Index of /enm/images/dokumen

RECENT DEVELOPMENT OF WOMEN’S ENTERPRISES IN INDONESIA Tulus Tambunan

Kadin Indonesia, 2007 Abstract

As a majority of women entrepreneurs in Indonesia is found in small and medium enterprises (SMEs), especially small enterprises (SEs) and micro enterprises (MIEs), recently, the Indonesian government has considered the development of SMEs as an important means to generate women entrepreneurs, as part of the national strategy for women empowerment related to its commitment to the Millennium Development Goals (MDGs). By surveying literature and analyzing statistical data, this paper aims to examine recent development of women entrepreneurs, especially in SMEs in Indonesia. The paper shows some important facts. First, SMEs are of overwhelming importance in Indonesia, as they account for more than 90% of all firms outside the agricultural sector. Second, the representation of women entrepreneurs is still relatively low, even in SMEs, which can be attributed to factors such as low level of education and cultural or religious constraints. Finally, the government has been the most important supporting agency for SMEs. However, there are no SME development programs specifically towards female entrepreneurs, and also evidence on the effectiveness of government programs to support SME development is mixed.

Introduction

Especially in developing or poor countries, women’s entrepreneurship has a tremendous potential in empowering women and transforming society. Yet this potential remains largely untapped, with no more than 10 per cent of the entrepreneurs in developing Asian countries, including Indonesia, being women. Studies have shown that a host of barriers prevent women from realizing their full potential as entrepreneurs, where they could make significant contribution to society (Sharma and Dhameja, 2002). Entrepreneurship by definition implies being in control of one’s life and activities (Sinha1, 2005). It is precisely this independence that many societies have denied women (Vishwanathan, 2001). Women’s family obligations often bar them from becoming successful entrepreneurs in both developed and developing countries. As Seymour puts it, Having primary responsibility for children, home and older dependent family members, few women can devote all their time and energies to their business (Seymour, 2001). Traditional gender role expectations and patriarchal attitudes in many developing nations make it even more difficult for women to relieve themselves of family responsibilities. The familial and social conditioning in many developing countries inhibits the confidence, independence and mobility of women (Sasikumar, 2000). This translates into poor access to training, information, credit, technology, markets, etc., and prevents women from starting a business or women entrepreneurs from growing beyond a particular level (Sinha1, 2005). The situation is more critical in poor countries such as in many South Asian, African and Latin American countries

It is generally believed that women entrepreneurs can play an important role in promoting growth and development, and hence reducing poverty in developing countries. As most female economic activities either as workers or owners/producers in these countries, including Indonesia, are found in small and

medium enterprises (SMEs), particularly in small enterprises (SEs) and micro enterprises (MIEs), these enterprises provide thus a good starting point for the mobilization of women talent, especially in rural areas, as entrepreneurs, while, at the same time, the enterprises can provide an avenue for the testing and development of women entrepreneurial ability.

The aim of this paper is to examine the recent development of women’s enterprises in Indonesia. Since a majority of women entrepreneurs in Indonesia (as in many other developing countries) is found in SMEs, the development of women entrepreneurs has mostly been associated with SME development. For this reason, this paper starts with the analysis of the current developments of SMEs in the country. Specifically, this paper addresses three research questions. First, how important are SMEs in the Indonesian economy? Second, how representative are women entrepreneurs in SMEs. Third, what are the main determinant factors of women entrepreneur development in the country? Four, how effective are government sponsored programs in supporting the development of SMEs and are there special programs to support women entrepreneurs in the sector? All these questions will be addressed by analyzing existing limited secondary data and surveying existing Indonesian studies on women entrepreneurs.

Definitions of SMEs

In Indonesia, there are several definitions of SMEs, depending on which agency provides the definition. As this paper uses data from the State Ministry of Cooperative and Small and Medium Enterprises (Menegkop & UKM), the Department of Industry (MoI), and the Central Statistical Agency (BPS), so, only definitions of these three government agencies are relevant for the paper. Menegkop & UKM promulgated the Law on Small Enterprises Number 9 of 1995, which defines a small enterprise (SE) as a business unit with total initial assets of up to Rp 200 million (about US$ 20,000 at current exchange rate), not including land and buildings, or with an annual value of sales of a maximum of Rp 1 billion (US$ 100,000), and a medium enterprise (ME) as a business unit with an annual value of sales of more than Rp 1 billion but less than Rp 50 billion. Law does not define explicitly MIEs. However, Menegkop & UKM data on SEs include MIEs. BPS, which regularly conducted surveys of SMEs, uses the number of workers as the basis for determining the size of enterprise. In its definition, MIEs, SEs and MEs are business units with, respectively, 1-4, 5-19, and 20-99 workers, and large enterprises (LEs) are units with 100 or more workers. MoI defines enterprises by size in its sector also according to number of workers as the BPS definition.

The Importance of SMEs in the Indonesia Economy

The development of SMEs and changes over time in their, e.g. employment and output shares, output composition, market orientation and location are usually thought to be related to many factors, including the level of economic development, changes in real income per capita, population growth, and progress in

technology. “classical” literature on SME development suggests that SME will become less importance in the course of economic development, i.e. as income per capita increases.1

The World Bank (2002, 2004), however, gives three core arguments in supporting the view that SMEs can function as the engine of growth in developing countries. First, SMEs enhance competition and entrepreneurship and hence have external benefits on economy-wide efficiency, innovation, and aggregate productivity growth. Second, SMEs are able to grow or they can be productive as LE. This argument is also supported by Berry, et. al (2001, 2002) from their study on SME dynamics in Indonesia by pointing out that in static terms, SMEs, on average, achieve decent levels of productivity especially of capital and all factors taken together (that is, total factor productivity); and in dynamic terms, most of these enterprises have considerable growth potential. But financial market and other institutional failures and not-conducive macroeconomic environment impede SME development. Third, SMEs expansion boosts employment more than LEs growth because SMEs are more labor intensive. In other words, the World Bank believes that SMEs can boost economic growth and development in these countries.

In Indonesia, SMEs have historically been the main player in domestic economic activities, especially as a large provider of employment opportunities, and hence a generator of primary or secondary source of income for many households. For low income or poor farm households in rural areas, SEs, i.e. units of less than 20 workers, in non-farm activities are especially important. These enterprises have also been playing as an important engine for the development of local economies and communities. However, as compared to many other APEC more developed economies, Indonesian SMEs are still relatively weak in terms of GDP contribution. Instead, they have been more important as the locus of most employment than as a GDP growth engine in Indonesia, which can be can be attributed to lack of capital, human resource, technology, and market access.

The SMEs have also been recognized to have another important role to play, namely as an important engine for development and growth of exports of non-oil and gas, particularly in manufacture. This stems from evidence showing that the most successful cases of SMEs development in East and Southeast Asian countries like South Korea, Taiwan, Hong Kong, and Singapore, have directly related to trade and the adoption of export-oriented strategies. The experiences of these countries indicate that SMEs can compete effectively in both domestic and international.

According to official data from the State Ministry of Cooperative and Small and Medium Enterprises (Menegkop & UKM), SMEs account for more than 90% of all firms in all sectors in the country (Table 1). These enterprises are thus the biggest source of employment, providing livelihood for over 90% of the country’s workforce, especially women and the young. The majority of SMEs, especially MIEs, are scattered widely throughout the

1

rural area and therefore they may play an important role as a starting point for development of villagers' talents, especially women, as entrepreneurs. MIEs are dominated by self-employment enterprises without hired/wage-paid workers. They are the most traditional enterprises generally with low levels of productivity, poor quality products, serving small, localized markets. There is little or no technological dynamism in this group. The majority of these enterprises eke out a bare survival. Some of them may be economically viable over the long-term, but a large portion is not. Especially with import liberalization, changing technology and the growing demand for higher quality modern products, many MIEs face closure or very difficult upgrading. However, the existence or growth of this type of enterprises can be seen as an early phase of entrepreneurship development.

