START NOW – Determining the criteria for MSEs and Non-MSEs is crucial to understanding the differences between these two business category. 

Both MSEs and Non-MSEs are play an important role in the Indonesian economy. As entrepreneur, you should understand them carefully. 

Definition of MSEs and Non-MSEs

MSE stands for Micro and Small Enterprises. It includes businesses that owned and managed by individuals or small groups with relatively limited capital and assets.

Micro enterprises are productive businesses owned by individuals or individual business entities with very limited capital and assets. 

Small businesses are also almost the same, except that they have slightly larger capital and sales figures than micro businesses.. 

It established by an individual or business entity that is not a subsidiary or branch of a larger company.

Medium-sized enterprises are also productive economic businesses that stand alone (not a branch or subsidiary of a larger company). 

They usually have a more complicated organizational structure and manpower compared to small businesses. They also have greater access to financial resources and wider markets. 

Meanwhile, large enterprises (non-MSEs) are productive economic businesses carried out by business entities with large capital and management capabilities. 

Large enterprises tend to have more complex and well-organized management structures. That’s why it has capability to operate across a wider range of industry sectors.

Differences between MSEs and Non-MSEs Based on Business Capital and Annual Turnover

The difference between MSEs and Non-MSEs can be seen especially in terms of their capital and annual turnover. 

The Law No. 20/2008 on Micro, Small and Medium Enterprises (MSMEs) provides clear limitations on the distribution of business capital. 

The following is a breakdown by scale of venture capital:

Micro-scale business capital criteria

The criteria for a micro business according to Law No. 20 of 2008 are:

• Have assets maximum to IDR50million, excluding land and building for business.
• Have annual turnover maximum to IDR300million.

Micro enterprises are often informally managed and lack complex management structures. These types usually have few employees or are even managed by the owners themselves.

The example of micro entreprise businesses may include small traders, stalls, and other home-based businesses. 

Small Business Capital Criteria

The criteria for small businesses are:

• Have assets more than IDR50million to IDR500million, excluding land and building for business.
• Have annual Turnover more than IDR300million to IDR2.5billion.

Small enterprises may have a few employees and usually have a more organized management structure than micro enterprises. 

This kind of businesses can operate in several sectors, such as trading, services, and small industries.

Medium Scale Business Capital Criteria

The criteria for medium-sized enterprises are:

• Have assets more than IDR500million to IDR10billion, excluding land and building for business.
• Have annual turnover more than IDR2.5 billion to IDR50 billion.

This kind of business category usually have more complex organizational structure and more employees than small enterprises. 

Medium-sized enterprises are generally also capable of operating on a wider scale and have access to larger markets. 

They can often involved in manufacturing, services and wholesale trade.

Large Scale Business Capital Criteria

Since the Law No. 20 of 2008 specifically regulates MSEs, it does not elaborate on the criteria regarding large businesses.

However, we can conclude that this non-MSEs business have assets and turnover that above the limits set for medium-sized businesses. 

Therefore, we can formulate that the criteria for large-scale businesses are

• Have assets more than IDR10billion.
• Have annual turnover more than IDR50billion.

Large enterpriseses usually have very complex and well-organized management structures. They also usually have better access to financial resources, advanced technology and international markets.

For that reasons, large enterpriseses capable to operate in various industrial sectors with a very wide scale of operations. 

Examples of large businesses are multinational companies, publicly listed companies, and large conglomerates.

Legal Basis Related to MSEs and Non-MSEs Criteria

The criteria for MSEs and Non-MSEs in Indonesia are governed by several key legal bases. Here is a brief explanation of the three regulations:

Government Regulation Number 7 of 2021 (PP UMKM)

PP No. 7 of 2021 concerns about the Ease, Protection, and Empowerment of Cooperatives and Micro, Small, and Medium Enterprises.  

This regulation aims to provide convenience, protection, and empowerment for MSMEs and cooperatives. It covers various aspects, such as:

• Ranging from licensing
• Access to financing, and
• Access to capacity building and competitiveness of MSMEs

This PP emphasizes the important role of MSMEs in the national economy. It also  provides various incentives and facilities to support MSMEs’ growth and sustainability.

Law Number 11 of 2020 on Job Creation 

Law No. 11/2020 also known as the Job Creation Law. It iis a law that aims to increase investment and job creation in Indonesia. 

One important part of this law is the simplification of regulations for MSMEs. The Job Creation Law provides various conveniences for MSMEs, including:

• Simplification of licensing procedures
• Easier access to financing, and 
• Increased protection and support for MSME actors. 

Thus, the Job Creation Law is encouraging the growth of MSMEs and increase their contribution to the national economy.

Law No. 20 of 2008 on Micro, Small, and Medium Enterprises (UMKM Law)

Law No. 20 of 2008 is the main legal basis that defines the criteria and role of MSMEs in Indonesia. 

This law regulates the definition and criteria of MSMEs based on the amount of assets and annual turnover. 

We have discussed about the criteria for MSEs and Non-MSEs that based on business capital and annual turnover earlier. 

In addition, the Law No. 20 of 2008 also includes various provisions regarding the development, empowerment, and protection of MSMEs. 

Through this law, the government is committed to creating a conducive environment for the growth of MSMEs.

It is including through the provision of various forms of support such as financing, training, and market access.

Now, you have a clearer understanding of the intricacies, differences, and roles of MSMEs and non-MSMEs, right?

By understanding well about MSEs and Non-MSEs, we can better support the growth and development of these two business categories.