Public Service Delivery Improvement for SME Support

Public service delivery management improvement for Small-Medium Enterprises support during early phase of the Local Governance Support Program, are include: establishing SME business service center (clinic); developing partnership of local economic development stakeholders; and microfinance service management capacity building. These are some good practice notes during the early phase of the program in six provinces in Indonesia.

1. Business Clinics

Business clinic is a service center/unit as part of service delivery system to deliver various services for (group) of SME. Normally its services include: (a) business consultation; (b) business and market information; (c) business advocacy; (d) training.

Business clinic is needed because SME need comprehensive supports, while each LG unit (Dinas) tends to serve partially based on its sector. In some districts/cities they created forum of LG units to serve SME and LED comprehensively, but the forum is not operating unit. So that, they still need an operating unit that can serve SME or group of SME directly with a comprehensive services. And, they decide to develop business clinic.

There are some jurisdictions with good progress in develop business clinic, such as: Kota Tebing Tinggi, called Klibi (Klinik Bisnis). Up to now Klibi is ready to operate and deliver service to SME or group of SME. After series of workshops to convince any parties, to get commitments, mayor decisions/decrees, recruitment process, finally they get the Klibi.

While in Palopo regency, Pematang Siantar city, business clinics which already in the final process of preparation and waiting for decision of mayor or district leaders are Palopo and D’best. And the others are still in the preparation workshop to develop organization, personnel, procedure, and its related policy.

Beside that, district of Jeneponto in South Sulawesi develops a business clinic that specifically for micro enterprises. Jeneponto is one of the poorest districts in the province, to accelerate the poverty alleviation program, SME empowerment become a choice. And, the business clinic will be used as an information center (on available program and micro-enterprises condition mapping), advocacy and program coordination.

Commitment of LG units, its stakeholders (SME communities, big companies) and local leaders is contribute to better progress in business clinic development.

Desired future direction:
• Klibi in Tebing Tinggi could be a good practice that should be supported until run well, so that other clinic can learn and replicate its success. The other benchmark is “Klinik Usaha Jawa Timur” (Business Clinic of East Java province);
• A clinic is just a ‘front office’ that depend on others support, so that we have to make sure that all institutions, service providers will support what SME ask to the clinic;
• Promotion or marketing of the clinic is needed, not only to potential clients (SME groups), but also to the supporting institution;
• To reach (group of) SME, the clinic also need to develop network and over-reach groups of SME all over the district area.

2. Partnerships of Local Economic Development:

Partnership forum is the other model that SME stakeholders choose. It is to response situation that need to be responded by many parties in the jurisdiction. An example is the district of Klaten, who had been suffered by earth-quake. An immediate response is needed for recovery and rehabilitation program. During the workshop, the LG and stakeholders decide to develop a partnership forum to assist SME communities to recover and rehabilitate their business.

The other jurisdictions also take partnership forum model to mobilize their stakeholder potentials. Same good examples like Kediri city, where a LED forum has achieved in linking several sectors for SME empowerment, create verification team for LG micro-finance program. District of Probolinggo is another case where its LED forum was effectively works to advocate LED and SME empowerment aspirations to be adopted in the district mid-term development plan. The forum also has been facilitating two clusters of SME, mango and furniture. Both of these cluster members are success to export their products abroad. However, adoption of the LED programs into the medium term plan has wide impact to other sector’s programs that will support SME empowerment.

Desired future direction:
• Forum effectiveness is crucial; it tends to open, with extended agenda and activities. So that, it will need more clear and focused agenda;
• The focused agenda should be clear in its output and outcomes, and its relation to the mid-term development plan.

3. Microfinance Service Management Improvement:

Micro-finance (delivery) management is another model to be chosen for SME empowerment. The objective is to promote transparency, equity and accountability in micro-finance service management. We actually not promoting LG to create any ‘credit subsidy’ for SME, however many LG do that. Our role is how to improve the management practice.

They way to do it is to create a verification team to make sure that the process of service delivery like – target group criteria, credit package design, mobilization of resources, distribution channels, and its delivery mechanism – are done well.

A good example is the city of Kediri, who had established micro-credit scheme. At least Rp 2 billon had been allocated for SME empowerment program. And, will be expanded for the next fiscal year. To do that, LG use a local bank (BPR, Bank Perkreditan Rakyat, or People’s Credit Bank) to deliver the credit to SME. Beside that, LG also use credit insurance to protect it.

District of Enrekang is another LG who deliver the micro-credit scheme. Enrekang has been trying to improve its management. And, after they meet in the SME National Workshop, they have commitment to share their experience. It is good to promote LG sharing of microfinance service management since many LG have been implementing this scheme.

Desired further direction:
• Credit schemes for SME empowerment are exist in the field – from national, provincial and local level – what we can do is to make the management transparent, equal and accountable;
• It should be clear whether a service (fund) is for business (follow market system) or a social safety-net program (social purpose).
[Risfan Munir, Public Service Management Specialist, ex Local Governanance Support Program, LGSP-USAID; and Performance Oriented Regional Management, PERFORM-USAID]