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MSMEs Are: Definition, Type, Up To Business Idea

Admin BFI
4 October 2022
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MSMEs Are: Definition, Type, Up To Business Idea

The existence of MSMEs plays an important role in Indonesia's economic growth. The term MSME is a term that has often been heard on many occasions, especially on issues related to business.

Then, what is MSME and what are the important points that we need to know about this? Sobat BFI, let's look at the following article!

 

1. Definition of MSME

MSME stands for Micro, Small, and Medium Enterprises. Broadly speaking, MSMEs are productive businesses that are owned either individually or by business entities that have met the criteria as micro-enterprises.

For more details, the definition of MSME is contained in the Law of the Republic of Indonesia No. 20 of 2008 which states that MSMEs are types of businesses that include micro, small, and medium enterprises.

Meanwhile, according to the World Bank, the definition of MSME is a business categorized according to the number of employees, asset value, and income. The full explanation is as follows.

1.1. Micro Enterprise

Have no more than 30 employees with an annual income of no more than $3 million dollars.

1.2. Small Enterprise

Have no more than 100 employees with an annual income of $100 thousand dollars with total assets owned not exceeding $100 thousand dollars.

1.3. Medium Enterprise

Has a capacity of a maximum number of 300 employees with an annual income of up to $15 million dollars and the value of assets owned reaches $15 million dollars.

2. Types and Characteristics of SMEs

MSMEs are businesses that are classified into three types based on the annual turnover, the number of assets or wealth, and the number of employees owned.

To find out more details, let's discuss the three types of MSMEs that exist as follows.

3. Micro Business

The first type of business in MSMEs is micro-enterprises. This business is a productive economic business owned by individuals or business entities on a micro scale.

The characteristics are:

  • Ineffective Financial Management (Generally Still Mixed With Personal Finance)
  • The maximum sales revenue per year is IDR 300,000,000
  • Business Assets Owned at Most IDR 50,000,000 (Excluding Assets in the Form of Land or Buildings)
  • HR Less Than 4 People

Examples of Micro Enterprises:

1. Small Business in the Market

2. Peddlers

3. Street Vendors

4. Small Business

The second type of business that exists in MSMEs is small business. Small business can be interpreted as a productive economic business that is independent or stand-alone.

In other words, this business is owned by an individual or a group which is not part of a company or branch of the main company that is classified as a medium or large business.

The characteristics are:

  • Acquisition of Sales Results or Turnover per Year Ranges Between IDR 300 Million To IDR 2.5 Billion
  • Financial Management Is More Professional When Compared To Micro Business
  • Owned Business Assets Range Between IDR 50 Million To IDR 300 Million (Excluding Assets in the Form of Land or Buildings)
  • Have HR From 5 To 19 People

Small Business Example:

1. Catering Business

2. Photocopying business

3. Motorcycle Workshop Business

4. Crispy Tofu Business

5. Medium Enterprise

The third type of business that exists in MSMEs is medium-sized enterprises. Like small businesses, medium-sized businesses are productive economic businesses, are independent or stand-alone, and are not owned by large companies or branches of the main company.

As for the characteristics:

  • Acquisition of Sales Results or Turnover Per Year Ranges Between IDR 2.5 Billion To IDR 50 Billion
  • Business Assets Owned Above Rp500 Million (Excluding Assets in the Form of Land or Buildings)
  • Already Have Legality For Financial Management
  • Have HR 20 to 99 people

Examples of Medium MSMEs:

1. Building Shop

2. Great Restaurant

3. Homemade Bakery

6. The characteristics of SMEs

The following are the characteristics of SMEs so that it is easier for you to understand them.

1. The place of operation can be changed at any time when needed

2. Products sold are not permanent. At any time, business owners may sell or offer other products

3. Generally do not have a complete administration. Financial management is still often mixed with personal finance

4. Some do not have business licenses and other important legalities such as NPWP

5. Some businesses do not have access to banking, some have access to non-bank financial institutions

5. The existing human resources in MSMEs are human resources who are generally not sufficiently honed or skilled in their fields

7. MSME Business Idea

Talking about MSME businesses, of course there are very diverse businesses. As quoted from gramedia.com, some examples of SMEs are as follows.

UMKM Adalah

Image Source: Pexels/Amina Filkins

7.1. MSMEs in the Culinary Sector

The culinary field in SMEs is one of the most in demand. A business in this field can be started with any capital, it does not need to be large as long as it is willing to innovate and be able to compete with competitors.

The reason is that food is the most sought-after commodity considering that food itself is part of the primary needs that must be met every day.

Business ideas that you can try in this field include crispy tofu businesses, Korean street food businesses, non-cholesterol foods, market snacks, and so on.

7.2. MSMEs in Agribusiness

The agribusiness sector in MSMEs is a business related to the agricultural sector. This field is also loved by many people because Indonesia is an agricultural country, where the people's livelihood is still dominated by the agricultural system.

Not only that, but not a few people are also fond of farming for hobbies or personal pleasure.

Business ideas that you can try if you are interested in this field include selling agricultural needs such as plowing tools, plant fertilizers, plant seeds, gardening tools, ornamental plants or selling flowers, and others.

7.3. MSMEs in the Automotive Sector

The third most sought-after sector in MSMEs is the automotive sector. Although it is not easy to implement, the public's interest in the automotive sector has never subsided.

Every year there are always new products, both cars, and motorcycles. You can take advantage of the opportunities that exist by starting a business in the automotive sector.

As for business ideas that you can try, namely a motorcycle repair shop, a motorcycle, and car wash, a special shop for vehicle spare parts, and a car travel business.

7.4. MSMEs in the Beauty Sector

Beauty trends are now increasingly widespread in various parts of Indonesia. The beauty sector in MSMEs is one of the opportunities that can lead you to a fantastic value of rupiah coffers.

This is certainly in line with the character of the Indonesian people who have begun to understand the importance of taking care of the body from head to toe, both women and men.

Well, for business ideas that you can try, namely selling skincare or make-up. To sell both or one of these commodities, you can start from Jastip, Reseller, or open offline and online stores.

7.5. MSMEs in the Fashion Sector

MSMEs are businesses that are closely related to innovation, without exception in the fashion sector where the existing trends are growing very rapidly and rapidly.

If you are interested in starting an MSME in this field, there are some business ideas that you can use as references, namely becoming a reseller of contemporary clothes, imported clothes, or certain brands, or opening a convection business.

As additional information, if you already have a business that is included in MSMEs, be it micro, small, or medium, you can register your business with the government to get legality in the form of a business license. So, later your business can run more smoothly.

8. How to Get Capital to Build MSMEs

How are you BFI friends, are you interested in opening your own business? If you need capital, BFI Finance is ready to help you.

With the guarantee of BPKB Motors, Cars, and House Certificates, we will process your business capital loan application quickly and of course with low-interest rates.

You can access more information regarding loans and other attractive offers via the following link.

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Disbursement of funds up to 85% of the value of the vehicle and a tenor of up to 3 years.

BPKB Motor Guarantee

Loan funds with a fast process and a maximum tenor of up to 18 months.

Home Certificate Guarantee

Low interest starts from 0.9% with a long tenor of up to 48 months.

Thus the information about MSMEs is Definition, Type, Up to Business Idea. Hopefully, this article can make it easier for you to understand more deeply MSMEs and other important points. Stay optimistic and persevere in your business. Business greetings!

Get other interesting information about business ideas, lifestyle, and loans on the BFI Blog. Updates every Monday-Friday!

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