Indonesia is planning to launch an MSME Holding within the next five years to create a stronger connection between small businesses and large industries.
This initiative, originally proposed by MSME Minister Maman Abdurrahman, will be based on an inclusive cluster business model similar to those used in Germany and China.
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The “Mittelstand” model in Germany connects small and medium-sized enterprises (SMEs) with large corporations, where SMEs supply components and services. In China, industrial clusters also operate with small businesses working within larger ecosystems, often with support from the state or corporations. These clusters provide SMEs with resources, infrastructure, and access to broader markets.
The Indonesian MSME Holding aims to group MSMEs into clusters across various sectors, such as culinary, services, and education. Medium-sized enterprises will play an important role in bringing together smaller businesses to increase market influence. This will help the MSMEs produce goods in larger quantities and at competitive prices and reduce production costs.
The ministry has already identified ten priority MSME clusters for this initiative. Four clusters are being explored in Malang, East Java, with sectors like sports and tourism being focused on.
For example, the Wendit Recreational Park has the potential to integrate up to 150 MSMEs, allowing these businesses to supply goods and services to the tourism sector.
The success of MSME Holding will also rely on the support of state-owned banks and credit schemes such as Kredit Usaha Rakyat (KUR). The ministry plans to develop 2-3 clusters by 2025 as a model for the broader initiative, with the goal of creating a self-sustaining ecosystem that enables MSMEs to be more competitive in both local and international markets.
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Currently, MSMEs’ engagement with large industries is mostly limited to corporate social responsibility, missing out on opportunities for greater collaboration.
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