The Role of Small and Medium Enterprises in Developing Countries

Development thinking towards small and medium-sized enterprises (SMEs) has shifted in its emphasis over the years. In the 1980s, led by the World Banks Get your prices right approach, small firm policy was focused on economic development through business development and access to capital. During this time SMEs were hailed, as had trade been before them (Lewis, 1954), as the new engine of growth for developing countries (DCs). By the 1990s the emphasis had shifted towards social development and therefore less interest was paid to fostering SMEs (CFED, 2004). In the last few years, however, a more holistic approach to dealing with inequities in the global economy has emerged, and SMEs are now viewed as a means of achieving both economic and social development through poverty reduction (CFED, 2004). During the first five years of this decade the World Bank has approved over $10 billion to support the growth of small firms, and indications from the Bank are that this support will continue (World Bank, 2002 and 2004).