Because of their contribution both to employment and productivity, small enterprises are vital to development. While small is not always beautiful, small firms are often more efficient in total resource use than the larger ones in sectors where the small predominate. Moreover, small enterprises are often productive in spite of policies that are biased against them, particularly agricultural, financial, and trade policies.While there are no policy panaceas, important patterns are apparent. Policy strategies, including large- and small-scale enterprise emphases, are discussed for 'hard' and 'soft' states and for Africa. In countries with very low incomes and untapped agricultural potential, the reform of agricultural policies must often receive top billing. Policy reforms should be pursued through donor and host country collaboration.