RECENT DEVELOPMENT OF WOMEN’S ENTERPRISES IN INDONESIA Tulus Tambunan
Kadin Indonesia, 2007 Abstract
As a majority of women entrepreneurs in Indonesia is found in small and medium enterprises (SMEs), especially small enterprises (SEs) and micro enterprises (MIEs), recently, the Indonesian government has considered the development of SMEs as an important means to generate women entrepreneurs, as part of the national strategy for women empowerment related to its commitment to the Millennium Development Goals (MDGs). By surveying literature and analyzing statistical data, this paper aims to examine recent development of women entrepreneurs, especially in SMEs in Indonesia. The paper shows some important facts. First, SMEs are of overwhelming importance in Indonesia, as they account for more than 90% of all firms outside the agricultural sector. Second, the representation of women entrepreneurs is still relatively low, even in SMEs, which can be attributed to factors such as low level of education and cultural or religious constraints. Finally, the government has been the most important supporting agency for SMEs. However, there are no SME development programs specifically towards female entrepreneurs, and also evidence on the effectiveness of government programs to support SME development is mixed.
Introduction
Especially in developing or poor countries, women’s entrepreneurship has a tremendous potential in empowering women and transforming society. Yet this potential remains largely untapped, with no more than 10 per cent of the entrepreneurs in developing Asian countries, including Indonesia, being women. Studies have shown that a host of barriers prevent women from realizing their full potential as entrepreneurs, where they could make significant contribution to society (Sharma and Dhameja, 2002). Entrepreneurship by definition implies being in control of one’s life and activities (Sinha1, 2005). It is precisely this independence that many societies have denied women (Vishwanathan, 2001). Women’s family obligations often bar them from becoming successful entrepreneurs in both developed and developing countries. As Seymour puts it, Having primary responsibility for children, home and older dependent family members, few women can devote all their time and energies to their business (Seymour, 2001). Traditional gender role expectations and patriarchal attitudes in many developing nations make it even more difficult for women to relieve themselves of family responsibilities. The familial and social conditioning in many developing countries inhibits the confidence, independence and mobility of women (Sasikumar, 2000). This translates into poor access to training, information, credit, technology, markets, etc., and prevents women from starting a business or women entrepreneurs from growing beyond a particular level (Sinha1, 2005). The situation is more critical in poor countries such as in many South Asian, African and Latin American countries
medium enterprises (SMEs), particularly in small enterprises (SEs) and micro enterprises (MIEs), these enterprises provide thus a good starting point for the mobilization of women talent, especially in rural areas, as entrepreneurs, while, at the same time, the enterprises can provide an avenue for the testing and development of women entrepreneurial ability.
The aim of this paper is to examine the recent development of women’s enterprises in Indonesia. Since a majority of women entrepreneurs in Indonesia (as in many other developing countries) is found in SMEs, the development of women entrepreneurs has mostly been associated with SME development. For this reason, this paper starts with the analysis of the current developments of SMEs in the country. Specifically, this paper addresses three research questions. First, how important are SMEs in the Indonesian economy? Second, how representative are women entrepreneurs in SMEs. Third, what are the main determinant factors of women entrepreneur development in the country? Four, how effective are government sponsored programs in supporting the development of SMEs and are there special programs to support women entrepreneurs in the sector? All these questions will be addressed by analyzing existing limited secondary data and surveying existing Indonesian studies on women entrepreneurs.
Definitions of SMEs
In Indonesia, there are several definitions of SMEs, depending on which agency provides the definition. As this paper uses data from the State Ministry of Cooperative and Small and Medium Enterprises (Menegkop & UKM), the Department of Industry (MoI), and the Central Statistical Agency (BPS), so, only definitions of these three government agencies are relevant for the paper. Menegkop & UKM promulgated the Law on Small Enterprises Number 9 of 1995, which defines a small enterprise (SE) as a business unit with total initial assets of up to Rp 200 million (about US$ 20,000 at current exchange rate), not including land and buildings, or with an annual value of sales of a maximum of Rp 1 billion (US$ 100,000), and a medium enterprise (ME) as a business unit with an annual value of sales of more than Rp 1 billion but less than Rp 50 billion. Law does not define explicitly MIEs. However, Menegkop & UKM data on SEs include MIEs. BPS, which regularly conducted surveys of SMEs, uses the number of workers as the basis for determining the size of enterprise. In its definition, MIEs, SEs and MEs are business units with, respectively, 1-4, 5-19, and 20-99 workers, and large enterprises (LEs) are units with 100 or more workers. MoI defines enterprises by size in its sector also according to number of workers as the BPS definition.
