Despite evidence of the contribution of fast-growing micro, small, and medium enterprises (MSMEs) to private sector growth and economic transformation, academic studies and policymakers have struggled to effectively identify and support these high-growth MSMEs. The reality is that much of our understanding of the MSME sector comes from information drawn from low- or no-growth MSMEs. Diao, Kweka, and McMillan (2018) uses nationally representative MSME data to present some characteristics of high-growth MSMEs, however, the number of high-growth firms identified with such data is low and the available information is limited.
This project aims to explore the possibility of using private sector data to effectively identify a group of high-growth MSMEs and to develop a deep understanding of their characteristics and circumstances.
Understanding the heterogeneity in the performance and growth potential of MSMEs will help development policies aimed at fostering entrepreneurship to be successful. Using administrative loan data, in partnership with the National Microfinance Bank, this project will determine what, if any, common characteristics high-growth firms have and how they differ from non-high growth firms.
If policymakers know how to identify high-growth MSMEs, then they will be better able to reach them with targeted support. And with a better understanding of how these high-performance MSMEs are distinct from other firms, policymakers will be better able to design policies that are tailored to their specific needs. Subsequently, we hope that our findings will lead to policy initiatives that will best support high-growth MSMEs and create private sector growth.