A few weeks ago,Tokoin participated in a workshop aimed at accelerating the growth of Micro, Small and Medium Enterprises (MSME), organized by the Indonesian Ministry of Trade. The event was held in Malang, on the 19th and 20th of June, 2019.
The workshop was aimed at addressing the issues faced by MSMEs in Indonesia today, and discussing possible ways of solving these problems. Indonesia is the 7th largest country in terms of GDP by PPP, and the MSME sector makes up more than 50% of the GDP. In fact, Indonesia today has more than 56 million MSMEs, which account for 99% of all business and provide 89% of private-sector employment! With Indonesia poised to become the 4th largest economy by 2030, the role played by the MSMEs is only going to become more important in the coming years.
One would think that being such a vital cog in Indonesia’s economic progress, special incentives are provided to the MSMEs. The ground reality is, unfortunately, starkly different. Most of the MSMEs are based in the rural sector, and more often than not, they don’t have any credit history to show when applying for loans. Credit is the lifeblood of these MSMEs, but in the absence of proper documentation, banks are reluctant to provide them with loans. As many as 77% of the MSMEs in Indonesia are not authorized, and even worse, 40% of them do not have access to financial aid.
Lack of credit also severely restricts their scope of scaling operations. MSMEs typically serve low order volumes, which increases the average material procurement, transportation and other logistical costs in comparison to large scale enterprises. The limited opportunity to increase their business and profitability further hurts these MSMEs.
We took this opportunity to explain to the small business owners and the general audience how we are using blockchain technology to create a digital identity and trust register for MSMEs. The MSMEs would be able to upload all their transaction data as well as identity data (wherever it’s available) onto Tokoin’s immutable public ledger. This would help create a trust rating system for the MSMEs. Banks would be able to access the trust scores of the MSMEs and use it instead of the traditional credit history when it comes to providing loans.
Speaking on this topic, Tokoin also highlighted the fact that the MSME industry first has to understand the roadblocks that prevent them from transitioning to a digital platform. To ease this process of transition, the Ministry of Trade in Indonesia has recently established a working partnership with Tokoin. The support of the Indonesian government is undoubtedly a validation of the work we have done so far, and a stimulus for our vision of providing growth opportunities for MSMEs by bringing business partnerships.
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