The Importance of SMEs in the Indonesia Economy
technology. “classical” literature on SME development suggests that SME will become less importance in the course of economic development, i.e. as income per capita increases.1
The World Bank (2002, 2004), however, gives three core arguments in supporting the view that SMEs can function as the engine of growth in developing countries. First, SMEs enhance competition and entrepreneurship and hence have external benefits on economy-wide efficiency, innovation, and aggregate productivity growth. Second, SMEs are able to grow or they can be productive as LE. This argument is also supported by Berry, et. al (2001, 2002) from their study on SME dynamics in Indonesia by pointing out that in static terms, SMEs, on average, achieve decent levels of productivity especially of capital and all factors taken together (that is, total factor productivity); and in dynamic terms, most of these enterprises have considerable growth potential. But financial market and other institutional failures and not-conducive macroeconomic environment impede SME development. Third, SMEs expansion boosts employment more than LEs growth because SMEs are more labor intensive. In other words, the World Bank believes that SMEs can boost economic growth and development in these countries.
In Indonesia, SMEs have historically been the main player in domestic economic activities, especially as a large provider of employment opportunities, and hence a generator of primary or secondary source of income for many households. For low income or poor farm households in rural areas, SEs, i.e. units of less than 20 workers, in non-farm activities are especially important. These enterprises have also been playing as an important engine for the development of local economies and communities. However, as compared to many other APEC more developed economies, Indonesian SMEs are still relatively weak in terms of GDP contribution. Instead, they have been more important as the locus of most employment than as a GDP growth engine in Indonesia, which can be can be attributed to lack of capital, human resource, technology, and market access.
The SMEs have also been recognized to have another important role to play, namely as an important engine for development and growth of exports of non-oil and gas, particularly in manufacture. This stems from evidence showing that the most successful cases of SMEs development in East and Southeast Asian countries like South Korea, Taiwan, Hong Kong, and Singapore, have directly related to trade and the adoption of export-oriented strategies. The experiences of these countries indicate that SMEs can compete effectively in both domestic and international.
According to official data from the State Ministry of Cooperative and Small and Medium Enterprises (Menegkop & UKM), SMEs account for more than 90% of all firms in all sectors in the country (Table 1). These enterprises are thus the biggest source of employment, providing livelihood for over 90% of the country’s workforce, especially women and the young. The majority of SMEs, especially MIEs, are scattered widely throughout the
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rural area and therefore they may play an important role as a starting point for development of villagers' talents, especially women, as entrepreneurs. MIEs are dominated by self-employment enterprises without hired/wage-paid workers. They are the most traditional enterprises generally with low levels of productivity, poor quality products, serving small, localized markets. There is little or no technological dynamism in this group. The majority of these enterprises eke out a bare survival. Some of them may be economically viable over the long-term, but a large portion is not. Especially with import liberalization, changing technology and the growing demand for higher quality modern products, many MIEs face closure or very difficult upgrading. However, the existence or growth of this type of enterprises can be seen as an early phase of entrepreneurship development.
