Licensing remains a serious challenge for micro, small, and medium enterprises (MSMEs) in Indonesia. Many business owners struggle with obtaining permits due to limited understanding, complicated bureaucracy, and ineffective systems.
These issues were highlighted in the MSME Class Series #26 discussion titled Licensing and Work Productivity of MSMEs, held at the UGM Directorate of Community Service meeting room, Bulaksumur, Tuesday (Aug. 12).
The discussion, organized by the said directorate, featured three speakers: Nuri Hermawati from the Investment and One-Stop Integrated Services Office (DPMPTSP) of the Yogyakarta Special Region, Seno Ajisaka, Head of Services at the National Standardization Agency (BSN) Integrated Service Office Yogyakarta, and Mohammad Genta Mahardhika, lecturer at the UGM Vocational College (SV UGM).
Nuri Hermawati explained that licensing problems can significantly affect business development, access to capital, and participation in the formal economy. MSMEs face structural challenges, particularly concerning business legality and work productivity. A fundamental issue is that most MSMEs have not yet fulfilled the complete legal requirements.
“Business legality does not only mean obtaining a Business Identification Number (NIB), but also includes product distribution permits such as PIRT (Home Industry Food Permit), halal certification, distribution permits from the National Agency of Drug and Food Control (BPOM), intellectual property rights such as trademarks, and legal business entities,” she said.
According to Hermawati, lack of understanding, limited access to information, and barriers in licensing processes often hinder MSMEs from growing their businesses. In 2023, out of approximately 64.19 million MSMEs, only 5.8 percent had obtained an NIB. This low figure contributes to the small number of MSMEs with halal certification or Indonesian National Standards (SNI), both of which are essential to enter modern and international markets.
For Seno Ajisaka, licensing plays a crucial role in building consumer trust. Proper licensing expands market access, increases product value, and opens export opportunities. Business legality is also a prerequisite for partnering with large industries or official digital platforms.
“Without valid legal documents, MSME products often face obstacles in distribution and promotion, while also being vulnerable to product safety issues and market distrust. The Indonesian government, through various policies, including the Online Single Submission Risk-Based Approach (OSS-RBA), has paved the way for simplifying and accelerating licensing processes for MSMEs,” he explained.
Ajisaka added that institutions such as DPMPTSP and BPOM also play an important role in ensuring MSME products meet established standards, while providing facilitation and guidance for licensing. Unfortunately, many business owners remain unaware of these procedures or fail to fully utilize available support opportunities.
Mohammad Genta Mahardhika noted that business legality alone is not enough. After securing permits, MSMEs face the next challenge: improving productivity. In reality, many MSMEs stop at licensing without enhancing production capacity, operational efficiency, or product quality.
This, he argued, keeps their competitiveness low in increasingly competitive national and global markets. In recent years, many MSMEs have even shown declining business sustainability, with some unable to continue due to stagnant or decreasing performance.
“Therefore, comprehensive efforts are needed to strengthen MSMEs so they become not only legally compliant but also productive and innovative. Managerial capacity, technology adoption, market access, entrepreneurial motivation, and sustained external support are key determinants in improving MSME productivity in a sustainable way,” he explained.
Dr. Rustamaji, Director of Community Service at UGM, emphasized the importance of licensing and efforts to increase MSME productivity. He underlined the need to improve literacy among business owners.
“We hope that MSMEs will be able to develop business planning and growth strategies supported by complete licensing, thereby ensuring protection and building market trust,” he said.
Author: Agung Nugroho