Table 1. Total Units of Enterprises by Size Category: 1997-2004

Size Category 1997 1998 1999 2000 2001 2003 2004

∑ SEs 39,704,661 36,761,689 37,804,536 38,985,072 40,137,773 42,475,756 43,158,468 ∑ MEs 60,449 51,889 51,798 55,061 57,743 59,580 63,361 ∑ LEs 2,097 1,831 1,832 1,946 2,095 2,169 2,248 Total 39,767,207 36,815,409 37,858,166 39,042,079 40,197,611 42,537,505 43,224,077 Source: Menegkop & UKM

From the ASEAN perspective, Indonesia as the largest member country has of course the largest number of SMEs (Table 2). Other member countries too have touted SMEs as the engine of economic growth and development, the backbone of national economies, the highest employment-generating sector, and a potential tool of poverty alleviation by creating self-employment avenues. Notwithstanding various definitional issues and data problems, by combining all sources which are available, there is an (rough) estimated total of some 21 million agricultural SME in ASEAN, or about more than 90% of all non-agriculture firms in the region. These enterprises play strategic roles in private sector development, especially in the aftermath of the 1997 Asian Financial Crisis. In some member countries, as their economies modernize and industrialize, SME provide the much-needed inter-firm linkages required to support large enterprises (LEs) to ensure that they remain competitive in the world markets. SMEs generally account for between 20-40% of total domestic output and they employ an overwhelming proportion (mostly in the 75%-90% cent range) of the domestic workforce, especially adult persons and women.2

Distribution by sector shows that SMEs are concentrated in agriculture. As shown in Table 3, in 2004, for instance, from 43,221,829 SMEs, almost 60% of them are in this sector. This may explain why the majority of SMEs in Indonesia are found in rural areas. Trade, hotel and restaurant is the second largest sector for SMEs with around 21% and slightly more than 22% of their total units during the period 2003-2004. The third important sector is manufacturing industry with around 6.4% of total SMEs. They are involved mainly in simple traditional manufacturing activities such as wood products, including furniture,

2

textile, garments, footwear, and food and beverages. Only a small portion of total SMEs are engaged in production of machineries, production tools and automotive components. The latter is generally carried out through subcontracting systems with several multinational car companies such as Toyota and Honda. This structure of industry reflects the current technological capability of Indonesian SMEs, as they are not so strong yet as their counterparts in other countries such as South Korea, Japan, and Taiwan in producing sophisticated technology embodied products.

Table 2: Non-agricultural SMEs in ASEAN and selected countries in East Asia SMEs as a % of Country No. of non-agricultural

SME in 2002 or later or best estimation (‘000)

Percentage of GDP/value

added (VA)/output _{All Firms Workforce} Brunei Darussalam Cambodia Indonesia Lao PDR Malaysia Myanmar Singapore Thailand Philippines Viet Nam

East Asia1

China

Chinese Taipei Hong Kong, China Japan ROK 302 26 21,895.9963 224 205 344 60-725 1,640 686 2,7007 8,000 1,050 292 6,140 2,700 - - 57 (total VA)

-

15 (total gross output) 47.3 (total VA) 26 (manufacturing VA)

-

41 (manufacturing output) 34.7 (total VA)

47 (total VA) 32 (total VA) 42 (total VA)

60 (industrial output) -

-

52 (manufacturing output) 55.3 (total VA) 47.5 (total gross output)

50 (total VA)

98 99 99.9 - 99.2 96 97 99.6 99.6 96 99 98.1 98.2 99.7 99.8 92 45 99.6 - 65.1 32.58 78 58 768 99 85 78.8 78.4 60.7 77.6 86.7

Notes: 1: best guess for 2000; 2: est. active (2004); 3: for 2006; 4 : 1998/9; 5: estimated active; 6: excludes 744,000 micro enterprises/MIEs (2001); 7: excludes 10 million MIEs; 8: manufacturing industry only.

Sources: APEC (2002), RAM Consultancy Services (2005), UNCTAD (2003), Hall (2002), Myint (2000), Regnier (2000), Ministry of Industry, Mines and Energy of the Kingdom of Cambodia, BPS (Indonesia), Census 2005 (Malaysia), JASME Annual Report 2004-2005 (Japan); SMEA (White Paper on SMEs in Taiwan 2005), OSMEP (White Paper on SMEs in Thailand, 2002), National SME Development Agenda 2000/2001 (Philippines).

Table 3. Total Units of Enterprises by Size and Sector, 2003 and 2004

SMEs LEs Sector

2003 2004 2003 2004

Agriculture 25,457,190 25,477,756 58 59

Mining 203,711 144,834 72 51

Manufacture 2,711,522 2,743,858 710 719

Electricity, gas & clean air supply 4,423 4,111 39 36

Construction 132,346 162,359 157 192

Trade, hotel & restaurant 9,071,331 9,845,682 434 471

Transport & communication 2,488,161 2,551,727 146 150

Finance, rent & service 33,169 37,185 292 328

Services 2,433,483 2,254,317 261 242

Total 42,535,336 43,221,829 2,169 2,248

In terms of GDP, on average, during the period 2000-2003, SME contributed more than 96% and almost 95% of total output in, respectively, trade, hotel and restaurant, and agriculture. In total GDP, SMEs performed relatively better than their larger counter part as they accounted for more than 50% of total GDP during that period (Table 4). Also SMEs’ output contribution to the annual growth rate of total GDP was higher than that of LEs. On average, the GDP growth share of SMEs was above 2%; whereas that of LEs was under 2%. Within SMEs, SEs appeared to be more important than MEs as their GDP growth share was higher than that of the latter ones (Table 5).

Table 4. Structure of GDP by size and sector: 2000-2003 (%)

Sector SE ME LE Total

Agriculture Mining Manufacture

Electricity, gas & clean air supply Construction

Trade, hotel & restaurant Transport & communication Finance, rent & service Services

GDP GDP without oil & gas

85.74 6.73 15.14 0.52 43.88 75.60 36.69 16.80 35.59 40.55 46.22 9.09 2.96 12.98 6.80 22.57 20.81 26.64 46.47 7.16 15.22 17.19 5.17 90.30 71.89 92.68 33.55 3.59 36.67 36.73 57.25 44.24 36.60 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Source: National Agency for Statistics (BPS)

Table 5: Contribution to GDP Growth by Size Group of Enterprises, (%)

Size category 2000 2001 2002 2003

SE ME LE 2.02 0.82 2.08 1.42 0.58 1.46 1.52 0.62 1.55 1.68 0.69 1.73 Source: BPS. Women Entrepreneurs

Recently, there is an increasing interest in women entrepreneurship development among policy makers, academics and practitioners in Indonesia. This interest comes from the recognition of the following facts. First, women predominate in informal economy where for most of them they do that primarily as a survival strategy. Because of their participation in informal economic activities, they are able to keep their families from falling into extremely poor. Human Development Report 2006 from UNDP shows, however, that economic potential of women, either as employees or entrepreneurs has not yet fully developed. It is reflected by lower estimated income of female than that of male and female economic activity rate as percentage of male rate is 60 (Table 6).

Second, the creation of women entrepreneurship, especially in rural areas, will contribute to the creation of many new rural enterprises that will increase local capabilities to bring rural economic growth and hence rural poverty reduction. Thus it is generally accepted that promoting female economic activities is very important as part of national poverty alleviation policy. In this respect, SMEs provide thus a good starting

point for the mobilization of women talent, especially in rural areas, as entrepreneurs, while, at the same time, SMEs can provide an avenue for the testing and development of women entrepreneurial ability.

Table 6: Gender Inequality in Economic Activity and Earned Income in Indonesia, 2004

Description Value Estimated earned income, female (PPP US$)

Estimated earned income, male (PPP US$) Ratio of estimated female to male earned income Female economic activity rate as % of male rate (ages 15 and older)

2,257* 4,963* 0.45

60

Note: * because no wage data are available, for the purposes of calculating the estimated female and male earned income, a value of 0.75 was used by UNDP for the ratio of the female nonagricultural wage to the male nonagricultural wage. Source: UNDP (2006).

At least two main characteristics of development of women entrepreneurship can obviously be observed in developing countries. First, SMEs are more important than LEs for women entrepreneurs. Second, within SMEs, the female-male entrepreneur ratio is generally higher in MIEs than in larger sized and more modern enterprises. This is due to the fact that women in developing countries are more likely than men to be involved in informal activities which consists dominantly of MIEs, either as self-employed or employers or paid/unpaid workers. Database from the International Labour Organization (ILO) indicate that almost 95% of MIEs in developing countries performed by women as self-employed; though the percentage varies between countries or regions.

- Evidence from Secondary Data Analysis

BPS data from various years indicate that women entrepreneurs in Indonesia have also been increasing since the 1980s during the NO era when the country achieved rapid economic growth leading to rapid increase in per capita income. According to a number of studies (e.g. Manning, 1998; Oey, 1998), the reason for the increasing number of women-owned enterprises are partly due to the increase of women’s educational level, and to the economic pressure the women faced in their households. However, the only readily available official statistics on women-led enterprises in Indonesia are only in MIEs and SEs, as presented in Table 7. From this table, there are three interesting facts. First, it reveals that only 32% of these enterprises are run by women. If it is assumed that this percentage applied to MEs and LEs and if total number of enterprises can be used as an indicator of current state of the art of women entrepreneurship development, then the table suggests that becoming an entrepreneur in Indonesia is still dominantly a man culture.3As a comparison, data from various sources women make up about 26% to 38% of total non-farm

3

Unfortunately, since no data are available on the proportion of women-led MEs and LEs in Indonesia, there is no indication on whether the percentage of women owners relative to men decreases or increases as firm size increases. Also, no data exist on the number of women starting enterprises each year, or on their growth rates into the next firm-size category. But, it is probably safe to say that a very small proportion of women in MIEs grow into SEs, and very few women-led SEs grow into MEs and LEs.

entrepreneurs in the Asia-Pacific Economic Cooperation (APEC) region for which data are available, and there has been a slight increase in the percentage of women entrepreneurs over the period 1990-2000 (Table 8).

