The literature on micro‐enterprises identifies a lack of capital as a primary constraint to enterprise development. Potentially, Botswana could be different as the commercial banking system has excess liquidity and the government has established relevant lending institutions and several financial assistance programmes. On the basis of a 1992 survey of 1,140 micro‐enterprises engaged in non‐formal activities in seven urban centres and villages in Botswana this study finds the situation in Botswana to be similar to the conclusions reported in the literature for other countries. There is a need for institutional changes which channel loanable funds to micro‐enterprises in a manner that addresses their respective capital constraints and encourages the entrepreneurs to become responsible savers and borrowers. The article draws on the literature and on the experience of several successful micro‐enterprise loan schemes to outline the essential features of needed programme delivery changes.

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