Table 1. Total Units of Enterprises by Size Category: 1997-2004
Size Category 1997 1998 1999 2000 2001 2003 2004
∑ SEs 39,704,661 36,761,689 37,804,536 38,985,072 40,137,773 42,475,756 43,158,468 ∑ MEs 60,449 51,889 51,798 55,061 57,743 59,580 63,361 ∑ LEs 2,097 1,831 1,832 1,946 2,095 2,169 2,248 Total 39,767,207 36,815,409 37,858,166 39,042,079 40,197,611 42,537,505 43,224,077 Source: Menegkop & UKM
From the ASEAN perspective, Indonesia as the largest member country has of course the largest number of SMEs (Table 2). Other member countries too have touted SMEs as the engine of economic growth and development, the backbone of national economies, the highest employment-generating sector, and a potential tool of poverty alleviation by creating self-employment avenues. Notwithstanding various definitional issues and data problems, by combining all sources which are available, there is an (rough) estimated total of some 21 million agricultural SME in ASEAN, or about more than 90% of all non-agriculture firms in the region. These enterprises play strategic roles in private sector development, especially in the aftermath of the 1997 Asian Financial Crisis. In some member countries, as their economies modernize and industrialize, SME provide the much-needed inter-firm linkages required to support large enterprises (LEs) to ensure that they remain competitive in the world markets. SMEs generally account for between 20-40% of total domestic output and they employ an overwhelming proportion (mostly in the 75%-90% cent range) of the domestic workforce, especially adult persons and women.2
Distribution by sector shows that SMEs are concentrated in agriculture. As shown in Table 3, in 2004, for instance, from 43,221,829 SMEs, almost 60% of them are in this sector. This may explain why the majority of SMEs in Indonesia are found in rural areas. Trade, hotel and restaurant is the second largest sector for SMEs with around 21% and slightly more than 22% of their total units during the period 2003-2004. The third important sector is manufacturing industry with around 6.4% of total SMEs. They are involved mainly in simple traditional manufacturing activities such as wood products, including furniture,
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textile, garments, footwear, and food and beverages. Only a small portion of total SMEs are engaged in production of machineries, production tools and automotive components. The latter is generally carried out through subcontracting systems with several multinational car companies such as Toyota and Honda. This structure of industry reflects the current technological capability of Indonesian SMEs, as they are not so strong yet as their counterparts in other countries such as South Korea, Japan, and Taiwan in producing sophisticated technology embodied products.
Table 2: Non-agricultural SMEs in ASEAN and selected countries in East Asia SMEs as a % of Country No. of non-agricultural
SME in 2002 or later or best estimation (‘000)
Percentage of GDP/value
added (VA)/output All Firms Workforce
Brunei Darussalam
Notes: 1: best guess for 2000; 2: est. active (2004); 3: for 2006; 4 : 1998/9; 5: estimated active; 6: excludes 744,000 micro enterprises/MIEs (2001); 7: excludes 10 million MIEs; 8: manufacturing industry only.
Sources: APEC (2002), RAM Consultancy Services (2005), UNCTAD (2003), Hall (2002), Myint (2000), Regnier (2000), Ministry of Industry, Mines and Energy of the Kingdom of Cambodia, BPS (Indonesia), Census 2005 (Malaysia), JASME Annual Report 2004-2005 (Japan); SMEA (White Paper on SMEs in Taiwan 2005), OSMEP (White Paper on SMEs in Thailand, 2002), National SME Development Agenda 2000/2001 (Philippines).
Table 3. Total Units of Enterprises by Size and Sector, 2003 and 2004
SMEs LEs Sector
2003 2004 2003 2004
Agriculture 25,457,190 25,477,756 58 59
Mining 203,711 144,834 72 51
Manufacture 2,711,522 2,743,858 710 719
Electricity, gas & clean air supply 4,423 4,111 39 36
Construction 132,346 162,359 157 192
Trade, hotel & restaurant 9,071,331 9,845,682 434 471
Transport & communication 2,488,161 2,551,727 146 150
Finance, rent & service 33,169 37,185 292 328
Services 2,433,483 2,254,317 261 242
Total 42,535,336 43,221,829 2,169 2,248
In terms of GDP, on average, during the period 2000-2003, SME contributed more than 96% and almost 95% of total output in, respectively, trade, hotel and restaurant, and agriculture. In total GDP, SMEs performed relatively better than their larger counter part as they accounted for more than 50% of total GDP during that period (Table 4). Also SMEs’ output contribution to the annual growth rate of total GDP was higher than that of LEs. On average, the GDP growth share of SMEs was above 2%; whereas that of LEs was under 2%. Within SMEs, SEs appeared to be more important than MEs as their GDP growth share was higher than that of the latter ones (Table 5).
