Social enterprises – businesses that aim to address social and environmental challenges while remaining financially sustainable – have reached an important milestone here in Indonesia.
The government now officially recognizes social enterprises as legal entities, thanks to a newly launched registration service on the AHU Online system. This initiative marks a significant step in advancing inclusive and sustainable development in the country.
The Ministry of Law and Human Rights (Kemenkumham), through the Directorate General of General Legal Administration (Ditjen AHU), launched a social enterprise registration service which was followed up with a press conference on November 13, 2024.
During this press conference, the Minister of Law, Supratman Andi Agtas, highlighted the importance of this initiative stating:
With this step, social enterprises will become a new economic force that supports social solidarity and inclusive development.

This new framework provides social enterprises with a stronger legal foundation and signals increased government and stakeholder support, paving the way for new growth opportunities and collaboration.
The Landscape of Social Entrepreneurship in Indonesia
While social enterprises have been active in Indonesia for some time, they still represent a small portion of the country’s business ecosystem.
A 2018 study by PLUS and the British Council identified around 342,000 social enterprises. Although this number is small compared to the country’s 65 million MSMEs, it underscores the sector’s potential for growth. Key insights from the report include:
- Only 50% of these social enterprises had a formal legal entity.
- Of those, just 40% were registered as Perseroan Terbatas (PT)
- Social enterprises make up just 0.5% of MSMEs, highlighting considerable room for growth. In other words, only five out of every 1,000 MSMEs are classified as social enterprises.

Requirements
Kemenkumham has adopted an iterative approach to regulating social enterprises, starting with specific criteria outlined in the Circular of the Minister of Law and Human Rights Number M.HH-1.AH.01.01 of 2024.
To qualify as a social enterprise, a company’s deed of establishment and articles of association must include the following:
- Alignment with SDGs: The company’s intent and objectives must support at least one of the 17 Sustainable Development Goals (SDGs), such as poverty alleviation, quality education, or climate action.
- Profit Allocation: At least 51% of net profits must be allocated to social missions aligned with the SDGs.
These requirements ensure that social enterprises not only pursue financial sustainability but also prioritize positive societal and environmental impacts.
Unlocking Opportunities and Capital
The recognition of social enterprises paves the way for incentives and growth opportunities. Official registration creates a pathway for:
- Government Support: Kemenkumham’s collaboration with other ministries, such as the Ministry of Finance, could lead to financial incentives, tax benefits, or grants for social enterprises.
- Attracting Impact Investors: The global interest in social and environmental investments continues to rise. Impact investors, who focus on funding ventures that deliver measurable social or environmental benefits, can now more easily identify and trust officially registered social enterprises.
In the press conference, Director General of AHU, Cahyo R. Muzhar, emphasized the importance of this initiative:
"The forms of contributions from impact investors include grants, loans, and equity. We also target investors who will provide training in creating business models such as world educational institutions that are already connected in a global impact investor network. Thus, we are not only opening opportunities for the development of social enterprises at the national level but also expanding access to the global capital market”
By fostering trust and visibility, the registration system could attract diverse forms of capital – grants, loans, or equity – as well as training opportunities and global partnerships.
Challenges and Questions to Address
While this initiative is a step in the right direction, several challenges remain:
- Profit Allocation Feasibility: The requirement to allocate 51% of profits for social missions might be unrealistic for many social enterprises, given that over 55% operate at break-even or loss, according to the PLUS report.
- Inclusivity of Other Entities: Cooperatives, foundations, and other organizations also contribute to SDG goals. The government needs to clarify whether they will qualify for similar benefits.
- Cross-Agency Coordination: Effective collaboration between different government bodies will be essential to create a cohesive and supportive ecosystem for social enterprises.

A Collaborative Path Forward
The government recognizes that this is just the beginning. Ongoing collaboration with social enterprises, ecosystem builders, and impact investors will be critical to refining policies and programs.
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