Micro Business, The Foundation of National Economy

Saturday, February 20, 2016

Micro Business, The Foundation of National Economy

According to a study on Micro, Small, and Medium Enterprises (MSMEs), there are more than 120 million MSMEs around the globe, with 89 million exist in emerging markets. However, those numbers are the representation of formal enterprises; as informal MSMEs are difficult to calculate (Kushnir, et.al, Micro, Small, and Medium Enterprises Around the World: How Many Are There, and What Affects the Count?, World Bank/IfC, 2010).

Micro Business, The Foundation of National Economy
Basically, there is no exact meaning of, either micro business or small business. Some definitions are used to simplify the measurement of the business, such as the capital required to run the business, the number of individual joining the business, the business location, and so forth. Hence, in order to make it uncomplicated, this article will use the term 'micro business'. Moreover, this business can also be classified as informal business, since it has no business structure. The objective of this article is to provide simple explanations on how micro business contributes to the national economy.

Micro businesses are the root of innovation in the economy, as they can adapt very fast in many circumstances. Practically, they are not affected by the inflation rate, the depreciation of the currency, and other complex economic indicators.

In some countries, including Indonesia, micro businesses offer solutions to those who want to be entrepreneurs. There are various products and services can be sold in the markets: from foods, beverages, snacks, traditional medicine (called “Jamu” in Bahasa), traditional massage, laundry service, and many others.

Based on information collected from micro business owners (during the writer’s simple observations), everyday they need no more than Rp. 200,000 (Indonesian Rupiah, equal to 15.4 US Dollar (US $ 1=Rp. 13,000)) as their capital to produce and sell the products. Approximately, the price of the products are in the range of Rp. 4,000 –Rp. 10,000/item (US $ 0.3 – 0.8). Since the price is not expensive, it can attract many consumers to buy the products; Therefore, it raises the consumption; and the increase in consumption elevates the whole economy.

Although micro businesses are independent and not depending on government support; nevertheless, the government ought to offer assistance in order to amplify micro businesses’ role in the economy.

Thus, the government, especially the local authority, should grant them with some incentives, such as:
  • by providing favorable spaces for micro businesses, so they can perform their businesses without worrying about where to sell the products/services.
  • by conducting regular events, such as traditional or musical events, sport events, etc, and allow micro businesses to participate in those events. Hence, it will give them the opportunities to develop their businesses.
  • by providing media for micro businesses to promoting their products/services.
  • by offering affordable access to financial credits and funding.

Finally, if micro businesses grow; consequently, the aggregate economy spurs, as well. **
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