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Small Enterprise Growth and the Rural Investment Climate: Evidence from Tanzania

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  • Kinda, Tidiane
  • Loening, Josef

Abstract

This paper analyzes characteristics of nonfarm enterprises, their employment growth patterns, and constraints in doing business in rural Tanzania. Using unique survey data, the we describe a low-return sector struggling to compete in a challenging business environment. However, about one-third of rural enterprises are growing fast. Most enterprises engage in agricultural trade. Due to a rapidly growing agricultural sector in recent years, limiting demand-side constraints, rural enterprise constraints in Tanzania mainly operate from the supply side, suggesting that in particular access to finance, road infrastructure, and rural cell phone communication is associated with employment growth. A major finding is that subjective and objective measurements of business constraints are broadly comparable. We discuss a number of factors that would help to unleash the full potential of private sector-led growth in rural areas. Marginal improvements in the rural investment climate matter for growth.

Suggested Citation

  • Kinda, Tidiane & Loening, Josef, 2010. "Small Enterprise Growth and the Rural Investment Climate: Evidence from Tanzania," MPRA Paper 25894, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:25894
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    2. Girum Abebe, 2015. "State-inducement Versus Self-initiation: A Comparative Study of Micro and Small Enterprises in Ethiopia," Working Papers 013, Policy Studies Institute.
    3. Kweka, Josaphat & Fox, Louise, 2011. "The household enterprise sector in Tanzania : why it matters and who cares," Policy Research Working Paper Series 5882, The World Bank.
    4. Sinne Borby Ørtenblad & Torben Birch-Thomsen & Lukelo Roden Msese, 2019. "Rural Transformation and Changing Rural–Urban Connections in a Dynamic Region in Tanzania: Perspectives on Processes of Inclusive Development," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 31(1), pages 118-138, January.
    5. Martijn A. Boermans & Daan Willebrands, 2018. "Financial Constraints Matter: Empirical Evidence On Borrowing Behavior, Microfinance And Firm Productivity," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 23(02), pages 1-24, June.
    6. Dominic, Theresia & Theuvsen, Ludwig, 2015. "The Impact of External and Internal Factors on Strategic Management Practices of Agribusiness Firms in Tanzania," GlobalFood Discussion Papers 197072, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    7. Helke Seitz, 2020. "Subgroup Analysis of Investment Constraints: Evidence from Ugandan Microenterprises," Discussion Papers of DIW Berlin 1920, DIW Berlin, German Institute for Economic Research.
    8. Rijkers, Bob & Söderbom, Måns & Loening, Josef L., 2010. "A Rural-Urban Comparison of Manufacturing Enterprise Performance in Ethiopia," World Development, Elsevier, vol. 38(9), pages 1278-1296, September.
    9. Ousman Gajigo, 2013. "Credit Constraints and Agricultural Risk for Non‐Farm Enterprises," African Development Review, African Development Bank, vol. 25(4), pages 648-662, December.
    10. Lie, Helene & Rich, Karl M. & Kurwijila, Lusato R. & Jervell, Anne M., 2012. "Improving Smallholder Livelihoods Through Local Value Chain Development: A Case Study of Goat Milk Yogurt in Tanzania," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 15(3), pages 1-32, September.
    11. Rijkers, Bob & Soderbom, Mans & Loening, Josef, 2009. "Mind the gap ? a rural-urban comparison of manufacturing firms," Policy Research Working Paper Series 4946, The World Bank.
    12. Sydney Chikalipah, 2017. "Institutional Environment and Microfinance Performance in Sub-Saharan Africa," African Development Review, African Development Bank, vol. 29(1), pages 16-27, March.
    13. Martijn Boermans & Daan Willebrands, 2012. "Financial constraints, risk taking and firm performance: Recent evidence from microfinance clients in Tanzania," DNB Working Papers 358, Netherlands Central Bank, Research Department.
    14. Reeg, Caroline, 2015. "Micro and small enterprises as drivers for job creation and decent work," IDOS Discussion Papers 10/2015, German Institute of Development and Sustainability (IDOS).
    15. Mr. Alun H. Thomas, 2015. "Sub-Saharan Employment Developments: The Important Role of Household Enterprises with an Application to Rwanda," IMF Working Papers 2015/185, International Monetary Fund.
    16. Dominic, Theresia & Theuvsen, Ludwig, 2015. "Agribusiness Firm Resources and Performance: The Mediating Role of Strategic Management Practices," GlobalFood Discussion Papers 200324, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.

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    More about this item

    Keywords

    Labor markets; rural investment climate; enterprise growth; Tanzania;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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