Month: June 2019

With the growing global internet penetration rate, the proliferation of smart devices, and the democratisation of knowledge, long-established barriers to business are lowering across industries around the globe. This is especially prevalent in developing markets, like Indonesia, where access to knowledge, skills, markets and funding have been limited. Let’s dive deeper into how this has improved.

Access to Knowledge

Technology has significantly improved the accessibility and affordability of information through (free) online content, ranging from simple how-to video’s on YouTube to courses on advanced topics like Machine Learning on platforms like Coursera, Audacity and Edx. Companies are opening up, too, with some sharing their learnings both online and offline, and even contribute to the coding community by publishing coding projects on online platforms like GitHub.

Indonesian ride-hailing firm Go-Jek publishes numerous videos on Youtube, covering a variety of topics from learning data science to surviving in the workplace.

Access to Talent

The rise of gig platforms like Upwork and GetCraft provide entrepreneurs access to highly skilled talents that may otherwise not be available to them locally, or for which they would not have a budget to hire on a full-time basis.

Large share of freelance work through platforms comprises higher-level skills
Source: BCG Future of Work 2018 worker survey.

Access to Markets Across the Globe

Tech has also levelled the playing field for small businesses by giving access to markets through online sales channels. Not only does online direct access to consumers reduce the dependency on distributors and retailers, but it also allows the seller to retain significantly higher margins.

Having an online presence has become very cheap nowadays – if not for free. Shopify, for instance, enables merchants to set-up and run their own customisable e-commerce platforms for only US$29 per month with no coding skills required.

Access to Business Infrastructure Without Capital

Major online marketplaces are evolving their ecosystems towards infrastructure-as-a-service, offering additional business services to their merchants such as logistics, fulfilment, payment and financial services. Examples are China’s Alibaba and Indonesia’s Tokopedia. These services cover areas that are normally capital intensive to perform in-house, lowering the barriers to doing business for many entrepreneurs.

Alibaba’s long-term vision is not to increase the number of merchants, but to make them more profitable.

Access to Funding

Limited access to funding has also been a critical barrier to growth for small businesses. In Indonesia for example there are estimates that about 51% of the adult population has now access to bank credit, resulting in a huge SME funding gap of $165 billion, according to SME Finance Forum.

But things are changing thanks to fintech ventures offering options for funding. Currently, Indonesia’s fintech industry has 88 registered platforms. In 2018, total loans allocated by Indonesia’s fintech industry in 2018 reached US$ 1.6 billion according to Indonesian Financial Services Authority.  It’s a small, but fast-growing number.

Welcome to the golden era of entrepreneurship

We at Heyokha are convinced that due to technology, we now live in a golden era of entrepreneurship. A time where anybody has the chance to pursue an idea and challenge the status quo. We can’t wait to see this creative potential be unleashed and are convinced that this Zeitgeist of entrepreneurship will drastically speed up innovation, especially in developing countries like Indonesia.

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Influenced by watching the tv-show Shark Tank every day, we have recently been writing a lot about “tech enabled” entrepreneurship and how we believe tech is lowering the barriers to doing business. However, we did not really substantiate the importance that entrepreneurship has. In this article we dig deeper.

Academics see entrepreneurs as the innovators, driving productivity and economic growth
Economic studies from around the world have linked entrepreneurship with rapid job creation, GDP growth, and long-term productivity increases. Indeed, in the academic explanation of modern growth – the period in which the per capita wealth generation went ballistic in the West after the 1700s – much weight is placed on the innovating role of the entrepreneur as the agent of “creative destruction” and “organiser” of capital and labour.

Many academics believe that such innovation on the back of entrepreneurship becomes especially more important as economies move from being resource-intensive to knowledge-intensive – a stage many developing markets currently find themselves in.

SME’s as vessel of entrepreneurial activity, play a major role in employment and productivity
In the study of economic development, SMEs are seen as the vessels for entrepreneurship. While their label may not signify great magnitude or prestige, one cannot overemphasize the importance that small and medium-sized enterprises (SMEs) play in the global economy.

They contribute up to 60% of total employment and up to 40% of national income (GDP) in emerging economies, according the World Bank. Seeing the essential role of SMEs in a nation’s development, the World Bank approved more than US$ 10 billion in SME support programmes over the period of 1998-2003.

The above stresses the important role entrepreneurs play in contributing to employment and adding to the greater well-being of society, especially in developing countries.

Emerging Markets Leapfrogging into the Future
In the book Why Nations Fail, the M.I.T. economist Daron Acemoglu and the Harvard political scientist James A. Robinson make a strong case for entrepreneurship. However, they also argue that in many developing countries, entry barriers are playing a crucial role for aspiring entrepreneurs. Powerful groups often stand against economic progress, in fear that their economic privileges will be lost.

With their history characterized by authoritarianism and cronyism, developing countries can benefit enormously from the equalizing power of entrepreneurship.

These nations are in an advantageous position to innovate. For example, leapfrogging – using the lack of existing infrastructure as an opportunity to adopt the most advanced methods – has been an effective approach for developing markets. Instead of developing their own technology from scratch, they can adopt technologies created elsewhere.

Often used examples are how low-income countries that never established a telecommunications landline infrastructure or a retail banking system, bypassed those development stages with the use of mobile phones and the innovative financial services now made readily available.
Some examples of technologies that are expected to be used in emerging markets to leapfrog are blockchain, cloud computing, and solar power.

Empower the entrepreneurs
History has shown that countries that allow the whole entrepreneurship process to happen – from having an idea, starting a firm, and getting a loan – tend to see more rapid growth. Emerging markets are well positioned to let technology drive their economies forward. In Indonesia we see things are starting to take off. We are excited to see how things will play out.

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