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Abstract

We use a survey of small rural enterprises from Tanzania to demonstrate quantitatively the economic importance of this sector and to identify participants' characteristics and obstacles to the sector's expansion and productivity. In stark contrast to most of the findings for the formal sector where taxation and other regulatory constraints were identified as key constraints in most of the countries, infrastructure constraints (but not regulatory obstacles) pose a formidable barrier to rural households' participation in rural non-farm and to investment and increased productivity by existing ones. The fact that such constraints emerge as particularly harmful for small enterprises suggests that policies to improve delivery of the public services in question will be important to provide a basis for a flourishing rural non-farm sector which in turn will have an important role for poverty reduction.

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