ABSTRACT
This chapter examines the dynamics of small-scale manufacturing enterprises in low-income countries and the evolving role of informal finance in that process. The macro studies indicate that the absolute number of micro and small enterprises is increasing in virtually all low-income countries. The magnitude and composition of the small enterprise's effective demand for finance will typically vary as it evolves. In Jamaica, over 90 percent of the microenterprise's financial difficulties were reported to be related to working capital shortages. Microenterprises in several industry subsectors, produce to order and thus operate much like a job-shop, where customers may even provide the raw materials. Professional moneylenders are source of informal finance for microenterprises. At different stages in the life cycle of the typical micro-enterprise the needs of the firm, including its effective demand for finance, vary in a rather systematic fashion.
