GOVERNANCE FRAMEWORKS AND RESILIENCE OF MICRO-ENTERPRISES: A DIAGNOSTIC EVALUATION AND THE ROLE OF LOCAL WISDOM IN ENHANCING SUSTAINABILITY

Abstract

This study aims to examine the governance frameworks of micro-enterprises (MEs) and their ability to survive in a competitive environment. Using the governance diagnostic tool developed by the International Finance Corporation (IFC), which is widely implemented in both developed and developing countries, the study evaluates six key governance areas. It also integrates local wisdom in applying the diagnostic tool. Discussions with micro-enterprise owners in Kendari and Makassar were conducted to assess the implementation of the IFC governance tool, providing insights into the actual governance practices in place. The results show that during the COVID-19 pandemic, micro-enterprises in the food, culinary, and hijab accessory sectors managed to sustain operations. However, from a governance perspective, most micro-enterprises are at the "Basic/Start-Up" stage, with an average score of 0-20% in the IFC matrix, indicating underdeveloped governance structures. Only four of the 15 governance elements were adequately met. These findings highlight significant governance weaknesses and the need for ongoing support to ensure long-term sustainability. The study suggests the introduction of a sustainability index for micro-enterprises, which should be disseminated as a crucial tool for evaluating their long-term viability and guiding policy development for SMEs.