United Nations


General Assembly

Distr. GENERAL  

4 October 1995


Fiftieth session
Agenda item 95 (j)


Note by the Secretary-General

  The Secretary-General has the honour to  transmit to the General  Assembly
the  report of the  United Nations  Panel on  Opportunity and Participation,
prepared in accordance with Assembly resolution 48/60 of 14 December 1993.

95-29882 (E)   271095/...

Report of the United Nations Panel on Opportunity and Participation


  In  an  effort   to  increase  the  opportunities  and  participation   of
developing  countries in  the world  economy  and  those of  individuals and
communities within  them for  accelerated and  sustainable development,  the
General Assembly, in  its resolution 48/60 of  14 December 1993, decided  to
establish  the United  Nations  Panel on  Opportunity  and  Participation to
conduct a  comprehensive study on the  issue.  The  Panel, appointed by  the
SecretaryGeneral as requested by the  Assembly, met during the week of 15-19
May 1995. The present report summarizes the  findings and conclusions of the
Panel and puts forward its recommendations.

  The report  is organized as follows.  Following an introduction, section I
briefly  discusses the  concepts of  opportunity and  participation.  Noting
that  these  concepts  encompass  a  wide  range  of  economic,  social  and
political  issues, the  Panel  concentrated on  issues  related  to economic
opportunity within  the framework  of sustainable development.   In  section
II, factors  shaping the policy environment,  at both  the international and
the national  levels, are discussed.   It also  highlights the complementary
roles of the overall economic environment  and the importance of appropriate
economy-wide  policies  at  the  national  level.    As  a  way  to increase
opportunity  and  participation   in  developing  countries,   with  special
reference to poverty  eradication and the situation of disadvantaged groups,
section III  discusses the  relevance of,  and scope for,  the promotion  of

micro-enterprises and small  and medium-sized enterprises  (SMEs), including
the need for targeted approaches.  It also discusses the positive impact  of
environmentally  sustainable  agriculture  on   rural  development  and  the
relevance of the participatory approach in its promotion.

  The  Panel  concluded  that the  continuous creation  and  exploitation of
opportunity and the widening  of participation are  required for sustainable
development.  The participatory approach was  found to be highly  effective,
especially  in programmes  aimed at  poverty  alleviation and  in  promoting
sustainable agriculture and  fisheries.  The promotion of  micro-enterprises
and SMEs  was found to be  an important means  of enhancing opportunity  and
broadening participation primarily through the  creation of employment.   In
the  Panel's view,  this  requires sound  macroeconomic  policies  and other
economywide  policies  at  the national  level  supported  by  a  favourable
international  environment.   Further,  the Panel  concluded  that  targeted
policies  for  the  promotion of  SMEs  were  also necessary  owing  to  the
vulnerability of the  sector.  Finally, the Panel considered that the United
Nations could  play  an important  role  in  disseminating the  concepts  of
opportunity and participation and development strategies embodying them.

  Paragraphs  Page

INTRODUCTION ...............................................1 -35


  A.  Opportunity ......................................  4 - 55

  B.  Participation ....................................  6 - 96

  C.  Opportunity, participation and development .......  10 - 116

II.  THE POLICY ENVIRONMENT ...............................12 -287

  A.  International economic environment ...............  14 - 218

    1.  Globalization of trade .......................15 - 188

    2.  Globalization of financial flows .............19 - 219

  B.  Domestic economic environment ....................  22 - 2810

    1.  Macroeconomic policy framework ...............22 - 2410

    2.  Mesoeconomic policies ........................25 - 2711

    3.  The mix of domestic policies ................. 2811

  SUSTAINABLE AGRICULTURE ..............................29 - 7012

  A.  Small enterprises and expanding opportunity ......  29 - 3112

  B.  Targeted policies for promotion of small
    enterprises ......................................  32 - 6213

    1.  Increasing access to financial resources .....33 - 4413

    2.  Entrepreneurship promotion ...................45 - 4719

    3.  Access to land ...............................48 - 4921

    4.  The regulatory environment and other policies  50 - 5422

    5.  Promotion of small enterprises with specific
      orientation ..................................55 - 6223

CONTENTS (continued)

  Paragraphs  Page

  C.  Cases of sustainable agriculture and fishery .....  63 - 7025

    1.  Seed provision ...............................64 - 6625

    2.  Small-scale tree crop cultivation ............67 - 6825

    3.  Small-scale sustainable fisheries development 69 - 7026

IV.  INSIGHTS AND RECOMMENDATIONS .........................71 -8326


1.  Trickle-up programme .............................................14

2.  Typology of successful credit programmes .........................16

3.  Mobilizing capital among the Tolai people of Papua New Guinea:
  incorporating customary practices in the modern economy ..........18

4.  The EMPRETEC programme ...........................................20

1.  Recognizing the need to intensify efforts to  increase the opportunities
and participation of developing  countries in the world economy, as well  as
those  of  individuals  and  communities  in the  developing  countries  for
accelerated  and  sustainable development,  the  General  Assembly,  in  its
resolution  48/60,  decided  to  establish  the   United  Nations  Panel  on
Opportunity and Participation.  The Panel met during  the week of 15-19  May
1995.   The present report  summarizes the findings  and conclusions of  the
Panel and puts forward its recommendations.

2.   The  Panel noted  that  the concepts  of opportunity  and participation
encompass a  wide range of economic,  social and political  issues.  In  its
deliberations,  the  Panel  concentrated  on  issues  related  to   economic
opportunity within the framework  of sustainable development.   It discussed
various  meanings of participation  and examined  the role  of participatory
processes  in  the elaboration  of  development  strategies  as  well as  in
project  formulation  and implementation.   The  Panel further  explored the
scope for increasing  opportunity and  participation in economic and  social
activities,  especially  by  disadvantaged groups  in  developing countries,
through the promotion of small enterprises. 1/, 2/

3.  The Panel observed  that an appropriate global  economic environment was
complementary to economy-wide policies at the  national level and that  both
were necessary for the expansion of economic and social  opportunity for all
groups and  individuals.   It noted  that careful  due account  needs to  be
taken  of  the differing  effects  of  structural adjustment  programmes  on
different  sectors of the  economy, as  well as on  enterprises of different
sizes,  and  appropriate  remedial  measures  incorporated  in  policy.   In
particular, it observed that  targeted support measures  were necessary  for
the promotion  of small enterprises owing  to their relative  vulnerability.
The   Panel  further   found   that  certain   policies,   while   fostering
environmentally sustainable  agriculture, tended to  have a positive  impact
on rural development  and on broadening  the participation  of disadvantaged
groups, particularly in the rural areas.


A.  Opportunity

4.   Opportunity refers to the scope for  expanding or diversifying existing
economic  activities or  creating new  ones,  as well  as for  enjoying  the
material,  social and other  benefits arising therefrom.   It may exist, and
therefore  needs to  be fostered,  at  various  levels, namely,  the global,
regional, national, subnational  (including communities and groups),  family
and individual levels.

5.    Whether  a  particular  situation   is  recognized  as  presenting  an
opportunity is related  to a nexus of needs  and means, shaped by  cultural,
locational  and  specific historical  factors.    Thus, what  constitutes an
opportunity  for one  person, a group  or a country  may not appear  such to
others,  if   they  have  differing  perceptions   of  their  needs   and/or
differential  access  to  the  means  available for  exploiting  what  could
otherwise constitute  an opportunity.   Sometimes,  opportunity may  already
exist,  needing only to be  identified and exploited.     At other times, it
has  to be  created.   Finally, it  must  be  recognized that  what provides
opportunity  for  some  may  shut  it   out  for  others.  Thus,  increasing
opportunity does not ipso facto produce equity or equality.

B.  Participation

6.   While the  term "participation"  has become  popular among  development
agencies in the formulation of development  projects, it takes on  different
meanings according  to the context in which it is used. 3/  The Panel viewed
participation in development as meaningful involvement in social,  political
and economic activities,  including burden-sharing, and equitable access  to
the benefits  of economic and social  progress.   This  is in line with  the
Programme of  Action  of the  World  Summit  for Social  Development,  which
affirms the promotion of participation as  essential for the achievement  of
social development. 4/

7.  In the present report,  the discussion on participation  concentrates on
activities  or   processes  relevant   to  the   exploitation  of   economic
opportunity.  This  covers the  involvement  of  people  and  groups in  the
production  and  exchange of  goods and  the  provision of  services.   Such
involvement may take the form  of employment, entrepreneurial  activity, the
management  of enterprises and  ownership of  assets.  As also  noted in the
Programme  of   Action,  increasing  economic   opportunity  and  broadening
participation raise important issues of governance. 5/

8.   Of particular salience here  is the question of participatory processes
in the formulation of  policy and the allocation  of resources.   The direct
involvement  of actors  in development  initiatives and  decision-making  is
especially  effective when  the target  is a  particular disadvantaged group
and the goal is poverty alleviation. 6/   While this inclusive approach  may
incur  high costs in such aspects as supervision and training, especially at
the initial  stages of a project,  the long-term  cost-effectiveness of such
an approach may be high. 7/

9.   Participatory  processes  are,  thus,  valued  for  their  contribution
towards  social  integration and  long-run  cost-effectiveness  of projects.
But they are  important for other  reasons as well.  They  may, for example,
increase welfare by  mobilizing underutilized resources.  Participation  can
also facilitate good governance, confer  legitimacy on public activities and
reduce  alienation, thereby contributing to the maintenance  of public order
and the integrity of the State.

C.  Opportunity, participation and development

10.   Current development strategies place  overwhelming emphasis on  market
mechanisms,  on  the  theory  that,  under  appropriate  conditions,  market
signals lead to a  more efficient allocation of resources.  It is  generally
appreciated   that   expansion   and   liberalization   of   markets  create

opportunities.    But  the  extent of  participation  in  the  opportunities
created  through  market  mechanisms  is  conditioned  by  factors  such  as
culture,  management  and  entrepreneurial  skills,  as  well  as  access to
productive   assets,  information,   technology,   research   and  financial
resources.   Moreover, the behaviour of  enterprises in unregulated  markets
may  impose  substantial  social and  environmental  costs  on other  social
actors and  constrict their scope for  participating in  social and economic
life.   There is,  therefore, a major  role for state  policy and action  in
preserving opportunity and  facilitating broad-based participation in  order
to promote sustainable development.

