Definition, Characteristics, Roles, and Criteria for Micro, Small and Medium Enterprises (MSMEs)

The word MSME may be familiar to our ears. Then what is the meaning of MSME?

MSME stands for Micro, Small, and Medium Enterprises.

From the abbreviation of the word, it may be clear what MSME is.

According to the KBBI (Big Indonesian Dictionary):

MSMEs are micro, small, and medium enterprises.

In-Law Number 20 of 2008, MSMEs have the meaning as a business activity run by the community.

MSMEs have a goal to expand employment opportunities and provide economic services to the wider community.

In other words, MSMEs are business groups or businesses run by individuals, groups, households, as well as small business entities. Then what are the criteria for micro, small and medium enterprises?

The difference between SMEs and SMEs

But in addition to the term MSME, we also often hear the term SME. So are these two terms the same? Actually, SMEs and SMEs are different things.

UKM stands for Small and Medium Enterprises. The term SME is often used to describe small and medium-sized business units. Meanwhile, MSMEs often focus on the coverage of micro business units.

MSME (Micro) SME (Small and Medium)
Construction &Empowerment Fostered by districts and cities Small businesses are fostered by the province and medium-sized businesses on a national scale
Formal Juridical Relatively not a legal entity Must have a legal basis / legal entity


In practice, SMEs are also regulated by several regulations such as Bank Indonesia Circular No. 26/I/UKK dated May 29, 1993, concerning Small Business Loans (KUK), namely businesses that have total assets of Rp. 600 million excluding land or houses they occupy. It can’t be more than that.

Meanwhile, according to the Ministry of Industry and Trade, small and medium-sized entrepreneurs are groups of modern industries, traditional industries, and handicraft industries that have investment, and capital for machines with a capital/labor investment risk of IDR 625 million and below and the business must be owned by Indonesian citizens.

Criteria for Micro, Small, and Medium Enterprises?

In addition to the explanation above, there are several points of criteria for micro-enterprises that differentiate each type of business. Let’s get acquainted further with the following explanation!

Micro Business Criteria

Micro-enterprises are productive businesses owned by individuals and/or individual business entities. A micro business is a type of business owned by individuals where the total assets owned are a maximum of IDR 50 million.

The total assets do not include land or buildings used as a place of business.

Meanwhile, micro-enterprises are businesses that have a turnover of Rp. 300 million per year. If your business has met both of these criteria, then it is included in the micro-enterprise group.

The criteria for micro-enterprises are:

  • Have less than four employees
  • Assets (net worth) up to IDR 50 million
  • Annual sales turnover up to IDR 300 million

Usually, one of the criteria for this micro-enterprise is wealth in the form of buildings or the company that is the place of business, which is not included in the calculation.

In addition, the criteria for micro-enterprises also have certain characteristics. For example, they have never done systematic financial administration, it is difficult to get assistance from banks, the goods sold are always changing and the form of business is relatively small.

Examples of Micro Enterprises

Micro-businesses are very easy to find in your hometown because they are the choice of the majority of people as a main or additional source of income.

To make it clearer, you can see some examples from home food businesses to micro-businesses that are commonly encountered below.

1. Traditional Cake Business

On the side of the road, especially when it is still morning, you can easily find traditional cake sellers. Well, the business of selling traditional cakes is one example of a micro-enterprise that is often encountered. The traditional cake business is not only located on the roadside or street vendors but also has a permanent place of business such as a kiosk, for example.

As long as its assets are not more than IDR 50 million, it is a micro business. Likewise, other types of street vendors are included in the micro-enterprise group.

2. Screen Printing

Another example is the screen printing business, both for t-shirts, bags, plates, MMT, and others. The difference with street vendors such as selling traditional cakes is that screen printing requires a permanent place of business because it has to use special equipment.

However, as stated in the previous explanation, business premises such as kiosks are not considered assets.

3. Ceramic Business

If you have ever traveled to the Kasongan area in Yogyakarta, you will find lots of ceramic and pottery craftsmen.

This is an example of a micro-enterprise that is labor-intensive and has a significant influence on the economic movement of the local community. Why? Because most of the people there work as craftsmen, either as business owners or employees.

