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DISCLAIMER: The findings, interpretations and conclusions expressed in this paper are those of

the authors and do not necessarily reflect the policies or views of UN Women, UNICEF or the
United Nations.


ADDRESSING INEQUALITIES
The Heart of the Post-2015 Development Agenda and the Future We Want for All
Global Thematic Consultation







ENTREPRENEURSHIP EDUCATION
FOR RESOLVING INEQUALITIES:
A CASE STUDY OF INDONESIA
Seiko Kaneko
Advisory Division for International Students,
Graduate School of Engineering, Osaka University
October, 2012

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Abstract
Even though some countries have made dramatic progress in achieving Goal 1 of the
Millennium Development Goals (MDGs), poverty issues remain unsolved. The MDGs emphasize
national or global averages, and progress may be much slower, possibly with growing
disparities for specific areas or groups. Development of the private sector is vital to meet MDGs
1. In particular, Small and Medium Enterprises (SMEs) must grow to resolve inequalities based
on income or region. In this regard, entrepreneurship is receiving increasing attention. In
Indonesia, where diversity exists throughout the society, inequalities among or within regions
have been major issues. Practical entrepreneurship education, which engages local SMEs, is
examined in this study as an inclusive and sustainable model for eradicating poverty and
inequalities. This research shows that entrepreneurship education by universities is effective in
narrowing gaps. Simultaneously, it is useful for university students who wish to start their own
businesses. The eventual and anticipated outcome is the creation of regional employment
opportunities. To accelerate progress towards achieving MDGs, the entrepreneurship education
programme described in this research can be disseminated as a model for resolving inequalities
based on income and region, and even gender or ethnicity, by proper targeting of particular
groups.

Biography of author
The author is currently an assistant professor in the Advisory Division for International Students,
Graduate School of Engineering, Osaka University, Japan. For almost 10 years, the author has
worked as a consultant in international educational development, specialized in international
cooperation, development of higher education and regional development in developing
countries.


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Introduction
Most of the Asian and Pacific region has made dramatic progress in achieving Target 1 of the
Goal 1 of the Millennium Development Goals (MDGs); ‘halve, between 1990 and 2015, the
proportion of people whose income is less than one dollar per day’. For example, the Republic
of Indonesia is well on track to hit their poverty target with a reduction from 17.4 percent on
the first observed date (the closest available to 1990) to 7.5 percent on the last observed date
(most recent available data) (United Nations ESCAP, 2005). However, the same data identifies
the proportion below the national poverty line as 15.7 percent on the first observed date and
27.1 percent on the last observed date. It should be noted that the national poverty line
estimates how many people fall below the level of income required to purchase essential food
and non-food items. Therefore, the data provide evidence of local realities, confirming that
poverty issues remain unsolved even in a dramatically growing economy.
Moreover, MDGs emphasize on national or global averages. Progress may be much slower,
and disparities may be growing for specific areas or groups. In many countries, inequality within
a country is a growing problem where the gap between the poor and the rich widens with
economic development. If sharp increases in inequality persist, they may have dire effects on
human development and social stability (United Nations Development Programme [UNDP],
2003).
Development of the private sector is crucial to meet MDGs 1 (i.e. eradicate extreme poverty
and hunger). Most poor people work and earn income in the private sector, which generates
more employment than the public sector (UNDP, 2008). In particular, the development of Small
and Medium Enterprises (SMEs) will resolve inequalities based on income or region because
they absorb the majority of labour in developing countries. Not surprisingly, entrepreneurship
is receiving increasing attention as a useful tool for the eradication of poverty and inequalities.
In developing countries, entrepreneurs are facing various problems, including the lack of
human resources, management and technology expertise, capital and market information. Of
course, microfinance has been a strong tool to support entrepreneurs. Access to credit,
however, is not sufficient for ensuring growth; a combination of financial and nonfinancial
services is required to support local entrepreneurs.
However, if microfinance institutions try to provide nonfinancial services, it is difficult for
them to achieve sustainable management (Japan International Cooperation Agency, 2003) and
fulfil the necessary expertise for providing both services (Okamoto, Awano, & Yoshida, 1999).
Thus, there is a high tendency for nonfinancial services to be dependent on public subsidies
(Committee of Donor Agencies for Small Enterprise Development, 2001). To realize robust and
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inclusive growth, a sustainable framework must be established for assisting small
entrepreneurs, and it must not be overly dependent on official assistance.
Besides supporting existing entrepreneurs, employment creation is essential to realize the
eradication of poverty and inequality. In developing countries, the high unemployment rate of
university graduates has become a major issue. United Nations Educational, Scientific and
Cultural Organization (2012) pointed out that more than 20 percent of university graduates in
Indonesia were unemployed or categorized as the non-labour force in 2009, excluding for those
furthering study. If these graduates obtain the necessary skills to start up their own businesses,
the unemployment rate will decline and more work-places will be created within the local
community, leading to a stimulated local economy and narrowing of social gaps.