11.   Determining the appropriate scope  and modalities  for effective state
action is, however, a complex and  controversial matter.  First,  the target
group must be  carefully identified and delimited.  Secondly,  consideration
must be given to the appropriate  level - international, regional,  national
and  subnational -  at which to  intervene.  Thirdly,  consideration must be
given to  the sphere  of intervention,  whether it  be political,  economic,
social  or some  combination  of  these.   Finally,  how  to intervene  most
effectively  has to  be judged  -through economic policy  instruments, legal
reform,   law   enforcement,   intergovernmental   cooperation,   political,
administrative  or judicial  discretion,  education policies,  research  and
development   policies,  technology   development   and   dissemination,  or
empowerment of particular geographical or disadvantaged social groups,  such
as indigenous people, minorities and women.


12.  The  Panel observed that  the ability of the peoples  in the developing
countries to participate meaningfully in  social and economic activities was
significantly influenced  by both  national policies  and the  international
economic environment.  It  was noted that the effect of sound and  efficient
policies at  the micro-economic  level as well  as the impact  on individual
and  small group initiatives  can be  blunted by  inconsistent or unbalanced
macroeconomic  policies.   On  the   other  hand,   properly  designed   and
implemented macroeconomic policies  greatly enlarge economic opportunity and
magnify  the  impact of  micro-economic policy  measures.   This facilitates
broader participation in economic growth and  improvements in the quality of
life.  At  the international level, globalization of the world economy, both
in  trade and  in finance,  offers considerable  opportunity  for externally
oriented  growth  strategies.    In  particular,  the  rapid   technological
innovations  of   recent  years,   reinforced  by   the  liberalization   of
international   trade  and   finance,  have   created  economic  opportunity
domestically and internationally.  The extent  to which these  opportunities
will be exploited and  their benefits widely  shared is greatly affected  by
conditions  in  the  international  as  well  as  the  domestic,  social and
economic  environment.   Thus, the  mere  presence  of opportunities  in the
global   economy   guarantees   neither   their  equitable   and   effective
exploitation nor economic or social progress in any particular country.

13.    Therefore,  selected  international  economic  developments  and  the
domestic  policy   environment  are  briefly   examined  in  the   following
paragraphs,  since these  create  opportunities and  largely  determine  the
extent of participation in their exploitation and enjoyment.

 A.  International economic environment

14.  The past 15  years or so have been  marked by increasing  globalization
of  economic   activity,  especially  in  relation  to  trade,  finance  and
communications. The new international trading regime  set up by the recently
concluded Uruguay Round  of multilateral trade  negotiations is  expected to
accelerate  this process.  Globalization, however,  has proceeded  unevenly,
with the result that  large numbers of people  have become marginalized.  To
help redress  this trend and create  conditions that  enable poor countries,
and the people within them, to benefit from  the opportunities created by  a

more integrated world economy calls for  concerted policy responses at  both
the international and national levels.

1.  Globalization of trade

15.  Over the past  decade, international trade has consistently expanded at
a more  rapid rate  than world  gross domestic  product (GDP).   During  the
period 1985-1994,  the volume of world exports  grew at the  rate of 5.6 per
cent  per annum, while world GDP grew at 2.2 per cent.  The growth of trade,
however, was not even across regions.  Exports of developing countries as  a
whole  increased more than  twofold (141.4  per cent) in  real terms, broken
down  as follows:  South and East Asia, including China, 233 per cent; Latin
America,  56 per cent;  and Africa,  52 per  cent.  However,  these gains in
export volumes were partially nullified by movements in the terms of  trade,
which  worsened during  the  period  1980-1994 for  all developing  regions,
except the Mediterranean.   The decline was 30  per cent for Latin  America,
50 per cent for Africa, 57 per cent for West Asia and 18 per cent for  South
and East  Asia.  The world  economy also  exhibited considerable instability
in the growth  of trade opportunities.  For  instance, the quantum of  world
exports rose by 9.4 per cent in 1994,  but only by 5.3 per cent  in 1993. 8/
Such instability  makes resource allocation  and innovation more  difficult.
While this affects all economies, its  effects are particularly serious  for
developing  countries,  especially  the  exporters  of  primary commodities,
which  are  more  vulnerable  to  external  shocks  owing  to  their  highly
inflexible economic structures.

16.     Although   the   increased  transparency   and   expanding   trading
opportunities resulting from the completion of  the Uruguay Round will  give
a boost to  world trade, many developing countries  may not be  able to reap
the full benefits of these  improvements.  One major factor is that the  new
regime restricts the use of export  incentives and industrial policies  that
were so  successfully  deployed in  the  development  process of  the  newly
industrializing countries  (NICs). To compensate  for this, improvements  in
other  aspects of  the international  institutional framework  are  urgently

17.     Three  broad  goals  should   be  pursued.     First,  international
institutions  need  to  increase  their  effectiveness  in  containing   the
occurrence  and severity of  instability in  the world  economy, and enhance
the  ability of countries to cope  with it.  They should  also take measures
to make  it  easier  for developing  countries  to  take  advantage  of  the
opportunities offered by the new trading  system.  Secondly, in  formulating
economic  policy,  proper account  should  be  taken  of the  differentiated
effects of specific measures on diverse  social and economic actors  through
their  effects on,  for example,  productivity, employment  and  investment.
Thirdly, efforts  should be  made to arrive at  a more balanced view  of how
markets work  in different  societies and  economies and  how they  interact
with government policy interventions.

18.  Regional trading arrangements among  developing countries could make  a
significant  contribution to their  efforts to  expand and diversify exports
as  well as  to  upgrade  their  quality.    Their  small  and  medium-sized
enterprises, in  particular, can benefit greatly  from the enhanced  trading
opportunities  offered   by  regionally   integrated  markets.     Developed
countries,  international institutions  and regional  organizations  should,
therefore,  encourage and  facilitate economic  cooperation among developing

2.  Globalization of financial flows

19.   The growing  volume of private  international financial  flows to many
developing  countries  in  recent  years  has  provided  them  with  a major
opportunity  to finance  needed investment.    It  has, however,  included a
large component  of short-term  capital flows,  which are  subject to  great

volatility, as  recent events  in Mexico  and several  other countries  have
demonstrated.  Except in Asia, the  more stable components, such  as foreign
direct investment  and long- and  medium-term financing,  have represented a
smaller part of  the flows.   Combined  with the recent  decline in official
development assistance,  which  is not  likely  to  be reversed  soon,  this
constitutes  a  serious  problem for  poor countries,  especially  the least

20.   The  undoubted dynamism  in  the  international financial  markets can
increase  the participation of  increasing numbers of countries in expanding
investment opportunities only  if financial instability is seriously  curbed
and the  flow of  information on  financial markets  greatly improved.   The
volume  and variety  of  compensatory financing  provided  by  international
financing institutions and  regional institutions also need to be  expanded.
A new allocation of special drawing rights (SDRs),  in sound amounts for the
world economy, could provide the needed financing for much of this.

21.  In  the face of volatile capital  flows, however, the role of  domestic
policy  becomes critical.   Successful countries  have been  those that have
been capable  of attracting a high level of external  capital inflows while,
through  active  macroeconomic   policies,  avoiding  the  over-heating   of
domestic demand, excessive exchange rate appreciation and volatile  interest
rates.   An instructive  illustration  is provided  by a  comparison of  the
cases of Mexico and  Chile in the past few years.  Both countries had budget
surpluses,  an  open  import   regime  and  privatized   ventures  and  were
implementing structural  reforms.   However, Mexico  remained  wide open  to
short-run capital  flows  and left  the  exchange  rate to  appreciate  pari
passu,  while Chile discouraged  such inflows through taxes on non-interest-
bearing  deposits and  increased  reserve requirements.   As  a consequence,
Mexico has  suffered a severe adjustment  crisis since  December 1994, while
Chile  has  exhibited  dynamic  and  financially  sustainable  growth.    In
general, successful  countries were  those that also  enhanced, rather  than
weakened, domestic investment efforts.

 B.  Domestic economic environment

1.  Macroeconomic policy framework

22.   Domestic  macroeconomic  policies intermediate  between  external  and
domestic markets, and should be capable of  softening the adverse effects of
external  shocks.   They  must  also  be   designed  to   avoid  or  cushion
domestically generated shocks.   Quite often, however, macroeconomic  policy
in many developing countries has generated  stop-and-go outcomes and created
environments   that   discourage   capital   formation   and   technological
innovation.  In general,  too little consideration has been given to how the
process of  adjustment affects  capital formation  and the  use of  existing
capacity.   Many  structural adjustment  and stabilization  programmes  thus
reflect  serious shortcomings  in  two  aspects  relevant  for  the  present
report.  They have been associated  with rather weak investment  performance
and with  negative trends in  the equitable  distribution of the  gains from

23.   In  the past  decade, several  indications of  weakening economic  and
social  participation have  been observed  in  various  parts of  the world.
There are  various  measures of  inequalities,  such  as the  percentage  of
household income  accruing to lower-income groups,  the ratio  of the income
share of  the richest 20 per  cent to the lowest  20 per cent, urban  income
versus rural income and real per capita GDP.  One  rather crude indicator of
changes  in inequality over  time among regions is  the differences in their
growth  rates of  GDP per  capita.   Thus,  for example,  per capita  GDP in
Africa and  West Asia has declined over the past decade (-1.0 per cent and -
2.8 per cent  per annum, respectively, for  1985-1994). For the  former, the
growth  rate was barely  positive in  the preceding decade, at  0.3 per cent
per annum, while the latter experienced a negative average annual growth  of
2.3  per cent.    In Latin  America,  the  average  annual growth  rate  was

marginally positive over the  past two decades  (0.7 per cent for  1975-1984
and  0.5 per cent for 1985-1994).   Only in South and  East Asia, especially
in China,  did per  capita GDP  grow strongly  throughout  the two  decades.
South  and East Asia  experienced an  average annual growth rate  of 3.8 per
cent  over the two decades,  while China increased its average annual growth
rate from 6.2 per cent to 8.3 per cent from one decade to the next. 9/

24.     To  the  extent  that   programmes  of   structural  adjustment  and
stabilization  have been  carried out  under the  guidance of  international
financial institutions, some of their shortcomings  may be attributable to a
rather  naive  interpretation  by  these  agencies  of  how  the  markets of
specific countries operated and how they  would react to different policies.
In this connection, the importance of  adapting policies to take  account of
economic heterogeneity  must be emphasized.   A larger  role for  the United
Nations in  economic matters could, perhaps, contribute to the dissemination
of a  more balanced  view of  market behaviour.   In particular,  the United
Nations regional commissions and the regional  development banks, which  are
closer to  the problems and understand  better their country  specificities,
could  contribute  significantly  to  shaping  opinion  and  designing  more
efficient policies.

