Encourage Access to Green MSME Capital

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There are already many micro, small and medium enterprises (MSMEs) that produce environmentally friendly products and pay attention to environmental aspects in their operations. They try to run a ‘green’ MSME business. The Faculty of Economics and Business Gadjah Mada University’s 2021 survey of 1,073 MSMEs found that almost 90% of the total respondents implemented environmentally friendly business practices.

Inez Stefanie, founder of the Supernova Ecosystem, said that access to capital or investment for green MSMEs needs to be continuously opened so that investment with impact can develop. Even so, in proposing a green business, it needs the right calculations and steps. The reason is, not all funding sources are willing or suitable to invest in a green business.

Since starting operations in 2021, Supernova Ecosystem has been trying to create a sustainable business ecosystem. This ecosystem, he said, is expected to encourage growth and create collaboration between green businesses in Indonesia.

Supernova Ecosystem has mentored 13 business entities. The majority of these businesses are involved in the fast-moving consumer goods (FMCG) sector, especially the beauty and health industries.

Supernova works on two sides, MSMEs with the Accelerator Constellation aim to accelerate their development so that they are ready to receive investment by holding various programs.

From an investor’s point of view, there is Equatora Capital. It is a solution for matching investors with the right business actors, with accurate funds and sector objectives.

In other words, he said, Equatora connects investors with environmental concerns to green MSMEs that match the investor’s background. Apart from that, he said, he also ensured that the amount of funds matched the needs of business actors in order to avoid investment risks.

The role of state financial institutions is important in encouraging green MSME business capital. Apart from venture capital, investment funding for green MSMEs can come from banks with regulations regulated by the Financial Services Authority.

Teguh Yudo Wicaksono, Head of Mandiri Institute, believes that in recent years, government regulators have shown enough commitment to encouraging sustainable MSMEs.

One example, he said, is the Financial Services Authority formalizing green policies such as OJK Regulation No. 51 concerning the Implementation of Sustainable Finance. Bank Indonesia, he said, also several times voiced pressure on private and state-owned banks to increase credit financing to green MSMEs.

According to Teguh, one response from the government through Bank Indonesia is in responding to the challenges of climate change and supporting the MSME transition to sustainable practices by collaborating with the Bogor Agricultural Institute. This collaboration, he said, is to compile a study of the green MSME development business model.

He said, there are other aspects that still need to be improved by the regulator to support green MSMEs. For example, changing the policy on the maximum limit and deadline for granting credit to green sector business actors.

Teguh said, the most effective way for local MSMEs to be successful in implementing environmentally friendly aspects is not through direct integration into physical products because it will be quite expensive. According to him, it is more cost-effective for local MSMEs if environmentally friendly aspects are implemented in one or several parts of the supply chain process.

Poppy Ismalina, a senior researcher from the Faculty of Economics and Business at Gadjah Mada University, said that green MSMEs are starting to attract young people.

“Why is that? MSME green products are usually spearheaded by young people and require creativity and stable capital from investors who are very concerned about environmental issues if they want to sustain their operations.”

For MSMEs, he said, it is indeed much easier to integrate environmentally friendly principles in production activities, such as waste management without waste, without having to change products into environmentally friendly goods.

According to him, the application of environmentally friendly principles in green MSME businesses and environmentally friendly products can become a cushion mechanism when an economic crisis occurs.

This, he said, is inseparable from the characteristics of the MSME business which are able to withstand global economic shocks, are able to absorb labor, and produce products at affordable prices.

Poppy said, with the growing development of green MSMEs, it would certainly strengthen the microeconomic bearing as well as environmental problems in Indonesia. That way, modality or investment support for the development of green MSMEs needs to be continued by all parties.

PT Alam Siak Lestari (ASL) from Siak Regency, Riau is one of the SMEs fostered by the Supernova Ecosystem in the accelerator constellation program.

Musrahmad, founder & director of PT Alam Siak Lestari said, ASL is a green MSME that focuses on snakehead fish cultivation using the pond method in peat forest areas in Siak.

“ASL decided to experiment with the cultivation and extraction of cork with a focus on health derivative products through the healthy cosystem alternative livelihoods programs ” said Musrahmad .

Musrahmad hopes that the existence of cork cultivation in Siak can strengthen the motivation and consistency of villagers to keep the peat wet, especially if there are promising livelihoods from its processing.

Jajang Nurjaman, a green economy activist in Tegallega Village, Hegarmanah Village, Bungbulang, Garut said, living in a rural area, family background is a farm labourer, accompanied by a supportive environment, the potential to move in the green economy sector. 

