ID to launch MSME Holding to bridge gap between SMEs and large industries

Indonesia is set to introduce the micro, small, and medium enterprises (MSME) Holding within the next five years, aimed at fostering a robust ecosystem linking small businesses to large industries. The concept was originally proposed by MSME Minister Maman Abdurrahman (pictured).

This follows an inclusive cluster business model, similar to successful models in Germany and China. In Germany, the "Mittelstand" model connects SMEs to large corporations, supplying essential components and services for more complex products. This creates an interconnected network that boosts the competitiveness of small enterprises and strengthens the national economy.

China's industrial clusters further mirror this strategy, where small businesses work within larger ecosystems under state-backed or corporate umbrella groups. These clusters provide SMEs with shared resources, infrastructure, and access to broader markets.

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"We need to create a system that allows MSMEs to produce goods in large quantities at competitive prices," Abdurrahman spoke before the Indonesian Employers Association (APINDO) recently. "By grouping MSMEs into a holding company, production costs can be reduced, production volume can be increased, and competitiveness can be enhanced."

Calling on APINDO to establish more tangible business partnerships with MSMEs, the minister highlighted that, at present, MSMEs' engagement with large industries is confined to corporate social responsibility, missing out on more impactful collaboration.

Indonesia's MSME Holding aims to consolidate small businesses into clusters across various sectors such as culinary, services, and education. Medium-sized enterprises will play a pivotal role in aggregating smaller businesses to increase collective market power.

The ministry has already identified ten priority MSME clusters for the initiative, with four clusters being explored in Malang, East Java. One of the sectors receiving attention is the sports industry, which will require deeper collaboration with local government to optimise assets for public-private partnerships.

Additionally, the ministry is focusing on tourism clusters, with Wendit Recreational Park being highlighted as a prime example. This cluster has the potential to integrate up to 150 MSMEs, offering local businesses opportunities to supply goods and services to the tourism sector.

While details on financing remain to be fully fleshed out, micro enterprises deputy Bagus Rachman told local media such as detikFinance that the support of state-owned banks and credit schemes such as Kredit Usaha Rakyat (KUR) would be vital for the success of the MSME Holding.

With plans to develop 2-3 clusters by 2025 as a model for the broader initiative, the ministry aims to create a self-sustaining ecosystem that enables MSMEs to compete more effectively in both local and international markets.

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