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tion in decision making that promote sustainableenterprises. In order to effectively address thechallenge to ‘level the playing field,’ governancestructures have to emphasise greater investmentin the human resources of the poor, guaranteeson business rights for all and fairness in markets.Countries with pervasive inequalities in wealth,resources, weak institutions, and power typicallyexperience narrow financial sectors that meetthe needs of the privileged and the influential.Among the many market failures in developingcountries, notable are those in the financial marketsincluding those for credit, insurance, land,and human capital. With the consolidation ofmarket power in a limited number of large banks,lending tends to get biased in the favour of enterprisesthat are low risk and may exclude thosewith the highest expected risk-adjusted returns.Access to finance is essential for businesses;however businesses in the informal economy lackaccess to financial markets and the capacity tocompete in product markets.The higher the levels of inequities, the greaterwould be the propensity of the institutionsand social arrangements to favour the interestsof the influential and the privileged. Inequitableinstitutions generate economic costs, which areavoidable. It is therefore important to make surethat business rights do not provide exclusivebenefits and are not enforced selectively so that,both middle and poorer groups end up with unexploitedcapacity.An Integrated Economy ApproachLegal empowerment measures have to take placewithin a policy and regulatory approach whichrecognises that the two parts of the economy —formal and informal — do not exist independentlyof each other. There is a constant exchange ofideas, people, skills, goods and services betweenthe two parts. At the base of the private sectorare millions of small, micro, and mini entrepreneurs,who provide the bulk of the raw materialfor formal sector production, engage intermittentlyas labour in the formal enterprises, anduse products made in the formal sector. Thosewho have been employees in the formal sectorand have acquired new techniques, capabilitiesand business contacts, often move into the moreflexible informal sector and set up their own businesses.If relationships between different levelsof economic activity are to be anticipated, madestrategic and optimized, policy and institutionalchange for sustained business linkages and skillsdevelopment has to take place. Those who workin the micro-enterprises, and own-account workerswithin supply chains that lead into the formalsector, have to be accorded legal protection ona par with enterprises and workers in the formalsector.Successful design and support of appropriate policiesand institutions for an integrated economymust begin with analysis of innovations emergingat the interface between the informal and formal.Small producers and micro-entrepreneurs aredaily developing strategies for dealing with thedemands of formal institutions, while the latterhave also developed ways of managing their inevitableencounter with those who are the majorityin the poorer countries of the world. These copingstrategies hold clues as to what developmentinterventions can and should build upon, withinthe context of particular cultures, economies andindustries. Contextual specificity and lessonsfrom on-the-ground experience, are importantprinciples for policy and institutional innovationsfor an integrated and inclusive economy.Analysis of current practice could provide guidancefor the move from a bifurcated to an integrated,cohesive approach to entrepreneurship199