Promoting Micro and Small Enterprises through Improved Entrepreneurs’ Access to Financial Services (PROMISE IMPACTS)

The Project aims at Improving policies and programs on development of entrepreneurship, business and cooperative to promote more and better jobs for men and women, including financial inclusion.


In Indonesia, almost 99.8 percent of over 57,900,000 firms are classified as micro and small enterprises (MSEs) . Moreover, there are almost 210,000 registered cooperatives out of which 147,249 are still active . More than 36 million people are members of registered cooperatives. MSEs provide jobs to over 93 percent of those engaged in wage employment. However, in terms of value added MSEs contribute relatively less to GDP (43 percent) compared to medium and large businesses (57 percent). With a concentration of workers in MSEs, productivity in these firms remains quite low compared to large enterprises. According to ILO, annual labour productivity growth in small and medium sized manufacturing enterprises averaged only 1.1 percent from 2005 to 2013. On the other hand in large manufacturing firms, the average annual labour productivity growth was 4.3 percent during the same period.

MSEs face a number of challenges that affect their growth and productivity. A survey conducted by Badan Pusat Stastistik (BPS) in 2011 showed that 37 percent of the MSEs consider lack of access as a key challenge. In October 2015, the outstanding loans to micro, small and medium enterprises (MSMEs) amounted to less than 19 percent of the total outstanding loans to the firms . It is likely that the amount of outstanding loans to the MSEs is even smaller.

The Indonesian downstream financial sector is often referred to as the “largest microfinance laboratory” in the world. Even with a plethora of institutions providing services, there is still a wide gap between demand and supply. Although a variety of loans, savings, and investments products are being offered, the range for micro and small enterprises is rather limited and in some cases inflexible and not reflecting the business cycles and financing needs of the clients.

Furthermore, rapid commercialization of microfinance has meant that many financial service providers (FSPs) in Indonesia have reached economies of scale and high level of profitability, but this has coincided with a “mission drift”. Several FSPs at the downstream level started with a mission to reach low-income households and small enterprises with an underlying aim to support growth and job creation. However, in their quest for high financial profitability, FSPs have undermined their depth of outreach and very few are measuring their impact at the client level. Success is being narrowly defined in terms of higher returns on assets, equity, and value for the shareholders and owners of the FSPs.

Project Strategy

Promoting Micro and Small Enterpries through Entreprenuers Access to Financial Services (PROMISE IMPACT) is a three year programme developed in partnership between the Ministry of Manpower, Swiss State Secretariat for Economic Affairs (SECO), and the International Labour Organization (ILO). PROMISE IMPACT aims to promote sustainable and responsible financial inclusion for micro and small enterprises (MSEs). The approach underlines responsible delivery of a range of products and services by financial institutions to create value, stimulate growth and productivity, and a double bottom line of maximizing profit and socio-economic welfare of the clients. Specifically, PROJECT IMPACT aims to realize three outcomes which are interrelated and feed into each other. These include:
  • Outcome 1. Supply of financial and non-financial services by FSPs are better aligned to the needs of the MSEs in the pilot areas as a result of innovations and social performance management.
  • Outcome 2. Enhanced productivity, improved working conditions, and access to financial and non-financial services for MSEs.
  • Outcome 3. Access to socially responsible finance is integrated in the national policies and in the regulatory framework.
Firstly, on the supply side the programme helps financial institutions to operationalize their mission into specific development metrics, and adjust their strategies and services accordingly. Secondly, on the demand side the programme helps MSEs to access financial services, enhance their productivity, and enable them to make effective and prudent use of financing. Lastly, on the policy and regulatory side the programme supports the formulation, and implementation of polices and regulations to promote responsible financial inclusion.

PROMISE IMPACT in the pilot phase will target West Java and East Java. The number of MSMEs in these provinces is quite high. In West Java MSMEs constitute almost 99 percent of the total businesses while in East Java the proportion of MSEs is 95.6 percent. MSMEs account for 81.7 percent and 67.7 percent of employment in West Java and East Java respectively (DisKUMKM Jabar, 2012, Jawa Timur Dalam Angka, 2012).

Key Partners

  • Ministry of Manpower of Republic of Indonesia
  • Indonesia Employers’ Association (Apindo)
  • Trade Union Confederations
  • Financial Service Authority (OJK)
  • Ministry of Cooperative and SME
  • Bank of Indonesia
  • Financial Service Providers (FSP) such as Rural Banks, Islamic Financial Institutions (BMT), and relevant associations

For further information, please contact:

Mr Owais Parray
Chief Technical Adviser
ILO Country Office for Indonesia and Timor-Leste
Tel.: +62 21 391 3112 
Fax.: +61 21 310 0766