Utilizing information technology to empower SMEs

Utilizing information technology to empower SMEs

Empirical evidence shows that small and medium enterprises (SMEs) are the giant sleeping sector in the Indonesian economy. More than 98 percent of Indonesian companies are categorized as SMEs, which account for 58.1 percent of gross domestic product (GDP), 97.2 percent of total employment providers and 14.1 percent of export revenues.

Based on experience, during the 1997/1998 financial crisis, SMEs have the potential to act as a bumper that can ease Indonesia in adapting to current global economic uncertainty.

However, efforts to capitalize on the potentials of SMEs are not easy. There is an indication that the productivity gap between SMEs and their larger counterparts tends to widen over time. This suggests that SMEs have failed to maintain their competitive position in the market. Lower productivity is also an indication that the wage level in SMEs is much lower than that in large enterprises.

Interestingly, the top one percentile of SMEs has higher productivity than that of the average productivity of large enterprises (TNP2K, 2014). SMEs in this percentile have adapted to the digital era and made use of information technology to expand their market, access to sources of capital and to use efficient production techniques. This suggests that utilization of IT should become mainstream in a bid to promote SMEs.

The door is open to using IT as a catalyst to empower SMEs for various reasons.

First, in 2016, almost 52 percent of the Indonesian population (132.7 million people) was connected to the internet (APJII, 2016). Around 66.3 percent (88 million people) of those internet users have Facebook accounts. Accordingly, Indonesia became the fourth-largest country of Facebookers.

Unfortunately, the concentration of internet users is in Java. Around 86.3 million people or 65 percent of total internet users reside in Java. Moreover, most users do not use the internet wisely for economically productive activities.

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