Table 7: Women Entrepreneurs in non-Farm MIEs and SEs Combined, 2003 (unit) Entrepreneurs/owners

Sector Total units

Male Female Mining, electricity (non-Stated Own/PLN) & construction

Industry manufacturing

Trade, hotel, & restaurant

Transportation & communication

Financial institutions, real estate, renting, and services

Total

253 146 (100.00)* 2 641 909 (100.00) 9 228 487

(100.00) 2 170 291

(100.00) 1 490 226

(100.00)

15 784 059 (100.00)

237 050 (93.64) [2.21]**

1 636 185 (61.93) [15.25] 5 649 138

(61.21) [52.64] 2 140 022

(98.60) [19.94] 1 070 001

(71.80) [9.97] 10 732 396

(68.00 ) [100.00]

16 096 (6.36) [0.32] 1 005 724

(38.07) [19.91] 3 579 349

(38.79) [70.86] 30 269 (1.40) [0.60] 420 225 (28.20) [8.32] 5 051 663

(32.00 ) [100.00] Notes: * = distribution percentage by row (sector); ** = distribution percentage by column (entrepreneur)

Source: BPS.

Table 8: Women Entrepreneurs as % of total non-farm entrepreneurs in APEC Economies, 1990-2000

Economies 1990 1996 1998 2000

Australia Canada Indonesia Japan Korea Mexico New Zealand Philippines USA 32.4 34.1 27.2 30.9 27.3 13.7 .. .. 33.2 32.7 33.2 29.5 29.0 28.9 25.9 29.1 .. 37.2 32.2 34.4 31.0 29.4 27.2 27.6 31.8 34.0 37.1 32.2 34.0 32.0 (2003) .. 35.7 32.0 .. 34.0 38.0

Note: These percentages include all types of non-farm business and all sizes of enterprises, i.e. women who are self-employed, own-account workers as well as those who are employers.

Sources: APEC (1999, 2003), BPS, and database online from some economies.

Second, in manufacturing industry, from a total of 1,005,724 women owned firms, about 97.9% are in MIEs, employing 5 or less people (and in many case are non-employing). They choose MIEs simply because this economic activity is characterized by an easy entry and exit, and low capital, skills, and simple technology requirements.

Evidence from other APEC economies also shows that women owned firms are much more likely to be more MIEs. For instance, about 95.4% of women enterprises in Korea are MIEs (Kim, 2005). In Mexico,

90% of women employers have fewer than 5 employees, compared to 78% of male employers. In Chinese Taipei, 82% of women employers have fewer than 10 employees, compared to 76% of men owned firms. In the United States, there is not a significant difference in the employment size of women-and men-owned firms (APEC, 1999).

Third, sectoral distribution is more or less similar for male and female entrepreneurs, as they both are concentrated in trade, hotel and restaurant; although the percentage is higher in the latter. In Indonesia female is more likely than male to be involved in this sector, mostly as own-account traders having small shops or as owners of small restaurants or hotel. In other APEC economies, Mexico, for example, the highest concentration of women owned firms is found in hotel and restaurant sector. In Australia, Canada and the United States, the majority of women owned firms are found in services or retail trade. In the Philippines, about 45% of women entrepreneurs are in manufacturing and 26% in retail trade.(APEC, 1999). In manufacturing industry, women entrepreneurs tend to pursue areas where they have gender-based skills and know-how. In Indonesia and the Philippines, for example, the majority of them are found in food, beverages, tobacco, clothing, and crafts industries (APEC 1999).

- Evidence from Literature Survey

Many studies have been conducted in the last 10 years on women entrepreneurs in Indonesia, especially in MIEs and SEs in different locations in rural areas. The studies mainly focus on food, textiles and handicraft industries since these are the favorite industries for women not only as entrepreneurs but also as workers. This is due to the nature of these industries: simple technology, low skill requirement, and easy production process. Maemunah (1996), for instance, tried to identify the characteristics of women leadership in home-based industry and to understand strategic constraints in the development of women business. Most of women entrepreneurs’ age covered by the study are between 21-40 years old, and only about 8.33% has finished college. Most of them have worked for 4-10 years. However, the high numbers of women working for more than 5 years in the home-based industry not because they have been successful, but mainly because the need of family additional income. Only very few of them said that their motivation is to show their existence as human beings able to achieve a kind of merit and be able to life independently within their family. The number of family dependents among these women shows that the highest numbers of respondents (58.33%) have more than 7 (seven) dependents, 25% have dependents between 4-6 people; and only 16.67% have dependent between 1-3 people. The leadership style the women have as entrepreneurs cover the whole managerial and administration functions. Their main constraint to develop their home-based industry is the lack of capital. So, most of them used their own capital or family capital for their

business. They hardly able to obtain loan from banks since most of them do not have collateral and the interest rate are mostly too high for them.

Purwandari (2002) did a research on handmade bags craft industry in Kulon Progo District, the Province of Yogyakarta. The objective of the study is to understand the roles of handmade bag industry on women’s working opportunity, women entrepreneurship and household income, and what social factors influence its role. The profile of the women works in the industry, either as paid workers (firms owned by male) or as entrepreneurs shows that the age of majority of them is between 28-55 years, and about 60% of them have only elementary school (finished and unfinished); and those who have finished high school reached 7.5%. Beside women home-workers, the industry has also absorbed children to work in the industry, with almost 62% of the children in two sampled villages work in the industry. The study shows that bags industry is the most suitable non-agricultural business activities for women entrepreneurs who could not leave their home easily due to local social constraints. It is also because this activity is easy to conduct with no high skill, complex technology and huge capital requirements.

Arifin (2004) investigated current most important obstacles faced by women in the informal micro businesses, which includes general problems derived not only from their business’s marginality and informality, but also from gender stereotyping. He proposes the systematic way of understanding women entrepreneurs’ vulnerability for effective empowerment and organizing activity. He finds that general problems usually faced by women entrepreneurs are risks especially in informal economic activities such as removal of their business sites by force and exploitations through illegal charges/retributions by preman or even by authoritative agents such as the police or security officers, and by traders, collectors or inputs suppliers who have monopoly or monopsony power on these women and so they often manipulate the prices in their favor.

A similar study also conducted by Dewayanti and Chotim (2004) who focus on women marginalization and exploitation in micro businesses in rural Jawa. The objectives of the study were to highlight structural problems faced by woman entrepreneurs. It shows that micro businesses in commerce/trade, low technology-based industry, such as food and garment industries, and services are favorite business types for women entrepreneurs in rural Java who lack of skills and capital. They run the businesses either independently or part of family production system. The majority of these micro businesses run by woman have subsystem character with income obtained most of it run out for everyday family consumption. They argue that women marginalization and exploitation are causal factors of underdevelopment of micro business run by women which has implication of adding woman’s load. This marginalization process generates spreading poverty in rural areas because most women reside in rural micro business, not only as

entrepreneurs but also as workers. As with findings from other studies, it reveals that the main motivation of women in rural areas in doing micro businesses is to improve their family income or survival strategy.

Suminar (2001) investigated the types of home-industry that can be built up by poor women. It reveals that the types of home-industry for the women to develop are industries that do not need physical strength such as garment, food, and handicrafts. However, even in these types of activities, women still face several constraints to run their own businesses, which can be distinguished between internal and external constraints. Internal ones are such as lack of skills and limited time (especially for married women); while, external ones include no easy access to bank credits, and cultural constraint particularly in a society which still holds that women’s main obligation is to do household work. However, in some regions, women as producers are positively appreciated. It is what Sulaiman (1982) found in Central Java among crafts-women making wooden products and batik. Their status increased in the eyes of their family and society, since they were able to earn income for their family, and in their society they were known as “businesswomen”.

Main Constraint Factors

Indonesia (as with many other developing countries) is yet less developed with respect to women entrepreneurship. There are more women as low paid workers in factories than women running their own businesses. Even in micro and small businesses, the representation of women entrepreneurs is relatively low (see Table 6). Although, from many case studies, it reveals that many women, especially in rural areas, run their own businesses as a family survival strategy.