He is engaged in agriculture, plantation and animal husbandry, such as seasonal crops, sometimes bananas, red ginger, guava, and the main thing is ant sugar and honey.

Regarding business capital, he used his own capital at the beginning, IDR 500,000. Over time, businesses need to involve many people, because they are managed from upstream to downstream. Finally, he got capital assistance from outside.

The Existence of Pekalongan Batik is Threatened by Flooding Rob

Lukni Maulana, Kartini and Faizyah are three batik workers in Pekalongan. They could be part of the 1,300 registered batik makers in the Pekalongan government. As batik workers, their income is often erratic and squeezed by tidal flood conditions.

Kartini and Faizyah are a mother and a child who live in Degayu, the northernmost village of Pekalongan and the most affected by the tidal flood. Meanwhile, Lukni’s first house in Tegaldowo was damaged by the tidal flood and has now moved two kilometers to the north. 

They have no choice to move house, even to raise the house. If the tide rises, they will flee. In the midst of flooding, they also have to continue to make batik to make ends meet. They also include poor families who receive social assistance from the Family Hope Program (PKH). 

Kartini and Faizyah are vulnerable groups affected by climate change. The IPCC in its report also stated that the poor are the group most affected by climate change because economic activity continues to be disrupted. 

A different story with Lukni Maulana. As a former batik skipper, he was forced to move in June 2022 due to tidal floods in Tegaldowo Wetan. His house is now just ruins which are a witness to Lukni’s struggle to start his batik business. 

He had to move house twice because of the same thing – tidal floods. The batik business capital was used up for the case of moving house. Until now, Lukni, the skipper, has to work as a batik dye worker. His income also decreased and was used up to survive the tidal flood attack. 

The analysis by the Auriga Nusantara Foundation shows that there have been significant changes to the land in Degaayu—home of Lukni, Kartini and Faizyah—from 2000-2021. Based on early 2020 satellite imagery, the land in Degayu is still not under water because the sea is still far from settlements.

The 2021 satellite image shows the eroded shoreline and sea water that has soaked nearly 50% of the land at the northern tip of Pekalongan City. Especially, in the east which is directly adjacent to Batang Regency.

This threat is reinforced by various studies which state that land subsidence in Pekalongan will definitely occur in the future. ITB researchers said 1-20 cm per year, while BRIN researchers said 10-11 cm per year. 

The prediction that the city of Pekalongan will sink is also projected from the results of research by Mercy Corps Indonesia (MCI) together with academics. In 2035, Pekalongan Regency and City will lose 5,271 hectares and economic losses are estimated at USD 2.15 billion. 

Heri Andreas, a Geodesy expert from ITB said that the exploitation of groundwater will exacerbate tidal floods. Moreover, groundwater exploitation in Pekalongan is relatively high. The Central Bureau of Statistics (BPS) for Pekalongan City recorded a population growth of nearly 40,000 people during 2000-2021. The latest data for 2021 records that the population of Pekalongan City has reached 308,310 people.

Heri said the tidal flood in Pekalongan could be finished with a strong will. The most important thing, said Heri, is to stop the exploitation of groundwater. Many cities in the world have stopped using groundwater decisively and successfully.

In a 2013 study , Tokyo managed to suppress groundwater use since the early 1960s and managed to stop land subsidence within 10 years after that.

The Existence of Batik which is in Danger of Disappearance

In 2009, batik became an intangible cultural heritage designated by UNESCO. Pekalongan is one of the areas known as the pioneers of mass-making batik using printing techniques. 

The Department of Trade and Cooperatives of Pekalongan City assesses the tidal flood as a disaster that threatens the existence of batik makers. Even though batik has contributed to the regional income of Pekalongan. The Department of Trade, Cooperatives and SMEs of Pekalongan City will account for 37% of exports in 2021, which number continues to rise. 

Even so, there is no specific program from this service to drive the local economy. According to Nugroho Hepi Kuncoro, Head of the Pekalongan Dindangkop Cooperative, all they can do is issue a regulation urging skippers to pay attention to the welfare of batik makers, especially in the northern part which was hit by the tidal flood.

“We arrange for them to have Employment BPJS. But not all can. It’s true that the informal sector is difficult, it depends on the owner,” said Hepi.

There is no allocation of funds or assistance from the government for artisans or residents whose land has been submerged by the rob. HA Afzan Arslan Djunaid, Mayor of Pekalongan, said that until now there has been no compensation mechanism provided by the Government of Pekalongan for land lost in sea water. Afzan only said that lost land could no longer return to the mainland.

“There is no (compensation). Unless they are clearing land to make embankments.”

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