The private sector and the catalytic role of micro, small and medium-sized enterprises

Micro-, small and medium-sized enterprises (MSMEs) often employ, and provide goods and services to, vulnerable and underserved segments of the population. In this capacity, MSMEs play a pivotal role in promoting inclusive growth and helping to achieve the Sustainable Development Goals in a way that leaves no one behind. This chapter provides an overview of opportunities and challenges in unleashing the potential of MSMEs to benefit the poor, and explains how development co-operation can help including through blended finance. It describes the variety of constraints facing MSMEs, such as barriers in accessing finance and lack of capacity, which hinder their abilities to act as drivers of inclusive growth. The chapter also highlights challenges in current development co-operation practices regarding MSMEs, and concludes with a set of questions for development partners seeking to have effective private sector engagement.