Abstract:
An increasing proportion of the world's poor live in fragile states, and efforts to build economic and social stability increasingly focus on those settings. Fragility harms the political and economic ecosystem, as well as individual endowments. Interventions that only focus on overcoming individual constraints might be insufficient. Support for entrepreneurs to overcome skills or credit constraints might have limited impacts if local economies cannot sustain the businesses they start, limiting impact on economic and social stability. This paper tests the effect of SME support in the context of localized development, which aims to develop local economies by boosting individual entrepreneurship capacity in demand-driven growth sectors. The intervention increased business startup and registration, but the relative income of beneficiaries declined. Moreover, for beneficiaries with positive outcomes, there are associated impacts on social outcomes, including reduced tolerance of violence, increased trust, and increased social participation.
