The number of micro, small, and medium enterprises (MSMEs) in Indonesia is estimated to be more than 65 million, and they contribute 60 percent of the national GDP, approximately Rp9,000 trillion.
However, it’s not easy for MSMEs to progress and expand due to a lack of financial management capability and strategy. Eighty-two percent of small businesses close due to cash flow issues. Therefore, there’s a need for financial literacy education.
This emerged in the UGMPreneur public lecture held by the UGM Faculty of Agricultural Technology on Friday (October 20).
The speakers at the event were Tony Wenas, President Director of PT Freeport Indonesia (FI), and Rico Tedyono, Co-Founder of Komunal Fintech.
Tony Wenas stated that Freeport Indonesia, one of the largest copper and gold mining companies in the world, is mentoring MSMEs in Papua, especially those belonging to indigenous communities.
Besides the company’s social and community programs, supporting MSMEs is expected to boost the circulation of money in Papua and nationwide, including from the activities of purchasing goods and services from Freeport Indonesia, totaling more than Rp50 trillion, which can also benefit Papua’s MSMEs.
“The money circulation from Freeport Indonesia’s activities is huge within the country. Approximately Rp50 trillion circulates annually within the country. So far, Freeport Indonesia has become the main economic driver in Papua, especially in Timika,” Wenas said.
“Our colleagues (MSMEs) in Papua require fairly extensive mentoring so that we can ultimately import goods and services from the region.”
He mentioned that in 2022, Freeport Indonesia mentored 199 MSMEs, including 99 micro-businesses, 92 small businesses, and five medium-sized enterprises.
Of the types of businesses, 47 percent were in trade and retail, 51 percent were in services, and 3 percent were in construction.
“This social investment we undertake is to encourage local growth and sustainability in providing goods and services, increase the competitiveness of entrepreneurs, and enhance the use of local goods and services for Freeport Indonesia’s operations,” he explained.
Wenas added that these business people are from the native tribes of Papua living around the company’s operational areas, involving two main indigenous tribes: the Amungme tribe in the highland Mimika region and the Kamoro tribe in the lowland region, along with five kinship tribes comprising the Dani, Damal, Nduga, Moni, and Mee tribes.
Rico Tedyono emphasized that MSMEs should gain financial literacy, especially in managing the financial aspect of their businesses, as 82 percent of small businesses fail due to cash flow issues.
“Many struggle to thrive due to a lack of financial business knowledge, making financial literacy vital for business people,” he elaborated.
Moreover, he highlighted that many business people still mix personal account funds with company accounts, which should be separated for the company to operate sustainably.
“Only 5 percent understand finance, and all investors usually request financial reports,” he pointed out.
He provided tips for business people to keep their financial balance healthy by consistently being efficient with any incurred costs and aiming to increase profits by reducing expenses.
“Don’t just focus on increasing revenue; focus on reducing costs. You will be forced to think about how, with my limited resources, I must still profit in tough financial conditions,” Tedyono concluded.
Author: Gusti Grehenson