This chapter assesses the system of business development services (BDS) in Indonesia. It presents information on the demand for such services by small businesses, describes the evolution and current offer of BDS in Indonesia, and analyses in detail the recent initiative of the Integrated Business Services Centres for Co-operatives and SMEs (PLUT-KUMKM Centres). There are currently a large number of BDS programmes run by different ministries in Indonesia. The Ministry of Co-operatives and SMEs is working to improve the standardisation of BDS and to consolidate the supply of BDS nationwide through the PLUT-KUMKM Centres. This initiative can help rationalise the offer of government-supported BDS, especially if it succeeds in building further synergies with other existing similar programmes.
SME and Entrepreneurship Policy in Indonesia 2018
Chapter 7. Business development services for SMEs and entrepreneurship
Abstract
Introduction
The concept of “business development services” (BDS) refers to services aimed at enhancing the productivity and competitiveness of SMEs through the upgrading of managerial and technical skills, access to markets, new or improved technologies, and appropriate financing mechanisms (see Box 7.1). Micro and small enterprises often cannot afford such services at market rates, leading many governments in OECD and non-OECD countries to offer subsidised BDS.
Government-supported BDS can be administered directly by public agencies, private-sector organisations (e.g. chambers of commerce and business associations), NGOs or a combination of the three (Storey, 2003). The services offered often include business diagnostics, information and advice, and coaching and mentoring, which can be delivered in physical spaces (e.g. one-stop shops and business services centres) or online (Mole, 2018).
Box 7.1. Definition of business development services
Business development services can be defined as “…services that improve the performance of the enterprise, its access to markets, and its ability to compete (…)”. They include a wide array of business services, both strategic and operational. Operational services are those needed for day-to-day operations, such as information and communications, management of accounts and tax records, and compliance with labour laws and other regulations. Strategic services can help the enterprise to identify and service markets, design products, set up facilities, and seek financing” (Committee of Donor Agencies for Small Enterprise Development, 2001).
The demand for BDS by Indonesian small enterprises
Survey data from the Central Bureau of Statistics (BPS) offer an insight into the demand and use of BDS and training services by Indonesian small industry-based companies (1-19 employees). In 2014 and 2015, only 4.5% and 4.2% of these companies had received business advisory services respectively (Table 7.1). Between 61% and 65% of the surveyed enterprises reported that they had not made use of such services due to a lack of awareness, while another 16% indicated that they did not know how to access these services. The government could seek to remedy this through awareness-raising campaigns on existing BDS programmes and opportunities and through ensuring that these services are available nationwide through physical government offices, mobile support centres or partnership arrangements with private-sector BDS organisations.
For the small proportion of small industry-based enterprises that used business advisory services, government programmes were the most used singular source, followed by BDS provided by co-operatives and banks. As shown in chapter 6, there is also variation in the use of business advisory services across Indonesian provinces.
Table 7.1. Proportion of industry-based small enterprises receiving business advisory services, 2014 and 2015
Survey of industry-based businesses with 1-19 employees
|
|
2014 |
2015 |
|||
|---|---|---|---|---|---|
|
Number of SMEs |
% |
Number of SMEs |
% |
||
|
Total number of SMEs |
3 505 064 |
100% |
3 668 879 |
100% |
|
|
Received business advisory support |
159 475 |
4.5% |
153 884 |
4.2% |
|
|
Did not receive business advisory support |
3 505 064 |
95.5% |
3 515 787 |
95.8% |
|
|
Reasons for not having received business advisory support |
|
Of the 95.5% |
|
Of the 95.8% |
|
|
|
Did not know about the service |
2 047 987 |
61.2% |
2 269 425 |
64.6% |
|
|
Did not know the procedures for accessing it |
536 076 |
16.0% |
555 605 |
15.8% |
|
|
Not interested |
556 231 |
16.6% |
520 318 |
14.8% |
|
|
Request for assistance was rejected |
41 003 |
1.2% |
47 079 |
1.3% |
|
|
Other |
164 292 |
4.9% |
119 909 |
3.4% |
|
Percentage who received business advisory support (4.5% in 2014 and 4.2% in 2015) organised by: |
|
Of the 4.5% |
|
Of the 4.2% |
|
|
|
Government programme |
54 464 |
33.0% |
63 532 |
40.7% |
|
|
Co-operatives |
34 929 |
21.2% |
35 303 |
22.6% |
|
|
Bank |
23 989 |
14.5% |
26 429 |
16.9% |
|
|
Private |
12 714 |
7.7% |
10 307 |
6.6% |
|
|
NGO |
5 219 |
3.2% |
3 104 |
2.0% |
|
|
Other (e.g. chamber, business association, etc.) |
33 683 |
20.4% |
17 519 |
11.2% |
Source: Central Bureau of Statistics (BPS), “Micro and Small Manufacturing Industry Survey”.
