SMEs and Poverty Reduction: Findings from Four Case Studies
This paper provides an overview of four interventions that formed Corporation for Enterprise Development’s (CFED’s) Small Grants Program. It presents key findings from the case studies, and a discussion of the challenges inherent in the integrated promotion of small and medium enterprises (SME) business vitality and poverty reduction.
The case studies demonstrate that strong and vibrant SMEs can be a powerful and important conduit to economic gains for poor people. They, however, also suggest that poverty reduction cannot simply be assumed to result from all programs that support SMEs. Aspects of program design that need to be considered when gauging a program’s potential for poverty reduction include:
- Identifying SMEs that are served, methods used to support them, and poverty reducing actions that companies are encouraged to take;
- Positions in the SMEs’ value chain that benefit poor people;
- Mechanisms that translate SME growth or stability into benefits for poor individuals;
- Area of program operation.
The study reinforces the value of supporting SMEs as a poverty reduction strategy. It suggests that donors, investors and policy makers must have an intentional and strategic focus on social outcomes to be effective.
