The Diverse Developments of MSME Digitalization in Indonesia

Technological advance that led the world to the era of digitalization has reached various sectors, including business. Beyond medium-sized enterprises, micro and small businesses have also applied cutting-edge technological innovation, not wanting to be left behind in the emergence of current breakthroughs. In fact, it is safe to say that business digitalization in Indonesia continues to increase in the post-COVID-19 pandemic era. But what exactly is MSME digitalization and its benefits to both business actors and the country?

What is MSME Digitalization?

Micro, Small, and Medium Enterprises (MSME) Digitalization is a transformation process of business management from conventional to digital systems. The purpose is to enhance business operations to be more effective and efficient. In addition, the shift to the digital domain also makes it possible to monitor cash flow in a real-time manner, thus improving business financial management.

Since the system is turning digital, it is without question that an adjustment to the strategies is required, including in terms of marketing. According to data from the MSME Empowerment Report (2022), 40% of MSMEs in Indonesia utilize social media, 38% of them use instant messaging platforms, and 13% have switched to e-commerce.

5 Benefits of MSME Digitalization

As a matter of fact, this digitalization is highly crucial and necessary to be implemented to adapt to the current development. But what can we really get from business digitalization?

1. Business can grow from everywhere

MSMEs in Indonesia play a vital role in the state. MSMEs contribute to the employment of approximately 56% of the Indonesian workforce in this sector and 60% of the Gross Domestic Product. The digital management system can improve MSMEs’ significant role and contribution to the state to be more optimal and practical. This is due to the nature of digitalization that enables business to be expanded and managed from everywhere.

For example, you can serve customers in the Jabodetabek (Greater Jakarta) area, even if you live outside of Java Island and have no offline store there. So, your business has the potential to compete nationally.

2. Strengthening business existence on the internet

Digitalization can also strengthen your business existence on the internet. Let’s imagine this case: despite running a home-scale business in East Java, your customers may come from Sumatra or other regions thanks to digital promotions. Hence, your business can grow more rapidly, generate more profit, and contribute to the state’s economy.

3. Providing the best experience for customers

Ever since the Covid-19 pandemic swept across the world, we can say that people’s lifestyle has changed a lot. Today, most people are becoming used to shopping online, thus giving you the opportunity to provide a better shopping experience by using prevailing technology. This is mostly because online shopping offers more varied payment features and methods, convenience for customers to compare prices, and provides a wider range of goods according to your needs. Ultimately, customers will slowly turn into regulars.

4. Cost efficiency

We have discussed briefly above that digitalization makes it possible for you to start a business without needing to build and have an offline store first. Thus, operational costs can be cut to the bone. For instance, you can reallocate the shop rental fee to pay a website subscription. Furthermore, you can also sell products via social media for free!

Not only for marketing purposes, leveraging available digital payment systems like QRIS can also improve business operational efficiency since it allows automatic records for all transactions, thus saving you time from bookkeeping.

5. A wider marketing scale

Since your business existence can be established using an internet connection, you can also automatically introduce your products and advertise them there. Even a target market located miles away from you will still able to see the advertisement. This is why door-to-door marketing is no longer needed to promote the products and services you offer.

The Development of MSME Digitalization in Indonesia

According to the MSME Empowerment Report 2022, 83.3% of MSMEs in Indonesia have made efforts to continue the digitalization process by utilizing technology to manage business. Despite decent figure percentage-wise, around 70% of MSMEs are, in fact, still facing obstacles in the marketing sector. This issue is typically fueled by three factors, namely capital stock, raw material procurement, and digital adoption.

In response to these challenges, the government put an emphasis on the MSME development agenda during the G20 discussion last year. Therefore, various programs are promoted and continued to be implemented by the government, together with Bank Indonesia and other relevant parties. Some of them are the establishment of a specific one-stop hub of Indonesian MSMEs abroad, the provision of a digital cross-country transaction facility, and funding for the product exporting process.

Digitalizing Payment System to Support MSMEs

One of the implementations of business digitalization is the use of digital payment methods, such as QRIS. To accelerate its implementation process, Bank Indonesia collaborated with the Indonesia Payment System Association (ASPI) and various financial service providers, then launched cross-border QRIS as a new innovation.

This technology is capable of processing transactions from various countries at once. Hence, business owners in Indonesia can now receive non-cash transactions from foreign banks by QR codes. Customers can also pay off the payment owed to foreign actors using QRIS.

Digitalization is an example of innovation that is essential to adopt if you wish to have a successful business. This is owing to the fact that digitalization offers many benefits, such as increasing financial gain, brand awareness, customer satisfaction, and business operation efficiency to further drive business growth. If you are a business owner, start integrating digital technology into your business strategy right now to gain more optimal results.