There is a broad agreement among development professionals that vibrant small-and-medium enterprises (SMEs) are crucial for the health of a country’s economy. And since SMEs self-report that financing is a major constraint for their growth and expansion, development policies targeting the SME sector very often address the “access to finance” barrier – through grants, loan subsidies, and high-risk microfinance schemes. Unfortunately, this approach ignores that fact many SMEs are not bankable for a reason. More often than not, they are hampered by a lack of innovative business ideas and management skills. In the Georgian reality, SMEs fail serve as an engine of growth because most of them are engaged in a very limited range of low-productivity activities such as primitive farming, small trade and transportation services, any growth in which is ultimately self-limiting. Subsidizing low-productivity SMEs that compete with each other in small local markets tends to result in waste of scarce public resources rather in sustainable or inclusive growth.

Tbilinomics works with governments, donors and the business community to design mechanisms to vertically integrate SMEs into supply chains of larger enterprises and to organize them in ‘clusters’ enabling product and process innovation and helping reduce costs, scale up production and facilitate (joint) access to lucrative markets – in Georgia and abroad. Additionally, we help promote, develop and evaluate industrial policies seeking to overcome coordination failures impeding the creation of new manufacturing, IT and service industries.