Indonesian legislator urges legal and data reform for small businesses

Gandung Pardiman, a member of Commission VII of the Indonesian House of Representatives (DPR RI), has highlighted that the primary challenges hindering the growth of micro, small, and medium enterprises (UMKM) are incomplete legal documentation and fragmented data.

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However, efforts in digitalization and scaling up UMKM business will not have an impact if these two fundamental issues have not been resolved, namely incomplete legality and fragmented UMKM data.

He stated that UMKM are the backbone of the national economy, contributing significantly to GDP and employment. However, efforts in digitalization and scaling up will be ineffective if fundamental issues like incomplete legality and scattered data are not resolved. Many UMKM owners lack essential documents such as a Business Identification Number (NIB), halal certification, PIRT (Food Industry Home Industry) permit, or a corporate NPWP (Taxpayer Identification Number).

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Banks and financing institutions need legal certainty. Marketplaces and BUMN need legal documents. If the legality is not yet settled, UMKM will continue to be trapped at the micro level.

This lack of legal standing prevents UMKM from accessing crucial resources. They face difficulties in obtaining micro-credit (KUR) financing, integrating into the supply chains of State-Owned Enterprises (BUMN), and participating in government procurement processes via e-catalogs. Banks and financing institutions require legal certainty, while marketplaces and BUMN need proper documentation, keeping UMKM trapped at the micro-level without these.

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This makes the government itself overwhelmed in providing stimulus to UMKM that want to be helped or grown. Data integration is not just about efficiency, but about justice for UMKM entrepreneurs.

Furthermore, the dispersion of UMKM data across various sectors and platforms complicates government assistance and development programs. Businesses are forced to repeatedly submit the same information, overwhelming government efforts to provide targeted support. Pardiman stressed that data integration is not just about efficiency but also about fairness for UMKM entrepreneurs. He concluded that strengthening the UMKM ecosystem requires a comprehensive approach where digitalization, legal certainty, and integrated data work together to enable UMKM to advance.

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Digitalization, legality, and integrated data are the keys for UMKM to move up a class.