Indonesian MSMEs Struggle Amid Economic Challenges

Weak Consumer Demand and Limited Access to Finance

The Micro, Small, and Medium Enterprises (MSMEs) sector in Indonesia continues to face significant headwinds, with the BRI Research Institute's MSME Business Index showing a decline to 101.9 in Q3 2025 from 103.7 in the previous quarter. Key factors contributing to this sluggish performance include low consumer purchasing power, difficulties in accessing financing, and limited distribution networks.

Factors Contributing to the Slowdown

1. Weak Consumer Demand: The normalization of consumer spending post-major religious holidays and school breaks has led to decreased demand. Additionally, high rainfall in several regions and the slowdown in the mining sector's expansion have negatively impacted production volumes and sales.
2. Rising Input Costs: Increased prices of input goods have further strained MSMEs, eroding their profit margins.
3. Limited Access to Finance: MSMEs continue to struggle with accessing adequate financing, hindering their ability to expand operations or improve their distribution networks.

Implications for MSME Growth

The current challenges facing MSMEs are multifaceted, requiring a comprehensive approach to address the issues of demand, financing, and distribution. Stakeholders, including financial institutions and policymakers, need to collaborate to create supportive measures that can help revitalize the MSME sector, which is crucial for Indonesia's economic growth.