Tokoin Partners with Indonesian Government Institutions in The MSME Sector

4 min readJul 8, 2019

Background

Emerging markets have a certain unique characteristic which is a major chunk of their Gross Domestic Product (GDP) comes from Micro, Small and Medium Enterprises (MSMEs). Indonesia, the 4th most populated country with more than 269 million people is no different; their MSMEs contributing almost 60% of its GDP. With over 58 million established or formal MSMEs in Indonesia, they account for 99% of all business and provide 89% private-sector employment. It also has the largest economy in the ASEAN region and the 7th largest in the world in terms of GDP by PPP. Research by PWC (PricewaterhouseCoopers) suggests that Indonesia could be the 4th largest economy in the world by 2050, trailing behind China, India and the US.

Another alarming report from The World Bank indicates that approximately 70% of MSMEs in emerging markets lack access to credit. Studies suggesting that there 365–445 million MSMEs in emerging markets with about 25–30 million formal SMEs, 55–70 formal micro enterprises and a staggering 285–345 million informal enterprises. Additionally, the total credit gap for both formal and informal MSMEs could be as high as $2.6 trillion. This report was in 2013 and not much has changed since then.

Context

To put things into perspective, this is a massive issue that needs to be addressed and governments in these emerging markets are keen to close this gap as solving this will lead to a significant improvement to their economy as a whole.

The current issue that plagues MSMEs in having access to basic financial services is the lack of collateral, accurate financial records, verification and credit score. While this may seem like a monumental task at hand for governments to solve, there seems to be a silver lining when looking at the whole picture and that is the massive penetration and adoption of technology, specifically smartphones. Irrespective of whether MSMEs or people, in general, have access to financial services, which is certain that they have a smartphone to communicate with everyone. Tokoin’s mobile platform service will be the key ingredient in helping solve this issue.

Partnerships

In recent times, governments are becoming more open to partnering with companies who can assist them in addressing fundamental issues that can be easily solved using technology and more so the blockchain.

Founded by an Indonesian team who understands the local and regional ecosystem well has no doubt given the government the confidence to engage with them to solve this credit gap crisis. Launching in Indonesia, one of the largest and most complex MSME markets in the world would give the Tokoin team the necessary experience and know-how to further expand into the ASEAN region and other emerging markets. One can be sure that other governments in the region are eagerly observing how things progress with Tokoin in Indonesia.

Three notable government institutions who have a pivotal role in the MSME sector have already partnered with Tokoin to take things forward and assist in onboarding 50,000 users in the Tokoin ecosystem by Q4 2019.

Indonesian Chamber of Commerce and Industry

Tokoin has been working together with the Chamber since November 2018, educating them on blockchain technology, the latest developments in the industry and how institutions can use this technology to their benefit. In turn, the Chamber connects Tokoin to MSMEs and other trade organizations, increasing their user base. Also, this gives Tokoin access regular business matching events between buyers and sellers in the Indonesian trade ecosystem which is vital to their exposure.

Ministry of Industry Indonesia

Tokoin and the Ministry of Industry started working together in January 2019, supporting each other in their individual fields of expertise. The Director General of the Ministry is leading the charge and is keen on bringing the 4th industrial revolution to MSMEs in Indonesia. The overall scope of the partnership is to join and assist the existing efforts by the Ministry, helping MSMEs grow and educating them on the available solutions and services offered by Tokoin, providing access to financial services that were unavailable earlier.

Joining the government program immediately gives Tokoin access to MSMEs across Indonesia, facilitating merchant acquisition and in return, Tokoin provides technology, business coaching and provides MSMEs with access to financial service providers partnered with Tokoin.

Ministry of Trade of the Republic of Indonesia

Tokoin’s proactive nature has recently led to the establishment of a working partnership with the Ministry of Trade in June 2019 which is a huge step forward as increased support from the government is not something that happens overnight but through a strict evaluation and due diligence. Being the first blockchain project to partner with the Ministry gives Tokoin a strong foothold, increasing their reach in Indonesia’s MSME sector, enabling platform users to sell their products globally.

Closing Thoughts

It goes without saying that in order to be able to do business in such a competitive environment, partnerships with governments are necessary and play a huge role in getting things done. With Tokoin providing actual value to the economy in Indonesia, there is no reason why we should not see further collaboration with other government organizations in Indonesia and the ASEAN region in the near future. User adoption facilitated with strong government backing would no doubt result in further partnerships with financial service providers ultimately benefiting the MSMEs and improving the economy as a whole.