A Deeper Look into the Indonesian Government's Fiscal Strategies on SMEs

Abstract

This study examines the Indonesian government's fiscal strategies aimed at strengthening the small and medium-sized enterprises (SMEs) sector. It focuses on how targeted taxation policies, subsidies, and stimulus packages support SME growth, resilience, and integration into national economic development agendas. In the post-pandemic recovery period, SMEs play a crucial role in economic revitalisation. Understanding fiscal interventions is vital to enhance their sustainability, competitiveness, and contribution to inclusive growth in Indonesia. This study concentrates on fiscal tools such as tax relief, credit guarantees, and grants within Indonesia. It does not evaluate monetary policies, informal sector dynamics, or the performance of individual SME sectors. It addresses two central research questions: How do fiscal strategies impact the growth and resilience of Indonesian SMEs? And what are the main challenges in implementing effective fiscal support for this sector? A qualitative research methodology is employed, incorporating policy reviews, stakeholder interviews, and the analysis of government reports. By examining fiscal planning, budget allocations, and implementation outcomes, the study evaluates the coherence of Indonesia’s fiscal approach and its real-world effects across both national and regional levels. Findings suggest that while fiscal strategies have had a positive impact on SME development, several persistent obstacles—such as bureaucratic inefficiencies, unequal access to support, and weak coordination at the local level—undermine their full potential. The study concludes by recommending more inclusive policy mechanisms, simplified administrative procedures, and improved intergovernmental coordination. Future research should explore how fiscal decentralisation affects SME support and examines the gender and sector-specific dimensions of fiscal interventions.