Entrepreneurship education
Entrepreneurs perceive opportunity and take advantage of it. Some entrepreneurs start
companies, and others push for change and innovation in existing organizations (UNDP, 2008).
Therefore, entrepreneurship education is quite important for stimulating economic activities
for those who would start their own businesses and those who wish to develop professionally
inside existing companies. Entrepreneurship education and training impact levels of
entrepreneurial attitude, aspirations and activity, which then affect the level of new enterprises
in the economy (Bosma, Acs, Autio, Coduras, & Levie, 2009).
Universities have some comparative advantages in supporting local entrepreneurs
sustainably and cost-effectively. Robson (1996) attests to rich human resources within higher
education institutes that support local SMEs. Industry and academic collaboration started in
1974 in the United Kingdom, between not only teaching staffs and managers of small firms, but
also with qualified graduates who support small firms and holding seminars and workshops to
disseminate outcomes. Indarti and Langenberg (2004) distributed questionnaires and interview
surveys to 100 SMEs in Yogyakarta (Indonesia) and revealed that diverse expertise of
universities, especially in management and technology, is a strong motivation for local SMEs to
cooperate with local universities. Rich human resources and diverse expertise inside
universities support the low-cost implementation of various development projects.
Most importantly, sustainability is realized by involvement of local university that
collaborates with industry, as in the case of the development programme that has been
incorporated into the undergraduate curriculum at the University of Warwick (Biggs, Brighton,
& Clark, 1996). Incorporation into academic curriculum ensures that the same developmental
activities will be conducted from year to year with different participants.
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The type of entrepreneurship education differs significantly, depending on the institution
that provides it, its purposes and its targeted students. According to Ohe and Tih (2011),
conventional entrepreneurship education programmes have a tendency to focus on theoretical
concepts and hypothetical case analyses in a classroom setting. Contrary to theoretical or
hypothetical entrepreneurship education, there are several types of practical entrepreneurship
education programmes. Non-classroom entrepreneurship activities include seminars,
symposiums, business plan contests, internship systems and incubation centre activities (Ohe,
2011; Daiwa Institute of Research, 2009).
Ohe and Tih (2011) pointed out that conventional entrepreneurship education includes a
theoretical model, internships and practical projects; those programmes, however, fall short of
providing students with the opportunity to experience entrepreneurship in its natural setting so
that they can understand the range of activities associated with running a business. Internships
only involve students in specific activities, and the outcomes of practical projects are limited to
classroom reports or presentations. Additionally, Japan Bank for International Cooperation
(2007) pointed out that most of the current models and teaching materials for
entrepreneurship education are based on cases from Western countries; therefore, they are
not pertinent to business situations of developing countries. Models or materials that involve
real local situations are desired.
To provide students with practical knowledge and experience and improve business
performance of local SMEs, a practical entrepreneurship education programme that involved
local SMEs was examined in this study and identified as an inclusive and sustainable model. My
hypothesis is that practical entrepreneurship education involving actual small businesses has a
positive impact in resolving poverty and inequalities based on income or region; further, a
university is an appropriate institution to implement the educational programme sustainably.