The same BPS survey also reveals that in 2015 only 4.3% of the 3.66 million industry-based small businesses undertook any form of workforce training (Table 7.2). Similarly to business advisory services, government programmes were the most common source of workforce training.
Table 7.2. Proportion of industry-based small enterprises receiving training, 2015
Survey of industry-based businesses with 1-19 employees
|
|
Number of SMEs |
% |
|
|---|---|---|---|
|
Total number of SMEs |
3 668 879 |
100% |
|
|
Have never received training |
3 512 434 |
95.7% |
|
|
Have received training |
156 439 |
4.3% |
|
|
Source of training for the 4.3% of SMEs that received training: |
Of the 4.3% |
||
|
|
Government programme |
96 550 |
60.4% |
|
|
Themselves |
22 578 |
14.9% |
|
|
Private sector |
20 186 |
12.6% |
|
|
NGO |
10 015 |
6.3% |
|
|
Other |
10 441 |
6.5% |
Source: Central Bureau of Statistics (BPS), “Micro and Small Manufacturing Industry Survey”.
The evolution and current offer of BDS programmes in Indonesia
Private-sector BDS
The Indonesian government’s first BDS policy in the 1990s consisted in subsidising the activity of private-sector BDS consultants working with SMEs, with the long-term goal of helping the rise of local BDS markets. In this first phase, the government would provide a small amount of initial operational capital to private-sector consultants willing to offer professional services to SMEs, which were in turn encouraged to get together to receive the technical assistance. This approach reflected the general principles for donor interventions in BDS for small enterprises, notably that sustainable BDS would be best achieved if delivered by the private sector on a user-pay basis (Committee of Donor Agencies for Small Enterprise Development, 2001).
From the early 2000s, however, the Indonesian government grew unsatisfied with this approach. The quality of the consultants was uneven and often unpredictable, thus causing strong heterogeneity in the quality of services across the country. Furthermore, most consultants were based in large urban areas, leaving SMEs in many parts of Indonesia underserved or unserved. Finally, in a system where only part of the services cost was covered by the government, most consultants preferred working with larger SMEs which could pay more, thus leaving smaller SMEs underserved.
SME Business Clinics
As a result, in 2006, the Ministry of Trade launched the so-called SME Business Clinics to provide free training and advisory services to SMEs in areas such as business management and access to markets, capital, raw materials and technology. The initial phase of this project was funded by the Ministry of Trade with the involvement of many other government and non-government institutions (e.g. the Ministry of Co-operatives and SMEs, Bank Indonesia, Bank Rakyat Indonesia and the Chamber of Commerce and Industry) in its implementation. Since the very beginning, this policy initiative partnered closely with local governments, which were expected to fund the activities of SME Business Clinics after the initial period of central government support. SME Business Clinics still exist today, but they are mostly operated at the local level by local governments and universities.
The Ministry of Industry’s Sentra Programme and SMI Technical Services Units
In the mid-2000s, the Ministry of Industry also started to encourage the creation of self-help groups, called SMI Sentras, to upgrade managerial skills in small and medium industry-based enterprises (SMIs). A “Sentra” is a group of at least five SMIs, in a certain geographic region, with similar raw material needs, production processes or end products, which come together to receive technical assistance facilitated by external consultants recruited by the Ministry of Industry. The technical assistance focuses on human resources capabilities, technology development and market development.
In 2016, there were more than 7 400 Sentra groups in Indonesia involving around 37 000 SMIs, with each SMI field consultant working with six Sentra groups. The Ministry of Industry plans to further expand this programme, with budget allocations of IDR 245 billion in 2016 (for new SMI Sentras in 191 districts) and IDR 531.5 million in 2017 (for new SMI Sentras in 14 districts). Proposals for the new SMI Sentra must come from district governments, with the requirement that property used for the Sentra is government-owned.
The Ministry of Industry also operates 40 Small and Medium Industry (SMI) Technical Services Units through a network of about 500 technology extension workers. These workers proactively reach out to SMEs in their respective local areas to offer free consulting and technical assistance in technology-related areas such as product development, intellectual property acquisition, design and product marketing, standard certification and energy use management.
The Ministry of State-Owned Enterprises’ Creative Houses
A more recent development has been the creation of so-called Creative Houses by the Ministry of State-Owned Enterprises (SOEs). These facilities, started in 2016, are a corporate social responsibility initiative of the Ministry of SOEs, targeting SMEs with technical guidance and assistance in product development, access to finance, marketing and promotion, and skills development. The ambition of the Ministry of SOEs is to have 545 of these facilities all over Indonesia.
Other initiatives
Other ministries and agencies operate programmes that provide BDS to SMEs, although these tend to be more limited in scope and number. For example, the Ministry of Youth and Sports operates about 60 Youth Entrepreneurship Centres to provide training and advisory services to clusters of young entrepreneurs (similar to the Sentra model). The Ministry of Manpower runs 22 Productivity Centres and the Business Advisory Programme, both of which target entrepreneurs and small business owners from disadvantaged social groups. Since 2015, the Financial Services Authority (Otoritas Jasa Keuangan, OJK) has established Centres for Education, Consumer Services and Financial Access for SMEs (PELAKU) at its regional branch offices. In 2017, the PELAKU Centres operated in 14 OJK branches, although the final objective is to have one in each of the 35 regional offices. The main activity of the PELAKU Centres is to facilitate access to credit and other sources of finance through dissemination of information on financial services and bank requirements.
The experience of the Integrated Business Services Centres for Co-operatives and SMEs (PLUT-KUMKM Centres)
In 2013, the Ministry of Co-operatives and SMEs launched the “Integrated Business Services Centres for Co-operatives and SMEs” (PLUT-KUMKM Centres), the main objective of which is to provide comprehensive, integrated and affordable (free) BDS to SMEs and co-operatives through a network of local one-stop shops. The centres aim to cover seven key business competencies: management advice; product quality and intellectual property; legal affairs; access to finance; marketing and promotion; ICT adoption; and business networks. A key principle of these centres is that their staff and consultants will reach out to small business owners in their workplaces, similarly to the Ministry of Industry’s SMI Technical Services Units and their extension workers.
In 2017, there were 51 PLUT-KUMKM Centres in operation, which had offered assistance to nearly 200 000 entrepreneurs and small business owners. The goal is to have 200 such centres by the end of 2019, which requires additional funding and which still might not be enough to guarantee a widespread presence of the centres across the country. By way of comparison, the Brazilian Micro and Small Enterprise Agency (SEBRAE) operates a network of 700 SME Support Service Centres for a population of 207 million, while Canada, with its small population of 36 million dispersed over a very large territory, has a network of 240 federally-funded Community Business Development Centres.
The PLUT-KUMKM Centres build on a close collaboration between the Ministry of Co-operatives and SMEs, provincial governments and, in some cases, local authorities (regencies and cities). The Ministry has issued technical guidelines on the design (e.g. the centres must have a front office, a consulting room, a training room and a networking room), organisational structure and technical responsibilities of the centres to ensure homogeneity in services delivery across the country. Furthermore, it has produced a Standard Operating Procedures Manual to give guidance to provincial and regency/city governments on how to operate a PLUT-KUMKM Centre. At the local level, the operations of the centres are managed by the department of the provincial government responsible for SME empowerment. Provinces have, sometimes, decided to build more than one centre to reach locations beyond the provincial capital. In such cases, the main provincial PLUT-KUMKM Centre co-ordinates and supervises the work of the centres located elsewhere within the same province.
