A considerable amount of development activity is concerned with helping organisations to improve their performance, but organisations are themselves shaped by their institutions. Institutions can be described as “humanly-devised constraints that structure political, economic and social interaction”, or simply as “the rules of the game” (North, 1991). They consist of both informal constraints (sanctions, taboos, customs, traditions, and codes of conduct), and formal rules (constitutions, laws, property rights)
Institutions that are created and maintained by rich and powerful elites can discriminate against the poor, excluding them from the benefits of economic growth and social development. Improving institutions is therefore viewed as an important step in supporting structural poverty reduction and promoting sustainable development by facilitating economic growth and subsequently aiding the implementation of pro-poor policies.