MSMEs and Co-operatives: Kinship and Affinity

Image source: – Developing countries in today’s world are currently experiencing a surge of the fast-changing emerging markets. Traditional economic models have started to be left behind. The economic order and the system of exchanging information and business transactions are done online and digitally. Subsequently, business categorization expands, and the form of economic organization is based on market-oriented economies.

The components of the economic system and decision-making structures that determine the resources, production process, and the allocation of output are targeted at a specific segmentation or region to minimize production costs and optimize market absorption and consumption. Large enterprises are more sustainable in this economic condition. Due to the stability of their collateral assets, larger enterprises are more likely to repay the loans that they take out. Banks trust them more because they have the collateral to secure the loan and guarantee that banks still have the revenue from the loaned amount of money.

On the contrary, smaller business enterprises, known as the MSMEs (abbreviated from Micro, Small, and Medium Enterprises) are still struggling to find a proper loan or fulfill the requirements for the loan. In fact, many MSMEs feel that these requirements are too complicated and take too much time. Formal financial institutions, for example, banks, still hold to the general assumption that small-scale MSMEs operating in the informal sector are not legitimate enough, do not have the proper legal documents, and are not likely to repay the loan.

The Indonesian government regulates MSMEs along with cooperatives under the Ministry of Cooperatives and SMEs. According to a survey conducted in 2011, more than 55.2 million MSME units had absorbed 101.7 million laborers. These MSME units are spread out all over the 34 provinces of the country, improving the standard of living of people in rural areas and narrowing the economic gap between the wealthy and the poor. Another important role of the MSMEs is to provide the stability of foreign exchange. In 2017, as MSMEs had reached the international market, they contributed 88.45 million rupiahs of foreign exchange, with the 8-time increase from the figure in 2016.

Meanwhile, according to Act 25 of 1992, a cooperative is a form of business organization whose members, the people or entities, base their economic activities on the values and principles of cooperatives and work as an economic movement by the people based on kinship. In its implementation, MSMEs are the proposed members of cooperatives. It is anticipated that the cooperative system is suitable for the operation of MSMEs, especially a cooperative as a credit union which provides credit services as small business-oriented organizations. The community-based network has become the channel for MSMEs to earn the People’s Business Credit (KUR), an affordable loan provided by the government intended to develop the MSME sector.

Together with cooperatives, Tokoin presents a digital way of doing businesses in the era of the Industrial Revolution 4.0 to accelerate MSMEs. Aiming at accelerating MSMEs, Tokoin connects MSMEs with financial business institutions which can facilitate MSMEs in terms of business operation. By means of Tokoin’s blockchain platform, MSMEs will be facilitated in increasing the efficiency of business operations by building valuable partnerships, while prevailing business institutions will be assisted in finding promising and qualified clients, particularly MSMEs affiliated with cooperatives.

Digitizing MSMEs is an effective way to bring out more potentials of MSMEs. Engaging them in the emerging markets opens up more opportunities to increase the economic growth of the country. To this end, Tokoin aims to facilitate both ways mutually through the utilization of blockchain technology.

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Author: Tokoin Official

TOKOIN is a platform that establishes the identity of MSMEs as an acceptable reputation in the business ecosystem. TOKOIN presents a better and modern business ecosystem that offers valuable partnerships to address inclusive growth. As a platform, TOKOIN captures and processes business information from the users as a valuable asset, which, in our ecosystem, translates to the trusted reputation of the MSMEs as our users to access previously inaccessible financial business services from providers which act as our partners. Therefore, TOKOIN links the business and financial sectors to launch a scheme of financial inclusion. The partnerships formed in TOKOIN will subsequently contribute to the national economic growth.