Research method
The analyses for this study were based on data collected in consulting-based entrepreneurship
education projects in Cambodia, Malaysia and Indonesia in which the author participated as a
higher education specialist. Consulting-based entrepreneurship education is an innovative
method for the eradication of poverty and inequality, local economic growth and the resolution
of unemployment. I conducted in-depth analysis of the consulting-based entrepreneurship
education programme that has been in place in Indonesia since 2007.
Indonesia was chosen for this research because it is a country of diversity and disparity. It is
said that there are around 250 ethnic groups in Indonesia (Ishii, 1994). ‘Unity in diversity’ is its
national motto, as there are different cultures, customs, religions or beliefs, and languages in its
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extensive archipelago; its population size is ranked fourth in the world, and rich natural
resources are scattered throughout the country.
Even though a certain region in the country has experienced rapid income growth, the
phenomenon might be due to a singular and specific economic asset, such as oil, gas or
minerals; additionally, the income growth may conceal growing inequalities in the region
(Sakamoto, 2007). Akita, Lukman, and Yamada (1999) also maintain that within-province
inequality should be emphasized over inter-province inequality, and urban-rural expenditure
inequality should be given a higher priority. Reducing urban inequality is another key factor to
reducing overall inequality. Inside a certain urban area, we can see severe disparities between
the formal and informal sectors. Within the informal sector, companies are not managed
properly and the skilled labour workforce remains inadequate (Miyamoto, 2008).
The main actor in the consulting-based entrepreneurship educational programme is the local
university. As stated before, universities have comparative advantages in supporting local
entrepreneurs. In Indonesia, the centre of the programme examined as part of this research
was Brawijaya University in Malang (East Java). It was selected for this primary role because the
university was originally quite active in entrepreneurship activities. First, faculties of all
disciplines require entrepreneurship education as a compulsory subject. Second, the university
has been appointed as a core university of entrepreneurship education by the Ministry of
National Education, and it maintains a network for entrepreneurship education with 20 national
universities. Thus, the dissemination of the positive results of educational programme is likely.
Taking into consideration regional and cultural diversity of the country, the programme is also
supported by Gadjah Mada University in Yogyakarta (Central Java) and Hasanuddin University in
Makassar (South Sulawesi).
University lecturers play key roles in entrepreneurship education programmes, by providing
instruction about the principles of entrepreneurship, business analysis and relevant tools, while
also supervising the programme. University students work with local SMEs on consulting teams,
analyse their business situations and create action plans for improving business performance of
the SMEs. SMEs are requested to cooperate with student teams by providing necessary
information about their business, attending meetings with lecturers and students, and
considering the action plans created by students.
For this research, students were chosen from a group of undergraduate or postgraduate
students interested in entrepreneurship education. The students submitted application forms
and participated in a screening process that included an entrepreneurial mindset test and
interview. In the case of Brawijaya University, 17 students were selected from the 64 who
applied. They came from various academic disciplines, including agriculture, management,
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information technology and economics. They were divided into five groups and formed
business-consulting teams.
University lecturers who joined the educational programme also came from various
disciplines. In the case of Brawijaya University, 5 young lecturers were selected from 13 who
applied. Their backgrounds were social science, fishery, business administration, and computer
science, among others.
The lecturers then selected several local SMEs within reach of the university and visited
them to invite them to participate in the educational programme. Some SMEs were located in
remote areas, such as coastal areas or villages far from the university, but they were accessible
by school van or motorbike. SME business types varied, but each business had to be rooted in
the local community. Interested SMEs were informed of the detailed requirement of
participation. In the case of Brawijaya University, five SMEs were selected carefully for the
educational programme. They included a manufacturer of traditional medicine, ceramic
product manufacturer, fish processor, handicraft producer, and bakery owner. The five SMEs
were selected for their common use of local natural resources, their representation as typical
Indonesian micro companies or their ability to attract tourists to the village.
The duration of the designed educational programme is six months. The programme
comprises course-work, field trips, action plan implementation, final presentations by university
students and a workshop for dissemination. The course-work covers concepts, eight strategic
tools and six functional tools. Concepts include global trends, management of customers,
management of assumptions, entrepreneurship mindsets and business plans. Strategic tools
include the consumption chain, attribute map, reverse financials, milestone planning, Strength,
Weakness, Opportunity, and Threat (SWOT) analysis, five forces, Kaizen and 5s, and value chain.
Functional tools consist of creativity, idea momming and brainstorming, elevator speeches,
learning styles, team-work, and business plans.
Students take field trips for the purpose of business and competitor analysis, market
research and so forth. They meet with SME owners to obtain information about their current
businesses. They also go to market (i.e. either modern supermarket or traditional market) to
observe competitor’s products, business state of the targeted SME and consumers’ behavior.
Based on the course-work and field trips, students create action plans to improve business
performance of their respective SMEs. An action plan usually comprises development of
promotion materials and new products, bookkeeping and sales promotion. Students then
implement the plans in cooperation with their SME owners. Sometimes they go out to the
marketplace again to obtain direct responses from consumers about newly developed products.
At the end of the programme, students conduct final presentations about the results of their
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action plan implementation. After the programme ends, a workshop is held to disseminate
outcomes to the community and other regions in the country.

