Are MSMEs also strong in Pandemic Covid-19?

When Indonesia experienced a monetary crisis in 1998, SMEs became the savior of the nation's economy. Data from the Central Statistics Agency from 1997 to 1998 showed that SMEs were able to withstand the Indonesian economic crisis in 1998. Starting from the 1997 labor absorption by small entrepreneurs was the highest at 57.40 million (87.62%), then in 1998 employment absorption by small entrepreneurs is also highest at 57.34 million (88.66%). Inflation of 88%, a deficit of 13% and foreign exchange reserves of approximately  17 billion US Dollars, but the MSMEs sector continues to run well.

The strong reason why MSMEs were affected by the 1998 economic crisis was partly because most SMEs were producing consumer goods and services with low demand so that the level of community income did not affect the demand for goods produced. In addition, most MSMEs do not get capital from banks, so when the banking sector collapses it is not too pronounced and influential for MSMEs.

Now when the Covid-19 pandemic, can SMEs again show their might? The monetary crisis and the pandemic are different things. When the monetary crisis hit Indonesia, other countries did not necessarily experience the same thing. The strengthening of the US Dollar at the time gave an advantage over exports by Indonesian MSMEs. MSMEs stretched amid the monetary crisis and amid the collapse of large companies at the time.

What about the Covid-19 pandemic? This outbreak made the entire world economy sluggish, exports and imports plummeted and SMEs also collapsed. Data from the Indonesian Retail Entrepreneurs Association shows that the decrease in trade transactions is 80-85% for non-food products and 30-40% for food products. The impact of Corona made the demand for MSMEs products decrease so that it affected the financial condition (cash flow). The continued impact of not being able to pay installments, credit interest and even taxes.

Compared to large businesses, MSMEs have operational flexibility, speed of innovation, low cost structures, and remaining focus in specific sectors. So as to just survive the UMKM, it is still easier to pivot, turn around and respond quickly to new needs that arise during a pandemic. During the Covid-19 pandemic, MSMEs could take advantage of the opportunity to provide substitutes for imported products, such as agricultural products, food, and spare parts.

After this pandemic ends, strategies for economic recovery are needed. The Government has issued Government Regulation Number 23 of 2020 (PP 23/2020) concerning the Implementation of the National Economic Recovery Program to Support State Financial Policies for Handling the 2019 Corona Virus Disease (Covid-19) Pandemic and / or To Face Threats that Harm National Economy and / Or Financial System Stability and National Economic Rescue (PEN).

PP 23/2020 regulates that the Government can carry out an economic recovery program through the allocation of state expenditure, one of which is to provide interest subsidies to groups of ultra micro, micro, small and medium enterprises affected by COVID-19 and have restructured their loans to banks  and finance companies. To be able to obtain the interest subsidy facility, business actors must meet the requirements including having a Taxpayer Identification Number. MSMEs must prepare requirements so that they can take advantage of the facilities provided by the government for the recovery of their flow.