Indonesian small business growth prospects at five-year high

• Indonesian small businesses are the most optimistic in the Asia-Pacific 
• Increased demand for external financing signals continued expansion
• Indonesia’s small businesses expect cyberthreats to increase in 2025

Indonesian small businesses experienced a successful 2024, with 83 per cent reporting growth, up from 80 per cent in 2023 - the country’s highest result since 2020, according to CPA Australia’s annual small business survey.

This momentum is expected to accelerate in 2025, with 87 per cent of small businesses expecting to grow, placing Indonesia among the top three growth markets from the 11 markets surveyed.

Confidence in Indonesia’s economy is strong, with 76 per cent of small businesses expecting the economy to grow, clearly above the Asia-Pacific survey average of 67 per cent.

“Indonesian small businesses are among the fastest growing in the region,” said Dr Hendro Lukman, Chairman of the CPA Australia’s Advisory Committee in Indonesia, attributing the optimism to strong focus on technology and a robust economy.

In 2024, 68 per cent of Indonesian small businesses that invested in technology said it increased their profitability, the third-highest result of the 11 markets surveyed.

Most Indonesian small businesses offer customers digital and mobile payment options, such as OVO, GoPay, ShopeePay and Dana. In 2024, 74 per cent received more than 10 per cent of their sales through these technologies, a marked increased from 54 per cent pre-Covid 19.

“Indonesia’s small business sector is driven by dynamic and youthful entrepreneurs, 85 per cent of business owners are under 50 years old, who embrace technology, innovation and agile. This forward-thinking mindset, combined with a customer-centric approach, is set to improve their performance and competitiveness in the long run,” Dr Hendro said. 

In 2025, 37 per cent of small businesses say they will introduce a new product, service, or business model unique to Indonesia or the world. This places Indonesian small businesses as the second most innovative among the markets surveyed.

As businesses digitalise, the risk of cyberattacks increases and Indonesian small businesses are no exception. 

In 2024, 50 per cent reported losses from cyberattacks, exceeding the survey average of 40 per cent. These cyber risks are anticipated to rise this year, with 54 per cent of small businesses expecting a cyberattack.

“The fact that only 48 per cent reviewed their cybersecurity in the past six months is worrying. Small businesses must take proactive measures to safeguard against major damage from cyberthreats to maintain customer trust and business continuity,” Dr Hendro said. 

Despite the availability of finance from a variety of channels, over one-third of Indonesian small businesses faced challenges securing external funding in 2024. Banks remain the most likely source of finance.

In 2024, 75 per cent of small businesses sought external finance, with 59 per cent seeking finance for growth, the fifth highest among the surveyed markets. 

“With more small businesses expecting to need external financing this year to grow their businesses, improving financial literacy is critical to help small businesses scale up and secure that finance,” Dr Hendro said.

“The Indonesian Financial Services Authority’s draft regulation to ease access to finance for Micro Small and Medium Enterprises (MSME) is a positive forward step for small businesses.”

In supporting the government’s programs, in late 2024, CPA Australia launched a toolkit, ‘Panduan Pengelolaan UMKM’, to improve financial literacy of MSME. 

Dr Hendro is confident the new regulation coupled with the government’s on-going capacity building initiatives will help small businesses weather geopolitical uncertainties.

“With the unfavourable 32 per cent tariff on Indonesian imports into the US, small businesses looking to expand abroad should focus on non-US markets. Businesses already exporting to the US may need to seek professional advice to gauge the impact on their businesses or explore new markets,” Dr Hendro said.

“Indonesian small business owners being visionary risk takers, any setback from these tariffs may just be a temporary blip in their long-term vision.”

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