Based on the literature survey, the relatively low representation of women entrepreneurs in Indonesia can be attributed to at least four main factors. First, low level of education and lack of training opportunities that make Indonesian women severely disadvantaged in both the economy and society may play an important role. In general, the index of gender development, particularly the index developed by the UNDP to observe gender inequality in human development, shows that although gender inequality in Indonesia is tending to decline, it is still relatively higher than in neighboring countries. As an illustration, based on Human Development Report 2006 from UNDP, gender inequality reflected in the difference in the human development index (HDI) and gender-related development index (GDI) in Indonesia in 2004 is 0.007 (HDI 0.711 and GDI 0.704), or GDI is 99.0% of HDI. Out of the 136 countries with both HDI and GDI values, 80 countries have a better ratio than Indonesia. Table 9 shows how Indonesia’s ratio of GDI to HDI compares to some other countries, and also shows its values for selected underlying values in the calculation of the GDI. Adult literacy rate female (% ages 15 and older) in 2004 is 86.8, compared to adult literacy rate of male at 94.0, or 92.3% of that of male. Combined gross enrolment ratio for primary, secondary and tertiary schools of female in the same year is 67 or 96.7% of that of male at 70.

Table 9: The GDI compared to the HDI in Indonesia and some other selected countries, 2004 GDI as % of HDI Life expectancy at birth (year)

Female as % male

Adult literacy rate (% ages 15 and older) Female as % male

Combined primary, secondary and tertiary gross enrolment ratio Female as % male 1. Luxembourg (100.4%)

79. Dominican Rep. (99.1%) 80. Tanzania (99.1%) 81. Indonesia (99.0%) 82. Nigeria (99.0%) 83. Mauritius (99.0%) 136. Yemen (94.0%)

1. Russian Fed. (122.4%) 113. Denmark (106.1%) 114. United Kingdom (106.1%) 115. Indonesia (105.9%) 116. Viet Nam (105.9%)

117. United Arab Emirates (105.8%) 191. Kenya (95.8%)

1. Lesotho (122.5%) 59.Malaysia (92.8%) 60.Viet Nam (92.5%) 61. Indonesia (92.3%) 62. Macau (92.1%) 63. Myanmar (92.0%) 115.Afghanistan(29.2%)

1. United Arab Emirates(126.0%) 126. Gambia (97.2%)

127. Saudi Arabia (97.0%) 128. Indonesia (96.7%) 129. Uganda (96.4%) 130. Uzbekistan (96.4%) 189. Afghanistan (40.9%) Source: UNDP (2006)

In fact in the last 20 years the Indonesia government has been giving efforts to improve gender equality in education. In 2005, the ratio of girls to boys in primary and secondary schools is close to 100%, much higher than the average level of low income countries or not far behind that of middle income countries (Figure 1). During the period 2001-2004, female to male ratio with respect to primary completion rate is slightly above 1 (Figure 2).

Figure 1: Ratio of girls to boys in Primary and Secondary Schools in Indonesia and other Selected Asian Developing Countries, 2005 (%)

0 20 40 60 80 100 120

Indonesia Afghanistan Bangladesh India Malaysia Pakistan China Philippines Srilanka Thailand Vietnam Low incom e Middle incom e High incom e

Source: World Bank (2007).

However, official data on working population by education in Indonesia indicate that the average level of education of male is still higher than that of female. Also, female entrepreneurs in MIE and SEs in general are lower educated than their male counterparts. As can be seen in Table 10, less than 1% of female entrepreneurs have university diplomas, as compared to their male counterparts at 6.5%. But this is not unique for Indonesian Even in many developed countries, the education structures of women entrepreneurs

are similar. For instance, in Australia the highest level of schooling for 54% of women employers is secondary school, while 65% of men employers have gone on to higher levels of education (APEC, 1999).

Figure 2: Female to Male Ratio: Primary Completion Rate in Indonesia and other Selected Asian Developing Countries, 2001-2004

0 0.2 0.4 0.6 0.8 1 1.2

Indonesia Bangladesh Cambodia India Malaysia Philippines Lao PDR Vietnam

Source: World Bank (2007).

Table 10: Education of Entrepreneur in Non-Farm MIEs and SEs by Gender, 2003 (%)

Level of education Female Male

Not finished primary school Finished primary school

Finished high school first degree (SMP) Finished high school second degree (SMA) Higher education

27.88 40.82 18.62 11.77 0.91

14.27 39.49 25.87 18.37 6.5 Source: BPS.

Sandee (1995) investigated the process of innovations in roof tile clusters in rural Java. He found female producers had very little chance to do innovations due to, among other constraints, lack of skills. Their firms were usually taken over by men as the technological shift proceeded. The fact that innovation adoption requires a more intensive involvement of both producers and workers may also militate against women, given their other (household) responsibilities

In addition, a report on gender mainstreaming in the education system in Indonesia (Jalal, 2004; quoted from Suharyo, 2005) shows that, the illiteracy rate for women is still higher than men and the gap between men and women in rural areas is much higher than that in urban areas. Many rural women speak only their native language and never read newspapers and so they are very restricted to communicate with the outside world. Particularly among women living in rural areas, there are still many social, cultural and religious

taboos that prevent those women who can and should be accessing higher education from doing so. Many parents living in rural areas still have the traditional thinking that (higher) education belongs to men only. Especially since after marriage women leave to join their husbands; families and, hence, are not regarded as being useful to their own families in the long run.

However, although this traditional thinking still exists in rural society, it depends on the economic condition of the family as well as education level of the parents or husbands. The better the economic condition of the family or the better the education of the parents/husbands, the less influence of the traditional thinking in their attitudes towards women to have better education.

Second, heavy household chores. Especially in rural areas, women have more children, and they are more demanded to do their traditional role as being responsible for housework and child care, and therefore they have fewer hours of free time than men, both during the weekend and on weekdays.

Third, there may be legal, traditions, customs, cultural or religious constraints on the extent to which women can open their own businesses. Although the majority of its population are muslim, Indonesia is indeed not a muslim state and not like many other muslim states which have failed to generate ideologies capable of copying realistically with social change. However, in rural areas, especially those which are isolated from big cities, Islamic-based norms have stronger influence on women daily life. This makes female behavior or attitude in rural areas less open than male (or than urban women) to “doing modern business” culture. In such society, women must fully comply with their primary duty as their husband’s partner and housewife, they are not allowed to start their own businesses or to do jobs that involve contact with or managing men, or simply they are not allowed to leave the home alone. Even if women do have their own business, in many cases, they defer to husbands or other family members in key business decisions, and many turn over greater power to these other family members as the business grows. All these constraints lead to an exclusion of women from entrepreneurial activities. While, in rural areas relatively close to urban areas with good transportation and communication links, changes in local society attitudes about traditional role of women being responsible for housework and child care and men for income in the last 30 years are observable.4

Fourth, lack of access to formal credit and financial institutions. This is indeed is a key concern of women business owners in Indonesia. This is found to be more problematic for women in rural areas or outside of major metropolitan areas such as Jakarta and Surabaya. This constraint is related to ownership rights which deprives women of property ownership and, consequently, of the ability to offer the type of collateral normally required for access to bank loans. In Indonesia, men are still perceived as the head of the family, and thus, in general, men are still perceived as the owner or inheritor of family assets such as land,

4

company and house. In Sandee’s (1995) study on roof tile clusters in rural Java, he found that limited access to formal credit was felt especially acutely by female producers.

Probably because of the above reasons, especially cultural or religious constraints, it is found that in Indonesia, particularly in rural areas, economic necessity or wanting to improve family income is a more predominant factor for entrepreneurship among women Economic pressures have made that women are being permitted to take up paid employment outside the home or to run income earning activities beyond their traditional role (Syahrir, 1986; Rusdillah, 1987)..While, in more developed economies such as the United States, or even in Korea, for instance, non-economic motives such as a desire for more fulfillment, or to test a winning idea, or as the first step towards independence, self—esteem and liberty of choices, are more important for women entering into business ownership (APEC, 1999).

Finally, the participation rate of female as entrepreneurs varies by region. Interestingly, although a larger part of MIE and SEs are located in Java, as also the majority of population, non-primary economic activities, and educated people in the country are found in this island, Nusa Tenggara (NT) in the eastern part of the country has the highest ratio, means that there are more female than male entrepreneurs in NT. However, this does not necessary reflect the higher spirit of female entrepreneurship in NT than in the rest of the country. NT is a region with a very high unemployment rate. Economic activities such as mining, manufacturing industry, construction, agriculture and banking are more or less stagnated in this island. Most matured or married men are working in low income generating activities such as transportation, motorcycle repair workshops or in agriculture as marginal/subsistent farmers owning less than 0.5 ha of land, or as civil servants. So, as a family survival strategy, in the household, wife is ‘pushed’ to do something outside home to earn some income. Therefore, the high participation rate of female as entrepreneurs in NT is most likely to be a reflection of a family survival strategy rather than a spirit of entrepreneurship. In other words, female entrepreneur development in NT is more a “push” rather than a “pull” phenomenon.

