Small and medium-sized enterprises (SMEs) form the backbone of modern economies and can be crucial engines of development through their role as seedbeds of innovation. A critical missing ingredient is often capital.

Tinier firms—micro-enterprises—frequently get more attention, as donors seek to help the very poor. But the type of support inherent to microfinance lending is generally ill-adapted to serving their slightly larger, and arguably more dynamic, cousins, the SMEs. New options are emerging for meeting SMEs’ financial needs, including commercial banks moving “down-market,” micro-credit institutions moving “up,” and creative application of venture capital investing ideas. Private investors have a key role, too

http://www.brookings.edu/papers/2007/03development_de_ferranti.aspx

At the time of India's independence in the year 1947, the nation had a plethora of serious problems to face, viz. shortage of food-grains, poor infrastructure, lack of financial resources, high rate of illiteracy and poor industrial base. Small scale sector has remained high on the agenda of all political parties, intelligentsia and policy makers since Independence as a legacy of Gandhian philosophy. The special thrust to this sector has been with the multiple objectives of employment generation, regional dispersal of industries and as a seedbed for Entrepreneurship. This literature talks about the various measures taken by the Government of India to promote the Small Scale Sector with special emphasis on the SME Cluster in Indian Context

http://www.unido.org/userfiles/RussoF/Small.pdf

World Bank report outlining the economic rationale for SME intervention. Looking at SME development through the broader context of industrial structure this report considers the rationale for SME intervention on both theoretical and empirical grounds. Highlighting the limitations of the traditional approaches to SME development it puts forward guidelines for a market orientated SME development strategy.

http://wbln0018.worldbank.org/html/FinancialSectorWeb.nsf/(attachmentweb)/SME_Framework_Paper/$FILE/SME_Framework_Paper.pdf