4. Food stall business

There must be neighbors around you who open a food stall business. That is an example of a micro-enterprise that is easy to find and many people do.

Even though this basic food business is small, if it is practiced and managed properly, it is not impossible that one day it will turn from warung to a mini-market.

Well, that’s an explanation of examples of micro ventures that you actually come across very often in everyday life.

Develop your micro-business with perseverance and tenacity in order to get optimal success.

Small Business Criteria

Small business is a productive economic business that stands alone and is carried out by individuals or business entities, which are not subsidiaries or branches of companies that are owned, controlled, or become a part either directly or indirectly of medium-sized businesses, or large businesses that meet business criteria. small.

The criteria for this small business are:

• Have less than 5-19 employees

• Assets (net worth) from IDR 50 million to IDR 500 million

• Annual sales turnover from IDR 300 million to IDR 2.5 billion

Small businesses also have certain characteristics. Namely not having a bookkeeping system, difficulties in expanding business scale, non-export and import businesses, and still have limited capital.

If viewed from this perspective, of course, small businesses have higher business progress than micro-businesses. Examples such as small industries, cooperatives, minimarkets, or department stores.

Medium Enterprise Criteria

A medium-sized business is a productive economic business that stands alone and is carried out by an individual or business entity, which is not a subsidiary or branch of a company that is owned, controlled, or becomes a part either directly or indirectly with a small business or a large business with a total net worth or proceeds. annual sales.

The criteria for this medium-sized business are:

• Have employees between 20 to 99 people

• Assets (net worth) between IDR 500 million to IDR 10 billion

• Annual sales turnover between IDR 2.5 billion to IDR 50 billion

Similar to other criteria for micro-enterprises, assets such as land and buildings as a place of business in this type are also not included in the calculation.

Medium-sized businesses usually have the characteristics of more modern business management and carry out a financial administration system even with a very limited model.

In addition, workers in companies with medium-sized business criteria usually have health and work insurance.

As for the company itself, at least it must have a TIN, neighbor permits, and other legalities.

Examples of medium-sized businesses are plantation businesses, import-export trades, ship-loading expeditions, and the like.

MSME Taxes That Businesses Must Pay Attention to

Based on Article 2 of Law no. 36 of 2008 concerning Income Tax, every individual, individuals who have an undivided inheritance, entities and permanent establishments are objects of income tax.

When you register a company or business entity at the Tax Service Office (KPP) where your business is domiciled, you will get an SKT or Registered Certificate. At a minimum you need to pay the following taxes:

  • PPh Article 4 Paragraph 2 or Final PPh (if there is a building/office rental, sales turnover, etc.)
  • Income Tax Article 21 (if you have employees)
  • Income Tax Article 23 (if there is a service purchase transaction)

0.5% Final PPh for SMEs

If an employee is subject to Article 21 Income Tax, the tax imposed on the entrepreneur or company is Final Income Tax.

What is Final Income Tax? This term is another name for PPh Article 4 paragraph 2. There are various types of Final Income Tax objects, such as for building rentals, construction services, taxes on bonds, and taxes on gross turnover (turnover) of business.

According to Government Regulation of the Republic of Indonesia Number 46 of 2013, Final PPh for MSME tax is a tax on income from business received or obtained by taxpayers who have a gross turnover or turnover of under Rp. 4.8 billion in a year.

Definition, Characteristics, Roles, and Criteria for Micro, Small and Medium Enterprises (MSMEs)

How to Establish MSMEs?

After knowing the basics about the criteria for micro, small and medium enterprises, are you interested in establishing one? If so, check out some tips on the steps in setting up an MSME!

  1. Make business management Clear

The first step that you really need to pay attention to is business management, no matter how simple your business activities are.

This business management can consist of recruiting employees, managing company finances well, and doing bookkeeping that must be arranged as neatly as possible. In addition, the inventory recording application is an option for your business management.

Clear management will have a positive impact on business continuity, especially in the long term.

