Norwegian support for small enterprises in the fight against poverty

Abstract

I AM GRATEFUL for this opportunity to address the readers and staff of Small Enterprise Development. I am happy to see that the journal has already reached its tenth anniversary. During these years it has become a highly respected and relevant journal in the field of small business and microenterprise development. It has clearly demonstrated its relevance both for the research community, public institutions like NORAD as well as for the many NGOs active in this field. The journal ensures a much needed and high-quality exchange of research, experiences and ideas within this area of such high importance in our common fight against poverty. Congratulations! During the 1980s the donor community and in particular the Bretton Woods Institutions focused heavily on macroeconomic stabilization and liberalization. ‘Getting the prices right’ was seen as the key issue in creating the right framework conditions for development and growth in developing countries. Correcting price distortions is undoubtedly an important element in creating a better and more reliable investment climate. However, the experience of the 1980s demonstrated clearly that this is far from enough. There are other key obstacles to investment and growth, such as inappropriate legal frameworks, weak institutions, lack of skilled human capital, difficult access to credit and technology, and so on. These obstacles need to be addressed more directly in order to promote investment, growth and development. Furthermore, the overall objective of development assistance is poverty reduction. Economic growth is a key element in any strategy for poverty reduction. We know that there is no automatic ‘trickle down’, however, and experience has shown that the links between economic growth and poverty reduction can be weak. The pattern of growth is a determining factor for the degree of poverty reduction resulting from economic growth. Hence the kind of investments and economic activity that we promote and support has implicatons for the degree of poverty reduction that we can achieve. Since poverty reduction is our overall objective, we need to promote economic activities from which poor people benefit one way or another. Promoting income-generating activities among the poor is therefore a key element of NORAD’s strategy for poverty reduction, as well as in our strategy for private sector development which was approved in 1998. The Norwegian strategy underlines that effective support for private sector development in developing countries requires a broad approach and efforts at several levels: