This article defines the central themes and issues on which research is most important to understand the role of small-scale enterprises (SSEs) in developing countries and how their contribution to economic growth and social welfare can best be enhanced. The purpose is to provide a common framework and direction for agencies and researchers interested in development of SSEs, with an emphasis on improving their environment and access to support institutions. Suggestions for research priorities are made on the basis of gaps in the existing literature; although no attempt is made to review that literature, some especially pertinent studies are cited as examples of each theme.Four broad categories of research can be identified:○ Characteristics and dynamics: descriptive studies that build empirical understanding of the nature and role of SSEs (Themes 1 and 2);○ Economic and social issues: analytical studies that help to understand how SSEs and efforts to assist them interact with their economic and social environment (Themes 3–5);○ Support mechanisms: the principal financial and non-financial approaches to assisting SSEs and analysis of their rational and effectiveness, differentiating among different target groups as one moves along the continuum from self-employment of the very poor to microenterprises and small and medium-scale firms (Themes 6 and 7);○ Enhancing assistance: ways of improving and extending the different types of assistance provided to SSEs and of enhancing SSEs' ability to use it effectively (Themes 8–12).
The changes faced by African business people over recent years have provided opportunities in the form of increased export markets and threats in the form of competition from new labour-force entrants. This article, which is adapted from the keynote speech of the conference of donor agencies for small and medium enterprises in Abidjan in 1993, outlines some of the changes that have taken place in many African countries following structural adjustment programmes. It describes changes in the markets in which firms operate, in the business environment and in the institutions affecting small enterprises.
BDS interventions that subsidize transactions are often thought to hinder market development by signalling that BDS can be obtained at an artificially low price. The justification for voucher programmes has been that MSEs are offered the chance to try out training at a temporarily reduced price, and if service providers respond to this opportunity, MSEs' lack of experience of the benefits of training is overcome, and they continue to purchase training at a higher level in future. This article discusses the economic rationale for intervention, then considers how to measure the short- and long-term development effects of incentives such as voucher and matching grant schemes. This is illustrated through an evaluation of the development impact of a recently ended voucher programme in Kenya, which shows signs of success in creating permanent market expansion in BDS training for MSEs.
The focus of articles in this journal has shifted over two decades from specific, supply-driven interventions for small enterprises to a broader market development approach, including demand and intermediaries for private enterprises generally. Microfinance and business development services are increasingly being treated holistically through a value chain approach.
A savings-and-credit scheme adapted by Ghana's rural banks from traditional informal methodologies is found to be effective in reaching unbanked clients and mobilizing additional domestic financial resources. Participation in the scheme transformed clients’ perception of the difficulties of saving and obtaining credit. Evidence indicated that accessing credit increased clients’ ability to purchase assets and support their household in education and health expenditures and decreased their tendency to spend on community social ceremonies. Nevertheless, the success of the scheme depends on methodologies used to mitigate risks of fraud and default: use of employees rather than autonomous agents; retention of savings of at least 50 per cent of loan amount; effective screening of loan applications, monitoring of both clients and mobile bankers; and good data systems.
Regulating microfinance is an art of balance between protecting depositors and enabling financial inclusion. Experimentation with microfinance in the late 20th century fostered innovative approaches to financial inclusion of low-income populations around the world. Ghana was a pioneer in regulations that enabled microfinance in some types of licensed institutions, while tolerating other forms. In the early 21st century, for-profit microfinance took off in ways not intended by early promoters. This review paper analyses the consequences of waiting too long to rein in proliferating profit-oriented microfinance companies and failing to build capacity for regulation, resulting in lost deposits, public mistrust, and a painful delicensing exercise. It also draws on some recent empirical research to indicate implications for public perception and key success factors, leading to a recommendation that regulation be accompanied by measures to build capacity for successful transformation and supervision of microfinance institutions for both financial inclusion and sustainability.