 2.  Mesoeconomic policies

25.  In order  to take advantage of the general trends towards globalization
and rapid technological progress in the  world economy, economic development
needs  to generate  markets for  technology, labour  training and  long-term
financing.  In  all these  areas, however, markets  are weak, incomplete  or
non-existent  in  most   developing  countries.     Therefore,  economy-wide
policies  directed  at  strengthening  these   markets  are  needed.    Such
policies,  termed mesoeconomic  policies,  play a  crucial  role  in linking
macroeconomic policy to the  behaviour of social and economic agents at  the
micro level.

26.   The externalities  involved in  the adoption  of new  technologies and
labour  training  can  be  very  significant,  particularly  in   developing
countries,  where   they  greatly  enhance   the  flexibility  of   national
economies.   Effective policies in  this area require the cooperation of the
central  government, local administration,  business associations and labour
unions in various combinations, depending  on the nature of the training and
technology  involved in  each case,  and on  the type  of market.    In some
cases, all  that is needed is encouragement by the  Government, for example,
by  providing  appropriate tax  incentives.    In other  cases,  it  may  be
necessary to  establish a training facility  or a  mechanism for channelling
information on new technologies to putative users.

27.  Long-term segments  of capital markets do  not emerge spontaneously  in
response  to naive  financial reforms.    Careful  effort by  Governments is
required to design and implement suitable  reforms, whose success is closely
related to the  nature of  capital inflows.   For, as previously  indicated,
policies  that  give  priority to  long-term flows  and  discourage volatile
flows  can  play  a  significant  positive  role  in ensuring  macroeconomic

3.  The mix of domestic policies

28.   While  it is  true that  a high rate  of investment  is not  by itself
sufficient to bring  about sustained development, no developing country  has
achieved  sustainable,  vigorous economic  development  with  low  rates  of
investment.   In order  to achieve  high rates  of investment, macroeconomic
and mesoeconomic policies must pay a great deal of attention to the  broader
factors shaping  the environment for investment.   Such  factors include the
investment  process itself, the possible effects of adjustment policies, the
complementary relationship  between public and  private investment, and  the
effects  of capital  flows on  exchange  rates,  domestic savings  and local

capital  markets.  The  record of  recent years  has been poor.   To improve
this  state  of affairs,  it  is  necessary  to reduce  instability  of both
external   and  domestic   origin.     Public   investment   in   education,
infrastructure  and training,  and  provision of  incentives  to  innovation
should  not be sacrificed in  adjustment processes.  Capital flows should be
directed to enhance investment  and to crowd in  domestic savings.   In sum,
more pragmatic and comprehensive macroeconomic policies, combined with  more
intense mesoeconomic policies, are crucial.


A.  Small enterprises and expanding opportunity

29.   Small  business undertakings,  embracing micro-enterprises  and  SMEs,
operate in  a wide range of economic activities in  virtually all countries.
They are found in both the  urban and the rural non-farm sectors, and may be
in formal or informal sectors.  In  most countries they provide the  bulk of
employment.  Micro-enterprises  offer   an  effective  means  for   creating
employment  and generating  income,  albeit frequently  at  the  subsistence
level, for the poorer  and more disadvantaged social  groups.  Among  these,
women,  who constitute  about  70 per  cent  of the  world's  poor,  feature
prominently  as owners and workers.  As is well-established, women engage in
such activities principally  as a means of sustaining their families.  Thus,
the  promotion  of  micro-enterprises  should  form  an  important  part  of
programmes for poverty alleviation. 

30.   The  promotion of  small and  medium-sized enterprises,  on the  other
hand,   can   be   more   effectively   incorporated   into   more   general
industrialization  strategies.  SMEs  can  play  an  active  part in  highly
competitive  areas,  such as  the  exportoriented  and  technology-intensive
sectors.   Employment thereby  generated has a  powerful multiplier  effect.
By  providing income and increasing production, these enterprises can induce
further  demand  for  goods  and  services,  which,  in  turn,  creates more
opportunities  and employment.   This chain  of SME  development also brings
about  indirect  effects, such  as  broadening  the  national  tax base  and
increasing  tax revenues,  which can  be redistributed  through  appropriate
policies  to   ensure  wider  participation  in  the  benefits  of  economic
development. Therefore,  the Panel  concluded that  the expansion  of micro-
enterprises and small and medium-sized enterprises,  and policies for  their
promotion, were  an important  means of extending  opportunity and  widening
participation, especially in developing countries. 

31.  With a view to promoting small  enterprises, special attention must  be
paid  to  the  differential  effects  that  macroeconomic  and  mesoeconomic
policies  have  on  firms  of  different  sizes.    In  particular,  certain
macroeconomic  policies  may be  harmful  to  the  small-enterprise  sector,
despite  their favourable  effects  on  larger enterprises.   For  instance,
trade liberalization, if it is introduced  without allowing enough time  for
adjustment, could  put some small enterprises  in jeopardy  by exposing them
to  tougher  competition  too soon.   Even  in  such cases,  however, direct
intervention  has  been  observed  to  be  harmful.   In  general,  the best
environment for small enterprises is likely to be  one where the markets  in
which they operate function well without direct  public sector intervention.
One  policy   approach  is  intervention  with   a  "light   touch".    Such
intervention is  normally decentralized and aimed at supporting, rather than
supplanting, the private market. 10/

 B.  Targeted policies for promotion of small enterprises

32.   As discussed  in  section II,  the  provision  of an  enabling  policy

environment  at the  macroeconomic and mesoeconomic levels  is essential for
the development  of  the  national economy,  including, in  particular,  the
small-enterprise sector.   By itself,  however, this is  not enough  for the
latter.  It has  to be complemented by policies targeted specifically at the
promotion  of micro-enterprises  and SMEs.   These  would include  measures,
inter  alia,  for   improving  access  to  financial  resources,   promoting
entrepreneurship,  increasing  access   to  land  and  providing  a   better
regulatory environment.

1.  Increasing access to financial resources

33.   One of the major  constraints on the productive occupation of the poor
and other disadvantaged groups, as well  as small enterprises generally,  is
lack of access to finance.  Macroeconomic and financial sector reforms  have
not  generally succeeded  in filling this  gap and providing  for the credit
needs  of  the  bottom  50  to  70  per  cent  of  the  economically  active
population.  Non-traditional specialized financial intermediaries, including
non-governmental  organizations, for their  part, reach no more than perhaps
2 per  cent of  the more than  500 million people  who run micro-  and small
enterprises throughout  the world. 11/   According to  the Human Development
Report, 1993:

"If  government  and official  aid  programmes  usually  fail  to reach  the
poorest  20% of  income groups,  most  NGO  interventions probably  miss the
poorest 5-10%." 12/

Thus,  not even  the specialized  non-governmental organizations  reach  the
very  poorest.    The  situation  of  the  more  advanced SMEs  is  slightly
different.  For  them, the  major handicap  is the  limited availability  of
venture capital.  

34.  Overall, the volume of funding made  available for assisting micro- and
small enterprises in most developing countries  has proved inadequate to the
task.  But even  with limited funding, a number of approaches are  available
to policy makers.  At the bottom of the scale,  grants offer the most direct
way to  reach the  very poorest.   For  the portion  of the population  with
productive  skills,   however,  credit   programmes  seem   to  offer   more
sustainable solutions. Here, different types  of credit programmes have been
designed  for different target groups and different  objectives.  Successful
programmes tend to be more comprehensive, emphasizing productive skills  and
sometimes providing for training and information support.

(a)Grant programmes for micro-enterprises

35.   Successful  grant programmes for micro-enterprise  development tend to
be  those  that provide  small  amounts  of  capital  in cost-effective  and
culturally appropriate ways.  The smallness  of the amount facilitates self-
selection  by highly  motivated but  poor  beneficiaries.   But,  instead of
merely  giving  out  aid,  these  programmes  tend  to  combine  grants with
technical assistance.   Grants  of this  sort have  been found  particularly
effective  in  relation  to   such  disadvantaged  groups  as  refugees  and
displaced  persons, victims  of  natural disasters,  ethnic  minorities  and
people affected by acquired immunodeficiency syndrome (AIDS) (see box 1).

36.  The dynamic feature of such grant  programmes is that by providing  the
very   poorest  with   the   opportunity  for   entrepreneurial  experience,
improvement of business skills and confidence-building, they can  facilitate
future access to  credit by enabling small-scale entrepreneurs to  establish
themselves and  qualify  for loans  from  other  sources.   Many  successful
grantees  subsequently seek  and  receive additional  capital  for  business
expansion  from   credit  programmes.     In  conjunction  with   community-
development programmes,  grants can  also promote the  formation of  locally
based revolving loan funds.

Box 1.  Trickle-up programme

  The trickle-up programme was  established in 1979 with a view to fostering
self-help  among  the world's  poor  by  providing  small  grants and  basic
business  training.    The  approach  of  the  programme  is  to  provide  a
conditional grant  of $100  in two  $50 instalments  to be used  as start-up
capital  for a business  activity.   The established  process requires 1,000
work-hours in  the first three  months, reinvestment of  20 per  cent of the
profits and  completion of  a business  plan and  report.   As of  mid-April
1995, more than 45,000 businesses had  been established under the  programme
in 110 countries.

  Wherever  it  is feasible,  the  trickle-up  programme  tries  to form  an
enterprise  zone  -  a  cluster  of   30  to  100  micro-enterprises   whose
entrepreneurial  progress  and  impact  on  the  surrounding  community  are
tracked for up to three years.  The following examples illustrate how  these
enterprise  zones  increase   opportunities  and  participation  for  micro-
entrepreneurs  in   production,  consumption,  access   to  capital,   self-
employment, community development and institution-building. 

  In Malawi, 13 enterprise zones, comprising 175  small farms, have been  in
operation  for  five  years  in  Dowa.    They  have  generated  income  and
employment through  the  cultivation of  hybrid  maize.   The  benefits  are
clear.    Average  family income  has more  than  doubled, and  profits from
maize,  coupled with the  20 per  cent trickle-up  savings requirement, have
attracted a  mobile rural savings  bank to the  villages.   The local credit
union, established  by enterprise  zone participants,  makes loans  for farm
improvement.  The production and storage of maize has provided a measure  of
food  security, and child  malnutrition has  decreased.   More families have
been able to send  their children to school,  and health has  improved as  a
result of the availability  of clean water from a community-built well.   In
addition,  the enterprise  zones have  served  as  a catalyst  for community
self-help efforts,  through which  a market-place,  a drinking  well and  an
elementary school  have been  built.  Three  institutions were  established:
an  agricultural  cooperative,   a  credit  union  and  a   non-governmental
organization, the  Dowa Enterprise  Zone  Association, which  was formed  to
continue and expand the enterprise zones.

