Abstract :

Objective: This study examines poverty in Indonesia from an economic approach and discusses the importance of micro, small, and medium enterprises (MSMEs). It focused on the impact of these enterprises on poverty in the country.

Methodology: The analysis incorporated an autoregressive model wherein total workers in MSMEs and economic growth rate as explanatory variables. Annual time series data for the period of 2007-2019 has been used. The study also reviews the earlier empirical studies on the relationship between the growth of MSMEs and poverty alleviation in many other countries/regions. It represents the descriptive analysis of the explanatory variables and trends in poverty and MSMEs’ workforce. The poverty-reducing impact of the increase in MSMEs’ workers has been examined.

Findings: The result is significant which implies that MSMEs can play a very important role in poverty alleviation in Indonesia. The results of the study imply that a strong MSME base is required for the development of the economy and poverty alleviation in the country.

Noverlty: There are many studies regarding MSMEs in Indonesia. However, empirical research regarding the impact of the growth of employment opportunities in MSMEs on poverty levels in Indonesia is still very rare. Therefore, this research fills this gap and at the same time stimulates further research.

---

Keywords :

economic growth, MIEs, MSMEs, Poverty, poverty alleviation.

---

References :

1. Abor, J. and Quartey, P. (2010). Issues in SME Development in Ghana and South Africa, International Research Journal of Finance and Economics, 39, 218-228
2. Adeyemi, Nathaniel, and Moshood Lanrewaju (2014). Impact of Micro and Small Business Entrepreneurship on Poverty Reduction in Ibadan Metropolis, South Western Nigeria, International Review of Management and Business Research 3 (3), 1603–1626.
3. Agyapong, Daniel (2010). Micro, Small and Medium Enterprises’ Activities, Income Level and Poverty Reduction in Ghana-A Synthesis of Related Literature, International Journal of Business and Management, 5(12), 196-205.
4. Ahmed, K.; Chowdhury, T.A. (2009). Performance evaluation of SMEs of Bangladesh. International Journal of Business and  Management. 4(7), 126-133.
5. Aina, Olayinka Chris Mnitp, RTP, Amnes (2007). The Role of SMEs in Poverty Alleviation in Nigeria, Journal of Land Use and Development Studies, 3(1), 124-131
6. Ali, Sharafat (2013) The small and medium enterprises and poverty in Pakistan: An empirical analysis, The European Journal of Business and Economics, 8(2) , 25–30
7. Ali, Sharafat, Humayun Rashid, and Muhammad Aamir Khan (2014), The role of small and medium enterprises and poverty in Pakistan: An empirical analysis, Theoretical and Applied Economics, 21(4), 67-80
8. Beck, T., Demiruc-Kunt, A. and Maksimovic, V. (2004). SMEs, Growth and Poverty-Do ProSME Policies Work? World Bank Policy Research, Working Paper, No. 268, Washington, DC.: the World Bank.
9. Begum, A.; and Abdin, M. (2015), Employment Generation and Poverty Alleviation through SME Cluster Development in Bangladesh. Turkish Economic Review, 2(1), 26-31 (https://ssrn.com/abstract=2584327)
10. Biyase, Mduduzi and Zwane, Talent (2017), An Empirical Analysis of the Determinants of poverty and household welfare in South Africa, MPRA Paper No. 77085, University of Johannesburg, January
11. Cook, P. and F. Nixon (2000). Finance and Small and Medium-Sized Enterprise Development. IDPM, Finance and Development Research Programme Working Paper Series, Paper No. 14. University of Manchester.
12. Dahliah and Yulianty Sidik Tjan (2023), The Effect SME in Overcoming Poverty and Unemployment: Empirical Study of Makassar City, Indonesia, Golden Ratio of Social Science and Education, 3(1),14-23
13. Distanont, A., and Khongmalai, O. (2018). The role of innovation in creating a competitive advantage, Kasetsart Journal of Social Sciences, 41(1), 15-21 (https://doi.org/10.1016/j.kjss.2018.07.009).
14. Edom, G.O., Inah, E.U., and Emori (2015), E.G. Small and medium enterprises financing and poverty reduction in Nigeria: An empirical analysis. Journal of Economics and Sustainable Development, 6 (11), 56–67.
15. Ehnberg, J., Ahlborg, H., and Hartvigsson, E. (2020). Approach for flexible and adaptive distribution and transformation design in rural electrification and its implications. Energy for Sustainable Development, 54, 101–110. (https://doi.org/https://doi.org/10.1016/j.esd.2019.10.002).
16. Faharuddin and Darma Endrawati (2022), Determinants of working poverty in Indonesia, Journal of Economics and Development, 24(3), 230-246.
17. Feder, J. and Yu, D. (2019), Employed yet poor: low-wage employment and working poverty in South Africa, Development Southern Africa, 37(3), 363-381.
18. Fibaek, M.M. (2021), Working poor? A study of rural workers’ economic welfare in Kenya, Journal of International Development, 33(1), 41-69.
19. Filandri, M., Pasqua, S. and Struffolino, E. (2020), Being working poor or feeling working poor? The role of work intensity and job stability for subjective poverty, Social Indicators Research, 148(3), 781-80
20. Gebremariam, Gebremeskel H., and Tesfa G. Gebremedhin (2004). The Role of Small Business in Economic Growth and Poverty Alleviation in West Virginia: An Empirical Analysis. Paper. Colorado: American Agricultural Economics Association.
21. Geremewe, Yaregal Tilahun (2018). The Role of Micro and Small Enterprises for Poverty Alleviation, International Journal of Research Studies in Agricultural Sciences, 4 (12), 1–10.
22. Harvie, Charles (2003). The Contribution of Micro-Enterprises to Economic Recovery and Poverty Alleviation in East Asia, Working Paper 03–07, University of Wollongong.
23. Hassaas, M. (2017), The effect of small and medium enterprises on poverty reduction in Afghanistan, Thesis, August, Department of Business, Istanbul Aydin University Institute of Social Science.
24. http://acikarsiv.aydin.edu.tr/handle/11547/2218.
25. Herman, E. (2014), Working poverty in the European Union and its main determinants: an empirical analysis, Inzinerine Ekonomika-Engineering Economics, 25(4), 427-436.
26. Husnah Nuzul (2023), Analisis Kebijan Pemerintah dan Upaya Pengentasan Kemiskinan di Indonesia dari Perspektif Tujuan Pembangunan Berkelanjutan, unpublished PhD dissertation, February, Fakultas Ekonomi dan Bisnis, Universitas Trisakti, Jakarta.
27. Hussain, Mohammad Delwar, Abul Bashar Bhuiyan, and Jamaliah Said (2017). Eradicating Poverty through Micro, Small, and Medium Enterprises: An Empirical Exploration, MAYFEB Journal of Business and Management,1, 42–49.
28. ILO (2019), The working poor or how a job is no guarantee of decent living conditions, ILOSTAT Spotlight on Work Statistics, Geneva: International Labor Office.
29. Ishartono and Rahajo, S.T. (2016). Sustainable Development Goals (SDGs) dan Pengentasan Kemiskinan. Social WorkJurnal, 6(2), 154-272.
30. Islam, Rizwanul (2004). The Nexus of Economic Growth, Employment and Poverty Reduction: An Empirical Analysis, Discussion Paper 14. International Labour Office, Geneva.
31. Kayanula, D., and Quartey P. (2000). The Policy Environment for Promoting Small and Medium-Sized Enterprises in Ghana and Malawi. Finance and Development Research Programme, Working Paper Series, Paper No. 15, IDPM, University of Manchester.
32. Koshy, Perumal, and V. N. Prasad (2007). Small and Micro Enterprises: A Tool in the Fight Against Poverty, Munich Personal RePEc Archive. https://mpra.ub.uni-muenchen.de/22827/.
33. Kowo, S., Adenuga, O., and Sabitu, O. (2019), The role of SMEs development on poverty alleviation in Nigeria, Insights into Regional Development, 1 (3), 214–226.
34. Lohmann, H. (2009), Welfare states, labour market institutions, and the working poor: a comparative analysis of 20 European countries, European Sociological Review, 25(4), 489-504.
35. Lyon, D.J. (2018), Working poverty: low skills or low wages? Challenge, 16 (1), 42-55.
36. Manzoor, Faiza, Longbao Wei, Mohammad Nurunnabi, and Qazi Abdul Subhan (2019). Role of SME in Poverty\Alleviation in SAARC Region Via Panel Data Analysis, Sustainability 11 (22), 1–14. doi:10.3390/su11226480.
37. Mukras, M.S. (2003). Poverty Reduction Through Strengthening Small and Medium Enterprises, Botswana Journal of African Studies, 17(2), 58-69
38. Nurkse, Ragnar (1961) Problems of Capital Formation in Underdeveloped Countries. Oxford University Press. New York.
39. Nursini Nursini (2020) Micro, small, and medium enterprises (MSMEs) and poverty reduction: empirical evidence from Indonesia, Development Studies Research, 7(1), 153-166, doi: 10.1080/21665095. 2020.1823238.
40. O’Neil, Tammie (2006), Introduction, in O’Neil, Tammie, Human Rights and Poverty Reduction: Realities, Controversies and Strategies. An ODI Meeting, March. Overseas Development Institute (ODI), London.
41. Ongkiko, Ila-Virginia-C., and Flor, AG. (2006). Introduction to Development Communication. Diliman Quezon City, Philippines: University of the Philippines Open University
42. Rajeevan, N., Sulphey, M., and Rajasekar, S. (2015), The critical role of micro, small & medium enterprises in employment generation: An Indian experience, Asian Social Science, 11 (24), 258-267
43. Sharp, A.M., Registes, C.A., and Grimes, P.W., (2000), Economics of Social Issues, New York: McGraw-Hill Education.
44. Singh, Ajit (1999). The Role of Employment and Work in Poverty Eradication and Empowerment and Advancement of Women, Working Paper 53561. Munich Personal RePEc Archieve. https://mpra.ub.uni-muenchen.de/53561/1/MPRA_paper_53561.pdf.
45. Suryahadi, Asep, Ridho Al Izzati and Daniel Suryadarma (2020), The Impact of COVID-19 Outbreak on Poverty: An Estimation for Indonesia, SMERU Working Paper, Jakarta: SMERU Research Institute
46. Thiede, B.C., Lichter, D.T. and Slack, T. (2016), Working, but poor: the good life in rural America? Journal of Rural Studies, 59, 183-193.
47. World Bank. (2020). Small and Medium Enterprises (SMEs), Washington, D.C. https://www.worldbank.org/ en/topic/smefinance.
48. Zegeye Paulos Borko (2017), Determinants of Poverty in Rural Households (The Case of Damot Gale District In Wolaita Zone) A Household Level Analysis, International Journal of African and Asian Studies, 29, 68-75