Electricity, gas & clean air supply Construction
Trade, hotel & restaurant Transport & communication Finance, rent & service Services
GDP GDP without oil & gas
85.74 Source: National Agency for Statistics (BPS)
Table 5: Contribution to GDP Growth by Size Group of Enterprises, (%)
Size category 2000 2001 2002 2003
Recently, there is an increasing interest in women entrepreneurship development among policy makers, academics and practitioners in Indonesia. This interest comes from the recognition of the following facts. First, women predominate in informal economy where for most of them they do that primarily as a survival strategy. Because of their participation in informal economic activities, they are able to keep their families from falling into extremely poor. Human Development Report 2006 from UNDP shows, however, that economic potential of women, either as employees or entrepreneurs has not yet fully developed. It is reflected by lower estimated income of female than that of male and female economic activity rate as percentage of male rate is 60 (Table 6).
point for the mobilization of women talent, especially in rural areas, as entrepreneurs, while, at the same time, SMEs can provide an avenue for the testing and development of women entrepreneurial ability.
Table 6: Gender Inequality in Economic Activity and Earned Income in Indonesia, 2004
Description Value Estimated earned income, female (PPP US$)
Estimated earned income, male (PPP US$) Ratio of estimated female to male earned income Female economic activity rate as % of male rate (ages 15 and older)
2,257* 4,963* 0.45
60
Note: * because no wage data are available, for the purposes of calculating the estimated female and male earned income, a value of 0.75 was used by UNDP for the ratio of the female nonagricultural wage to the male nonagricultural wage. Source: UNDP (2006).
At least two main characteristics of development of women entrepreneurship can obviously be observed in developing countries. First, SMEs are more important than LEs for women entrepreneurs. Second, within SMEs, the female-male entrepreneur ratio is generally higher in MIEs than in larger sized and more modern enterprises. This is due to the fact that women in developing countries are more likely than men to be involved in informal activities which consists dominantly of MIEs, either as self-employed or employers or paid/unpaid workers. Database from the International Labour Organization (ILO) indicate that almost 95% of MIEs in developing countries performed by women as self-employed; though the percentage varies
between countries or regions.
- Evidence from Secondary Data Analysis
BPS data from various years indicate that women entrepreneurs in Indonesia have also been increasing since the 1980s during the NO era when the country achieved rapid economic growth leading to rapid increase in per capita income. According to a number of studies (e.g. Manning, 1998; Oey, 1998), the reason for the increasing number of women-owned enterprises are partly due to the increase of women’s educational level, and to the economic pressure the women faced in their households. However, the only readily available official statistics on women-led enterprises in Indonesia are only in MIEs and SEs, as presented in Table 7. From this table, there are three interesting facts. First, it reveals that only 32% of these enterprises are run by women. If it is assumed that this percentage applied to MEs and LEs and if total number of enterprises can be used as an indicator of current state of the art of women entrepreneurship development, then the table suggests that becoming an entrepreneur in Indonesia is still dominantly a man culture.3As a comparison, data from various sources women make up about 26% to 38% of total non-farm
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entrepreneurs in the Asia-Pacific Economic Cooperation (APEC) region for which data are available, and there has been a slight increase in the percentage of women entrepreneurs over the period 1990-2000 (Table 8).
Table 7: Women Entrepreneurs in non-Farm MIEs and SEs Combined, 2003 (unit) Entrepreneurs/owners
Sector Total units
Male Female Mining, electricity (non-Stated Own/PLN) & construction
Industry manufacturing
Trade, hotel, & restaurant
Transportation & communication
Financial institutions, real estate, renting, and services
Total Notes: * = distribution percentage by row (sector); ** = distribution percentage by column (entrepreneur)
Source: BPS.
Table 8: Women Entrepreneurs as % of total non-farm entrepreneurs in APEC Economies, 1990-2000
Economies 1990 1996 1998 2000
Australia
Note: These percentages include all types of non-farm business and all sizes of enterprises, i.e. women who are self-employed, own-account workers as well as those who are employers.
Sources: APEC (1999, 2003), BPS, and database online from some economies.
Second, in manufacturing industry, from a total of 1,005,724 women owned firms, about 97.9% are in MIEs, employing 5 or less people (and in many case are non-employing). They choose MIEs simply because this economic activity is characterized by an easy entry and exit, and low capital, skills, and simple technology requirements.
90% of women employers have fewer than 5 employees, compared to 78% of male employers. In Chinese Taipei, 82% of women employers have fewer than 10 employees, compared to 76% of men owned firms. In the United States, there is not a significant difference in the employment size of women-and men-owned firms (APEC, 1999).
