Innovation is a simple thing that can be the key to success for small, micro and medium enterprises (MSMEs). This can lead to a competitive advantage, increased revenue and profitability, increased customer satisfaction and retention rates, better employee morale and performance, improved reputation, or something else.
The main and most important strategy for encouraging innovation in MSMEs is research and development. In this case, with a relatively small scope of business, it usually involves spending money to develop new products or services that meet market needs for solving problems experienced by customers.
In other strategies with a larger business scope, the business usually innovates more broadly. Such as collaboration with other businesses, leveraging technologies such as artificial intelligence (AI), robotics or 3D printing, engaging employees in innovation activities through training programs and encouraging them to share ideas within their teams or across the organization, or many other things.
Simply put, innovation can be defined as a new idea, method or device that can be used to create something useful. This innovation is important for MSMEs, because it will help companies remain competitive in the market by giving an advantage over other competitors. The purpose of its usefulness value certainly refers to business growth.
However, innovation is not only beneficial for company growth but also for employee personal development and career prospects. Innovative employees tend to be more engaged at work, due to better performance than those who do not innovate regularly or are passive at work.
In Indonesia, there are still many problems with MSMEs that are difficult to solve and even hinder their development. For this reason, quality innovations are needed in Indonesia. Launching from Media Indonesia, Minister of Cooperatives and SMEs Teten Masduki revealed, there are five factors that are obstacles to the development of the MSME sector in Indonesia and of course really hopes for an innovation.
First, there are differences in the definition of MSMEs between supporting institutions, which results in the absence of an integrated MSME database. Second, the large number of MSMEs in Indonesia is not balanced with their contribution to the Gross Domestic Product (GDP). In Indonesia, SMEs dominate as much as 99% of businesses. However, only 57% can contribute to GDP.
Third, the low number of MSMEs that form partnerships. According to Teten Masduki, the low level of MSME partnerships can be seen in the lack of MSMEs networked with global value chains. In this case, the OJK also asked banks to increase credit to MSMEs, because 93% of these MSMEs did not establish partnerships and less than 15% contributed to Indonesia's exports.
Fourth, low access to finance for SMEs. According to data from the Ministry of Cooperatives and SMEs, as many as 88% of MSMEs do not receive or do not receive credit. Banking has also been encouraged to contribute more, but currently the ratio of MSME loans in banks is quite low to total credit, which is only 20%.
Then finally, the low use of technology or digitization in MSMEs. Currently, as many as 94% of MSMEs do not use computers in their business, while 90% do not use the internet. Referring to this data, it is clear that the answer is why Indonesian MSMEs are still having a hard time competing and needing innovation breakthroughs.
- M. Iqbal Al Machmudi. Media Indonesia. 2021. Ini Lima Isu yang Hambat Pengembangan UMKM di RI.
https://mediaindonesia.com/ekonomi/385940/ini-lima-isu-yang-hambat-pengembangan-umkm-di-ri