SME Development Policies

In Indonesia, almost all known types of government intervention to promote the development of SME have been tried at one time or another. These include various subsidized credit, such as credit for small farmers and village cooperatives (KUD), small-scale credit (KIK, KMKP, KUK), and credit for village units (KUPEDES); development of small rural development banks (BKD); human resource development trainings such as in production technique, general management (MS/MUK), management quality systems ISO-9000, and entrepreneurship (CEFE, AMT); providing total quality control advice, technology and especially internet access (WARSI) and advisory extension workers, subsidized inputs, facilitation, setting up of Cooperatives of Small-Scale Industries (KOPINKRA) in clusters, development of infrastructure, building special small-scale industrial estates (LIK), partnership program (the Foster Parent scheme), Small Business Consultancy Clinics (KKB); establishment of the Export Support Board of

Indonesia (DPE), establishment of common service facilities (UPT) in clusters, and implementation an incubator system for promoting the development of new entrepreneurs.

The SMERU Research Institute has mapped out most of the important assistance programs to strengthen MIEs and SEs provided by government and non-government institutes during the period 1997-2003, showing that most are run by the government (SMERU, 2004). The data in Table 11 show that there were 64 institutions with such programs. A total of 594 programs were identified, two-thirds of which were provided by the government.5 Other programs were conducted by NGOs (18%), donor agencies (8%), banking institutions (5%), private companies (2%), and other institutions. The government is still running 127 different support programs.

Table 11: Number of institutions and assistance programs to strengthen MIEs and SEs, 1997-2003 Number of assistance programs

Still continuing Institutions Number of institutions

Total Total % Government institutions Banking institutions Private companies Donor agencies NGOs Others Total 13 7 10 8 20 6 64 388 31 12 46 109 8 594 127 25 12 15 79 8 266 32.7 80.7 100.0 32.6 72.5 100.0 44.8 Source: SMERU (2004).

Table 12 shows the type of assistance provided by these programs. The number of activities within each program also varied, but generally ranged from between one and three. In total, the most common types of activities were the provision of training (22.9%), capital assistance/credit (17.3%), facilitation (16.1%), and the dissemination/introduction of new technology (15.2%).

Table 12: The proportion of assistance programs to strengthen MIEs and SEs based upon the type of activities and the executing institutions.

Government institutions Banking institutions Private companies Donor agencies

NGOs Others Total Capital assistance Training Facilitation Information Facilities Promotion

Dissemination/introduction of new technology

Guidelines Others

Types of activities

5.3 21.1 11.3 1.9 16.2 3.0 27.9 4.3 9.0 531 52.9 13.7 9.8 7.8 2.0 3.9 0.0 0.0 9.8 51 25.0 22.2 19.4 2.8 5.6 13.9 0.0 0.0 11.1 36 21.0 19.0 7.6 3.8 8.6 6.7 6.7 0.0 26.7 105 29.6 29.0 28.7 1.6 1.0 1.0 1.3 0.7 7.2 307 28.6 21.4 0.0 21.4 0.0 7.1 0.0 0.0 21.4 14 17.3 22.9 16.1 2.6 9.7 3.3 15.2 2.4 10.5 1044 Source: see Table 11.

However, there are no government sponsored-SME development programs specifically for women entrepreneurs. This is one serious lack of government’s efforts to promote the development of women entrepreneurship. An official

from the State Ministry of Cooperative and SME, i.e. the national coordinator of all SME development programs from all departments and institutes, told the author once that such women entrepreneur-specific programs are not necessary since both male and female owners of SMEs in principle are targeted by existing programs. However, as he said further, female participants in for instance training programs are generally few as they are more neglected to participate not because of some discrimination criteria put by the providers but mostly because of cultural constraints. Female entrepreneurs in MIEs and SEs often rely more on their husbands or their families when they face difficulties with their businesses. Also female producers more hesitate to apply for credit than their male counterparts.

Typically, government programs are evaluated according to the number of enterprises who participate. The actual outcome of the program is generally not assessed. Thus, it is impossible to tell for most government programs whether they are effective or not in improving technical ability. Moreover, program benefits should be compared with program costs to determine the net benefits, but this is generally not done (van Dierman, 2004).

Few studies suggest that most SME development programs have not been very successful.6For instance, the Foster Parent (FP) program attempted to create productive linkages between LEs and SMEs, but levels of participation were low and very little training and technical assistance was supplied.7Data 2003 (BPS) show that only 11% of MIEs and 3% of SEs received training and technical assistance from the program.

The general impression is that the FP was essentially a non-market mechanism to pressure LEs and the SMEs into a ‘forced marriage’. International evidence shows dense patterns of linkages and partnerships are not established through mandatory requirements. Rather, they are established when they offer commercial benefits to both parties.

Another more comprehensive technical assistance program has involved the development of technical service units (UPT)) in existing SME clusters of similar industries across provinces. These units provide extension and technical services and training courses, and are staffed by government technical officers who have received special training. Van Diermen (2004) concludes that the UPT extension service program has achieved poor results. It has failed to deliver efficient services; to target appropriate recipients; or to address the important criteria of providing a net benefit to society and/or effectively addressing equity or fairness objectives. In particular, van Dierman notes that: (i) types of services are highly supply oriented rather than demand driven; (ii) most of the machines and equipments are outdated. Originally, these units were supplied

6

For discussion explicitly or implicitly on the government programs to support SMEs in Indonesia, see for instance Klapwijk (1997), Sandee (1994, 1995), Sandee et al (1994, 2000, 2002), van Dierman (1997, 2004), and Sato (2000).

7

In this scheme, introduced on a nation-wide basis in February 1992, all state-owned enterprises and big private companies (LEs) were required to assist SMEs with capital, training and technical assistance, marketing, procurement of raw material, and many others. For example, with respect to marketing, the parent companies provided promotion facilities such as trade exhibitions and study tours for the supported enterprises or acted as a trading house. With respect to technology, the parent companies provided the supported enterprises with financial assistance for the purchase of new machines or provided them technical trainings or technicians during the innovation process.

with modern technological machines and equipments. However, over the years, especially after the economic crisis 1997/1998, budget constraints have prevented the replacement of the existing equipment; (iii) services have been delivered indiscriminately to clusters; (iv) the staff of the UPT had not had the appropriate training to respond to entrepreneurs’ needs; and (v) there was not great enough flexibility in the system to respond to the changing needs of SMEs, possibly due to the bureaucratic structure of the UPT.

Based on his analysis of the effects of macro-and micro-policy environments on rural industries in Indonesia, van Dierman (2004) comes to the following conclusions: (i) few of the micro-policies (programs) implemented by the government have had a lasting impact on improving rural SMEs; (ii) a significant number of macro-and micro-policies placed additional costs and burdens on rural SMEs’ compliance. This has led to most operating outside of the formal economy; and (iii) macro-policies that created a favorable economic environment, as reflected by consistently high growth rates in GDP, and not biased in favor of LEs, provided the best stimulus for SME growth.

Based on their study on a furniture cluster in Jepara (Central Java), Sandee et al (2000) conclude that public intervention, not specific programs to help SMEs, is likely to have contributed to the success of this cluster. A comprehensive development package, including technical upgrading through the provision of a common service facility for wood drying; export training, and support for participation in trade fairs; and investment in improvement of the regional infrastructure (container facilities, roads, telephone), helped the cluster to gradually develop export markets.

Sato’s (2000) field study of several clusters in the metal-working and machinery industry in Java concludes that the successful development of these clusters has been achieved without significant government supports. Her impression about effectiveness of government programs on development of SMEs is also supported by Tambunan’s (1998) findings on rattan industries in Padang (West Sumatra). He conclude that the government’s efforts to support the clusters have not yielded positive results. One reason appears to be the lack of coordination between the various government agencies. In many clusters, local government agencies such as regional offices of the State Ministry for Cooperatives and SME; the MoI, state universities; and workers skill training centers (Balai Latihan Kerja) from the Department of Manpower provided some supports. However, sometimes different agencies provided similar schemes/programs, and there was little attempt to coordinate their efforts.

While the government is the largest supplier of training programs, the evidence suggests that the quality and relevance of the training provided is poor. Most of these programs do not appear to have been very effective in upgrading the technological capabilities of the firms trained. For example, Sandee (1994) notes that training materials and other information do not always match the needs of the producers, stating that: ……. In practice, direct assistance frequently concerns brief training sessions of one or two days for a

selected group of producers. Such sessions are characterized by a great deal of theory and little attention paid to how to improve the actual running of the business of particular activities. (page 152).