Third, sectoral distribution is more or less similar for male and female entrepreneurs, as they both are concentrated in trade, hotel and restaurant; although the percentage is higher in the latter. In Indonesia female is more likely than male to be involved in this sector, mostly as own-account traders having small shops or as owners of small restaurants or hotel. In other APEC economies, Mexico, for example, the highest concentration of women owned firms is found in hotel and restaurant sector. In Australia, Canada and the United States, the majority of women owned firms are found in services or retail trade. In the Philippines, about 45% of women entrepreneurs are in manufacturing and 26% in retail trade.(APEC, 1999). In manufacturing industry, women entrepreneurs tend to pursue areas where they have gender-based skills and know-how. In Indonesia and the Philippines, for example, the majority of them are found in food, beverages, tobacco, clothing, and crafts industries (APEC 1999).
- Evidence from Literature Survey
business. They hardly able to obtain loan from banks since most of them do not have collateral and the interest rate are mostly too high for them.
Purwandari (2002) did a research on handmade bags craft industry in Kulon Progo District, the Province of Yogyakarta. The objective of the study is to understand the roles of handmade bag industry on women’s working opportunity, women entrepreneurship and household income, and what social factors influence its role. The profile of the women works in the industry, either as paid workers (firms owned by male) or as entrepreneurs shows that the age of majority of them is between 28-55 years, and about 60% of them have only elementary school (finished and unfinished); and those who have finished high school reached 7.5%. Beside women home-workers, the industry has also absorbed children to work in the industry, with almost 62% of the children in two sampled villages work in the industry. The study shows that bags industry is the most suitable non-agricultural business activities for women entrepreneurs who could not leave their home easily due to local social constraints. It is also because this activity is easy to conduct with no high skill, complex technology and huge capital requirements.
Arifin (2004) investigated current most important obstacles faced by women in the informal micro businesses, which includes general problems derived not only from their business’s marginality and informality, but also from gender stereotyping. He proposes the systematic way of understanding women entrepreneurs’ vulnerability for effective empowerment and organizing activity. He finds that general problems usually faced by women entrepreneurs are risks especially in informal economic activities such as removal of their business sites by force and exploitations through illegal charges/retributions by preman or even by authoritative agents such as the police or security officers, and by traders, collectors or inputs suppliers who have monopoly or monopsony power on these women and so they often manipulate the prices in their favor.
entrepreneurs but also as workers. As with findings from other studies, it reveals that the main motivation of women in rural areas in doing micro businesses is to improve their family income or survival strategy.
Suminar (2001) investigated the types of home-industry that can be built up by poor women. It reveals that the types of home-industry for the women to develop are industries that do not need physical strength such as garment, food, and handicrafts. However, even in these types of activities, women still face several constraints to run their own businesses, which can be distinguished between internal and external constraints. Internal ones are such as lack of skills and limited time (especially for married women); while, external ones include no easy access to bank credits, and cultural constraint particularly in a society which still holds that women’s main obligation is to do household work. However, in some regions, women as producers are positively appreciated. It is what Sulaiman (1982) found in Central Java among crafts-women making wooden products and batik. Their status increased in the eyes of their family and society, since they were able to earn income for their family, and in their society they were known as “businesswomen”.
Main Constraint Factors
Indonesia (as with many other developing countries) is yet less developed with respect to women entrepreneurship. There are more women as low paid workers in factories than women running their own businesses. Even in micro and small businesses, the representation of women entrepreneurs is relatively low (see Table 6). Although, from many case studies, it reveals that many women, especially in rural areas, run their own businesses as a family survival strategy.
Table 9: The GDI compared to the HDI in Indonesia and some other selected countries, 2004
117. United Arab Emirates (105.8%) 191. Kenya (95.8%)
In fact in the last 20 years the Indonesia government has been giving efforts to improve gender equality in education. In 2005, the ratio of girls to boys in primary and secondary schools is close to 100%, much higher than the average level of low income countries or not far behind that of middle income countries (Figure 1). During the period 2001-2004, female to male ratio with respect to primary completion rate is slightly above 1 (Figure 2).
Figure 1: Ratio of girls to boys in Primary and Secondary Schools in Indonesia and other Selected Asian Developing Countries, 2005 (%)
0 20 40 60 80 100 120
are similar. For instance, in Australia the highest level of schooling for 54% of women employers is secondary school, while 65% of men employers have gone on to higher levels of education (APEC, 1999).
