Over US$24.5 billion of development aid is targeted at Small and Medium Sized Enterprises (SMEs) and donor interest is increasing; yet the development benefits of targeting small enterprises are controversial. This page explores the debates in more detail, and lists key resources on the topic.
At a glance: Short reads on Small Enterprise Support
DCED Synthesis Note: Current Debates on Small Enterprise Development (last updated October 2018): This four-page note summarises current debates on the definition of small enterprises, their role in job creation and poverty reduction and the most appropriate forms of support. Key take-aways include:
- Small enterprises provide a large share of employment in low-income countries but their contribution to job growth is driven by a few fast-growing businesses. Given the lower survival rates of small enterprises, they create similar amounts of jobs as large ones.
- Combining finance with management training has helped increase incomes of small business owners; yet, long-term effects on productive growth may require support to small but high-growth entrepreneurs, and improving the market systems in which they operate.
- A study in more developed countries found that the establishment of an SME promotion agency, which channels all government support to the sector, was more efficient than spreading resources over various support organisations.
DCED publications on Small Enterprise Support
- Technical report: Creating Better Business Environments for Micro and Small Enterprises, 2018. Presents the results of a survey of donor and development agencies on their views and experiences in MSE-oriented business environment reform.
- Technical report: Policies that Promote SME Participation in Public Procurement, DCED, 2017. This study seeks to analyse the various models of preferential treatment of SMEs in public procurement, provide an assessment of the impact such policies have had, as well as identify lessons learnt based on a series of country-level case studies.
The role of small enterprises in development
- Small Matters: Global evidence on the contribution to employment by the self-employed, micro-enterprises and SMEs, ILO 2019. Drawing on a database of 99 countries, the report finds that 70% of global employment is in small economic units; in some low-income countries, this share can rise to 90%. Overall, 62% are in the informal sector.
- A Research Agenda for the Small and Growing Business Sector, by Christopher Woodruff for IGC / ANDE / Argidius 2018. Addresses two questions: How effective are interventions in supporting SGB growth? And when small business grow, do they create jobs that reduce poverty?
- Small and medium-sized enterprises and decent and productive employment creation, ILO, 2015. This report presents evidence on the relevance of small and medium-sized enterprises (SMEs) for employment, the key constraints faced by SMEs and their workers, and the effectiveness of measures to support this enterprise segment.
- Micro, small and medium enterprise upgrading in low- and middle-income countries: literature review, DIE, 2013. This paper asks which factors constrain or promote micro and small enterprises in becoming larger and/or more productive.
- Which factors determine the upgrading of small and medium enterprises? Evidence from Egypt, India and the Philippines, DIE, 2013. This paper presents three extensive empirical case studies on Egypt, India and the Philippines. It argues that the entrepreneur matters much more than the recent literature would otherwise suggest.
- Is Small Still Beautiful? Literature Review of Recent Empirical Evidence on the Contribution of SMEs to Employment Creation, ILO, GIZ and BMZ, 2013. Donor agencies and governments have provided multi-billion dollar support programs for SMEs in developing countries. This study reviews the recent literature concerning credible empirical evidence on the role of SMEs in employment creation.
- Entrepreneurship and Economic Development: Theory, Evidence and Policy, IZA, 2013. This paper provides an overview of the state of the art of the intersection of development economics and entrepreneurship. It deals with (i) recent theoretical insights; (ii) empirical evidence; and (iii) fresh insights for entrepreneurship policy that emerges from recent advances in this area, including female entrepreneurship.
High growth enterprises
See also ANDE’s Why SGBs? website for relevant publications.
- Accelerating Startups in Emerging Markets: Insights from 43 Programs, GALI/Deloitte 2017.
- Small and Growing Businesses in Africa: Profiles, Successes and Challenges (2016). ada
- High-growth entrepreneurship in developing countries. A preliminary literature review, The World Bank, 2016.
- Small and Growing Businesses: Investing in the Missing Middle for Poverty Alleviation, ANDE, 2012.
- Constrained Gazelles: High Potentials in West Africa’s Informal Economy, World Development vol. 40/7, 2012.
- Household enterprises in Mozambique: Key to poverty reduction but not on the development agenda? World Bank Policy Research Working Paper, 2013.
- Helping a Large Number of People Become a Little Less Poor: The Logic of Survival Entrepreneurs. European Journal of Development Research, 2012.
- Household enterprises in Sub-Saharan Africa: Why they matter for growth, jobs, and livelihoods, World Bank Policy Research Working Paper, 2012.
- Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, in: Reluctant Entrepreneurs, Abhijit Banerjee and Esther Duflo, 2011.
Different forms of support to small enterprises
Access to finance
- Matchmaking between businesses and investors: A practical guide for technical assistance providers on how to integrate matchmaking best practices into programmatic activities, GIZ, 2019.
- Headwinds and Tailwinds in Banking Small Businesses, CGAP blog, 2016.
- Scaling-Up SME Access to Financial Services in the Developing World, IFC, 2010.
Business environment reform and trade facilitation
- Technical report: Creating Better Business Environments for Micro and Small Enterprises, DCED, 2018.
- The Impact of Business Environment on Small and Medium Enterprise, Erick Rocha, 2014.
- Micro-Multinationals, Global Consumers and the WTO. Towards a 21st Century Trade Regime, eBay, 2013.
- Doing Business 2014. Understanding Regulations for Small and Medium-Size Enterprises, The World Bank, 2013.
Promoting women’s economic empowerment through small enterprises
- Growing micro-enterprises: How gender and family can impact outcomes – evidence from Uganda, ILO, 2017.
- The Women’s Entrepreneurship Index (FEI), GEDI Institute, 2015.
- Gender and the Business Environment for New Firm Creation, The World Bank Research Observer, vol 26/2, 2011.
Evaluations of small enterprise support programmes
- Six Ways to Support Small and Growing Businesses in Emerging Markets, Matthew Guttentag, January 2019.
- Improving market access for smallholder farmers: What works in out-grower schemes – Evidence from Timor-Leste, ILO, 2017.
- What do we know about the effectiveness of Business Management Training? Key studies referenced in the DCED Evidence Framework, DCED, 2013.
- The impact of SENAI’s vocational training programme on employment, wages, and mobility in Brazil, IRIBA, 2014.
Guidance for small enterprise promotion
- SME Promotion Agencies – Is there a best set-up? A quest for good practice, ILO, 2016.
- Innovation Policy in Developing Countries. A Guide for Developing Countries, The World Bank, 2010.
- Developing SMEs Through Business Linkages, IFC, 2008.
- Business Development Services for small enterprises: Guiding principles for donor Intervention, DCED, 2001.