Agro-based small- and medium-scale enterprises are increasingly recognized for their
contribution to employment generation, food security and poverty reduction in developing
countries. However, globalization and liberalized domestic markets are transforming the global
agri-food economy. This transformation offers several new opportunities for both these
enterprises and smallholder farmers in developing countries. But it also poses significant threats
of exclusion and further impoverishment for those enterprises that cannot meet the exacting
quality and safety standards that this transformation implies. This paper discusses key factors
that condition the development of agro-based small- and medium-scale enterprises in developing
countries. Particular attention is given to implications for rural development and poverty
reduction. It describes institutional innovations that have successfully linked such enterprises
and smallholder farmers to high value markets. Finally, the paper raises a number of issues for
policy and program initiatives designed to develop competitive agro-based small- and mediumscale
enterprises.