You Need to Know the Difference between SME and MSME!

SME (UKM) and MSME (UMKM) both sound the same, but they have differences. The main difference is that SME focuses on small businesses, while MSME has a wider scope. The reach of MSMEs can be up to micro businesses. Is this explanation enough? If you want to know the world of SME and MSME, let’s check this explanation out!

Introduction to Indonesian Small Business

You need to know, both of them are in the business world domiciled in Indonesia. Both also have the same goal, namely to grow and develop their business to help build the national economy.

Next, what are the differences between SME and MSME? According to, SME stands for small and medium enterprises, emphasizing the focus on small businesses. Meanwhile, MSME stands for micro, small and medium enterprises, which more often focus on the scope of micro enterprises. Although in the end, the term MSME is more often used because it includes all three types of businesses.

How’s this explanation? Do you need more information? It’s okay, here are important points that you can take to distinguish the two.

Differences Aspects between SME and MSME

  1. Business Turnover

Based on Law Number 20 of 2008, micro businesses have annual sales results or a maximum turnover of IDR 300 million. Meanwhile, small businesses have an annual turnover of more than IDR 300 million, up to a maximum of IDR 2.5 billion. Then, medium businesses have an annual turnover of more than IDR 2.5 billion, up to a maximum of IDR 50 billion.

  1. Net worth

The maximum net worth of micro businesses is IDR 50 million. Meanwhile, the net worth of small businesses ranges from IDR 50 million to IDR 500 million. Followed by the net worth of medium businesses ranging from IDR 500 million to IDR 10 billion. It should be noted that all net assets of these three business units do not include land and buildings for the business premises.

  1. Total manpower

According to the Central Bureau of Statistics (BPS), the three business units have different numbers of workers. Micro businesses have at least 1 to 5 workers. Small businesses have a workforce of 6 to 19. Then medium enterprises have 20 to 99 workers.

  1. Differences in Initial Capital

The difference between SME and MSME can be seen from the amount of business establishment capital. The capital to set up an SME is IDR 50 million. While the capital to set up MSMEs is IDR 300 million. MSME capital can also be obtained with assistance from the government.

Interestingly, this large difference in capital is due to the potential influence of MSME, which is considered to be greater. MSMEs are believed to have more influence on economic development in Indonesia. While SMEs are considered to be on a small profitable scale or individual.

  1. Business Development

When viewed from business development, SME and MSME also have differences. According to Law Number 23 of 2014. Micro-scale businesses are fostered by districts and cities, small businesses are fostered by provinces, while medium-sized businesses are fostered on a national scale.

  1. Imposed Tax

Referring to PP No. 23 of 2018, taxpayers who earn income with a gross turnover not exceeding IDR 4.8 billion are subject to a final income tax of 0.5%. This means that business actors who have a certain gross turnover are not required to collect and pay VAT for each transaction, but must collect Final Income Tax of 0.5%.

Comprehensive Cover

The term MSME is more often used than SME because it covers all three types of businesses, namely micro businesses, small businesses, and medium businesses. However, there are several aspects of the difference between the two that need to be emphasized in each business unit. Starting from the amount of annual turnover, asset wealth, number of workers, initial business capital, business development, and taxes imposed.

So, that’s the explanation of the differences between SME and MSME. If you already have the knowledge, you definitely want to see the diversity of SME and MSME right? Look no further, just check out! Find daily necessities and favorite items made by Indonesian small businesses!

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