  In   Guatemala,  a   partnership  between   the  Government,   grass-roots
organizations and  the trickle-up  programme is  helping indigenous  people.
Three enterprise zones, involving 230 businesses,  were started in the rural
areas  of Chimaltenango,  Totonicapan and  Sacapatepequez in  1993/94.   The
entrepreneurs,  mostly   women,  have  started  micro-businesses   involving
foodprocessing, vending  and traditional  crafts, such as clothes,  rugs and

  Within  a year,  the entrepreneurs  had  gained experience  as  successful
entrepreneurs on  two levels.   First,  as successful  business people  they
were able  to take  risks and  secure and  utilize loans.   Secondly,  their
community organizations had  demonstrated their  capacity to  manage a  more
complex  programme.   After  receiving  their  grants  from  the  trickle-up
programme, three community  organizations applied for, and obtained,  $9,000
from the  Government of  Spain for  "solidarity funds".   The  organizations
were  trained to manage these funds  and are now making loans to members for
business expansion.
(b)  Improving access to credit

37.  Except for  those operating among the  absolute poor, credit programmes
would seem to offer a more  financially sustainable approach than grants for
micro- and small enterprise support.  Those enterprises  that have access to
credit have  demonstrated their ability  to repay their  loans.  Those  that
are  compelled to resort  to moneylenders pay even  higher rates of interest
than  is charged by  commercial banks.   The United Nations  Expert Group on
Women and  Finance, convened by Women's  World Banking,  concluded that what
is most desired by such enterprises is an  improvement in access to  credit,
not  subsidies. 13/   Lack of collateral  and the  small size  of their loan
requests  constitute  major obstacles  to  these  enterprises  in  obtaining
credit from  traditional financial institutions,  which perceive such  small

loans as unduly costly. 

38.  A number of credit schemes and  specialized financial institutions have
been designed to reach small enterprises, and the record shows such  schemes
to  be viable.  They range from specialized banks to village-based revolving
funds. These  programmes take different forms  depending on  their goals and
target groups  (see box 2).   However,  even these special  programmes reach
probably only 10 million micro-enterprises and  SMEs worldwide, about 2  per
cent of the overall number.  Thus, greater efforts are called for. 

39.   Several lessons about targeting  large numbers  of these entrepreneurs
can be  learned from the  experiences of  successful financial institutions.
First, the  programmes  have to  be  designed  specifically to  reach  their
target groups.   Thus, when  the target group  is low-income  women, factors
such as  smallness of loans,  alternative collateral requirements and simple
application  procedures  become important.    Secondly,  these  institutions
should aim for financial selfsufficiency so  that they can become  permanent
institutions serving their  target group without being vulnerable to  sudden
policy changes  by Governments  or donors.   It  is not  always possible  to
achieve full  financial self-sufficiency in all types of schemes.  14/  Even
where a measure of subsidy is  required, however, the positive externalities
may be  sufficiently large to justify  such schemes.  Thirdly, the financial
institutions should  aim at  empowering their clients.  Provision of  credit
itself contributes  directly to the  economic empowerment of the recipients.
But,  in addition, the  more successful  programmes provide training schemes
for their clients.
  Box 2.  Typology of successful credit programmes

  Different  types of  credit programmes  have  been  designed and  used for
different objectives and target groups.  Four  broad categories of these are
considered  here:   development  banks,  including  special  credit  schemes
within  commercial  banks; poverty-oriented  banks; affiliate  networks; and
other non-governmental organizations.

(a)  Development banks

     These  are generally  government-owned, with a mandate  to serve small-
scale borrowers.  Included are commercial  banks with special credit schemes
targeted  at  such  borrowers.    Examples  of  such  development  banks are
NAFIN/PROMYP  of Mexico and  CFN/FOPINAR of  Ecuador, both  of which operate
through second-tier lending.  An example of  a commercial bank programme  is
BRI/KUPEDES of  Indonesia.   This bank operates through  chabangs (branches)
and  unit  desas  (village  units).    It  was  originally  set  up  for  an
agricultural credit programme, but the numerous  unit desas, which were  the
only formal banking system  for 75 per cent  of the country,  were converted
to full banking units by mid-1994 to serve the rural population.

(b)  Poverty-oriented banks

     These are officially registered as banks,  but have the clear objective
of serving the poor.   Two of the best-known  examples in this  category are
the  Grameen  Bank  in   Bangladesh  and  the  SEWA  (Self-Employed  Women's
Association) Bank in India.  The Grameen Bank serves landless people in  the
rural areas. Its innovative feature is  to arrange for collective collateral
by organizing people  into groups of five.  Although the Grameen Bank is now
looking into non-subsidized loans, it has,  to date, relied on concessionary
loans and  grants for its funds.   The SEWA Bank  operates as a  cooperative
bank, pooling  members' funds and collecting  savings, which  form the basis
for its loans. The  members are poor women entrepreneurs.  Both the  Grameen
and the SEWA Banks enjoy high repayment rates.

(c)  Affiliate networks

     By forming networks,  a number of  institutions are able  to exploit  a
wide array of  funds, services and information.   In addition to their  main
function  of   financial  intermediation,   these  networks   provide  other

services, such as training  and counselling.  One of the best known examples
in this category  is Women's World Banking (WWB).  Each WWB  affiliate is an
independent non-profit  institution with  autonomy over  decision-making and
finances.  The  network's centre in New York  offers a range  of services to
affiliates and coordinates  programmes, including  organizing global  forums
and local workshops. 

(d)  Other non-governmental organizations

     These  institutions  are  usually  not  formal  financial institutions.
Their  linkages  with  commercial  and  development  banks  enable  them  to
mobilize funds  to meet the needs  of their client  groups.   One example is
the Asociacion  Dominicana  para el  Desarrollo  de  la Mujer  (ADOPEM),  an
affiliate  of WWB, in  the Dominican  Republic.   A loan-guarantee agreement
with  WWB has  enabled ADOPEM  to arrange  a  leveraged  credit line  from a
commercial  bank, which ADOPEM  on-lends to  entrepreneurs.   ADOPEM is more
than fully financially selfsufficient.  Also  included in this category  are
more than  17,000 credit unions operating  in 67  developing countries whose
national  associations  are affiliated  with  the  World Council  of  Credit
Unions.   They are member-owned and  operated, providing  savings and credit
40.  Although special programmes and specialized  financial institutions are
important,  their limited  coverage means  that  a  sustained impact  on the
problem of underfunding of micro-enterprises and  SMEs calls for more active
involvement  of commercial banks, which tend to exclude  this portion of the
population  because of the conviction that it is too costly to service.  The
experience of successful  specialized institutions should encourage them  to
look more closely  into the market opportunities  offered by lending to this
sector.  By  altering ways of operating and  of products offered, costs  and
risks  can   be  reduced.   Finally,  the   possibilities  of   establishing
collaborative    relations   among    commercial   banks,   non-governmental
organizations and specialized institutions to serve this sector should  also
be examined.

41.    Government agencies  and  national  development  banks are  generally
better  able  to  serve  as  catalysts  than  as  direct  lenders  to  small
enterprises. National  development banks should,  therefore, concentrate  on
wholesale  lending   to  private  financial   institutions  that  meet   set
performance   standards,  including  competence  in  lending  to  low-income
enterprises, which can then on-lend to this sector. 15/

(c)  Availability of funds

42.  In  relation to needs, funds made  available for programmes that  serve
micro-enterprises and  SMEs  are woefully  inadequate.    Grant as  well  as
credit  programmes  generally need  to  be  subsidized.    Even when  credit
schemes  and specialized  financial  institutions aim  for  financial  self-
sufficiency, they  may still require subsidies  in their  early phases while
they  build institutional  capacity  and  achieve  a  break-even  volume  of
lending.   The  experience of  these programmes  indicates that it  takes an
efficient  lender  from  three  to  five  years  to  cover  operating costs,
including loan loss provisions,  and from five  to seven years to build  the
volumes needed  to  cover full  commercial  financing  and operating  costs.
Governments and other funders can provide resources in ways tailored to  the
stage  of  development  of  particular  institutions.    When  they  achieve
sufficient size and  capacity, however, these  financial institutions may be
expected  to access  domestic and  international commercial  funds  directly
through the financial markets.

 (d)  Other aspects of policy

43.  Legislation  affecting specialized financial  institutions is  often so
restrictive  as to allow  little room  for scaling up to  reach the stage of
financial self-sufficiency.  This needs to  be altered.  Again,  performance
evaluations  of  financial  institutions  can be  modified  to  give greater
weight to their lending  to micro- and small  enterprises.  This  would help

improve the  access  to funds,  refinance  and  deposit insurance  by  these
institutions.    In addition,  NGO  financial  institutions,  especially  in
Africa and  Latin America, often  face restrictions  on savings mobilization
that reduce their ability to lend and cause  them to depend more on  outside

44.  Again, many community-based development  agencies lack the capacity  to
implement grant  and  credit programmes,  which  require  a certain  minimum
level of  financial, administrative  and technical  resources.   Governments
can support development finance  institutions in providing capacity-building
services  to community  organizations.   Networks of  specialized  financial
institutions,  including   non-governmental  organizations,   can  also   be
effective in providing such services.   In some communities, where  they are
not fully integrated into modern, monetized economies, ways  can be found to
incorporate traditional  business  practices into  modern systems  so as  to
increase the economic participation of local people (see box 3).

             Box 3.  Mobilizing capital among the Tolai people of
                     Papua New Guinea:      incorporating customary
                     practices in the modern economy a/

  Coconuts and  traditional shell-money have been used to raise capital by a
community-based  business engaged  in development  on  behalf of  the  Tolai
people, who  live on the  Gazelle Peninsula of  Papua New  Guinea's East New
Britain Province.  The experience of  the New Guinea Development Corporation
shows  how  traditional  values,  institutions  and  ideas  may  be  used to
mobilize  capital in order to create and take advantage of opportunities for
economic participation in developing countries.