Results
The consulting-based entrepreneurship education programme conducted as part of this
research had a positive effect in improving business performance of participating SMEs. The
SMEs accepted the action plans that the students developed.
For example, a participating ceramic manufacturer produces ceramic products for interior
decor, souvenirs, and aroma-therapy. The owner started the business 12 years prior to the
educational programme with a capital outlay of 1 million rupiah. He employs 10 staff members.
Students analysed that weaknesses of the company included an inefficient arrangement of the
production area, lack of an accounting system, insufficient linkages with other institutions and
no product labelling or attractive packaging. Based on their analysis, the students developed an
action plan that addressed production design improvement, layout arrangement, the
introduction of a new accounting system, new promotional material including product labelling
and a brochure, new packaging design, business networking with a wedding planner and
participation in exhibitions. As a result, sales increased from around 15 million to 25 million
rupiah per month.
A fish processing company that produces dry shredded fish also participated in the
programme. The company is located in a coastal area about 70 km away from downtown. The
owners (husband and wife) started the business 12 years prior to the programme and
production was 150kg per month. Students analysed that the company was lacked proper
packaging, promotion, plans for market expansion, organized production and a management
system. Consequently, they advised the owner to initiate a new promotion style by
participating in exhibitions, creating new promotional material, engaging in marketing at new
locations, such as the university campus and souvenir shop, recording a book and separating
the processing space from the family kitchen to create a new hygienic production area. By
implementing the action plan, sales of the fish processing company rose 500 percent within five
months.
The participating handicraft company produces artificial flowers, floral bouquets, accessories
and souvenirs made from discarded corn husks. The owner started the business 11 years prior
to the programme. Focusing on the uniqueness of the business, students developed an
improvement plan that consisted of an introduction of accounting records using a
computerized accounting system, production of a new variety of accessories, a new showroom
separated from the production area and a new brochure, label and boxes. One of the students
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even opened a direct selling location in her house, which is nearer to downtown to help the
business owner with direct selling, distribution and consignment. During the programme, sales
increased from around 5 million to 10 million rupiah per month.
In all of the above cases, sales of the SMEs increased dramatically after the owners
expressed receptivity to new ideas and followed the plans generated from the student
consulting groups. The owners already had entrepreneurial mindset; thus, they were creative
by nature. They appeared to have become too busy to make changes in their businesses, or
they may become complacent with what they had at the moment. Once their entrepreneurial
minds were stimulated by students’ fresh ideas, they became more proactive in making
business improvement.
Another achievement resulting from implementing the educational programme was the
cultivation of an entrepreneurial mindset among the students. An entrepreneurial mindset test
was conducted before and after the programme for comparison. The test was designed by
Management Systems International (MSI) to identify the following ten key entrepreneurial
characteristics that differentiate successful entrepreneurs from unsuccessful ones: opportunity
seeking, persistence, commitment to work contract, demand for quality and efficiency, risk
taking, goal setting, information seeking, systematic planning and monitoring, persuasion and
networking, and self-confidence (Chanhming, 2008). Upon completion of the programme, large
increases were seen in self-confidence, risk-taking and persistence. All other characteristics,
except for information seeking and systematic planning/monitoring, showed improvement.
The results indicate that the entrepreneurial mindset of the students improved significantly
because of their participation in the practical entrepreneurship education programme, even
though its length was relatively short (six months). Practical entrepreneurship education, rather
than the conventional classroom education style, attracted student’s attention and interest.
After acquiring basic knowledge and tools of entrepreneurship from lectures, students actively
went out from the classroom to gain practical knowledge through such activities as visiting
production sites for new product ideas, discussing business plans with owners of SMEs and
conducting market research at the shopping mall. By applying business theories or tools
learned in the classroom to real business situations, students understood relevant concepts
with more clarity; they discovered that practical experience was more valuable than the
classroom, joining internship, or contest (e.g. business plan) experiences.
Furthermore, students were selected by faculties of various academic disciplines;
subsequently, they formed consulting teams through which they learned to cooperate with
each other and work as teams by making the most of each person’s expertise. For example,
students from computer science could contribute their IT skills towards creating a company’s
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website or promoting e-commerce. Management students could help SMEs with the start-up of
a new accounting system.
Prior to implementation of the programme, the university carried out screening of SMEs to
decide which ones to support. Then, they targeted local micro industries rooted in the
community that had the potential to grow. The selection process by the university is very
important to ensure that financial and nonfinancial services are directed toward SMEs that truly
need assistance.

