Institutional and Infrastructural Roles in Fostering the Advancement of Micro, Small, and Medium Enterprises at the Village Level in Aceh Province, Indonesia

Abstract

This article examines whether the presence of impoverished individuals influences the number of Micro, Small, and Medium Enterprises (MSMEs) and explores solutions for transforming them into entrepreneurs with income. It aims to understand the role of institutions in fostering an entrepreneurial climate in each village and investigates the impact of economic, educational, and health infrastructure on entrepreneurship development in these areas. The practical goal is to contribute significantly to poverty alleviation while supporting the growth of MSMEs and examining the role of institutions in providing community services, along with the availability of educational, health, and economic infrastructure for supporting economic activities by MSMEs in Aceh Province. Quantitative research utilizes panel data analysis with the Common Effect Model as the preferred analytical tool. The data from the Central Statistics Agency, released in the Village Potential of Aceh Province for the years 2011, 2014, and 2018, constitute 19,355 observations from 6,505 villages in Aceh Province. The study finds that small and medium industries can be influenced by impoverished populations, institutions, and village infrastructure. The number of poor people has a proven impact on the number of SMEs. Institutions comprise three variables affecting MSMEs numbers: distance from the village to the hospital, distance from the village to the health center, and distance from the village office to the regent's office. Infrastructure factors influencing MSMEs numbers include the number of elementary schools, high schools, health workers, and cooperatives. Other independent variables do not significantly affect the number of MSMEs in Aceh Province villages. Recommendations include: (1) The government should involve the poor in encouraging the emergence of new entrepreneurs through its programs. (2) Government institutions must provide excellent services and convenience for SMEs in terms of health and administration. (3) Educational, health, and economic infrastructure significantly influence the development of small and medium industries. Therefore, the government needs to enhance the quality and quantity of this infrastructure.