Figure 2: Female to Male Ratio: Primary Completion Rate in Indonesia and other Selected Asian Developing Countries, 2001-2004
0 0.2 0.4 0.6 0.8 1 1.2
Indonesia Bangladesh Cambodia India Malaysia Philippines Lao PDR Vietnam
Source: World Bank (2007).
Table 10: Education of Entrepreneur in Non-Farm MIEs and SEs by Gender, 2003 (%)
Level of education Female Male
Not finished primary school Finished primary school
Finished high school first degree (SMP) Finished high school second degree (SMA) Higher education
27.88 40.82 18.62 11.77 0.91
14.27 39.49 25.87 18.37 6.5 Source: BPS.
Sandee (1995) investigated the process of innovations in roof tile clusters in rural Java. He found female producers had very little chance to do innovations due to, among other constraints, lack of skills. Their firms were usually taken over by men as the technological shift proceeded. The fact that innovation adoption requires a more intensive involvement of both producers and workers may also militate against women, given their other (household) responsibilities
taboos that prevent those women who can and should be accessing higher education from doing so. Many parents living in rural areas still have the traditional thinking that (higher) education belongs to men only. Especially since after marriage women leave to join their husbands; families and, hence, are not regarded as being useful to their own families in the long run.
However, although this traditional thinking still exists in rural society, it depends on the economic condition of the family as well as education level of the parents or husbands. The better the economic condition of the family or the better the education of the parents/husbands, the less influence of the traditional thinking in their attitudes towards women to have better education.
Second, heavy household chores. Especially in rural areas, women have more children, and they are more demanded to do their traditional role as being responsible for housework and child care, and therefore they have fewer hours of free time than men, both during the weekend and on weekdays.
Third, there may be legal, traditions, customs, cultural or religious constraints on the extent to which women can open their own businesses. Although the majority of its population are muslim, Indonesia is indeed not a muslim state and not like many other muslim states which have failed to generate ideologies capable of copying realistically with social change. However, in rural areas, especially those which are isolated from big cities, Islamic-based norms have stronger influence on women daily life. This makes female behavior or attitude in rural areas less open than male (or than urban women) to “doing modern business” culture. In such society, women must fully comply with their primary duty as their husband’s partner and housewife, they are not allowed to start their own businesses or to do jobs that involve contact with or managing men, or simply they are not allowed to leave the home alone. Even if women do have their own business, in many cases, they defer to husbands or other family members in key business decisions, and many turn over greater power to these other family members as the business grows. All these constraints lead to an exclusion of women from entrepreneurial activities. While, in rural areas relatively close to urban areas with good transportation and communication links, changes in local society attitudes about traditional role of women being responsible for housework and child care and men for income in the last 30 years are observable.4
Fourth, lack of access to formal credit and financial institutions. This is indeed is a key concern of women business owners in Indonesia. This is found to be more problematic for women in rural areas or outside of major metropolitan areas such as Jakarta and Surabaya. This constraint is related to ownership rights which deprives women of property ownership and, consequently, of the ability to offer the type of collateral normally required for access to bank loans. In Indonesia, men are still perceived as the head of the family, and thus, in general, men are still perceived as the owner or inheritor of family assets such as land,
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company and house. In Sandee’s (1995) study on roof tile clusters in rural Java, he found that limited access to formal credit was felt especially acutely by female producers.
Probably because of the above reasons, especially cultural or religious constraints, it is found that in Indonesia, particularly in rural areas, economic necessity or wanting to improve family income is a more predominant factor for entrepreneurship among women Economic pressures have made that women are being permitted to take up paid employment outside the home or to run income earning activities beyond their traditional role (Syahrir, 1986; Rusdillah, 1987)..While, in more developed economies such as the United States, or even in Korea, for instance, non-economic motives such as a desire for more fulfillment, or to test a winning idea, or as the first step towards independence, self—esteem and liberty of choices, are more important for women entering into business ownership (APEC, 1999).
