Entrepreneurial Assistance for SMEs Empowerment

The Challenge

According to FEB UI’s 2018 Small and Medium Enterprises (UKM) and Entrepreneurship Empowerment research institute, the development of SMEs in the country has two main obstacles: capital and marketing difficulties. Capital problems prevented UKM players from expanding their businesses and elevating to the next level. This problem is very much related to financing access matters. The current trend shows that the majority of SME financing is still based on banking sector. Even though the potential for financing through other sectors is still wide open with wider access range.

Financing through the non-banking sector such as cooperatives, leasing, factory, mortgage, capital market; and types of credit financing such as grants, equity, insurance are still not optimized by the government. According to the Chairperson of the Small and Medium Enterprises (UKM) and Entrepreneurship Empowerment Institute FEB UI, this financing trend will lead to financial technology (fintech), so that human labor and certain locations required because the fund could be directly channeled to each device. Another issue that will affect SMEs in 2018 is the development of the creative economy, more than 90% of the creative economy sector is the SMEs group.

Small and Medium Enterprises (SMEs) and entrepreneurs play a major role in achieving the economic aspects of the Sustainable Development Goals (SDGs), especially to achieve the 8th goal of Decent Work and Economic Growth. The Indonesian government will integrate the SDGs into the Medium Term Development Plan (RPJM) with the National Development Planning Agency (Bappenas) as the coordinating body for the implementation of SDGs cross-sector. (Source: http://sdgsindonesia.or.id).

Our strategy

Filantra and Adira Finance Syariah work together to run an Entrepreneurial Assistance program for 50 SMEs players in Solo, Yogyakarta, Cirebon, Malang and Bogor to assist them in matters of capital and marketing with the following activities:

1. Capital Assistance and Business Facilities

Business capital assistance provided for the beneficiaries is Al Qard financing agreements (loans) and business facilities in the form of business equipment assistance.

2. Product Optimization

This product optimization is especially conducted in terms of product branding & certification to strengthen the brand and the legality of the beneficiary’s products to ensure their product can be recognized by public easier. That would also increase the income of beneficiaries.

3. Entrepreneurship Development

Entrepreneurship development activities are carried out once a month in the form of training by practitioners and academics. It aims to increase the knowledge and skills of beneficiaries about how to conduct business successfully which also would affect the increasing of their income.

4. Mentoring

This mentoring activity is carried out by a facilitator that includes motivation support, financial records (turnover, production costs and take home pay) sales process, etc.

Outcome and Impact

Entrepreneurial Assistance Program of Adira Syariah Finance has supported three (3) points of SDGs as follows:

1. SDGs goal 1 No Poverty

Relevant to the objectives of SDGs goal 1 No Poverty which aims to end poverty in all forms, which is one indicator of the SDGs, this entrepreneurial assistance programs have succeeded in alleviating 50 beneficiaries of poverty.

The turnover chart report showed that 82% of beneficiaries consistently experience an increase in turnover every month due to the quite intensive assistance give. It also supported by other instruments in the form of business capital, business facilities, and product optimizing.

2. SDGs Goal 5 Gender Equality

We empowered 50 beneficiaries and 58% of them 29 people are women who are housewives on average. This is in line with the aim of the 5th SDGs of Gender Equality to help equalize and empower women.

Their background in participating in this program is to support their families, which encourages them to be empowered and independent to earn income and help their husbands.

3. SDGs Goal 8 Decent Work and Economic Growth

After participating on this program the majority of beneficiaries felt more confident in running their business activities because they were able to provide better quality products. Quality products have a positive impact to increase in the number of customers which then has an impact to increase the profit as well.

This is relevant to the SDGs goal 8 Decent Work and Economic Growth, where beneficiaries can create their economic growth by increasing their business productivity through this program.

Lesson learned

Collaborating on this Entrepreneurship Assistance program with Adira Finance Syariah provided an opportunity for us to instill a basic pattern of economic empowerment especially in the form of Entrepreneurship Assistance. To achieve the success of the Entrepreneurship Assistance program there are several important points as follows:

1. Instilling Strong Mentality

Mentality is the most important thing, because it will determine the success of beneficiaries in running their business. We must ensure the program succeeds in instilling a strong mentality with each beneficiary to make them optimistic, persistent and resilient in facing difficulties such as losses, etc. A strong mentality is also the one great thing that can build big entrepreneurs in the future.

2. Material Capital

This capital performs in funds and business facilities. This is another instrument that can support the success of an entrepreneurial assistance program. After instilling the strong mentality before, then the beneficiaries need to be supported by sufficient capital as a tool for them to develop their business.

3. Branding

Nowadays Branding has become an important thing, the touch of branding on beneficiary products can strengthen the bargaining position of their products and businesses. And even more if the business supported by integrated sales system, so that the increase of income will be a common thing. In other words, this brand needs to be seriously managed to generate beneficiary income.

4. Mentoring

This assistance is important to be carried out to ensure that beneficiaries remain ‘on the track’, and to help beneficiaries when they find difficulties as well. This assistance certainly must be done on certain period of time with clear exit strategy.

In other words, assistance cannot be done forever without a limited period, because actually the success of a program is assessed by the sustainable impact felt by the community, not by the sustainable program.

Those four aspects would help the formulation of an economic empowerment program in the form of entrepreneurial assistance as we collaborated with Adira Finance Syariah. It is also important to always ensure that the exit strategy is established at the beginning of the program so that the program has clear objectives and strong indicators of success. For economic programs like this usually the exit strategy performed in joint business group that becomes an institution such as cooperatives, BUMDES (Village-owned Enterprise), etc.