Overall, it is hard to find evidence showing that those programs have been effective in empowering SMEs. But, the policy makers keep believing that their SME development model does work well, which is often measured simply by the annual increase in total number of SMEs (see again Table 1), or the annual increases in total implemented programs and total number of participants. It may also be a case of donor-driven fads and priorities, without any durable government commitment. Moreover, donor sponsored SME development programs in Indonesia (as in many other developing countries) are usually short term activities and after that no follow up. Even, no evaluations have been done by the local executing or donor agencies.

Concluding Remarks

In Indonesia as in many other developing countries in Asia, Africa and Latin America, women predominate in informal economy such as MIEs and SEs, either as workers or entrepreneurs, where they do that as a survival strategy. Many case studies in Indonesia show that because of their participation in informal economic activities, these women are able to keep their family from falling into extremely poor. This suggests obviously how important is the development of women entrepreneurs as a means to alleviate poverty.

The economic contribution of women entrepreneurs, however, has remained largely unacknowledged and unmeasured. In Indonesia, as in many other developing countries, no national data are available which can show how much these female-owned enterprises contribute to total value added or gross domestic products (GDP), and on average how much their contribution to their family incomes. This calls for the extension of national statistic censuses or surveys on economic activities in these countries to include the comprehensive profile of women entrepreneurs, including their role in the economy, not only with respect to employment but also to GDP and export contributions Without such information, the real potential economic capacity of women and its main factors or constraints will never known, and, a good gender sensitive policy which recognizes the value of female economic activities for economic development and poverty reduction can never be developed. Consequently, the ongoing efforts to promote women entrepreneurs and hence to empower women as part of the MDGs will not yield an optimum result as expected.

This Indonesian case also show that the economic potential of women entrepreneurs is constrained by internal factors such as lack of education and limited time especially for married women, as well as external factors such as lack of access to credit and cultural or social constraints. Of course, some of these constraints, especially in relation to social or cultural constraints, are not so easy to solve. However, to

increase public awareness about the important role that women can play in the economy in general and in the family welfare in particular through various means such as education, television talk shows, women entrepreneurship awards, successful stories about women entrepreneurs in news papers, and so on, is a good effort needs to be taken.

References

Ahmed, Leila (1992), Women and Gender in Islam, New Haven and London: Yale University Press.

APEC (1999), “Women Entrepreneurs in SMEs in the APEC Region”, APEC Project (SME 02/98), Singapore. APEC (2002), Profile of SMEs and SME Issues in APEC 1990-2000,Singapore: APEC Secretariat.

APEC (2003), “Providing Financial Support for Micro-enterprise Development,” information paper presented at the SMEs Ministerial Meeting, Chiang Mai, Thailand, 7-8 August.

Arifin, Haswinar (2004), “Cara memahami kerentanan perempuan pengusaha kecil” (a way to understand the vulnerability of women-entrepreneurs), Jurnal Analisis Sosial, 9 (2): 157-170.

Berry, Albert, Edgard Rodriguez and Henry Sandee (2001), “Small and Medium Enterprise Dynamics in Indonesia,” Bulletin of Indonesian Economic Studies,31(3): 363-84.

Berry, Albert., E. Rodriguez and Henry Sandee (2002), “Firm and Group Dynamics in the Small and Medium Enterprise Sector in Indonesia”, Small Business Economics, 18(1–3):141–161.

Dewayanti, Ratih and Erna Ermawati Chotim (2004), “Marginalisasi dan Eksploitasi Perempuan Usaha Mikro di Perdesaan Jawa (women marginalization and exploitation in micro business in rural Jawa). Bandung: Yayasan Akatiga.

Haleh Afshar and Bina Agarwal (eds.)(1989), Women, Poverty and Ideology in Asia, London: Macmillan. Hall, Chris (2002), “Profile of SMEs and SME Issues in East Asia,” in Charles Harvie and Boon-Chye Lee

(eds.), The Role of SMEs in National Economies in East Asia, Cheltenham: Edward Elgar.

Kandiyoti, Deniz. (1989), "Women and Islam: What Are the Missing Terms ?", In Dossier 5/6, December 1988 - May 1989. Grabels: WLUML.

Klapwijk, M. (1997), “Rural Industry Clusters in Central Java, Indonesia. An Empirical Assessment of their Role in Rural Industrialization”,Tinbergen Institute Research Series, No. 153.

Maemunah, May (1996), “Studi tentang kepemimpinan wanita dalam industri rumah tangga di Kabupaten Batanghari (study on women leadership in home-based industry at Batanghari District), mimeo, March, Jambi: Faculty of Education Universitas Jambi.

Manning, C. (1998), Indonesian Labour in Transition: An East Asian Success Story, Cambridge University Press.

Mumtaz, Khawar (1993), "The Changing Status of Women in Muslim Societies, Special Report: Anthropology". In 1993 Britannica Book of the Year, Chicago: Encyclopaedia Britannica Inc.

Myint, Sein (2000), “The SMEs and skill development in Myanmar”, paper presented at the Leadership Forum 2000, 15-17 January, Bangkok.

Oey, Mayling (1998), “The Impact of the Financial Crisis on Indonesian Women: Some Survival Strategy”,

The Indonesian Quarterly, 26(2): 81-90

Purwandari, Istiti. (2002), ”Peranan Industri terhadap kesempatan kerja wanita dan pendapatan rumah tangga (The role of industry on women’s working opportunity and household income)”, mimeo, January, Yogyakarta: Faculty of Agriculture STIPER.

RAM Consultancy Services (2005), “SME Access to Financing: Addressing the Supply Side of SME Financing”, REPSF Project No. 04/003, Final Main Report, July.

Regnier, Philippe (2000), Small and Medium Enterprises in Distress – Thailand, the East Asian Crisis and Beyond, Aldershot: Gower Publishing Limited.

Rusdillah, Erly (1987), “Penelitian Wanita di Sektor Informal di Lima Kota” (Research on women in informal sector in five cities), paper presented at the National Training Workshop for User and Provider of Data and Indicators on Women Productive Economic Activities, October, 5-9, Jakarta.

Sandee, Henry (1994), “The Impact of Technological Change on Interfirm Linkages. A Case Study of Clustered Rural Small-Scale Roof Tile Enterprises in Central Java”, in P.O. Pedersen, A. Sverrisson, and M.P. van Dijk (eds.),

Flexible Specialization. The Dynamics of Small-Scale Industries in the South, Intermediate Technology Publications, London.

Sandee, H. (1995), Innovation Adoption in Rural Industry. Technological Change in Roof Tile Clusters in Central Java, Vrije Universiteit Press, Amsterdam.

Sandee, H., P. Rietveld, H. Supratikno, and P. Yuwono (1994), “Promoting Small-scale and Cottage Industries in Indonesia. An Impact Analysis for Central Java”, Bulletin of Indonesian Economic Studies, 20(3):115-142.

Sandee, Henry, R. K. Andadari, and S. Sulandjari (2000), “Small Firm Development during Good Times and Bad: The Jepara Furniture Industry,” in C. Manning and P. van Diermen (eds.), Indonesia in Transition. Social Aspects of Reformasi and Crisis, Singapore: Institute of Southeast Asia Studies. Sandee, Henry, B. Isdijoso, and Sri Sulandjari (2002), SME clusters in Indonesia: An analysis of growth

dynamics and employment conditions, Jakarta: International Labor Office (ILO). Sasikumar, K. (2000), Women Entrepreneurship, New Delhi: Vikas Publishing House.

Sato, Yuri (2000), “Linkage Formation by Small Firms: The Case of a Rural Cluster in Indonesia”, Bulletin of Indonesian Economic Studies,36(1): 137–66.

Seymour, Nicole (2001), “Women entrepreneurs in the developing world”, CELCEE Digest, No. 01-04, August, http://www.celcee.edu/.

Shaheed, Farida (1994), “Controlled or Autonomous: Identity and the Experience of the Network Women Living Under Muslim Laws”, Occasional Paper 5, July, The international network, Women Living Under Muslim Laws (WLUML).

Sharma, D.D. and S.K. Dhameja (2002), Women and Rural Entrepreneurship, Chandigarh: Abhishek Publications.

Sinha1, Shalini (2005), “Developing Women Entrepreneurs in South Asia: Issues, Initiatives and Experiences”, ST/ESCAP/2401, Trade and Investment Division, UNESCAP, Bangkok.

SMERU (2004), “Mapping Assistance Programs to Strengthen Microbusinesses”, Smeru News, no.10, April-June.

Suharyo, Widjajanti I. (2005), “Gender and Poverty”, SMERU (Gender and Poverty), No.14, April-June. Sulaiman, Larasati Suliantoro (1982), “Crafts-women: The social status and economic role of women

among low income society”, mimeo, Jakarta: LP3ES.

