Private sector connection to development

SSE activity appears to be on the increase in most developing countries. Being labor-intensive, SSE"s generate more employment than larger firms, and probably use capital more efficiently and generate higher levels of per unit profit. Host governments and donors can improve the policy environment for SSE"s by removing existing biases against them and by enhancing the demand for their products. Providing credit to SSE"s - the most common form of direct assistance - has proven successful when the loans are for working rather than fixed capital, are screened locally on the basis of the borrower"s character, and are initially made for small amounts and for short periods of time. Successful nonfinancial direct assistance projects have been those which are industry- and task-specific, address a single constraint, include prior surveys of the individual industry, and tend to be built on proven existing institutions, even informal ones. Supporting statistical data are appended.