Small industry in developing countries: A discussion of issues

Abstract This paper first examines the changing size distribution of industry in developing countries by region and over time, and, by reference to firm-level surveys, it discusses the underlying causes. The importance of markets generated by the growth of agriculture and rural incomes for the regional development of industry, both small- and large-scale, is noted. Second, it discusses the entrepreneurship issue, arguing that while small and largefirms alike are highly responsive to the growth of markets, the measured entrepreneurial response is neither as full nor as efficient as is desirable. The third and last part discusses small industry programmes and their relation to development policy. Financing and extension programmes are considered in detail, and there is a discussion of the risks involved. Some parallels with agricultural credit are discussed, in particular the default problem and the problems associated with concessionary finance. It is also argued that small industries - and, by implication, the programmes intended to support them - would stand to benefit from more efficient (and also more labour-demanding) policies towards agriculture and industry.

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