CATIE Study Highlights the Contribution of Non-Repayable Seed Capital to Sustainable Rural Development in Costa Rica

• The study analyzed 34 rural micro- and small enterprises supported by Activa-CATIE and Costa Rica’s Development Banking System between 2020 and 2022.
• The findings highlight the value of combining non-repayable financing, technical assistance, and capacity building to promote territorial development.

Non-repayable seed capital is a strategic tool for strengthening rural enterprises, promoting business formalization, and contributing to sustainable territorial development. This is the conclusion of a study conducted by CATIE (Tropical Agricultural Research and Higher Education Center), which analyzed the economic, social, and environmental impacts of this financing mechanism when combined with technical assistance and specialized follow-up.

The findings are presented in the policy brief "Effects of Seed Capital on Sustainable Rural Development in Costa Rica," prepared by Katherine Castellón Reyes, a graduate of CATIE’s Graduate School, together with researchers Vladimir Valera, Ricardo Padrón, and Fernando Casanoves.

The study evaluated the impact of non-repayable seed capital provided through Activa-CATIE, with funding from Costa Rica’s Development Banking System (Sistema de Banca para el Desarrollo – SBD), to 34 rural micro- and small enterprises supported between 2020 and 2022.

Among its main findings, the research shows that this type of financing generates returns for the State through tax payments, social security contributions, job creation, and the formalization of productive enterprises.

“The study estimated that approximately one year after the implementation phase of the seed capital program, the State recovers its initial investment,” said Castellón.

The analysis also identified the creation of 195 new jobs, including employment opportunities for women, young people, and older adults. In addition, 29 of the 34 enterprises evaluated became formally registered, primarily with the Ministry of Finance and the Costa Rican Social Security Fund (CCSS).

From an environmental perspective, 32 of the 34 enterprises adopted practices related to efficient water management, forest conservation, and the use of renewable energy. These results reflect the program’s contribution to strengthening entrepreneurial capacities, fostering innovation, and promoting sustainability.

According to Vladimir Valera, Coordinator of the Activa-CATIE Innovation and Entrepreneurship Laboratory, these findings demonstrate the importance of supporting rural business development strategies with technical and scientific evidence to assess their scope and impact.

“This research demonstrates that business incubation programs combining non-repayable financing, strategic capacity-building support, and technical assistance generate economic, social, and environmental benefits that extend well beyond the initial investment,” Valera said.

He added that the evidence generated by the study can contribute to strengthening business incubation and acceleration programs throughout Latin America and the Caribbean, while also informing the design of public policies and financing instruments that promote sustainable rural development.

María del Milagro Solórzano León, President of the Governing Council of the Development Banking System (SBD) and Costa Rica’s Minister of Economy, Industry and Commerce, highlighted the importance of these findings for strengthening financial instruments that create opportunities in rural territories.

“This study confirms that seed capital is an investment that creates opportunities, strengthens rural enterprises, and contributes to the sustainable development of rural territories. The results achieved together with CATIE reaffirm the importance of continuing to promote these instruments to expand the impact of the Development Banking System and improve the well-being of communities across the country,” Solórzano stated.

Strengthening the Rural Entrepreneurship Ecosystem

The study notes that the entrepreneurial ecosystem in Latin America and the Caribbean faces structural challenges that limit the growth of micro- and small enterprises, particularly in rural areas. These include limited access to financing, gaps in business management capacities, and weak integration into markets and value chains.

In this context, the research highlights the strategic role of non-repayable seed capital in providing the resources needed to establish or strengthen productive activities while reducing market entry barriers for rural entrepreneurs.

The document also emphasizes that results are significantly enhanced when financing is complemented by mentoring, technical support, and business networking opportunities, as these elements generate broader economic, social, and environmental returns.

From this perspective, non-repayable seed capital is positioned as a public investment that helps stimulate rural economies, strengthen territorial resilience, and promote more inclusive and sustainable development models.

The policy brief "Effects of Seed Capital on Sustainable Rural Development in Costa Rica" is available at: https://repositorio.catie.ac.cr/handle/11554/14373

Through these findings, CATIE reaffirms its commitment to generating applied knowledge, strengthening capacities, and promoting innovative solutions that contribute to sustainable rural development in collaboration with public institutions, strategic partners, and entrepreneurial communities. The evidence presented provides valuable guidance for directing investments, improving entrepreneurship support mechanisms, and advancing more resilient, inclusive, and sustainable territories.