Finally, the participation rate of female as entrepreneurs varies by region. Interestingly, although a larger part of MIE and SEs are located in Java, as also the majority of population, non-primary economic activities, and educated people in the country are found in this island, Nusa Tenggara (NT) in the eastern part of the country has the highest ratio, means that there are more female than male entrepreneurs in NT. However, this does not necessary reflect the higher spirit of female entrepreneurship in NT than in the rest of the country. NT is a region with a very high unemployment rate. Economic activities such as mining, manufacturing industry, construction, agriculture and banking are more or less stagnated in this island. Most matured or married men are working in low income generating activities such as transportation, motorcycle repair workshops or in agriculture as marginal/subsistent farmers owning less than 0.5 ha of land, or as civil servants. So, as a family survival strategy, in the household, wife is ‘pushed’ to do something outside home to earn some income. Therefore, the high participation rate of female as entrepreneurs in NT is most likely to be a reflection of a family survival strategy rather than a spirit of entrepreneurship. In other words, female entrepreneur development in NT is more a “push” rather than a “pull” phenomenon.
SME Development Policies
Indonesia (DPE), establishment of common service facilities (UPT) in clusters, and implementation an incubator system for promoting the development of new entrepreneurs.
The SMERU Research Institute has mapped out most of the important assistance programs to strengthen MIEs and SEs provided by government and non-government institutes during the period 1997-2003, showing that most are run by the government (SMERU, 2004). The data in Table 11 show that there were 64 institutions with such programs. A total of 594 programs were identified, two-thirds of which were provided by the government.5 Other programs were conducted by NGOs (18%), donor agencies (8%), banking institutions (5%), private companies (2%), and other institutions. The government is still running 127 different support programs.
Table 11: Number of institutions and assistance programs to strengthen MIEs and SEs, 1997-2003 Number of assistance programs
Still continuing Institutions Number of institutions
Total
Table 12 shows the type of assistance provided by these programs. The number of activities within each program also varied, but generally ranged from between one and three. In total, the most common types of activities were the provision of training (22.9%), capital assistance/credit (17.3%), facilitation (16.1%), and the dissemination/introduction of new technology (15.2%).
Table 12: The proportion of assistance programs to strengthen MIEs and SEs based upon the type of activities and the executing institutions.
Government
However, there are no government sponsored-SME development programs specifically for women entrepreneurs. This is one serious lack of government’s efforts to promote the development of women entrepreneurship. An official
from the State Ministry of Cooperative and SME, i.e. the national coordinator of all SME development programs from all departments and institutes, told the author once that such women entrepreneur-specific programs are not necessary since both male and female owners of SMEs in principle are targeted by existing programs. However, as he said further, female participants in for instance training programs are generally few as they are more neglected to participate not because of some discrimination criteria put by the providers but mostly because of cultural constraints. Female entrepreneurs in MIEs and SEs often rely more on their husbands or their families when they face difficulties with their businesses. Also female producers more hesitate to apply for credit than their male counterparts.
Typically, government programs are evaluated according to the number of enterprises who participate. The actual outcome of the program is generally not assessed. Thus, it is impossible to tell for most government programs whether they are effective or not in improving technical ability. Moreover, program benefits should be compared with program costs to determine the net benefits, but this is generally not done (van Dierman, 2004).
Few studies suggest that most SME development programs have not been very successful.6For instance, the Foster Parent (FP) program attempted to create productive linkages between LEs and SMEs, but levels of participation were low and very little training and technical assistance was supplied.7Data 2003 (BPS) show that only 11% of MIEs and 3% of SEs received training and technical assistance from the program.
The general impression is that the FP was essentially a non-market mechanism to pressure LEs and the SMEs into a ‘forced marriage’. International evidence shows dense patterns of linkages and partnerships are not established through mandatory requirements. Rather, they are established when they offer commercial benefits to both parties.
Another more comprehensive technical assistance program has involved the development of technical service units (UPT)) in existing SME clusters of similar industries across provinces. These units provide extension and technical services and training courses, and are staffed by government technical officers who have received special training. Van Diermen (2004) concludes that the UPT extension service program has achieved poor results. It has failed to deliver efficient services; to target appropriate recipients; or to address the important criteria of providing a net benefit to society and/or effectively addressing equity or fairness objectives. In particular, van Dierman notes that: (i) types of services are highly supply oriented rather than demand driven; (ii) most of the machines and equipments are outdated. Originally, these units were supplied
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For discussion explicitly or implicitly on the government programs to support SMEs in Indonesia, see for instance Klapwijk (1997), Sandee (1994, 1995), Sandee et al (1994, 2000, 2002), van Dierman (1997, 2004), and Sato (2000).
