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Nonfarm microenterprise performance and the investment climate : evidence from rural Ethiopia

Author

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  • Loening, Josef
  • Rijkers, Bob
  • Soderbom, Mans

Abstract

This paper uses uniquely matched household, enterprise and community survey data from four major regions in rural Ethiopia to characterize the performance, constraints and opportunities of nonfarm enterprises. The nonfarm enterprise sector is sizeable, particularly important for women, and plays an important role during the low season for agriculture, when alternative job opportunities are limited. Returns to nonfarm enterprise employment are low on average and especially so for female-headed enterprises. Women nevertheless have much higher participation rates than men, which attest to their marginalized position in the labor market. Most enterprises are very small and rely almost exclusively on household members to provide the required labor inputs. Few firms add to their capital stock or increase their labor inputs after startup. Local fluctuations in predicted crop performance affect the performance of nonfarm enterprises, becauseof the predominant role played by the agricultural sector. Enterprise performance is also affected by the localized nature of sales and limited market integration for nonfarm enterprises. The policy implications of these and other findings are discussed.

Suggested Citation

  • Loening, Josef & Rijkers, Bob & Soderbom, Mans, 2008. "Nonfarm microenterprise performance and the investment climate : evidence from rural Ethiopia," Policy Research Working Paper Series 4577, The World Bank.
    • Handle: RePEc:wbk:wbrwps:4577
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    References listed on IDEAS

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    Cited by:

    1. Tidiane Kinda & Josef Loening, 2010. "Small Enterprise Growth and the Rural Investment Climate: Evidence from Tanzania," African Development Review, African Development Bank, vol. 22(1), pages 173-207.
    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. Carla Daniela Calá & Miguel Manjón-Antolín & Josep-Maria Arauzo-Carod, 2017. "Regional Determinants of Exit Across Firms’ Size: Evidence from Argentina," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 108(6), pages 768-785, December.
    4. Nagler, Paula & Naudé, Wim, 2014. "Labor Productivity in Rural African Enterprises: Empirical Evidence from the LSMS-ISA," IZA Discussion Papers 8524, Institute of Labor Economics (IZA).
    5. Nagler,Paula & Naude, Wim & Nagler,Paula & Naude, Wim, 2014. "Non-farm enterprises in rural Africa : new empirical evidence," Policy Research Working Paper Series 7066, The World Bank.
    6. Kimhi, Ayal, 2011. "Can Female Non-Farm Labor Income Reduce Income Inequality? Evidence from Rural Southern Ethiopia," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114756, European Association of Agricultural Economists.
    7. Ali, Merima & Peerlings, Jack, 2011. "Value Added of Cluster Membership for Micro Enterprises of the Handloom Sector in Ethiopia," World Development, Elsevier, vol. 39(3), pages 363-374, March.
    8. Courage Ose Eburajolo & Leonard Nosa Aisien, 2019. "Impact Of Commercial Banks’ Credit To The Real Sector On Economic Growth In Nigeria," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 4(1), pages 38-46, March.
    9. Mintewab Bezabih & Andrea Mannberg & Eyerusalem Siba, 2014. "The land certification program and off-farm employment in Ethiopia," GRI Working Papers 168, Grantham Research Institute on Climate Change and the Environment.

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    Keywords

    Access to Finance; Microfinance; Economic Theory&Research; Debt Markets;
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