Food Processing Industry gives the biggest contribution to Gross Regional Domestic Product (PDRB) of Malang Regency during 2010 until 2014; but unfortunately, it has not developed optimally yet, especially to increase the income of small and medium entrepreneurs. This study aims to (1) identify the types of production based SMEs within this industry which are potential to drive the economy of the District in Malang Regency, and (2) investigate the factors which may affect the production of

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... SMEs. Data were obtained from the Industry and Commerce Department of Malang Regency. Location Quotient (LQ) analysis tool was employed to identify the type of food production based SMEs that are potential to become the driving force for the regional economy. In addition, multiple linear regression was used to determine the effect of the amount of labor, equipment investment, and raw material costs on the production of processed food types. The results of the identification find that there are three types of food production based SMEs (that are generated by most of 33 districts in Malang Regency), namely (1) bread and pastries, (2) chips, and (3) crackers. The result of LQ analysis shows that bread and pastry SMEs become the economic driver in Dau, Gedangan, Singosari, Sumberpucung, Wagir, and Wajak subdistricts. Chips SMEs become the economic driver in Ampelgading, Pagelaran, Pakis, Tirtoyudo, Turen and Wajak subdistricts. Meanwhile, Crackers SMEs become the economic driver in Bululawang, Donomulyo, Sumbermanjing Wetan, Turen, and Wajak subdistricts. From the perspective of equity aspect in economic development, the findings of this research is deemed to be interesting, because it shows that most sub-districts whose food production based SMEs become the economic driver are located in South Malang (except Singosari, Dau, and Pakis subdistricts) in which economic condition of the people is lower than that of the rest of Malang Regency.