  The  Corporation  was  set  up  in   the  early  1970s,  when  traditional
agricultural  subsistence   was  either   giving   way  to   wage-employment
(primarily for men), mainly in semi-skilled  and unskilled occupations -  or
was being  supplemented by  small-scale production  of copra  and cocoa  for
export, trade stores or trucking.  Government-sponsored cooperatives,  which
were the  largest  locally  owned  concerns,  were  competing  with  (mainly
foreign) entrepreneurs. Widespread  opposition to local  government reforms,
which would have had  the effect of increasing foreign influence in a Tolai-
owned  and operated cocoa-processing  project, led  to the  formation of the
Mataungan  Association  - and  to  its  economic  offshoot,  the New  Guinea
Development  Corporation. According to the founder of  the Corporation, John
Kaputin,  the political circumstances  that developed  in the  area "meant a
rejection  of the foreign system"  by a substantial proportion  of the Tolai
people,   who  then  numbered   well  over   60,000  and  created  important
preconditions for establishing the Corporation.
   The New  Guinea Development  Corporation was  launched in  May 1970,  was
registered  in  August 1972  and  began  operations  in November  1972.   It
developed  from a  long series  of  informal  discussions, held  in villages
throughout the  Gazelle Peninsula,  at which  the current  situation in  the
area  -  and  alternatives  -were  raised;  followed   by  formal  meetings,
deliberately confined to small numbers in order to facilitate  communication
and  timed to fit  in with  particular villages'  employment and subsistence
commitments; and, finally, by actual capital raising.

  Contrary to  the requirements of introduced  law, the  Corporation did not
begin  with a  board  of  directors but  with  a group  of village  leaders.
Concepts  were deliberately  explained  in familiar,  cultural  terms,  with
"corporation",  for  example, being  equated  with  the  traditional,  Tolai
landowning group (or clan), the wunatarai.   Consistent with the  commitment
of the founders of the Mataungan Association and the New Guinea  Development
Corporation  to self-reliance,  customary practices and  explaining abstract
ideas  in familiar terms,  contributions were  initially not  sought in cash
but  in the  form  of coconuts  (three  per adult  and  one per  child)  and
traditional  Tolai shell-money,  tabu.    The coconuts  were  sold,  thereby
demonstrating  "the   creation  of  capital   from  ...  available   natural
resources".   The Corporation became "the  only modern  institution in Papua
New  Guinea to be involved  in     two currencies  - the  Kina (the official

money currency) and tabu".

     The K100,000-plus raised  from communal  effort and  selling of  shares
eventually involved  some 10,000 people.   Following Tolai  custom, in which
contributions  to   communal   enterprises   were   stored   until   further
transactions occurred and tangible assets were  acquired, none of the income
was used (and no one was paid) until the Corporation  had acquired its first

     The  Corporation's  early   investments  included  a  store,  a   cocoa
fermentary,  a copra drier,  and plantations.   Other  properties have since
been acquired for investment purposes in other parts of the country.


     a/    Based on  John Kaputin, "The New Guinea Development Corporation",
in  F. S.  Stevens and  Edward P.  Wolfers, eds.,  Racism:   The  Australian
Experience.  A Study  of  Race  Prejudice  in Australia,  2nd  ed., vol.  3;
Colonialism and  After (Sydney, Australia and  New Zealand  Book Co., 1977),
pp. 398-413.

2.  Entrepreneurship promotion

45.  The promotion  of entrepreneurship is not  necessarily the same  as the
promotion  of enterprises, though  the two  obviously reinforce one another.
Entrepreneurs are  those able  to identify  opportunities  and convert  them
into   profitable  business   activity.     The  successful   operation   of
entrepreneurs   enhances   participation   by   others   through   increased
opportunities  for employment  and  other economic  activities.   Thus, some
programmes for promoting small and  medium-sized enterprises may be designed
to target specific entrepreneurs or individuals with  potential for creating
and expanding productive activities.  While  such targeting may seem  unduly
selective,  the overall  effect  usually extends  beyond  the  entrepreneurs
themselves. 16/  (For an example of such programmes, see box 4.)

46.   Constituting  more than  half of  the  population  living in  absolute
poverty,  women  would thus  represent  the  majority of  the  beneficiaries
targeted by  any properly  designed micro-entrepreneur  and SME  development
programmes - except  where their  participation in  production and  economic
activity  is constrained  by social  factors  or  by special  limitations on
their access  to capital.   As entrepreneurs,  women have a  record of  good
performance, and  the indirect  benefits of  their success are  significant.
The latter include, for example, improved  nutrition, health and housing for
their families,  greater  interest  in  family  planning  and  provision  of
education for their children.

Box 4.  The EMPRETEC programme a/

  The  EMPRETEC  programme,  jointly  implemented  by  the  United   Nations
Conference  on Trade  and Development  and  the Department  for  Development
Support and  Management Services of  the United Nations Secretariat, focuses
on  entrepreneurship   development  and   building  linkages   with  foreign
companies.  The  basic  feature  of  EMPRETEC   is  to  identify   potential
entrepreneurs, provide  them with  training and  technical assistance,  help
them  in arranging mutually  beneficial connections with larger national and
foreign  companies   and  establish  long-term   support  systems  for   the
development of  their ventures. The  programme also  emphasizes the building
of effective and active coalitions of public  institutions, private business
associations,   national    and   foreign   companies,   and    multilateral
organizations.   By charging  cost-recovery fees, the programme  is expected
to become  self-financing  within  three to  four years,  by  which time  an
EMPRETEC foundation  or equivalent organization  will have been  established
to carry out the programme locally.

  By the end of 1994, six years after its inception, the EMPRETEC  programme
had become  fully operational in  Argentina, Brazil,  Chile, Ghana, Nigeria,

Uruguay,  Venezuela  and  Zimbabwe.    It  operates  through  18  local  and
provincial  business  support  centres  and has  benefited  more  than 2,500
entrepreneurs in  these countries.   In addition,  preparatory assistance or
project  documents have  been formulated  for 18  other countries.   In  the
first  three  years,  the average  annual  cost  of the  programme  was  US$
700,000, of which one third was  for training subcontracts and  fellowships.
But as  the programme matured,  this component  was reduced.   The programme
also recovers operational costs by charging fees for its services.

  The results so far indicate that EMPRETEC projects can have a  significant
positive  impact  on   SME  development,  albeit  influenced  by  the  local
political  and  economic environment.    A  favourable economic  climate has
assisted  the growth  of the SME sector  in general in Chile  and Ghana, and
EMPRETEC entrepreneurs  have  recorded high  rates  of  success there.    In
contrast, continuous  political unrest  and the  dormant performance of  the
national economy  gave EMPRETEC  entrepreneurs in  Nigeria a  difficult time
during  1993. These  factors, combined  with administrative  problems,  have
meant  that the  Nigeria project  has yet  to see  substantial results after
four  years  of operation.        EMPRETEC  projects  have demonstrated  the
effectiveness of an  approach that focuses on identifying entrepreneurs with
superior potential.   The programme has  been successful  in the development
of  new  businesses  and the  expansion  of existing  ones.   The  bottom-up
approach, which is built upon the  needs of participating entrepreneurs,  is
considered  to  be  one  of  its strengths.  Establishing  national  support
structures within  the organization of the  programme is  also an innovative

  The programme is  not, however, without its shortcomings.  First, in spite
of its emphasis on  training, the programme has not provided training on  an
ongoing  basis.  Secondly,  with the exception  of the  Ghana project, there
has   been  no  systematic  effort  to  facilitate   linkages  with  foreign
companies.    Thirdly, the  effort  to  facilitate the  access  of  SMEs  to
financial  resources  has  been  ad hoc.    Fourthly,  the database  on  the
participants and their progress  has not yet been  developed to a point that
would permit  monitoring  and  evaluation  of  projects  in  a  satisfactory


     a/   EMPRETEC is a  Spanish acronym for "emprendedores" (entrepreneurs)
and "tecnologia" (technology).

47.  The legal  and social obstacles often faced by women entrepreneurs call
for special  attention.   For  a start,  they need  encouragement to  expand
their businesses  beyond self-employment.   Literacy programmes and  general
education can  provide  them with  a  powerful  means for  increasing  their
economic and  social involvement.   Additionally,  basic business  education
and specific training in entrepreneurial skills  and attitudes can provide a
crucial boost to
their confidence  and  competence in  the  economic  sphere.   Networks  and
support groups among women can provide  additional information and advice to
support the development of women entrepreneurs.

3.  Access to land

48.  In the rural areas of many  countries, lack of access to land  can be a
major  constraint  on  micro-enterprise  and  SME  development.     In  some
countries, successful agrarian  reform has been a precursor to  agricultural
productivity  increases   and  SME   development.     As  a  general   rule,
agricultural land  that is  surveyed and  registered, giving  the cultivator
clear title, records much  greater productivity than other land.  This is  a
powerful argument in favour of land tenure reform.   In this connection,  it
should  be observed  that problems  related  to  tenure are  not necessarily
attributable  to tenure  being based  on custom  or statutory  law, but  the
appropriateness of particular systems to country-specific situations.

49.   Private land  use must  also be  reconciled with the  public interest.
This  issue is  of increasing  importance,  as  the need  to provide  public
facilities, such as roads, airports and schools, rises.   As regards the use
of land, next to  exercising the right  of eminent domain, perhaps the  most
effective  policy instrument  is the  power to  tax.   By effective  use  of
taxation,  Governments  can  encourage more  efficient land  use  and higher
productivity.    Land  registration   is,  of  course,  a  prerequisite  for
effective  taxation.  The  public interest  in environmental  protection has
become  increasingly  important,   especially  in  relation  to   activities
involving natural resources such as forestry and minerals.

4.  The regulatory environment and other policies

50.  While government regulation of enterprise activity  has a vital role to
play,  especially in  maintaining  health and  environmental  standards  and
protecting  the safety of  workers, excessive  bureaucracy and  red tape can
hamper  the functioning  of  enterprises.    It has  been  observed in  many
countries  that  some   government  regulations  prove  damaging  to   small
enterprises, where  the cost of compliance is largely relative  to the level
of sales and where they may be subjected  to exploitation by corrupt  public

51.    Additionally,  regulations affecting  labour markets,  such  as those
setting out  minimum  wages  and  social security  contributions,  may  work
against small  enterprises.  While intended  for the  protection of workers,
such  regulations  tend  to  be  designed  with  the  conditions  of  larger
enterprises in the modern  sector in mind.   Minimum wages, for example,  if
set  too high,  may place  SMEs  at a  competitive disadvantage  relative to
larger  firms.    So  may  high   social  security  contributions.     While
regulations  such as standards on  health, safety and quality  do not always
impose undue  burdens on SMEs, some  others, such as  siting and floor  area
requirements, may do so.

