Business Engineering’s Insight: World Bank’s Perspective on Small and Medium Enterprises (SMEs) Finance

Business Engineering, as known as BE provides comprehensive insight on doing business with strong engineering. BE intertwines trilogy of Operations & Systems Engineering; Business & Finance; and Information and Communication Technology (ICT). This trilogy constitutes major portion to contribute, in this article, on the SMEs as vital role in most economies, according to the World Bank. Thus, these most economies include Indonesia, implying the next young future leader of Indonesia, need to be prepared.

This article conveys further elaborated perspective of the aforementioned World Bank’s Perspective on SMEs, and its source is obtained and adapted from https://www.worldbank.org/en/topic/smefinance, and the World Economic Forum’s Perspective on SMEs https://www.weforum.org/agenda/2021/09/how-can-indonesian-smes-scale-up/ . Eventually, the World Wide’s Indonesia SMEs reputation on https://www.youtube.com/watch?v=DBPzb5q4sq8

To begin with, and First, the World Bank indicates that Small and Medium Enterprises (SMEs) play a vital role in most economies, particularly in developing countries. SMEs account for the majority of businesses worldwide and are important contributors to job creation and global economic development. They represent about 90% of businesses and more than 50% of employment worldwide. Formal SMEs contribute up to 40% of national income (GDP) in emerging economies. These numbers are significantly higher when informal SMEs are included.  According to our estimates, 600 million jobs will be needed by 2030 to absorb the growing global workforce, which makes SME development a high priority for many governments around the world. In emerging markets, most formal jobs are generated by SMEs, which create 7 out of 10 jobs. However, access to finance is a key constraint to SME growth, it is the second most cited obstacle facing SMEs to grow their businesses in emerging markets and developing countries.

Furthermore, and Second, the World Economic Forum indicates that Indonesia is going through unprecedented times. A new middle class is on the rise, and digital technology has brought increased opportunities to start a business. Currently, in Indonesia as of end of 2021 there are over 62 million SMEs (Small and Medium-sized Enterprises) in the country, which is one SME for every five Indonesians. Of these, 98.75% (61.5 million) are micro-enterprises. Developing these small businesses into bigger ones will be an essential driver of the country’s future development.

Many early-stage SMEs lack a strategic growth plan. There is an urgent need to develop a blueprint to help more SMEs scale up successfully. The main focus in the past couple of years has been digital transformation. For micro-enterprises, however, this is not always the answer; they don’t have the managerial or operational capacities to grow, even with digital help. What is it that allows some SMEs to become established companies?