A substantial number of African households do not limit their labor to agriculture,
but diversify into non-farm entrepreneurship. Why and how they do so remains
however relatively unexplored, especially from a comparative and empirical
perspective. Using the World Bank’s LSMS-ISA survey data that covers six
countries in Sub-Saharan Africa, this paper answers three questions about the
neglected topic of rural non-farm entrepreneurship. (i) How prevalent is nonfarm
entrepreneurship in rural Africa? (ii) Do households enter the sector as a
result of push or pull factors? (iii) Which types of businesses do they operate?We
find that almost half of all households in rural Africa are engaged in non-farm
entrepreneurship, with however substantial country-level heterogeneity. Using
probit regressions we also find that enterprises are operated due to both push and
pull factors. Push factors are related to the risk of farming under imperfect and
missing markets for credit and insurance, and include shocks, surplus household
labor, and seasonality in agriculture. Pull factors that allow households to seize
business opportunities, are related to the access to credit, household wealth and
education. Finally we find, using a multinomial logit model, that the type of
business activity households operate also depends on individual, household and
location characteristics.