52.  The effects of reducing  regulatory standards are, however,  ambiguous.
As it is, small enterprises tend to evade many of these regulations, in  any
event. In  addition, even though some  exploitation by  public officials may
exist, it is hardly likely that this will cause  enterprises to fail.  Thus,
the issue is  not one of  necessarily exempting SMEs from  such regulations,
but  applying the latter  in ways  as to  reduce the cost  of compliance for
SMEs as much as possible.

53.    As  encouragement  to  small  entrepreneurs  and  for  promoting  the
interests of  disadvantaged groups, such as  women, there  are other aspects
of  legislation  that  need  to  be  revisited.    These  will  include  the
simplification of registration procedures, taxation and credit access,  with
a view to facilitating  the operations of micro-  and small enterprises  and
the financial  institutions that  serve them.   In  many countries,  women's
economic participation is further discouraged by laws regarding  inheritance
and property rights  which restrict  their right to  acquire legal title  to
real property or financial  assets.  These, finally,  need to be  dealt with
decisively if the benefits  of entrepreneurial activity by women, especially
its positive effects on family welfare, are ever to be fully realized.

54.    Large-scale industrial  projects  can  also effectively  promote  the
involvement  of SMEs in  various ways,  including subcontracting.   In Papua
New  Guinea, for  example, firms  applying  for  large mining  projects must
include plans to stimulate local business activity.

  5.  Promotion of small enterprises with specific orientation

(a)  Export-oriented small enterprises

55.  Even though  the importance of SMEs  in economic development in general
has received  some recognition,  the role of  SMEs in  export promotion  has
attracted   less   attention,   probably   because   their   potential   for

international  competitiveness  is  usually  underrated.    But,  as   their
contribution to the  recent successes of  the NICs,  and Japan before  that,
has demonstrated, SMEs can  play an important role  in export growth.   When
their indirect contribution in supplying parts  and components to the larger
export-oriented enterprises is taken into account, the overall  contribution
of SMEs is quite significant.

56.   SMEs can  be important  even in  the initial stages  of an  export-led
growth  strategy.   For  example,  the  flexibility  of  SMEs in  production
enables them  to adjust  easily to  changes in  overseas demand.   SMEs also
have  an advantage  in the  production of  low-cost, labour-intensive goods,
which  are typical export  items at  the early stages  of export-led growth.
Even where SMEs do  not export directly, they may be subcontracting to large
enterprises.  It must be recognized, too, that SMEs have been successful  in
relatively technologyintensive production, such as in metal fabrication  and
light engineering.   At a later stage of  development, more SMEs are able to
export directly, leading  to changes in the structure and composition of the
SME sector itself.

57.  In  spite of their acknowledged success  in certain countries in  Asia,
however, SMEs in other countries, particularly  in Africa and Latin America,
have  been  responsible  for  only  a  small  share  of exports.    Lack  of
information   regarding   overseas   markets,   an   adverse   macroeconomic
environment and  discriminatory trade policies  in potential export  markets
are some  of the reasons for  this.  It  is thus  essential that Governments
provide an enabling environment  for the development of SMEs.  In  addition,
Governments can  provide an  integrated package of  assistance, which  could
include   tariff/tax  reductions,   export   credit   guarantees,  technical
assistance, improvement of marketing and export facilities, and  improvement
of  market  information flows.   Further,  as  happened  in the  Republic of
Korea, Governments can  provide assistance in facilitating linkages  between
SMEs and  larger firms where  these linkages may  otherwise be difficult  to
establish.    Experience  shows  that  foreign  partners,  be  they  trading
companies  or companies making  direct investments,  can also  assist in the
strengthening of export-oriented  SMEs.  Even tourists can  be of help as  a
source of  information  on trends  abroad so  that  SMEs  can produce  goods
suitable  for  export  - as  happened  in  the  garment  industry  in  Bali,
Indonesia.   Innovative concepts such  as franchising, industrial  incubator
schemes  and venture  capital financing  may  also  be useful  for promoting
export-oriented small enterprises.  
(b)  Technology-intensive small enterprises

58.  In the technology-intensive industries,  large size was once considered
essential  to  carry  out  research  and   ensure  an  efficient  scale   of
production.  In the  past two decades, however,  it has become  evident that
small enterprises play a significant role  in the growth of  high-technology
industries in  the developed countries.   In an  age of  rapid technological
change,  small  firms  have  a  comparative  advantage  in  many  sectors in
identifying and serving new  markets before large firms move in.  The growth
and  competitiveness of  firms in  the Silicon  Valley in the  United States
have  demonstrated   the  strength  of  small  enterprises  in  some  highly
technology-intensive  industries.   The  availability  of a  pool of  highly
educated  and skilled labour is,  of course, a prerequisite  for the success
of this subsector - a condition not often met in the poorer countries.

59.   Some developing  areas, Taiwan  Province of  China, for example,  and,
more  recently, India,  have shown  that  it  is possible  to encourage  the
development   of  technology-oriented   SMEs  in   developing  areas,   too.
Government  policy  can  promote  the  development  of  such  industries  by
ensuring  access  to finance,  especially  venture  capital;  by  protecting
intellectual  property  rights;  and  by  providing  tax  incentives.    The
critical  mass in  research  and development,  manufacturing  and  marketing
provided by large companies can be complemented  by the flexibility of small
firms.   A  high-technology industrial  park,  which  consists of  large and
small  enterprises, built in  conjunction with  a local  university and with
government  assistance, could  be  a  useful  approach for  some  developing

countries.    The rapid  growth  of  globalized  telecommunication  networks
presents a  unique opportunity  for SMEs  to overcome  the disadvantages  of
size, not only with respect to access to  information but also for obtaining
business services. 

(c)  Cooperative enterprises

60.   Because they  are owned and  controlled by  their members, cooperative
enterprises  offer  a   unique  way  of  increasing  both  opportunity   and
participation.  Most  often, members  of  a  cooperative  reside  in one  or
several neighbouring  communities.    By sharing  the same  environment  and
social circumstances, these cooperators are likely  to pursue goals that are
beneficial to the community as a whole.

61.   Cooperatives take many forms  and have a variety of  objectives.  They
can take the form of production  cooperatives or labour cooperatives,  where
members  themselves  constitute  the  workforce.    They  can  be  formed by
independent   enterprises  and  by   micro-enterprises.    Examples  include
purchasing,   supply  and   marketing  cooperatives,   savings   and  credit
cooperatives,  cooperative  banks  and  cooperative  insurance  enterprises.
But,  as  mutual   self-help  organizations,  cooperative  enterprises   can
contribute   directly  and   indirectly   to  poverty   alleviation  through
employment creation.   An example of  a cooperative bank  is the SEWA  Bank,
described in box 2 above.

62.  It  has to be acknowledged that  the record of cooperative  enterprises
in creating sustained opportunities has varied.  For joint-marketing,  bulk-
buying  and  large-scale  services,  the  rate  of  success  has  been good.
Housing and credit  cooperatives have also had some  success.  But, when  it
comes to production, the record has been more  mixed.  Thus, in agriculture,
land-holding  cooperatives,  where  production  is  carried  out  by  family
farmers owning subdivisions within the holding, have a good record.  On  the
other hand,  land-working cooperatives, where members do not necessarily own
the land, have rarely thrived.

 C.  Cases of sustainable agriculture and fishery

63.   In the  rural areas  of many  developing countries, it  is possible to
design  and implement  programmes of  sustainable  development that  have  a
positive impact on disadvantaged groups.  While many examples  can be given,
only three are taken up:   seed provision, small-scale cash-crop cultivation
and small-scale fisheries.

1.  Seed provision

64.   An important aspect  of most agricultural extension programmes is seed
provision.  The  "Green Revolution" has produced  a number of better quality
seeds for important commercial crops.   For the most part, however, attempts
by  both  public  and  private  institutions  to  provide  better  seeds  to
smallholders have not  been very successful.   While the  public sector  has
been hampered by such  factors as lack of resources, poorly motivated  staff
and poor  management, the  private sector  has often been  deterred by  high
transaction costs.

65.    To  fill  the  gap,  non-governmental  organizations  with  a  highly
participatory  orientation have been  brought into  the picture.   Such non-
governmental  organizations  have  the  advantage  of being  closer  to  the
farmers, especially if  they are already involved in other programmes in the
same location.   Being  independent of  public  officials or  profit-seeking
managers, non-governmental  organizations are  in a position  to allow  more
scope  for popular  participation in decision-making and  operations.  Their
major  drawback is  perhaps  their small  size, even  in  the case  of  non-
governmental organizations  with adequate  technical knowledge  and research

capability.  17/  This  results in  high production  costs, jeopardizing the
long-term sustainability of such programmes.

66.    One promising  way  to  make these  seed  provision  programmes  more
successful  is to  support  local  farmer enterprises  in  seed  production.
Another  way  is   to  involve  local  and  international   non-governmental
organizations,  as  well  as   research  institutions,  in  the  design  and
implementation of  the programmes.  An  interesting example  is furnished by
the On-Farm Seed Project,  which operated from 1987  to 1992 in  Senegal and
the  Gambia, and  involved cooperation among aid  agencies, universities and
international and local non-governmental organizations. 18/  By  emphasizing
a participatory  approach in research  and extension,  this programme sought
to improve the capacity of the farmers involved.

2.  Small-scale tree crop cultivation

67.  Even  with the increased  funding provided  by major  donors since  the
1970s for  tree cultivation  projects, estimates  made in  the mid-1980s  of
atmospheric carbon dioxide suggest the need  for more intensive planting  in
order to offset high rates of  deforestation.  This has led  to a search for
less costly, more  management-intensive and internally  motivated approaches
involving  the encouragement  of  smallholder tree  cultivation  instead  of
large-scale government  schemes in  developing countries, many of  which are
hampered by severe financial and institutional constraints.
  68.    Success  here  depends  on  the  mix  of  at  least  four  factors:
appropriate agroclimatic  conditions,  the availability  of off-farm  trees,
market demand for  tree-based resources and access  to markets.  In general,
the last  two factors,  namely, the  price of  tree products  and access  to
markets, are the most important conditions.   Particular attention needs  to
be paid to changes in market conditions as such schemes mature, in order  to
avoid  the collapse  of  markets as  a result  of  oversupply.   Credit  and
subsidies  may   facilitate,  but   do  not   determine,  the  decision   of
smallholders  to  undertake  tree   planting.    After   these  factors  are
considered,  the  next  most  important  determinant  of  the  smallholders'
decisions to cultivate trees  seems to be tree  and land tenure,  though the
disincentives created  by insecure tenure can  be offset  by the expectation
of a  high rate  of return.   There  is also  a need  for assistance in  the
diffusion  of  locally  adapted  and  new  cultivation.   One  of  the  most
important roles of government is again  to ensure macroeconomic and sectoral
stability.  High  interest rates and inflation will discourage  smallholders
in planting trees, as in other areas of  production, by reducing the present
value  of  their  investment.  Properly  conceived  and  executed,   though,
commercial tree  cultivation could prove to be a useful means of alleviating
rural poverty while increasing tree cover.

