The number of poor people in the world is increasing constantly, because the world population has grown so significantly. Political upheavals, natural disaster, smaller tragedies and economic recession have continued to threaten stability of every people in the world. According to bridges.org 2002, “The best hope for breaking the poverty cycle in many developing countries and disadvantaged communities is the importance of entrepreneurship and the needs of crucial sector like MSMEs must be understood to frame an effective and sustainable approach to modern development aid.” Based on the study of Global Entrepreneurship Monitor (GEM 2000), almost 150 million people are engaged in some forms of entrepreneurial activities. Enterprise development comes in variety of sizes, range of services, line of products and amount of contributions to an economy where a number of entrepreneurs are growing in significant relations to economic growth and poverty reduction. Entrepreneurship is often the backbone of the developing world that offers employment opportunities to millions of people.
How MSME’s aid Economic Growth in Indonesia.
Micro, small and medium enterprises (MSMEs) in developing countries are important socially and economically for a number of reasons, which include: (i) their wide dispersion across rural areas and therefore they are very important for rural economic development; (ii) their ability to absorb a significant large number of workers; (iii) their role as a place for entrepreneurship and business skill development, especially in rural areas; and (iv) as a source of business opportunities for women. However, their development is hampered by a number of constraints, and most significant being the lack of access to bank loans and difficulties in marketing.
Using Indonesia as a case study, a characteristic of the Indonesian economy is that domestic economic activities are dominated by MSMEs; although the ratio of MSMEs to large enterprises (LE) varies across different economic sectors.
Concerning their contribution to the formation of GDP, MSMEs always play a smaller role compared to their contribution to employment generation. While their share in total employment was around 99%, they accounted for only approximately 61.41% of GDP in 2017 in the figure below. The same thing was also found by Yuhua (2013) from her study in the Asia-Pacific region, which shows that in all countries in the region, more than 90% of total employment was generated by MSMEs but their contribution to GDP was much below 90%; although the ratio varies by economy.
The lower contribution of MSMEs to the formation of GDP compared to their role in job creation is due to many factors, including their limited access to advanced technologies, capital and human resource that resulted in their much lower productivity than that in LEs. In other words, their greater share of GDP than that of LEs is simply because the number of companies from the MSME category is far more than the number of LEs.
Tokoin’s Role in MSME Growth.
Tokoin is an Indonesia based blockchain powered project targeted at expediting MSME growth starting from Indonesia with potential of global outreach. Tokoin offers a straightforward but practical solution to the major problem of MSME’s in Indonesia which is funding. Tokoin’s mission is sto build MSME profiles to guarantee their data integrity, create a virtual ledger for each MSME transactions, Lower financial inclusion barriers by providing reputation scoring, establishing a sustainable business model that enables MSMEs to perform in higher scale and increasing the economic capability of the whole MSMEs ecosystem.
Conclusion
Countries in today’s global commerce and trade ecosystem continue to give great importance on entrepreneurs and entrepreneurship to elevate the lives of people from poverty and to assist economic growth from dynamic changes of reality. The rise of Micro, Small, and Medium Enterprise (MSME) sector creates a conducive environment for business, secures employment generations to people, and stimulates economic growth.
References
Global Entrepreneurship Monitor (GEM). Global Entrepreneurship Monitor 2000 Executive Report.
Yuhua, B. Z. (2013). SMEs in the APEC Region. APEC Policy Support Unit, Policy Brief №8. December. Singapore: APEC Secretariat.Google Scholar
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