Indonesia: World Bank says Small Business Growth could reduce Poverty

Small businesses, which employ millions of Indonesians, could become major engines of economic growth in this cash-strapped country and help reduce poverty, the World Bank has said.

Indonesia's 15.7 million small enterprises make up more than 90 percent of all businesses and employ up to 60 percent of the workforce, outside agriculture, but their growth is hindered by access to credit and poor infrastructure, the World Bank's Indonesia director said in a report released Wednesday.

"Lack of access to credit, poor roads and unreliable electricity top the list of concerns faced by micro and small enterprises," Andrew Steer said in a press release accompanying the report.

The World Bank argues in its study that outside major cities, small enterprises "could become important engines of pro-poor growth if the right policies are in place."

Whilst large firms, such as those in manufacturing absorb up to 40 percent of the available workforce in the urban areas, in rural areas the largest employers are small enterprises, says the Bank.

"Moreover, micro and small enterprises tend to employ poorer people, so stimulating growth in such firms tends to boost the incomes of the poor directly," the report said.

"And large firms are heavily concentrated in the major metropolitan areas and their surroundings. By contrast micro and small enterprises are dispersed throughout the country, so promoting the growth of these firms can also help to reduce inequality between regions."

The Bank, which surveyed 2,500 businesses in six districts, says that more than 85 percent of enterprises complained that hiring skilled labour and labour from outside their region, was a problem.

The Bank urged regional governments not to enact laws preventing companies hiring employees from outside their districts, and also called on them to improve the quality of education.

"The single most important factor determining the ability of the poor to obtain decent jobs is the level and quality of their education," said the report.

Officially 10.8 million of Indonesia's 106 million-strong workforce in 2005 were unemployed. But another 29.6 million are under-employed, working less than 40 hours a week, and half the population lives on less than two dollars a day. — AFP

Small businesses, which employ millions of Indonesians, could become major engines of economic growth in this cash-strapped country and help reduce poverty, the World Bank has said. Indonesia's 15.7 million small enterprises make up more than 90 percent of all businesses and employ up to 60 percent of the workforce, outside agriculture, but their growth is hindered by access to credit and poor infrastructure, the World Bank's Indonesia director said in a report released Wednesday.

"Lack of access to credit, poor roads and unreliable electricity top the list of concerns faced by micro and small enterprises," Andrew Steer said in a press release accompanying the report. The World Bank argues in its study that outside major cities, small enterprises "could become important engines of pro-poor growth if the right policies are in place."

Whilst large firms, such as those in manufacturing absorb up to 40 percent of the available workforce in the urban areas, in rural areas the largest employers are small enterprises, says the Bank.

"Moreover, micro and small enterprises tend to employ poorer people, so stimulating growth in such firms tends to boost the incomes of the poor directly," the report said. "And large firms are heavily concentrated in the major metropolitan areas and their surroundings. By contrast micro and small enterprises are dispersed throughout the country, so promoting the growth of these firms can also help to reduce inequality between regions."

The Bank, which surveyed 2,500 businesses in six districts, says that more than 85 percent of enterprises complained that hiring skilled labour and labour from outside their region, was a problem. It urged regional governments not to enact laws preventing companies hiring employees from outside their districts, and also called on them to improve the quality of education. "The single most important factor determining the ability of the poor to obtain decent jobs is the level and quality of their education," said the report.

Officially 10.8 million of Indonesia's 106 million-strong workforce in 2005 were unemployed. But another 29.6 million are under-employed, working less than 40 hours a week, and half the population lives on less than two dollars a day. — AFP
Small businesses, which employ millions of Indonesians, could become major engines of economic growth in this cash-strapped country and help reduce poverty, the World Bank has said.

Indonesia's 15.7 million small enterprises make up more than 90 percent of all businesses and employ up to 60 percent of the workforce, outside agriculture, but their growth is hindered by access to credit and poor infrastructure, the World Bank's Indonesia director said in a report released Wednesday. "Lack of access to credit, poor roads and unreliable electricity top the list of concerns faced by micro and small enterprises," Andrew Steer said in a press release accompanying the report.

The World Bank argues in its study that outside major cities, small enterprises "could become important engines of pro-poor growth if the right policies are in place." Whilst large firms, such as those in manufacturing absorb up to 40 percent of the available workforce in the urban areas, in rural areas the largest employers are small enterprises, says the Bank.

"Moreover, micro and small enterprises tend to employ poorer people, so stimulating growth in such firms tends to boost the incomes of the poor directly," the report said. "And large firms are heavily concentrated in the major metropolitan areas and their surroundings. By contrast micro and small enterprises are dispersed throughout the country, so promoting the growth of these firms can also help to reduce inequality between regions."

The Bank, which surveyed 2,500 businesses in six districts, says that more than 85 percent of enterprises complained that hiring skilled labour and labour from outside their region, was a problem. The Bank urged regional governments not to enact laws preventing companies hiring employees from outside their districts, and also called on them to improve the quality of education.

"The single most important factor determining the ability of the poor to obtain decent jobs is the level and quality of their education," said the report. Officially 10.8 million of Indonesia's 106 million-strong workforce in 2005 were unemployed. But another 29.6 million are under-employed, working less than 40 hours a week, and half the population lives on less than two dollars a day. — AFP