Construction of the SME Business Environment Index: The Case of Depok City in Indonesia

This study aims to identify key factors in the business environment and develop them into a business environment quality index for the SME segment. In building this index, the study considers several important factors as its constructs, namely (i) economic conditions, (ii) political and security, (iii) financing conditions, (iv) infrastructure conditions, and (v) competitive environment. This research is an explanatory study. SME actors were selected using a simple random sampling method. A total of 107 SME actors completed and returned the online questionnaire, resulting in a response rate of approximately 76%. The research findings show that the business environment condition index for SMEs in Depok City is 0.709, placing it in the moderate category. This indicates that the business environment conditions for SMEs, observed from economic condition, political and security, financing, infrastructure, and competitive environment factors, are sufficiently supportive of SME business development in Depok. Among the factors analyzed, infrastructure contributes the most to shaping the business environment in Depok. However, the business environment for SMEs in Depok City can be further improved by enhancing performance in the areas of economic, political and security, financing, and competitive environment factors.

DOI: https://doi.org/10.59857/QMZK8442