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with modern technological machines and equipments. However, over the years, especially after the economic crisis 1997/1998, budget constraints have prevented the replacement of the existing equipment; (iii) services have been delivered indiscriminately to clusters; (iv) the staff of the UPT had not had the appropriate training to respond to entrepreneurs’ needs; and (v) there was not great enough flexibility in the system to respond to the changing needs of SMEs, possibly due to the bureaucratic structure of the UPT.
Based on his analysis of the effects of macro-and micro-policy environments on rural industries in Indonesia, van Dierman (2004) comes to the following conclusions: (i) few of the micro-policies (programs) implemented by the government have had a lasting impact on improving rural SMEs; (ii) a significant number of macro-and micro-policies placed additional costs and burdens on rural SMEs’ compliance. This has led to most operating outside of the formal economy; and (iii) macro-policies that created a favorable economic environment, as reflected by consistently high growth rates in GDP, and not biased in favor of LEs, provided the best stimulus for SME growth.
Based on their study on a furniture cluster in Jepara (Central Java), Sandee et al (2000) conclude that public intervention, not specific programs to help SMEs, is likely to have contributed to the success of this cluster. A comprehensive development package, including technical upgrading through the provision of a common service facility for wood drying; export training, and support for participation in trade fairs; and investment in improvement of the regional infrastructure (container facilities, roads, telephone), helped the cluster to gradually develop export markets.
Sato’s (2000) field study of several clusters in the metal-working and machinery industry in Java concludes that the successful development of these clusters has been achieved without significant government supports. Her impression about effectiveness of government programs on development of SMEs is also supported by Tambunan’s (1998) findings on rattan industries in Padang (West Sumatra). He conclude that the government’s efforts to support the clusters have not yielded positive results. One reason appears to be the lack of coordination between the various government agencies. In many clusters, local government agencies such as regional offices of the State Ministry for Cooperatives and SME; the MoI, state universities; and workers skill training centers (Balai Latihan Kerja) from the Department of Manpower provided some supports. However, sometimes different agencies provided similar schemes/programs, and there was little attempt to coordinate their efforts.
selected group of producers. Such sessions are characterized by a great deal of theory and little attention paid to how to improve the actual running of the business of particular activities. (page 152).
Overall, it is hard to find evidence showing that those programs have been effective in empowering SMEs. But, the policy makers keep believing that their SME development model does work well, which is often measured simply by the annual increase in total number of SMEs (see again Table 1), or the annual increases in total implemented programs and total number of participants. It may also be a case of donor-driven fads and priorities, without any durable government commitment. Moreover, donor sponsored SME development programs in Indonesia (as in many other developing countries) are usually short term activities and after that no follow up. Even, no evaluations have been done by the local executing or donor agencies.
Concluding Remarks
In Indonesia as in many other developing countries in Asia, Africa and Latin America, women predominate in informal economy such as MIEs and SEs, either as workers or entrepreneurs, where they do that as a survival strategy. Many case studies in Indonesia show that because of their participation in informal economic activities, these women are able to keep their family from falling into extremely poor. This suggests obviously how important is the development of women entrepreneurs as a means to alleviate poverty.
The economic contribution of women entrepreneurs, however, has remained largely unacknowledged and unmeasured. In Indonesia, as in many other developing countries, no national data are available which can show how much these female-owned enterprises contribute to total value added or gross domestic products (GDP), and on average how much their contribution to their family incomes. This calls for the extension of national statistic censuses or surveys on economic activities in these countries to include the comprehensive profile of women entrepreneurs, including their role in the economy, not only with respect to employment but also to GDP and export contributions Without such information, the real potential economic capacity of women and its main factors or constraints will never known, and, a good gender sensitive policy which recognizes the value of female economic activities for economic development and poverty reduction can never be developed. Consequently, the ongoing efforts to promote women entrepreneurs and hence to empower women as part of the MDGs will not yield an optimum result as expected.
increase public awareness about the important role that women can play in the economy in general and in the family welfare in particular through various means such as education, television talk shows, women entrepreneurship awards, successful stories about women entrepreneurs in news papers, and so on, is a good effort needs to be taken.
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