The Impact of Covid-19 on Indonesian SMEs: The Role of Internal and External Support

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Gambar untuk The Impact of Covid-19 on Indonesian SMEs: The Role of Internal and External Support
The Covid-19 pandemic has undeniably impacted millions of lives across the globe – affecting virtually every aspect of human life, including social behavior, public health, education, and the economy, especially Small and Mid-size Enterprises (SMEs). We can begin to witness mass layoffs just a week into the crisis. Many people, including our friends and relatives lost their jobs and means of livelihood with production halted and industries indefinitely closed. Based on a report by Katadata Insight Center (KIC), SMEs receive 82,9% of negative impact. Studies show that multiple factors contributed to dropping sales of the SMEs, such as people’s decreasing purchasing power, limitations on distribution, manual payment methods, vulnerabilities in supply, shortage of raw material, and human resource scarcity.

SMEs are strong pillar of Indonesia’s economic growth. Hence, our government has played a key role in supporting SMEs by launching the National Economic Recovery or Pemulihan Ekonomi Nasional (PEN) program in 2020 which is currently still under implementation. PEN will not sustain any longer if the internal factors in SMEs fail to adapt to the new normal because the pandemic has brought about forced changes in people’s lives and work style to fit a contactless society. Limitations on human mobility have changed consumer behavior which in turn has certainly impacted the patterns of the buying and selling process for some time to come. The Indonesian Chamber of Commerce and Industry recorded that only 13% of Indonesian SMEs have already adopted digital form. It may take time and several new changes, but SMEs should have started to transform into digital form in order to survive, even after the pandemic.

Digitalization and digital tools can help SMEs create additional values such as higher engagement of customers, optimization of processes, transformation of products and services, and empowerment of employees. While it may seem like a long journey to the top, the initial step in the direction can be joining the e-commerce club. A high percentage of consumers today are savvy digital natives, and their numbers continue to rise rapidly. The Ministry of Communication and Informatics claimed that online purchase increased up to 400% during the pandemic. It is strong supporting evidence that evolving into a digital platform is a valuable option.

This pandemic has been difficult on all of us. The economy experienced a fall in revenue, economic growth, and industrial development due to the restricted mobility, followed by a snowballing effect on jobs and employment. Hopefully, Indonesian SMEs can survive through the pandemic, with the programs that have been introduced by the government. Lastly, experts advise that government effort should be complemented by the willingness and action of SMEs to adapt to the new normal, so we can go through this together and see the future better ahead.

Picture source: Image by Kompas


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Aditiya Irawan
couldnt be more agree. the internal and external support during the pandemic is what pushing us alive. great job rosa, you explained it very well!
Sopphie Van schuyler
i hopes that the pandemic will end soon so that everyone can return to their normal activities. i believes everyone must have their own difficulties and that they are not easy to overcome when we feel hopeless. I am sure everything will be beautiful in its time
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