The International Labour Organization (ILO) and the Banda Aceh City Government have signed a Memorandum of Understanding in Banda Aceh to strengthen the micro, small and medium enterprises (MSME) ecosystem and support the city’s Perfume City Programme. The initiative focuses on developing Banda Aceh’s signature commodity, patchouli, which has long been recognised as one of the world’s highest-quality sources of patchouli oil and an important raw material in the global perfume industry.
The partnership is part of the ILO’s broader support under the Promoting SME Enterprises through Improved Access to Financial Services (Promise II Impact) project, funded by the Government of Switzerland. The project aims to improve financial inclusion and expand access to funding for MSMEs in priority sectors by strengthening value chains and enhancing business opportunities for small enterprises.
Banda Aceh has been identified as a strategic location for this programme due to its strong potential in patchouli production. The Perfume City initiative seeks to increase value addition by improving downstream processing and positioning local products for higher-value domestic and international markets, thereby supporting long-term economic development in the region.
At the core of the collaboration is the strengthening of the patchouli value chain, which includes improving business capacity, supporting product development, and expanding access to markets. The programme also addresses key challenges faced by MSMEs such as limited financing, weak market access, low digitalisation, and gaps in business management skills.
The initiative is built around three main focus areas, including training for entrepreneurs in business development and quality standards, creation of higher-value patchouli-based products, and expansion of market opportunities. It also aims to improve coordination among key stakeholders such as local government, academia, the private sector, and MSME actors to ensure a more integrated and sustainable ecosystem.
Officials from both the ILO and the Banda Aceh City Government highlighted the partnership as a significant step toward achieving the city’s vision of becoming a globally competitive perfume hub. They emphasised that strengthening MSMEs will help create more inclusive and productive economic growth.
The collaboration is expected to improve MSMEs’ access to finance, markets, and capacity-building support while contributing to decent job creation. Overall, the initiative aims to position Banda Aceh as a model for sustainable, inclusive, and commodity-driven economic development.