3.  Small-scale sustainable fisheries development

69.   In many  countries, the  adoption of  fisheries technologies requiring
large-scale operations not only marginalize small-scale fishing  communities
but  also create a  "crisis" in in-shore  fishing by  depleting fish stocks.
By  the  mid-1970s,  the  importance  and  appropriateness  of   small-scale
fisheries,  especially  for  in-shore  fishing  in  the  context  of   rural
development,  began  to be  appreciated.   Initially,  this recognition  was
based  on conventional  socio-economic considerations  such as  job-creation
and the  size of  the fish  harvests,  compared to  medium- and  large-scale
fishing, which  remained more economic  for deep-sea fishing.   By  the mid-
1980s, additional benefits began to be recognized.  The promotion of  small-
scale  fisheries,  it  was observed,  could lead  to  small-scale processing
activities and  greater self-reliance  at the  community level.   This  more
labour-intensive cycle  can  result in  lower  fish  prices and  more  local
employment, thus making fish more accessible to the rural population.

70.   A new approach is,  therefore, necessary to  guide the sector  towards
environmentally, socially  and economically  sustainable development.   This

would  include such measures as recapturing artisanal knowledge and blending
traditional  technologies with  modern ones,  capacity-building in  resource
management,  community  development  and  the  organization  of fishworkers,
development  of  a  programme  of  conservation  and  the  establishment  of
protected areas  for local  communities with  restrictions on  the catch  of
endangered species, and attention to the role of women in this sector.


71.   In this  concluding section,  the Panel endeavoured  to pull  together
threads  of the material  presented in  the earlier sections,  draw on their
insights and  suggest approaches and measures  that it  believed will enable
policy  makers  to  move towards  expanding  the  opportunities  of  people,
especially in  the developing countries,  and enhancing their  participation
in social and economic life.

72.     Sustainable  development  requires   the  continuous  creation   and
exploitation  of  opportunity  and  the  widening  of  participation.    The
participatory  approach  was  considered  highly  effective,  especially  in
programmes aimed at poverty alleviation,  when multiplier effects  and cost-
effectiveness are  taken into  account.  This  approach is best  promoted by
involving  stakeholders throughout  the project  cycle, beginning  with  the
initial  planning stage, so  that the  selection of  strategies and specific
measures will be suited to their needs.

73.  The operations of micro- and small  enterprises are an important  means
of enhancing opportunity and broadening participation primarily through  the
creation  of employment.  In  the first instance,  policies and measures for
broad-based  economic development  at both  the international  and  national
levels are  important for  the successful  operation of  micro-entrepreneurs
and SMEs. These would include:

  (a)    At  the  international  level,  measures  for  the  containment  of
instability  in  international  trade  and  financial  flows  to  developing
countries,  recognition of  the special  vulnerabilities of  the latter,  an
increase   in  the  volume   and  variety  of  compensatory  financing,  and
facilitation of regional cooperation among developing countries;

  (b)  At the national level: 

  (i)Macroeconomic   and  mesoeconomic   policies  that   ensure  a   stable
environment for  rational  economic  activity,  taking due  account  of  the
differential effects  of  such policies  on  the  various economic  sectors,
enterprises of different sizes and social groups;
    (ii)Infrastructure development, both physical and  social, with priority
accorded to the development of:

       a.Transport   and   communications  to   facilitate   marketing   and
distribution of goods;

    b.Education, as an investment in human productivity;

       c.General  health conditions,  as an  investment in  human  resources
   (iii)Institution-building,  to  redress  the  general  situation  of  low
institutional capacity, which  has tended to constrain both opportunity  and
participation;  such institutions must  be economically solvent, politically
accepted and designed to ensure feasibility and credibility.

74.  Within the scope of  mesoeconomic policies, technology, information and
training are of  particular importance.   Lack of access  to technology  and
information  as well  as limited  capacity  to  adopt and  adapt appropriate
technologies  constitute a  major limitation  on  the development  of micro-

enterprises and SMEs.  Producers' associations  and cooperatives can play  a
role  in transferring  technology, as  can contacts  with foreign companies,
especially  in the  case  of export-  and  technology-oriented  enterprises.
Appropriate   and  flexible  training  must  also  be   available  to  small

75.  Owing to the  particular vulnerability of micro-enterprises and SMEs to
external   and   internal   shocks,   however,   specific  targeted   public
interventions are necessary.  Such interventions should be decentralized  to
ensure effective  targeting and designed to  support markets  rather than to
supplant them.

76.   Lack of  financial resources  constitutes  a major  constraint on  the
development  and operation of micro- and small enterprises.   To begin with,
public  funds  for the  development  of  micro-  and  small enterprises  are
generally inadequate.  More  importantly, lacking access  to regular sources
of commercial credit,  the majority of the  micro- and small enterprises are
driven to resort to moneylenders  who charge well above  commercial rates of
interest.  Thus,  measures to improve their  access to finance  are critical
to the development  and successful operation  of micro-enterprises and SMEs.
Such measures would include the following:

  (a)    The  encouragement  of  development  banks  and  the  provision  of
incentives to commercial banks to serve micro-enterprises and SMEs;
  (b)  Increased availability of banking services to rural people and  other
target groups not usually reached by such services;

  (c)    The  encouragement  of partnerships  between  commercial  banks and
international  financial institutions,  on the  one  hand, and  between non-
governmental  organizations  and community-based  development organizations,
on the other hand, in cases where the latter have the demonstrated  capacity
to  work  with  micro-  and  small entrepreneurs  and  to  help  them  start
sustainable businesses;

  (d)   The encouragement of the private sector  to increase its involvement
in  both technical assistance  and technology  transfer to  micro- and small

  (e)   Increased support  from donors  and international  agencies for  the
development of  institutions within  developing countries  that can  provide
capital  and   training  to  micro-   and  small  entrepreneurs  and  manage
enterprise development programmes.

77.   Entrepreneur  development is  another  approach  to the  promotion  of
micro- and small enterprises.  This  approach involves the identification of
successful entrepreneurs  and individuals with  the potential for  expanding
economic  activities,  and   provision  to  them  of  appropriate   support,
including training, where necessary.

78.    Measures  by  Governments  and   the  business  community  to  expand
opportunities  for women  in public  life and  in  economic activity  and to
facilitate their  participation  in other  spheres  of  social life  are  of
particular importance. Such emphasis on women  is warranted since women, who
compose  more than half  of the  world's poor, often face  special legal and
social  obstructions  in carrying  out  business  and  economic  activities,
despite their  record of being  responsible entrepreneurs  and the principal
contributors  to the  welfare  of  the family.    In order  to increase  the
participation  of  women  in   economic  activity  through   entrepreneurial
development, the following measures are proposed: 

  (a)   Women should be  encouraged to expand  their businesses beyond self-

  (b)  Special  emphasis should be placed  on basic literacy programmes  and
general education for women;

  (c)   Focused basic  business education  and, in  particular, training  in
entrepreneurial skills and attitudes should be provided to women;

  (d)   Networks to  provide information and  advice should  be promoted  to
support the development of women entrepreneurs;

  (e)  The  access of women  to credit  should be eased  - this may  involve
recourse  to alternative  financial  institutions, designed  specifically to
serve women entrepreneurs.

79.    Contrary  to the  general perception  that  SMEs are  not competitive
internationally,  they are important  in the  export sectors of  a number of
countries.  However, this requires that  government policy should provide an
enabling environment and allow price mechanisms  to work.  Foreign partners,
such  as trading  companies, firms  making  direct  investment, or  even the
demonstration effect of tourists, can help  the development of these export-
oriented SMEs  in various ways.   Governments should  also consider offering
an  integrated  package  of  assistance,  including  tariff/tax  reductions,
export  credit  guarantees, support  for linkages  between  SMEs and  larger
firms through  subcontracting,  technical assistance  and marketing,  export
facilitation  and improved  information  on overseas  markets.    Innovative
concepts that  may be considered  include franchising, industrial  incubator
schemes   and  venture   capital  financing.   Regional  cooperation   among
developing  countries   may  also   complement  national   efforts  of   SME
development, providing expanded trading and investment opportunities.

80.   Attention should also  be paid to the promotion of technology-oriented
small   enterprises.     Owing  to   their  flexibility,  small   firms  are
increasingly  becoming  a  major  source of  innovation,  thereby  gaining a
comparative  advantage over  larger firms.    Their development  can further
facilitate  the widespread acquisition of skills in  both technical know-how
and  business practices.  Governments  can  promote such  enterprises  in  a
number of  ways.  In  addition to the measures  discussed above, Governments
can encourage  the use of global  telecommunication networks  to improve the
access  of small  firms to  information  and  business services.   Secondly,
Governments should  ensure the protection  of intellectual property  rights.
Thirdly,  they should  encourage the development of  venture capital markets
and the establishment of technology parks.

81.  While cooperatives have  in many cases broadened participation by their
very nature,  their record  in creating sustained  economic opportunity  has
varied  across   sectors.    Service-providing   cooperatives  seem  to   be
relatively successful  in exploiting  economies of  scale, while  production
cooperatives have a more mixed record.

82.   The  participatory approach seems particularly  suitable for promoting
sustainable agriculture.   For example,  non-governmental organizations  can
be very  effective in implementing  seed provision  programmes.  Cooperation
with international non-governmental organizations and aid agencies can  help
overcome  the  frequently  low  capacity  level  of  local  non-governmental
organizations. Involving  local farmer  enterprises in  seed production  can
also  be an effective  means of  broadening participation.   The small-scale
cultivation of  tree crops  can contribute  to  sustainable agriculture  and
poverty alleviation.   As  for sustainable  fisheries, especially  in-shore,
coastal  fisheries,   the   appropriateness  of   artisanal  knowledge   and
traditional technology has  been recognized  and deserves to be  encouraged.
Moreover, conservation  programmes and restrictions  on access to  protected
fisheries  reserved for  local  communities may  be  necessary  to reconcile
equity  considerations   with  sustainable   exploitation  of   the  fishery
resources.   As in other  areas, there is  a need  for capacity-building and
enhancement of the role of women.

