Coconut sugar or palm sugar is superior product in Banyumas regency, which supported by widespread of coconut tapping trees covering 5,157 ha and production of coconut sugar reach 57,400 tons per year, but welfare of coconut sugar entrepreneur are still relatively low. Therefore, it needs to be examined about the main problems of Small Medium Enterprises (SMEs) coconut sugar. This study used an exploratory approach as it aims to explore the potential and problems of SMEs coconut sugar. The study was conducted in any clusters SMEs coconut sugar, in Banyumas Regency. Source data from coconut sugar entrepreneurs and parties which related to the development of coconut sugar industry in Banyumas.The analysis showed that the four major problems in the industrial sector are the production of coconut sugar, human resources, finance, and marketing. Program development should rely on these main problems, so the role of coconut sugar as superior product can improve the welfare of community businesses.