded lower profits, according to a new report by the United Nations Development Programme (UNDP) and the University of Indonesia’s Institute for Economic and Social Research (LPEM).

The joint report was launched today in an online event involving a dialogue with Mohammad Rudy Salahudin from the Coordinating Ministry for Economic Affairs, Mohamad Dian Revindo from the University of Indonesia’s Institute for Economic and Social Research, Irma Sustika from Womenpreneur Community and a report presentation by UNDP Indonesia Economist, Rima Artha Pratama.

The Report confirms the ferocity and the depth of COVID-19 pandemic to Indonesia’s economy which experienced a slowdown in 2020. It involved 1,180 MSMEs spread in 15 provinces in Indonesia, including those outside the main island of Java. It was conducted in July – August 2020, using in-depth interviews and focus group discussion method.

The report also points out that women entrepreneurs - who generally have unequal access to financing to begin with - suffered a setback. More than 37 percent of female owned MSMEs experienced revenue losses - between 40 and 60 percent.

“The findings give us areas of opportunities and much-needed clues required for a national response plan to recover from the pandemic. Given its vital place in the Indonesian economy, the pandemic offers the perfect opportunity for the MSMEs sector to take a leading role in the country’s transition towards a greener and more inclusive model,” said Sophie Kemkhadze, Deputy Resident Representative of UNDP Indonesia.

“With just nine years remaining until 2030, we now face the challenge of building a path forward post pandemic while securing some of the gains we’ve made towards achieving the Sustainable Development Goals,” she added.

The report is part of UNDP Indonesia’s larger support to the Government of Indonesia in mitigating the COVID-19 pandemic. UNDP is the technical lead for the UN’s socioeconomic response in support of the government’s response to the COVID-19 pandemic

The MSMEs sector is the backbone of Indonesia’s economy, the largest in South-East Asia by GDP . It employed 97 percent of the workforce and contributed more than 61 percent to Indonesia’s GDP in 2018. The MSMEs study focuses on, the coping strategies, as well as their plans to future growth. It reveals findings that confirm the ferocity and the depth of COVID-19 pandemic to Indonesia’s economy

The report seeks to provide stakeholders, especially policymakers, and the general public an opportunity to develop a response which supports MSMEs recover, move forward and prepare from future shocks.

Other key findings in the Report are:

• Nine out of ten MSMEs faced lower demand for their products during the pandemic.

• Most of the MSMEs found it difficult to distribute their products due to COVID-19.

• Around 44 percent of the MSMEs surveyed had joined the online marketplace or e-commerce (Tokopedia, Shopee, etc.) during the COVID-19 pandemic.

• There were more female MSME owners (32% before pandemic, 47 percent after pandemic) than male MSME owners (25 percent before pandemic, 40 percent after pandemic) in the online marketplace.

• Two-thirds of MSMEs took in less revenue during the pandemic, while more than 80% had lower profit margins during COVID. More than 53 percent of MSMEs experienced a decrease in asset value.

• In terms of the impacts by gender, more than 37 percent of female-owned MSMEs faced a decrease in revenue between 40 percent and 60 percent.

• One of the alternative strategies adopted by MSMEs to minimize their expenses is reducing utility consumption, thus lowering their utility bills.

• More than 40 percent of MSMEs had been selling their products through the online marketplace.



UNDP Indonesia Economist, Rima Prima Artha, rima.artha@undp.org UNDP Indonesia Communication Specialist, Tomi Soetjipto, suryo.tomi@undp.org

UNDP Indonesia Communication and Advocacy Specialist, Ranjit Jose,