83.  The United  Nations has an  important role to play in  bringing forward
the  generally  felt  concern  for  the  expansion  of  opportunity  and the
broadening  of participation,  especially in  the developing  countries.  In
addition  to  stimulating  the  widest  possible  discussion  of  the issues

touched on in the  present report, the  United Nations and its agencies  can
make an important contribution by:

  (a)     Endorsing  initiatives  aimed   at  expanding  opportunities   and
broadening participation, particularly  for the  less-advantaged sectors  of
the populations of all countries;

  (b)    Encouraging the  employment  of  the  concepts  of opportunity  and
participation   in   development   initiatives   and  project   formulation,
particularly for projects targeted at disadvantaged groups;

  (c)  Disseminating to developing  countries, development models  that have
worked  in various  places, such  as  the  EMPRETEC, trickle-up  and Women's
World Banking programmes mentioned in the report;

  (d)   Providing direct  technical and  financial assistance within various
country programmes to micro- and small enterprises;

  (e)   Promoting  a more  balanced view  of  market behaviour,  taking into
account  the broader  factors that  affect  markets,  in the  formulation of
structural adjustment and other development programmes;

  (f)  Involving those individuals and  institutions that have been involved
in successful  programmes with  disadvantaged groups  in the formulation  of
projects related to micro-enterprises  and SME development  at the regional,
subregional and international levels.


  1/  The expression  "small enterprises" covers  micro-enterprises as  well
as small  and medium-sized  enterprises, terms  often used  together in  the
present report.   Definitions of these  terms abound.   N.  Chowdhury, in  a
paper  prepared   for  the   United   Nations  Panel   on  Opportunity   and
Participation,   entitled  "Opportunity   and  participation   in   economic
development:   recent experience  and policy  options", cites  J. Curran who
found 75 countries defining  small firms in  50 different ways.  In  an OECD
study  (C. Morrisson  and others,  Micro-enterprises and  the  Institutional
Framework:  In  Developing Countries (Paris, OECD, 1994))  micro-enterprises
are defined as those with fewer  than 20 workers.  Its definition of workers
includes  all the people  working in  the enterprise,  including owners, and
wage-  as well  as non-wage-workers.  "Micro-enterprises", defined  as  ones
with  1 to 10  workers, are  considered as differing from  small and medium-
sized  enterprises  in  their  frequent  engagement  of  non-wage   workers.
"Medium-sized enterprises"  are defined as ones  with more  than 20 workers,
implying that "small enterprises" are those with between 11 and 20 workers.

  2/    In fact,  economic,  social  and  political  aspects of  opportunity
interact.    The  Programme  of  Action  of  the  World  Summit  for  Social
Development (Report of the World Summit for Social Development,  Copenhagen,
6-12 March  1995  (A/CONF.166/9), chap.  I,  resolution  1, annex  II)  also
refers  to the promotion  of SMEs  as a means to  achieve social development
(see, for example, paras. 12 (h), 44, 51 and 91 (c)).

  3/     Marja  Liisa  Swantz,   "Participation  in  economic   development"
(Helsinki,  United   Nations  University/World  Institute  for   Development
Economics Research, 1994), p. 1.

  4/  See Report of  the World Summit for Social  Development ..., paras.  2
and  4; see, also, World Bank, The World Bank and Participation (Washington,
D.C.,   1994),  in  which   the  Bank's   Learning  Group  on  Participatory
Development defines participation  in the development  context as  a process
through  which stakeholders  influence and  share control  over  development
initiatives, decisions and resources which affect them.

  5/  See Report of the World Summit for Social Development ..., para. 7.

  6/   Ibid., paras. 72 (a)  to (c); see,  also, Bhatnagar and Williams, op.
cit., pp. 22-23.

  7/  See Bhatnagar and Williams, op. cit., pp. 21-24.

  8/  The statistics are  based on the data maintained by the Department for
Economic and  Social Information and Policy  Analysis of  the United Nations

  9/     See  World  Economic  and   Social  Survey   1995  (United  Nations
publication, Sales No. E.95.II.C.1), table A.1.

   10/   See A. Berry,  in a paper prepared for the  United Nations Panel on
Opportunity  and  Participation,  entitled  "Creating  an  enabling   policy
environment:   traditional  and innovative  approaches", in  which he  cites
Brian  Levy  and  others,   Technical  and  Marketing  Support  Systems  for
Successful  Small and  Medium-Sized Enterprises  in Four  Countries,  Policy
Research Working Paper No. 1400 (Washington, D.C., World Bank, 1994).

  11/   See  Women's  World  Banking,  "The  missing  links:    finance  and
enterprise systems that work for the majority", draft position paper of  the
Women's World Banking Policy Forum, April 1995, pp. 1-2.

  12/   See United Nations  Development Programme, Human Development Report,
1993 (New York, Oxford University Press, 1993), p. 96.

  13/  See Women's World Banking, Report of  the United Nations Expert Group
on Women and Finance (1994), p. 21.

  14/     The  definition   of  financial   self-sufficiency  varies   among
institutions.   For example, some  define it  to cover  only costs  directly
linked  to lending,  while others  define it  to cover  all costs  incurred,
including lending and training expenses.

  15/  The  World Bank has recently announced  a new programme, which  would
provide funds to local banks that specialize in  micro-loans.  The programme
has so far obtained a pledge of $200 million, which is estimated to be  able
to provide  finance credit for a  million prospective  entrepreneurs a year,
with loans being as small as $100 each.   When implemented, this would  be a
considerable  step forward for  the World  Bank in its attempt  to reach the

  16/   EMPRETEC  GHANA, one  of  the  EMPRETEC programmes,  an entrepreneur
promotion  project  run  by  the  United  Nations  Conference  on  Trade and
Development  (UNCTAD)  and  the  Department  for  Development  Support   and
Management  Services of  the United  Nations Secretariat (DDSMS),  is openly
selective.  It bases selection not only on potential but also on  successful
track records  among existing entrepreneurs.   But the  benefits that spread
from  the resulting higher success  rates seem to justify this approach; for
a  discussion  of  the  EMPRETEC  programme,  see  box  4  and UNCTAD/DDSMS,
EMPRETEC:   A Unique  Approach to  Entrepreneurship Development  (Geneva/New
York, 1994).

  17/   Steve Wiggins and  Elizabeth Cromwell, "NGOs  and seed provision  to
smallholders  in developing  countries", World  Development, vol. 23,  No. 3
(1995), p. 413.

  18/   Tom Osborn, Participatory Agricultural Extension:   Experiences from
West Africa, Gatekeeper  Series No. 48 (London, International Institute  for
Environment and Development, 1995).  


[An asterisk (*) indicates papers commissioned for the
Panel Meeting]

*  Agrawal, Arun.  Institution-building for disadvantaged groups.  1995.

Berger, Marguerite.  Giving women credit:  the  strengths and limitations of
credit as a tool  for alleviating poverty.   World Development, vol. 17, No.
7, pp. 1017-1032.  1989.

*Berry, Albert.  Creating an enabling  policy environment:  traditional  and
innovative approaches.  1995.

*Chee  Peng Lim.   Promoting  export-oriented small and  medium enterprises.

*Chowdhury,  Nuimuddin.      Opportunity  and   participation  in   economic
development:  recent experience and policy options.  1995.

*Crocombe,  Ron.  Customary land tenure:  its impact on economic development
and policy alternatives.  1995.

*Ferguson,  Robert, and  Chi-Ning  Liu.   Promoting  technology-based  small
enterprises.  1995.

*Habachy,  Susan,  and  others.    Promoting  micro-enterprises  among   the
poorest: the experience of the trickle-up programme.  1995.

International Cooperative Alliance and  the United Nations.  Contribution of
cooperative enterprises  and the international  cooperative movement to  the
implementation  of  Agenda   21:    Programme  of  Action  for   Sustainable
Development.  Geneva/New York.  1995.

*Kurien, John.   Increasing the  participation of  small-scale fisheries  in
sustainable development.  1995.

*Levitsky,  Jacob.    Donor support  for  opportunity  and participation  in
economic development:  traditional and new approaches.  1995.

Morrisson, Christian, and  others.  Micro-enterprises and the  institutional
framework:   in developing  countries.   Paris:   Organisation for  Economic
Cooperation and Development.  1994.

Osborn,  Tom.  Participatory agricultural extension:   experiences from West
Africa.   Gatekeeper Series  No. 48.   London:   International Institute for
Environment and Development.  1995.

Papua   New  Guinea,  Ministry   of  Foreign   Affairs.     Opportunity  and
Participation.  1993.

*Peterson, Rein.  Promoting women entrepreneurs.  1995.
  Swantz, Marja  Liisa.  Participation  in economic  development.  Helsinki:
United  Nations   University/World  Institute   for  Development   Economics
Research.  1994.

____________.   Report of  the expert group meeting on  the role of women in
public life.  1991.

____________.     Report  of   the  World  Summit  for  Social  Development,
Copenhagen, 6-12 March 1995.  A.CONF.166/9.

United  Nations.    World Economic  and  Social  Survey,  1995.    Sales No.

____________, Secretariat for the Fourth World  Conference on Women.  Report
of  the  expert  group  meeting  on   women  and  economic  decision-making.
EDM/1994/1.  1994.

United  Nations   Conference  on  Trade   and  Development/United   Nations.
EMPRETEC:   a unique approach  to entrepreneurship  development.  Geneva/New

York.  1994.

United Nations Development Programme.  Human  Development Report, 1993.  New
York:  Oxford University Press.

Wiggins,  Steve,  and  Elizabeth  Cromwell.    NGOs  and  seed  provision to
smallholders in  developing countries.  World  Development, vol.  23, No. 3,
pp. 413-422.  1995.

*Wilkie, David S., and Ricardo A. Godoy.  Promoting small holder  commercial
tree cultivation.  1995.

Women's World Banking.   Report of the United  Nations Expert Group on Women
and Finance.  1994.

____________.  Best  practice in financial services to  micro-entrepreneurs.
What works (New York), vol. 4, No. 2.  April 1994.

____________.   Women's World  Banking:  principles, programmes, and people.
What works (New York), vol. 4, No. 3, June 1994.

____________.  Achieving policy  impact.  What works (New York), vol. 4, No.
5, December 1994.

____________.  The missing links:  finance and  enterprise systems that work
for the majority.  Women's World Banking Policy Forum.  April 1995.

World Bank.  Participatory Development and  the World Bank. Bhuvan Bhatnagar
and  Aubrey  C.  Williams,  eds.    World  Bank  Discussion Paper  No.  183.
Washington, D.C.  1992.

____________.    The  World  Bank  and  participation.    Washington,   D.C.
September 1994.



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