The original aim of the national government was to meet the initial costs of each PLUT-KUMKM Centre, including the construction of the facilities intended to host the centres and the operational costs of the centres for the first three years of operations. However, due to budget constraints, only 5 of the 90 requests from provinces could be approved in 2017. As a result, since 2018, provinces submitting proposals for the PLUT-KUMKM Centres must agree to meet the costs related to the physical facility of the centre, possibly by renovating an existing public building, with the central budget only covering operational costs (i.e. the cost of the staff giving advice and training) for the first three years. Eventually, it is expected that provincial and local governments will fund the operations of the PLUT-KUMKM Centres through their own budgets.
Besides the close partnership between the central government and the provincial/local governments, the PLUT-KUMKM initiative rests on the involvement of private-sector organisations with strong BDS expertise. This has the advantage of leveraging existing private-sector expertise and creating a local demand for BDS.
The main private-sector organisation involved in the operations of the PLUT-KUMKM Centres is the Association of Business Development Services Indonesia (ABDSI), whose members account for 40% of the approximately 300 consultants/advisors in the existing 51 centres. Together with ABDSI, the Ministry of Co-operatives and SMEs has developed a four-level (i.e. beginner, intermediate, advanced and master) competency standard for BDS providers leading to a national qualification. The development of the competency standard has been informed by a review of experiences in other countries and has benefited from the collaboration of the Ministry of Manpower.
An essential component in the management of the certification programme will be the establishment of a national certification body. ABDSI is in the process of creating a Professional Certification Institute that could play this role. The Pelita Harapan University also has experience certifying small business counsellors under an agreement with the Asia-Pacific Economic Co-operation (APEC) and could also provide valuable inputs into this process.
The Ministry of Co-operatives and SMEs also collaborates with ABDSI to reach out to parts of the country lacking a PLUT-KUMKM Centre and to gather information on the profile of SME clients visiting and using the services of the centres. This latest development could permit the collection of useful information for the monitoring and evaluation of the activities of the PLUT-KUMKM Centres. Data collected from each PLUT-KUMKM Centre should, however, go beyond simply counting the number of users to report on their characteristics (e.g. gender, sector of activity, stage of business development, etc.), types of services received, and level of satisfaction with the information and assistance received. This information should be collected from each PLUT-KUMKM Centre into a centralised electronic system to make aggregate analysis possible.
Other third-party organisations also participate more occasionally in the operations of the PLUT-KUMKM Centres. For example, some of the centres have installed SME Digital Villages in partnership with Telkom Indonesia to improve the quality of market access for co-operatives and SMEs, while the Chamber of Commerce and Industry (KADIN) delivers training courses on small business management in some of the centres.
Moving forward, it will be important to increase the number of PLUT-KUMKM Centres to better reflect the geographical expanse and population size of Indonesia, although this could also partly be achieved through better integration of the PLUT-KUMKM Centres with other similar government programmes, such as the Creative Houses of the Ministry of SOEs and the SMI Technical Services Units of the Ministry of Industry. Stronger collaborations with other stakeholders of the national entrepreneurial ecosystem, such as universities, should also be developed. The case study of the Negosyo Centres from the Philippines provides an example of how another ASEAN country has built an integrated BDS offer nationwide through a single visible entry point for small business owners and entrepreneurs (see Box 7.2)
Box 7.2. International inspiring practice: Negosyo Centres, Philippines
Description of the approach
The Negosyo Centres (NCs) were established under the Republic Act 10644 of 2014 (also known as the “Go Negosyo Act”) in order to enhance the contribution of SMEs and new entrepreneurs to economic growth and social cohesion. The Act stipulates that the NCs are governed by the Micro, Small and Medium Enterprise Development (MSMED) Council under the oversight of the Department of Trade and Industry (DTI), and that they should be established in every province, city and municipality through public-private partnerships.
The main tasks of the NCs involve the provision of: i) assistance with business registration, including co-ordination with the respective local government units (LGUs); ii) business information, including on training opportunities, financial institutions and government support programmes; iii) business advisory services, including free one-on-one advice and the organisation, together with the local chambers of commerce, of a mentoring programme for future and existing entrepreneurs.