Suminar, Tri (2001), ”Peluang kerja perempuan miskin perkotaan pada sekto industri rumah tangga (Working opportunity of urban poor women in home-industry sector), mimeo, January, Faculty of Education, Universitas Negeri Semarang.

Syahrir, Kartini (1986), “Lapangan Kerja Bagi Wanita di Sektor Informal” (Employment Opportunity for Women in Informal Sector), paper presented at the One Day Symposium on Employment Opportunity for Women, December 12, Jakarta.

UNCTAD (2003), “Improving the Competitiveness of SMEs through Enhancing Productive Capacity”, TD/B/Com.3/51/Add.1, January, Geneva.

UNDP (2006), Human Development Report 2006, Geneva.

Tambunan, Tulus T.H. (1998), “Cluster Diagnosis in Padang Rattan Industries and Proposed Action Plan”, Study report, October, UNIDO, Jakarta.

Tambunan, Tulus T. (2006), Development of Small & Medium Enterprises in Indonesia from the Asia-Pacific Perspective, LPFE-Usakti, Jakarta.

van Dierman , Peter (2004), “ The Economic Policy Environment for Small Rural Enterprises in Indonesia”, Thomas R. Leinbach (ed.), The Indonesian Rural Economy Mobility, Work and Enterprise, Singapore: ISEAS.

Vishwananthan, Renuka (2001), “Women in Business”, <http://indiatogether.org/women/business/ renuka.htm>

World Bank. (2002), SME, World Bank Group Review of Small Business Activities, Washington, DC: World Bank.

World Bank. (2004), SME, World Bank Group Review of Small Business Activities, Washington, DC: World Bank.

World Bank (2007), 2007 Global Monitoring Report on the Millennium Development Goals (MDGs), Washington, D.C.

from the State Ministry of Cooperative and SME, i.e. the national coordinator of all SME development programs from all departments and institutes, told the author once that such women entrepreneur-specific programs are not necessary since both male and female owners of SMEs in principle are targeted by existing programs. However, as he said further, female participants in for instance training programs are generally few as they are more neglected to participate not because of some discrimination criteria put by the providers but mostly because of cultural constraints. Female entrepreneurs in MIEs and SEs often rely more on their husbands or their families when they face difficulties with their businesses. Also female producers more hesitate to apply for credit than their male counterparts.

Typically, government programs are evaluated according to the number of enterprises who participate. The actual outcome of the program is generally not assessed. Thus, it is impossible to tell for most government programs whether they are effective or not in improving technical ability. Moreover, program benefits should be compared with program costs to determine the net benefits, but this is generally not done (van Dierman, 2004).

Few studies suggest that most SME development programs have not been very successful.6For instance, the Foster Parent (FP) program attempted to create productive linkages between LEs and SMEs, but levels of participation were low and very little training and technical assistance was supplied.7Data 2003 (BPS) show that only 11% of MIEs and 3% of SEs received training and technical assistance from the program.

The general impression is that the FP was essentially a non-market mechanism to pressure LEs and the SMEs into a ‘forced marriage’. International evidence shows dense patterns of linkages and partnerships are not established through mandatory requirements. Rather, they are established when they offer commercial benefits to both parties.

Another more comprehensive technical assistance program has involved the development of technical service units (UPT)) in existing SME clusters of similar industries across provinces. These units provide extension and technical services and training courses, and are staffed by government technical officers who have received special training. Van Diermen (2004) concludes that the UPT extension service program has achieved poor results. It has failed to deliver efficient services; to target appropriate recipients; or to address the important criteria of providing a net benefit to society and/or effectively addressing equity or fairness objectives. In particular, van Dierman notes that: (i) types of services are highly supply oriented rather than demand driven; (ii) most of the machines and equipments are outdated. Originally, these units were supplied

6

For discussion explicitly or implicitly on the government programs to support SMEs in Indonesia, see for instance Klapwijk (1997), Sandee (1994, 1995), Sandee et al (1994, 2000, 2002), van Dierman (1997, 2004), and Sato (2000).

7

In this scheme, introduced on a nation-wide basis in February 1992, all state-owned enterprises and big private companies (LEs) were required to assist SMEs with capital, training and technical assistance, marketing, procurement of raw material, and many others. For example, with respect to marketing, the parent companies provided promotion facilities such as trade exhibitions and study tours for the supported enterprises or acted as a trading house. With respect to technology, the parent companies provided the supported enterprises with financial assistance for the purchase of new machines or provided them technical trainings or technicians during the innovation process.

with modern technological machines and equipments. However, over the years, especially after the economic crisis 1997/1998, budget constraints have prevented the replacement of the existing equipment; (iii) services have been delivered indiscriminately to clusters; (iv) the staff of the UPT had not had the appropriate training to respond to entrepreneurs’ needs; and (v) there was not great enough flexibility in the system to respond to the changing needs of SMEs, possibly due to the bureaucratic structure of the UPT.

Based on his analysis of the effects of macro-and micro-policy environments on rural industries in Indonesia, van Dierman (2004) comes to the following conclusions: (i) few of the micro-policies (programs) implemented by the government have had a lasting impact on improving rural SMEs; (ii) a significant number of macro-and micro-policies placed additional costs and burdens on rural SMEs’ compliance. This has led to most operating outside of the formal economy; and (iii) macro-policies that created a favorable economic environment, as reflected by consistently high growth rates in GDP, and not biased in favor of LEs, provided the best stimulus for SME growth.

Based on their study on a furniture cluster in Jepara (Central Java), Sandee et al (2000) conclude that public intervention, not specific programs to help SMEs, is likely to have contributed to the success of this cluster. A comprehensive development package, including technical upgrading through the provision of a common service facility for wood drying; export training, and support for participation in trade fairs; and investment in improvement of the regional infrastructure (container facilities, roads, telephone), helped the cluster to gradually develop export markets.

Sato’s (2000) field study of several clusters in the metal-working and machinery industry in Java concludes that the successful development of these clusters has been achieved without significant government supports. Her impression about effectiveness of government programs on development of SMEs is also supported by Tambunan’s (1998) findings on rattan industries in Padang (West Sumatra). He conclude that the government’s efforts to support the clusters have not yielded positive results. One reason appears to be the lack of coordination between the various government agencies. In many clusters, local government agencies such as regional offices of the State Ministry for Cooperatives and SME; the MoI, state universities; and workers skill training centers (Balai Latihan Kerja) from the Department of Manpower provided some supports. However, sometimes different agencies provided similar schemes/programs, and there was little attempt to coordinate their efforts.

While the government is the largest supplier of training programs, the evidence suggests that the quality and relevance of the training provided is poor. Most of these programs do not appear to have been very effective in upgrading the technological capabilities of the firms trained. For example, Sandee (1994) notes that training materials and other information do not always match the needs of the producers, stating that: ……. In practice, direct assistance frequently concerns brief training sessions of one or two days for a

selected group of producers. Such sessions are characterized by a great deal of theory and little attention paid to how to improve the actual running of the business of particular activities. (page 152).

Overall, it is hard to find evidence showing that those programs have been effective in empowering SMEs. But, the policy makers keep believing that their SME development model does work well, which is often measured simply by the annual increase in total number of SMEs (see again Table 1), or the annual increases in total implemented programs and total number of participants. It may also be a case of donor-driven fads and priorities, without any durable government commitment. Moreover, donor sponsored SME development programs in Indonesia (as in many other developing countries) are usually short term activities and after that no follow up. Even, no evaluations have been done by the local executing or donor agencies.

Concluding Remarks

In Indonesia as in many other developing countries in Asia, Africa and Latin America, women predominate in informal economy such as MIEs and SEs, either as workers or entrepreneurs, where they do that as a survival strategy. Many case studies in Indonesia show that because of their participation in informal economic activities, these women are able to keep their family from falling into extremely poor. This suggests obviously how important is the development of women entrepreneurs as a means to alleviate poverty.

The economic contribution of women entrepreneurs, however, has remained largely unacknowledged and unmeasured. In Indonesia, as in many other developing countries, no national data are available which can show how much these female-owned enterprises contribute to total value added or gross domestic products (GDP), and on average how much their contribution to their family incomes. This calls for the extension of national statistic censuses or surveys on economic activities in these countries to include the comprehensive profile of women entrepreneurs, including their role in the economy, not only with respect to employment but also to GDP and export contributions Without such information, the real potential economic capacity of women and its main factors or constraints will never known, and, a good gender sensitive policy which recognizes the value of female economic activities for economic development and poverty reduction can never be developed. Consequently, the ongoing efforts to promote women entrepreneurs and hence to empower women as part of the MDGs will not yield an optimum result as expected.

