Both as a result of ideological factors and from sheer necessity, international agencies and governments in developing countries have been looking increasingly in recent years towards the small-scale industrial (SSI) sector as a source of growth. In countries throughout the South, studies have been commissioned, strategies planned and policies implemented to promote the sector. A common feature of most of these strategies is a heavy emphasis on supply-side inputs, that is on the provision of a variety of services to small firms to encourage their development. Conversely, relatively little attention has been paid to the wider, macroeconomic environment and to its role in fostering or hindering the sector's growth.It is not the aim of this paper to argue that there is no role for government to play in fostering SSI by means of an improved package of assistance. On the contrary, much can be achieved in this field. Rather, the suggestion is that the scope for development of the sector is conditioned more by macroeconomic factors, particularly the strength and position of large firms, than by the level of government assistance. It is, consequently, proposed that an appropriate diagnosis of the problems faced by the sector must be based on an analysis of the role played by SSI within the macroeconomy and its linkages with other sectors, particularly the large-scale industrial sector.
The theory behind structural adjustment policies implies raised agricultural incomes in rural incomes, fewer regulatory constraints on small enterprises and greater opportunities to import and export. In this article a survey of small businesses in Nigeria reveals a less buoyant situation. Falling incomes have led to falling demand for the goods of small businesses, few businesses were able to afford imported inputs, and many domestically produced materials which were formerly available were now in short supply because they were being exported. A few enterprises have been able to occupy high-income niche markets, but the majority are facing falling demand and increased competition.
In recent years, donor funding for small producer support projects has been slanted heavily in favour of microcredit, where credit is the only form of support offered. An important reason for this has been a belief that non-financial services (or business development services, BDS, as they have now come to be called) can generally neither achieve a large scale of impact nor be delivered cost effectively. Two important developments in recent years demonstrate the need for a return to a more balanced approach, with an enhanced role for BDS. First, recent evidence suggests that there are serious limitations to the developmental impact of such credit, delivered without business and technical advice. Second, some innovations in the design and delivery of BDS projects indicate that these can be made more cost-effective and have greater impact than has until now been thought possible.
Globalization creates opportunities as well as obstacles for small producers in the countries of the global South. This paper describes the attempts of four BDS initiatives - AKILI (Kenya), USSIA (Uganda), SITE (Kenya) and SEEDS (Sri Lanka) - to help small producers exploit emerging opportunities to reach new markets within and outside their countries. Considerable success was achieved in helping client producers access new, higher-value markets and to link up with private sector BDS providers, including packaging firms and standards certification agencies, thus enabling the producers to supply supermarkets and other non-traditional markets. However, such successes were often limited to the minority of more advanced small businesses, the so-called 'stars': more difficulties were encountered when working with the less sophisticated majority of microenterprises and small businesses (MSEs), especially where a significant leap in product quality was required for them to access the new markets. The greatest potential for widespread outreach and poverty alleviation lies in the adoption of sub-sector approaches, where there is greater potential for leverage. There is still an important role for support agencies to identify market opportunities thrown up by globalization, of which small producers are often unaware.