Jakarta. Indonesia’s Free Nutritious Meals (MBG) program has yet to translate its broad reach into widespread business opportunities for micro, small and medium-sized enterprises (MSMEs), with only a small share of surveyed businesses reporting links to the initiative, an INDEF survey has found.

Only 5% of formal MSMEs and 1% of informal MSMEs said they had partnered with or were exploring partnerships with the program, despite 97% of respondents being aware of it and 92% saying it was already operating in their village or urban ward.

The findings come from a survey of 1,806 formal and informal MSMEs conducted by the Institute for Development of Economics and Finance (INDEF) in August 2026. The survey also found that 82% of respondents did not see the MBG program creating new business opportunities.

The gap between the program’s reach and business participation is also reflected in respondents’ assessments of its impact. Some 22% reported declining business activity associated with MBG, while only 5% reported an improvement.

Informal businesses appeared more vulnerable. Around 26% of informal MSMEs reported declining activity, compared with 18% of formal businesses. Only 2% of informal businesses reported an improvement, against 8% of formal MSMEs.

INDEF said the findings pointed to a challenge in ensuring that government spending translates into broader gains for local businesses.

“The large amount of government spending [by MBG and KDMP programs] does not automatically generate inclusive local economic growth that is felt by MSMEs,” the report said.

One possible explanation is that businesses outside the program’s supply chain are missing out on procurement spending, while some vendors face competition from the meals provided to students. The survey found that 20% of informal MSMEs viewed MBG as a competitor, compared with 15% of formal businesses.

INDEF said the program could have a substitution effect, particularly for food sellers near schools, if students spend less at nearby stalls after receiving government-provided meals. However, the survey measures respondents’ reported experiences and perceptions and does not establish that MBG directly caused every reported decline.

The gap also reflects the challenge of connecting millions of small businesses to the program’s supply chain. Indonesia had around 56.7 million MSMEs in 2025, compared with approximately 27,500 MBG kitchens, according to the report. With each kitchen sourcing from a limited number of suppliers, many businesses may struggle to secure a place in the program’s supply chain.

INDEF urged the government to publish procurement needs, including required goods, volumes, schedules and reference prices, while offering clearer purchasing contracts and payment guarantees to bring more MSMEs into the MBG supply chain.

Survey respondents also called for business assistance, cited by 31% of formal and 33% of informal MSMEs, and access to credit, cited by 22% and 34%, respectively. Better program information was another priority for 27% of formal and 25% of informal businesses.

Despite limited participation so far, 39% of formal MSMEs and 33% of informal businesses still expected to benefit from MBG over the next 12 months.

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