NCs are classified into three operating models. “Full-Service Centres” have 3-5 business counsellors and administrative support staff and cover the whole range of activities. “Advanced Centres” are staffed with 2-3 business counsellors and need the support of the DTI or a Full-Service Centre in order to execute certain programmes and activities. “Basic Centres” are staffed with one business counsellor and mainly disseminate business-related information and provide assistance in the processing of documentation.
By the end of 2017 there were 789 NCs in the Philippines, 691 of which were located in local government offices (87%), 76 in DTI regional offices (10%) and the remaining 3% in universities or NGOs. The majority of the NCs are Basic Centres (352, i.e. 45% of the total), 35% are Advanced Centres (275) and 20% are Full-Service Centres (162). As of end-2017 the NCs employed 1 682 people (average of 2.1 persons per centre) and had assisted a total of approximately 636 000 clients, about half of whom with business registration, 15% with management training support, and 2% with access to finance-related services. Based on information from government documents (Multi-Phase Plan of 2014-2022), the DTI plans to establish an additional 526 centres by the end of 2022.
To establish an NC, local stakeholders, including the local DTI office, the LGU, the business community, academia and the financial services sector, meet to discuss and identify their individual roles and responsibilities, which are formalised in a legal agreement. Thereafter, the different representatives participate in a Learning Workshop offered by DTI covering the operational details related to managing an NC. In cases where an LGU already operates a business development centre, it can apply to the DTI to upgrade it into an NC to offer a wider and more consistent range of services.
The NCs operate based on a co-funding arrangement by which the host cities and municipalities provide the physical space and the DTI assumes responsibility for the basic equipment and the training components of the programme.
Success factors
A critical success factor in the NC Programme has been co-ordination and collaboration with the local level of government and the private sector, for example to secure subscription plans to advanced network connectivity (e.g. Quickbooks Online and Microsoft Office 365 Accounts).
The existence of a co-ordinating body for the NCs at the DTI, the “Negosyo Centre Programme Management Unit” (NC-PMU), has also played an important role. In addition to overseeing the establishment of new NCs, the NC-PMU holds monthly meetings and workshops with the NC co-ordinators to monitor developments and ensure that the operations of all centres comply with national standards.
Furthermore, good internet connectivity has also proven crucial. For example, the use of cloud-based software enables all NCs and the NC-PMU to store, manage and transmit large amounts of information across regions and has enabled the creation of the Negosyo Centre Monitoring System at the NC-PMU.
Obstacles and responses
Ensuring the competences of the staff working in the NCs has proven the main challenge. In this respect, the “Go Negosyo Act” stipulates that DTI business counsellors and staff working in the NCs must undergo the Small Business Counselling Course (SBCC) training which covers modules on business diagnostics, strategic marketing, operations management, financial management, and investment promotion. As of December 2017, 2 800 NC staff and business counsellors had participated in the SBCC training.
Relevance to Indonesia
The Negosyo Centres illustrate the benefits of building a single visible entry point for the supply of government BDS nationwide at a moment when the Indonesian government is seeking to reduce the current fragmentation in its offer of BDS programmes. Other interesting insights from the experience of the Negosyo Centres relate to the development of an online platform for managing information and data, the emphasis on performance reporting and monitoring, and the value of developing partnerships with private-sector suppliers of business management tools.
Sources for further information
The Department of Trade and Industry (DTI) website at: http://www.dti.gov.ph/programs-projects/negosyo-center/
It will also be important that the national BDS offer reach rural and remote regions, as these often have specific support needs (Best et al., 2004). This could be done through Mobile SME Support Centres, such as those in use in Canada and Kazakhstan (see Box 7.3), or through emulating the practice of SEBRAE’s SME Support Service Centres, which offer a virtual platform for entrepreneurs to access training and counselling services online. In this endeavour, the Ministry of Co-operatives and SMEs should work in collaboration with the Ministry of Villages, Disadvantaged Regions and Transmigration.
Box 7.3. Mobile Entrepreneur Support Centres, Kazakhstan
Kazakhstan’s Ministry of National Economy operates a “single window” network of Entrepreneurship Support Centres in partnership with the offices of the National Chamber of Entrepreneurs. To address the needs of SMEs in rural villages, the government of Kazakhstan has created Mobile Entrepreneur Support Centres as an integral component of the Entrepreneurship Support Centres. These mobile units make regularly scheduled visits to rural areas to provide initial advice and information to aspiring and existing entrepreneurs, as well as to disseminate information and handouts on government programmes.
