51% of MSMEs in Indonesia use cash for transactions

In the midst of the rapid development of technology and digitalization which has penetrated various aspects of life, research from Modalku shows that old traditions have not been completely abandoned. Even though various modern payment methods have emerged, cash transactions and bank transfers remain the dominant choices for Indonesian MSMEs.

To explore the perspective of MSME players, the Modalku Group, which is a digital funding platform in Southeast Asia, conducted a survey in 2023 involving 977 MSMEs from five countries: Indonesia, Malaysia, Singapore, Thailand and Vietnam. Of the total respondents, the majority were micro entrepreneurs (74%) and business owners (63%). Of them, 59% were recipients of funds from the Modalku Group while the other 41% were not.

In the MSME business landscape in the Modalku Group's operational areas, there is an interesting phenomenon related to the payment methods used. Even though the era of digitalization is gaining strength, bank transfers remain the main choice for the majority of MSMEs.

Data shows that almost 90% of respondents choose to pay their suppliers via bank transfer. In fact, 88% of these MSMEs confirmed that they received payments from customers in the same way.

However, it cannot be ignored that cash transactions still have a place in the hearts of many MSMEs, especially in Indonesia. As many as 51% of respondents in Indonesia expressed their dependence on cash, both to pay suppliers and receive payments from customers.

However, payment trends don't stop here. With technological developments, alternative payment methods are starting to gain ground among MSMEs.

For example, 27% of respondents stated that they accept payments from customers via e-wallet. Meanwhile, checks are still relevant with 14% of MSMEs receiving payments via this method.

Virtual accounts are also starting to gain traction with 12% of MSMEs adopting them to receive payments. In terms of payments to suppliers, checks are still the choice for 17% of respondents, followed by virtual accounts (8%), and e-wallets (4%).

This shows that MSMEs continue to adapt to the various payment options available, reflecting their flexibility and resilience in the face of changing market dynamics.

51% of Indonesian MSMEs started a business with their own capital, friends or family

This latest report from the Modalku Group also provides an in-depth look at the realities behind the establishment of MSMEs in several key countries in the region, such as Indonesia, Malaysia and Singapore.

In Indonesia, the majority of MSMEs obtain initial capital from personal savings, help from family and friends (51%), followed by conventional banks (31%), alternative funding such as fintech (10%), and the remainder from investors (3%) .

Modalku Country Head, Arthur Adisusanto, said, "This survey confirms and expands our understanding of MSMEs to serve them better, by making it easier to access the funding provided and starting to enter into cash flow management, which will be applied to our products."

This survey also revealed that Business Term Loans dominate respondents' choices in Southeast Asia with a portion of 49%. This product also has a significant impact on business funding in the country with a contribution reaching 74%. Other products that received attention were account payable financing (25%) and invoice financing (22%). Not only that, expense management products were also sought after by 21% of respondents, while 13% chose cross-border transactions and 8% utilized card payment facilities.