Conclusion
Consulting-based entrepreneurship education has a positive impact for improving business
performance of local SMEs and stimulating the entrepreneurship mindset of university students.
By targeting SMEs that need assistance, or even micro companies or cottage industries based in
the local community, practical entrepreneurship education through a local university will
resolve inequalities based on income or region.
Further research is recommended to explore the longer-term impact of entrepreneurship
education on the business productivity of participating SMEs and career paths of participating
students. The SMEs’ continuous improvement in profit, expansion of investment, employment
of more staff members and extension of sales locations will lead to eradicating inequalities and
poverty. The establishment of new businesses by students who have participated in a practical
entrepreneurship education programme or improvement in the employment rate after
graduation will result in regional employment generation. Relevant data can be explored by
long-term follow-up surveys of SMEs and students.
To realize sustainability, collaboration between SMEs and academic institutions in a
development programme incorporated into academic curriculum is effective because the
programme will be continued from year to year with different participants as discussed earlier.
To secure sustainability, however, cooperation with other organizations that can continuously
provide funding for the programme would be also important. Private companies, such as local
commercial banks, may be interested in this kind of programme to fulfil their Corporate Social
Responsibility (CSR) obligation. In fact, Brawijaya University already started business incubation
activities, which provide credit and nonfinancial services by involving local governmental bank
and national commercial bank. Gadjah Mada University, in cooperation with one of the largest
banks in Indonesia, empowers local small businesses that previously suffered from national
disasters.
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In fact, financial institutions are seeking partners to whom they can outsource a certain
range of tasks, such as surveying of local SMEs for possible extension of credit, management
and technical training for SMEs, consulting, monitoring and so forth. Universities can undertake
those kinds of tasks by utilizing their rich human resources and expertise. At the same time,
universities can work with local SMEs to establish a practical field for their research and
education.
Once the educational programme and partnership with local SMEs is established at one
university, the framework can be disseminated by holding seminars or teachers’ training for
other universities. Brawijaya University held a workshop to disseminate their outcomes by
presenting a description of their programme and its results, poster sessions by participating
students and an exhibition of participating SMEs. The dissemination process can be conducted
locally and internationally. A host university can share their experiences with universities in
other provinces or other countries by utilizing their academic network. Sustainability of the
educational programme depends on the framework, especially use of the university as a
regional centre of excellence for business incubation and dissemination of the established
programme. In this regard, universities are perfect centres based on their fundamental roles in
knowledge transfer and local community development, as well as their rich human resource
and diverse expertise.
Our analysis has implications for policies associated with resolving inequalities based on
income and region. Furthermore, applying it to female entrepreneurs or specific ethnic groups
may lead to the resolution of inequalities due to gender or ethnicity. While success of female
entrepreneurs who were assisted by the Grameen Bank is impressive, women who manage
businesses represent a quite large percentage of the total SMEs. To support female
entrepreneurs, barriers of taxation law must be removed and loan accessibility should be taken
into account. To realize expansion of the method, appointing an appropriate university that can
properly target particular groups for participation is essential.

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Endnotes
The author gratefully acknowledges the use of cases from the pilot study of the consulting-
based entrepreneurship education programme sponsored by the Japan Bank for International
Cooperation (JBIC). The survey in the pilot study was designed and carried out by a pilot study
team consisting of members from Waseda University and Asia Science and Education for
Economic Development (Asia SEED). Fieldwork was generously supported by Brawijaya
University, Indonesia, in cooperation with Gadjah Mada University and Hasanuddin University.
Those responsible for the pilot study bear no responsibility for the analysis and interpretations
herein.