Source: OECD (forthcoming), SME and Entrepreneurship Policy in Kazakhstan 2018, OECD Publishing, Paris.
With respect to the everyday operations of the centres, it would be recommended that PLUT-KUMKM staff be aware of other national and local government support programmes and local private-sector BDS specialists to be able to perform effective referral services. This task would be facilitated by the mapping of existing support programmes and by making the information available on an online portal accessible to PLUT-KUMKM staff (see also chapter 4 and the example of the Canada Business Network).
Finally, the Indonesian government could encourage the clients of the PLUT-KUMKM Centres to complete a diagnostic assessment of their current strengths and weaknesses to identify the areas in greatest need of improvement. This diagnosis would allow the staff of the centres to better tailor programme assistance to the needs of the businesses, including referrals to consultancy advice and technical assistance in areas not covered by the centres. In this field, Indonesia could benefit from the experience of Malaysia, where the national SME agency (SME Corp. Malaysia) has developed SME diagnostic assessment tools tailored to micro-enterprises (M-CORE) and small and medium-sized enterprises (SCORE) (see Box 7.4).
Box 7.4. International inspiring practice: SME diagnostic assessment tools, Malaysia
Description of the approach
SME Corporation Malaysia (SME Corp.), the SME Agency of Malaysia, has developed two diagnostic tools to assess the capabilities, performance and needs of SMEs: the “SME Competitiveness Rating for Enhancement” (SCORE) and the “Micro-Enterprise Competitiveness Rating for Enhancement” (M-CORE).
SME Competitiveness Rating for Enhancement (SCORE): this online tool enables individual SMEs to assess themselves against seven criteria: financial performance; business performance; management capability and human resources; production capability; technical capability; technology adoption; and quality system/certification. The assessment leads to a 1-5 star-rating which reflects the quality of the business. Upon request of the company, the assessment can be verified by a qualified SME Corp. auditor through an onsite visit. The final assessment report, prepared by the SME Corp. auditor, includes a spider diagram of the firm’s performance against the seven criteria and recommendations for improvement, including the type of assistance needed. The auditor can also work with the enterprise to develop an Action Plan outlining how to implement the suggested actions.
M-CORE (Micro-Enterprise Competitiveness Rating for Enhancement): this is a separate diagnostic tool that assesses the capabilities and competitiveness of micro-enterprises, i.e. businesses with less than five full-time employees or less than MYR 300 000 in turnover. The tool assesses performance in four key business areas: business performance; financial capability; operations; and management.
Micro-enterprises achieving a qualifying rating of Level 1 and above in the M-CORE assessment are eligible to participate in the Micro-Enterprise Enrichment and Enhancement Programme, an integrated approach to strengthen the core business of micro-enterprises and build their capacity. To qualify for assistance, micro-enterprises must be registered and hold a valid business license (i.e. they must be formal businesses), meet the full definition of a micro-enterprise, be in operation for at least six months and be operating on a full-time basis. The application can be submitted online. The programme’s capacity-building components include:
Skills upgrading: short-term courses provided by training centres appointed by SME Corp. Malaysia and focusing on entrepreneurship training (e.g. branding, packaging, etc.).
Advisory services: consulting from business counsellors and members of the SME Corp.’s SME Expert Advisory Panel.
Facilitating access to finance: advisory services from various financial institutions on how to increase the chances of receiving external finance.
Success factors
One of the main benefits of the SCORE and M-CORE tools is the identification of support services that are better matched to individual business needs. For example, for SMEs with a star-rating of 3 or below, SME Corp. concentrates on improving their capacities and abilities through business advisory services, while the 4 and 5-star rated SMEs are more likely to receive support in the form of participation in supply chains and international trade missions.
Obstacles and responses
A main challenge has been to build a cadre of trained auditors able to deliver the back-up support to SMEs completing the online SCORE assessment tool. This was addressed by delivering a training programme to selected consultants in the SCORE methodology, which includes SME site visits to gather additional inputs (through interviews and observations) for the assessment.
