IDB Group Support to the Small and Medium Enterprise Sector (1990-2002): Achievements, Lessons and Challenges

This technical report summarizes the achievements, lessons, and challenges of IDB Group operations over the period 1990-2002 in the area of small and medium enterprises (SME) development. The IDB group includes the Inter-American Development Bank, the Inter-American Investment Corporation and the Multilateral Investment Fund.

Some of the important lessons learned that the paper lists are:

• SMEs operate better and increase their competitiveness in a healthy and stable macroeconomic environment;
• Increasing competition in goods and services markets is possibly the most important factor in improving SME productivity;
• Private sector participation is essential for SME support programs to succeed;
• Implementing SME support programs is more efficient when public and private sector roles are clearly defined;
• Experience shows that SMEs have greater access to credit when financial markets are more developed;
• It is possible to create incentives to improve the productive capacity of businesses without introducing market distortions.

The important challenges to IDB's future SME strategy are:

• Reconciliation of aims with instruments;
• Coordinated actions;
• Improvement in public and private sector communication;
• Expansion of the range of actions to improve the business environment;
• Financing diversification;
• Local economic development;
• Increase in the entrepreneurial base;
• Monitoring of performance and measuring of results.