  1. Jelly saw an opportunity

The foresight of business people in seeing opportunities can be one of the keys to business success or failure. Therefore, try to pay attention to the environment around you, about what type of business is most suitable to be developed there.

Business actors need to determine which sector their business sector will operate in. Determination of this line of business is needed to be able to develop a business or business that is carried out based on the field to be carried out.

For example, if your location is close to campus, then a culinary business, photocopying, or even a bookstore might be suitable for development. Do not forget to continue to innovate by paying attention to the tastes and desires of the market.

  1. Highlight the uniqueness of the product

The uniqueness of the product is your strength, so this needs to be highlighted to consumers.

A unique product does not mean that it has never existed before. Here, you are required to think creatively, for example by packaging products with unusual packaging, different promotional strategies, and so on. The key is to make your product as attractive as possible and different from the others.

  1. Calculating capital

Capital is also an important thing for business actors to consider in developing their business. The capital owned by business actors is also the initial provision to determine which direction the business sector will take.

Capital can also be a determinant of what steps will be taken by business actors in the field of business they run.

Thus, it is important for business actors to take into account the capital they have for the sustainability of the business they are engaged in. And in order to facilitate the calculation of transactions, you can use the accounting program from Jurnal by Mekari.

  1. Take care of the administration

After the management and product preparations have been arranged and run properly, it’s time for you to start seriously taking care of the administration.

Even though the business you run is relatively small, the administrative aspect also needs to be considered. Apart from indicating that you are serious about doing business, this kind of administration will also be very necessary one day, for example when you want to expand your business.

One of the administrative requirements that need to be taken care of is the IUMK. IUMK is a sign of legality to a person or business actor/certain activity in the form of a micro and small business license in the form of a single sheet text.

IUMK is expected to provide legal certainty and become a means of empowerment for micro and small business actors in developing their businesses.

Preparation for IUMK Submission

1. Fill out the form which contains:

  • Name
  • ID card number
  • Phone number
  • Address
  • Business activities
  • Business facilities used
  • Total working capital

2. Cover Letter from RT/RW related to the business location

3. Photocopy of ID card

4. Copy of Family Card

5. Recent color photograph size 4 x 6 (2 sheets)

For the manufacturing process, you can take care directly to the sub-district office or online through the website https://www.oss.go.id/oss/. You must pay attention to the document above so that it includes the criteria for micro, small and medium enterprises.

The characteristics of SMEs

Micro, Small, and Medium Enterprises are economic sectors that differentiate them from other businesses. The first is an unspecified product type.

Second, the business location of Micro, Small, and Medium Enterprises can be changed as needed. In addition, the three Micro, Small, and Medium Enterprises usually do not have detailed administrative implementations that are suitable for large industries.

MSMEs are characterized by a small number of people and usually easy management, namely:

  1. Human Resources (HR) in the business are not yet qualified.
  2. The education level of the existing human resources is relatively low.
  3. Capital is obtained from non-banks, even though it would be better and legal if capital could be obtained from banks or creditors.
  4. Businesses that are run usually do not have a business license as well as a TIN and legality.
  5. It does not yet have a complete administrative system and in terms of finances, it is also not yet distinguished which one is personal and which one is business.
  6. The location of the business is still in the home area and less strategic.
  7. Management is still done simply.
  8. There are still few employees or employees, maybe 5 to 10 people.
  9. Not yet included in imports and exports even if there are still very few.
  10. The efforts made are still in a small scope.

The Role of MSMEs in the Indonesian Economy

  1. Means of Equitable Economic Level of Small People.

Micro, Small, and Medium Enterprises play a role in the equitable distribution of the people’s economic level because MSMEs can exist in various regions. Micro, Small, and Medium Enterprises even reach remote areas so that people do not have to go far to the city to earn a decent living.

  1. Means of Alleviating Poverty.

Micro, Small, and Medium Enterprises play a role in overcoming the level of poverty in the community because the level of employment is relatively high.

  1. Foreign Exchange Entry Means for the State.

MSMEs will contribute to foreign exchange for the country because the market is from the national to international level.

Leave a Reply

Your email address will not be published.

Back to top button