This Indonesian case also show that the economic potential of women entrepreneurs is constrained by internal factors such as lack of education and limited time especially for married women, as well as external factors such as lack of access to credit and cultural or social constraints. Of course, some of these constraints, especially in relation to social or cultural constraints, are not so easy to solve. However, to

increase public awareness about the important role that women can play in the economy in general and in the family welfare in particular through various means such as education, television talk shows, women entrepreneurship awards, successful stories about women entrepreneurs in news papers, and so on, is a good effort needs to be taken.

References

Ahmed, Leila (1992), Women and Gender in Islam, New Haven and London: Yale University Press.

APEC (1999), “Women Entrepreneurs in SMEs in the APEC Region”, APEC Project (SME 02/98), Singapore. APEC (2002), Profile of SMEs and SME Issues in APEC 1990-2000,Singapore: APEC Secretariat.

APEC (2003), “Providing Financial Support for Micro-enterprise Development,” information paper presented at the SMEs Ministerial Meeting, Chiang Mai, Thailand, 7-8 August.

Arifin, Haswinar (2004), “Cara memahami kerentanan perempuan pengusaha kecil” (a way to understand the vulnerability of women-entrepreneurs), Jurnal Analisis Sosial, 9 (2): 157-170.

Berry, Albert, Edgard Rodriguez and Henry Sandee (2001), “Small and Medium Enterprise Dynamics in Indonesia,” Bulletin of Indonesian Economic Studies, 31(3): 363-84.

Berry, Albert., E. Rodriguez and Henry Sandee (2002), “Firm and Group Dynamics in the Small and Medium Enterprise Sector in Indonesia”, Small Business Economics, 18(1–3):141–161.

Dewayanti, Ratih and Erna Ermawati Chotim (2004), “Marginalisasi dan Eksploitasi Perempuan Usaha Mikro di Perdesaan Jawa (women marginalization and exploitation in micro business in rural Jawa). Bandung: Yayasan Akatiga.

Haleh Afshar and Bina Agarwal (eds.)(1989), Women, Poverty and Ideology in Asia, London: Macmillan. Hall, Chris (2002), “Profile of SMEs and SME Issues in East Asia,” in Charles Harvie and Boon-Chye Lee

(eds.), The Role of SMEs in National Economies in East Asia, Cheltenham: Edward Elgar.

Kandiyoti, Deniz. (1989), "Women and Islam: What Are the Missing Terms ?", In Dossier 5/6, December 1988 - May 1989. Grabels: WLUML.

Klapwijk, M. (1997), “Rural Industry Clusters in Central Java, Indonesia. An Empirical Assessment of their Role in Rural Industrialization”, Tinbergen Institute Research Series, No. 153.

Maemunah, May (1996), “Studi tentang kepemimpinan wanita dalam industri rumah tangga di Kabupaten Batanghari (study on women leadership in home-based industry at Batanghari District), mimeo, March, Jambi: Faculty of Education Universitas Jambi.

Manning, C. (1998), Indonesian Labour in Transition: An East Asian Success Story, Cambridge University Press.

Mumtaz, Khawar (1993), "The Changing Status of Women in Muslim Societies, Special Report: Anthropology". In 1993 Britannica Book of the Year, Chicago: Encyclopaedia Britannica Inc.

Myint, Sein (2000), “The SMEs and skill development in Myanmar”, paper presented at the Leadership Forum 2000, 15-17 January, Bangkok.

Oey, Mayling (1998), “The Impact of the Financial Crisis on Indonesian Women: Some Survival Strategy”, The Indonesian Quarterly, 26(2): 81-90

Purwandari, Istiti. (2002), ”Peranan Industri terhadap kesempatan kerja wanita dan pendapatan rumah tangga (The role of industry on women’s working opportunity and household income)”, mimeo, January, Yogyakarta: Faculty of Agriculture STIPER.

RAM Consultancy Services (2005), “SME Access to Financing: Addressing the Supply Side of SME Financing”, REPSF Project No. 04/003, Final Main Report, July.

Regnier, Philippe (2000), Small and Medium Enterprises in Distress – Thailand, the East Asian Crisis and Beyond, Aldershot: Gower Publishing Limited.

Rusdillah, Erly (1987), “Penelitian Wanita di Sektor Informal di Lima Kota” (Research on women in informal sector in five cities), paper presented at the National Training Workshop for User and Provider of Data and Indicators on Women Productive Economic Activities, October, 5-9, Jakarta.

Sandee, Henry (1994), “The Impact of Technological Change on Interfirm Linkages. A Case Study of Clustered Rural Small-Scale Roof Tile Enterprises in Central Java”, in P.O. Pedersen, A. Sverrisson, and M.P. van Dijk (eds.),

Flexible Specialization. The Dynamics of Small-Scale Industries in the South, Intermediate Technology Publications, London.

Sandee, H. (1995), Innovation Adoption in Rural Industry. Technological Change in Roof Tile Clusters in Central Java, Vrije Universiteit Press, Amsterdam.

Sandee, H., P. Rietveld, H. Supratikno, and P. Yuwono (1994), “Promoting Small-scale and Cottage Industries in Indonesia. An Impact Analysis for Central Java”, Bulletin of Indonesian Economic Studies, 20(3):115-142.

Sandee, Henry, R. K. Andadari, and S. Sulandjari (2000), “Small Firm Development during Good Times and Bad: The Jepara Furniture Industry,” in C. Manning and P. van Diermen (eds.), Indonesia in Transition. Social Aspects of Reformasi and Crisis, Singapore: Institute of Southeast Asia Studies. Sandee, Henry, B. Isdijoso, and Sri Sulandjari (2002), SME clusters in Indonesia: An analysis of growth

dynamics and employment conditions, Jakarta: International Labor Office (ILO). Sasikumar, K. (2000), Women Entrepreneurship, New Delhi: Vikas Publishing House.

Sato, Yuri (2000), “Linkage Formation by Small Firms: The Case of a Rural Cluster in Indonesia”, Bulletin of Indonesian Economic Studies,36(1): 137–66.

Seymour, Nicole (2001), “Women entrepreneurs in the developing world”, CELCEE Digest, No. 01-04, August, http://www.celcee.edu/.

Shaheed, Farida (1994), “Controlled or Autonomous: Identity and the Experience of the Network Women Living Under Muslim Laws”, Occasional Paper 5, July, The international network, Women Living Under Muslim Laws (WLUML).

Sharma, D.D. and S.K. Dhameja (2002), Women and Rural Entrepreneurship, Chandigarh: Abhishek Publications.

Sinha1, Shalini (2005), “Developing Women Entrepreneurs in South Asia: Issues, Initiatives and Experiences”, ST/ESCAP/2401, Trade and Investment Division, UNESCAP, Bangkok.

SMERU (2004), “Mapping Assistance Programs to Strengthen Microbusinesses”, Smeru News, no.10, April-June.

Suharyo, Widjajanti I. (2005), “Gender and Poverty”, SMERU (Gender and Poverty), No.14, April-June. Sulaiman, Larasati Suliantoro (1982), “Crafts-women: The social status and economic role of women

among low income society”, mimeo, Jakarta: LP3ES.

Suminar, Tri (2001), ”Peluang kerja perempuan miskin perkotaan pada sekto industri rumah tangga (Working opportunity of urban poor women in home-industry sector), mimeo, January, Faculty of Education, Universitas Negeri Semarang.

Syahrir, Kartini (1986), “Lapangan Kerja Bagi Wanita di Sektor Informal” (Employment Opportunity for Women in Informal Sector), paper presented at the One Day Symposium on Employment Opportunity for Women, December 12, Jakarta.

UNCTAD (2003), “Improving the Competitiveness of SMEs through Enhancing Productive Capacity”, TD/B/Com.3/51/Add.1, January, Geneva.

UNDP (2006), Human Development Report 2006, Geneva.

Tambunan, Tulus T.H. (1998), “Cluster Diagnosis in Padang Rattan Industries and Proposed Action Plan”, Study report, October, UNIDO, Jakarta.

Tambunan, Tulus T. (2006), Development of Small & Medium Enterprises in Indonesia from the Asia-Pacific Perspective, LPFE-Usakti, Jakarta.

van Dierman , Peter (2004), “ The Economic Policy Environment for Small Rural Enterprises in Indonesia”, Thomas R. Leinbach (ed.), The Indonesian Rural Economy Mobility, Work and Enterprise, Singapore: ISEAS.

Vishwananthan, Renuka (2001), “Women in Business”, <http://indiatogether.org/women/business/ renuka.htm>

World Bank. (2002), SME, World Bank Group Review of Small Business Activities, Washington, DC: World Bank.

World Bank. (2004), SME, World Bank Group Review of Small Business Activities, Washington, DC: World Bank.

World Bank (2007), 2007 Global Monitoring Report on the Millennium Development Goals (MDGs), Washington, D.C.