One quality of the SCORE tool is to enable SMEs to benchmark themselves again the industry average. This required building an electronic database to collect information on the performance results of all SMEs completing the SCORE assessment form.
Relevance to Indonesia
An SME diagnostic assessment tool could allow the PLUT-KUMKM Centres to better assess the strengths and weaknesses of their SME clients and tailor the intervention accordingly to the areas in greatest need of improvement.
Sources for further information
Business Advisory and Support Division, SME Corp. Malaysia, Kuala Lumpur. Email: sekretariatscore@smecorp.gov.my
SCORE Programme and description at: http://www.score.gov.my.
Conclusions and policy recommendations
There are many BDS programmes and models in Indonesia, such as the SME Business Clinics originally created by the Ministry of Trade; the Ministry of Industry’s SMI Sentra and SMI Technical Services Units; the Ministry of SOEs’ Creative Houses; and more than 1 000 independent private-sector BDS consultants, some of whom are members of the Association of Business Development Services Indonesia (ABDSI). The Ministry of Co-operatives and SMEs is seeking to standardise and consolidate the supply of BDS nationwide through the Integrated Business Services Centres for Co-operatives and SMEs (PLUT-KUMKM Centres), which is a positive development given the large number of programmes providing similar BDS at the national level. In a large country like Indonesia, it will also be important that the BDS offer reach rural and peripheral areas, for example through the deployment of mobile support centres.
A parallel challenge relates to improving the quality and standardisation of the services offered by government-supported BDS centres. In this respect, the implementation of national competency standards through training programmes and the related certification of qualified BDS managers and consultants will be a priority.
Based on the analysis in this chapter, the following recommendations are offered to strengthen the BDS system of Indonesia.
Recommendations on the national business development services (BDS) system
Improve the take-up of BDS among SMEs by raising local awareness about the existence of such services and by ensuring that BDS are available across the whole country.
Consolidate the offer of BDS in Indonesia through the integration, co-location and merger of some of the existing government-backed BDS programmes into the new PLUT-KUMKM Centres.
Develop mobile business development services centres operating out of the PLUT-KUMKM centres to serve the needs of SMEs and entrepreneurs in more remote districts.
Fully implement the national competency standard for business advisors through the development of a national training programme and the establishment of a certification body to attest the qualifications of professionals completing the training.
Develop a diagnostic tool enabling SMEs to assess their performance and business counsellors to tailor the nature of advisory and consultancy services, based on the results of the diagnostic assessment.
Ensure that business counsellors attached to the PLUT-KUMKM Centres are fully aware of existing government support programmes and local BDS consultants to be able to provide appropriate referral services to SME clients.
Convene an annual conference for managers and business advisors of the PLUT-KUMKM Centres for the purpose of competency enhancement, sharing of good practices, and exchange of information and experience.
Enhance the monitoring and evaluation system of the PLUT-KUMKM Centres by collecting and assessing data from users on their characteristics, types of services received, and level of satisfaction with the assistance received. Implement an electronic system to centralise this information for the purposes of aggregate analysis.
References
Best, R., S. Ferris and C. Wheatley (2004), A Guide to Strengthening Business Development Services in Rural Areas, USAID, Washington DC, https://www.crs.org/sites/default/files/tools-research/guide-to-strengthening-business-development.pdf
Committee of Donor Agencies for Small Enterprise Development (2001), Business Development Services for Small Enterprises: Guiding Principles for Donor Intervention, World Bank Group, Washington DC, https://www.enterprise-development.org/wp-content/uploads/BDS-Guiding-Principles-2001-English.pdf.
Mole, K. and J. Capellaras (2018), “Take-up and variation of advice for new firm founders in different local contexts”, Journal of Environment and Planning: Politics and Space, Vol.36, Issue 1.
OECD (forthcoming), SME and Entrepreneurship Policy in Kazakhstan 2018, OECD Publishing, Paris.
Storey, D. (2003), “Entrepreneurship, small and medium sized enterprises and public policies”, in D. Audretsch and Z. Acs (eds.), The Handbook of Entrepreneurship, pp. 473-511, Kluwer Publishing House, London.