Government Regulation No. 7 of 2021 on the Ease, Protection, and Empowerment of Cooperatives and Micro, Small and Medium Enterprises (PP UMKM) has been issued by the government along with 48 other implementing regulations from Law No. 11 of 2020 on Job Creation (Job Creation Law) on February 16, 2021. The PP UMKM amends several provisions that were previously regulated in Law No. 20 of 2008 on Micro, Small and Medium Enterprises (UMKM Law). One of them is the rules related to the criteria for MSMEs themselves.
New MSME Criteria
The new MSME criteria are regulated in Article 35 to Article 36 of the MSME Regulation. Based on these articles, MSMEs are categorized based on the criteria of business capital or annual sales revenue. The business capital criteria are used for the establishment or registration of MSME activities established after the PP UMKM comes into effect. The capital criteria consist of:
- Micro Enterprises have a business capital of up to a maximum of Rp1,000,000,000.00 (one billion rupiah) excluding land and buildings of the business premises.
- Small Enterprises have a business capital of more than Rpl,000,000,000.00 (one billion rupiah) up to a maximum of Rp5,000,000,000.00 (five billion rupiah) excluding land and buildings of the business premises.
- Medium-sized Enterprises have a business capital of more than Rp5,000,000,000.00 (five billion rupiah) up to a maximum of Rp10,000,000,000.00 (ten billion rupiah) excluding land and buildings of the place of business.
As for MSMEs that have been established before the MSME Regulation comes into effect, the grouping of MSMEs is carried out based on the criteria of annual sales results. The annual sales result criteria consist of:
- Micro Enterprises have annual sales up to a maximum of Rp2,000,000,000.00 (two billion rupiah)
- Small Businesses have annual sales of more than IDR 2,000,000,000.00 (two billion rupiah) up to a maximum of IDR 15,000,000,000.00 (fifteen billion rupiah).
- Medium-sized Enterprises have annual sales of more than Rp15,000,000,000.00 (fifteen billion rupiah) up to a maximum of Rp50,000,000,000.00 (fifty billion rupiah).
The nominal value of the above criteria may be changed in accordance with economic development. In addition to the criteria of business capital and annual sales proceeds, ministries/state institutions may use other criteria such as turnover, net worth, investment value, number of workers, incentives and disincentives, local content, and/or the application of environmentally friendly technology in accordance with the criteria of each business sector for specific purposes (Article 36 of PP UMKM).
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The criteria for MSMEs in Article 6 of the MSME Law are regulated significantly differently in the MSME Regulation. For comparison, here are the differences:
| INDICATOR | MSME LAW | PP MSME |
| Grouping of MSMEs | MSMEs are categorized based on net worth or annual sales. Net worth is the sum of assets after deducting debts or liabilities. | MSMEs are categorized based on business capital criteria or annual sales results. Business capital is both own capital and borrowed capital to run business activities. |
| Net Worth or Business Capital | 1. Micro Business: IDR50 million at most 2. Small Business: more than Rp50 million – at most Rp500 million 3. Medium Enterprises: more than Rp500 million – at most Rp10 billion Excluding land and building of business premises. | 1. Micro Business: at most Rp1 billion 2. Small Business: more than Rp1 billion – at most Rp5 billion 3. Medium Business: more than Rp5 billion – at most Rp10 billion Excluding land and building of the business premises. |
| Annual Sales Results | 1. Micro Enterprises: maximum IDR300 million 2. Small Business: more than IDR300 million – maximum IDR2.5 billion Medium Business: more than IDR2.5 billion – maximum IDR50 billion | 1. Micro Enterprises: maximum IDR 2 billion 2. Small Enterprises: more than IDR 2 billion – maximum IDR 15 billion 3. Medium Enterprises: more than IDR 15 billion – maximum IDR 50 billion
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It is important for entrepreneurs to know the development of regulations related to their business. Apart from being a form of awareness of the surrounding, knowing the latest regulations can be the basis for determining the steps to be taken in the future. READ ALSO:
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KH Contact
Confused about the applicable legal provisions? Or have questions related to MSMEs and licensing? Don’t worry, just consult with Kontrak Hukum. We are the solution to your worries! Contact us at the Ask KH link or send a message on Instagram @kontrakhukum.
