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Small enterprise growth and the rural investment climate : evidence from Tanzania

Author

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  • Kinda, Tidiane
  • Loening, Josef L.

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 authors describe a low-return sector struggling to compete in a difficult 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. This suggests that, in particular, access to finance, road infrastructure, and rural cell phone communication is correlated with employment growth. A major finding is that subjective and objective measurements of business constraints are broadly comparable. The authors discuss a number of factors that would help to unleash the full potential of private sector-led growth in rural areas. The findings show that marginal improvements in the rural investment climate matter for growth.

Suggested Citation

  • Kinda, Tidiane & Loening, Josef L., 2008. "Small enterprise growth and the rural investment climate : evidence from Tanzania," Policy Research Working Paper Series 4675, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4675
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    References listed on IDEAS

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    1. Deininger, Klaus & Jin, Songqing & Sur, Mona, 2007. "Sri Lanka's Rural Non-Farm Economy: Removing Constraints to Pro-Poor Growth," World Development, Elsevier, vol. 35(12), pages 2056-2078, December.
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    11. Lanjouw, Peter & Quizon, Jaime & Sparrow, Robert, 2001. "Non-agricultural earnings in peri-urban areas of Tanzania: evidence from household survey data," Food Policy, Elsevier, vol. 26(4), pages 385-403, August.
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    15. Meghana Ayyagari & Asli Demirgüç-Kunt & Vojislav Maksimovic, 2008. "How Important Are Financing Constraints? The Role of Finance in the Business Environment," World Bank Economic Review, World Bank Group, vol. 22(3), pages 483-516, November.
    16. 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.
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    Citations

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    Cited by:

    1. 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.
    2. 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 (IFAMA), vol. 15(3).
    3. 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.
    4. 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.
    5. repec:bla:afrdev:v:29:y:2017:i:1:p:16-27 is not listed on IDEAS
    6. 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.
    7. Dominic, Theresia & Theuvsen, Ludwig, 2015. "The Impact of External and Internal Factors on Strategic Management Practices of Agribusiness Firms in Tanzania," Discussion Papers 197072, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    8. Alun H. Thomas, 2015. "Sub-Saharan Employment Developments; The Important Role of Household Enterprises with an Application to Rwanda," IMF Working Papers 15/185, International Monetary Fund.
    9. Dominic, Theresia & Theuvsen, Ludwig, 2015. "Agribusiness Firm Resources and Performance: The Mediating Role of Strategic Management Practices," Discussion Papers 200324, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.

    More about this item

    Keywords

    Access to Finance; Rural Poverty Reduction; Microfinance; Banks&Banking Reform;

    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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