THE ROLE OF MICRO AND SMALL INDUSTRIES TO POVERTY ALLEVIATION IN INDONESIA

Agung Tri Rahmanto, Prof. Sanjaya Acharya

2013 | Tesis | S2 Magister Ek.Pembangunan

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The proponents of micro, small and medium enterprises argue their contribution in creating job opportunities for lower-skilled labor. Expansion of the micro and small industries, therefore, will boost employment and hence reduce poverty. The government of Indonesia has paid a lot of efforts to the empowerment of small-scale business as a strategy to fight the pervasive poverty. However, the presumption regarding the role of small business in reducing poverty incidence in developing country like Indonesia remains as a question of investigation. This study explores the relationship among the development of micro and small industries (MSI), economic growth, and poverty alleviation using panel data analysis of provinces in Indonesia. The findings of this study show the potential and limitation of MSI to poverty alleviation in Indonesia. The anti-poverty impact of MSI development is primarily by means of the growth channel. Hence, the role of MSI development on poverty alleviation can be reinforced by increasing the level of its labor productivity. The efforts should focus on upgrading the capacity of business owner who may transfer the skill and knowledge to the family workers. The employment of female workers can be an effective way of improving family welfare. Moreover, the government has to improve the facilitations to MSI and encourage the non-governmental programs to MSI empowerment by training and partnership.

Kata Kunci : small and medium enterprise (SME), micro and small industries, economic growth, poverty alleviation