Although non-farm enterprises are ubiquitous in rural
Sub-Saharan Africa, little is yet known about them. The
motivation for households to operate enterprises, how productive
they are, and why they exit the market are neglected
questions. Drawing on the Living Standards Measurement
Study—Integrated Surveys on Agriculture and using discrete
choice, selection model and panel data estimators, this
paper provide answers using data from Ethiopia, Niger, Nigeria,
Malawi, Tanzania, and Uganda. The necessity to cope
following shocks, seasonality in agriculture, and household
size can push rural households into operating a non-farm
enterprise. Households are also pulled into entrepreneurship
to exploit opportunities. Access to credit and markets,
household wealth, and the education and age of the household
head are positively associated with the likelihood of
operating an enterprise. The characteristics are also associated
with the type of business activity a household operates.
Rural and female-headed enterprises and enterprises with
young enterprise owners are less productive than urban and
male-owned enterprises and enterprises with older owners.
Shocks have a negative association with enterprise operation
and productivity and a large share of rural enterprises does
not operate continuously over a year. Enterprises cease operations
because of low profits, a lack of finance, or the effects
of idiosyncratic shocks. Overall the findings are indicative
that rural enterprises are “small businesses in a big continent”
where large distances, rural isolation, low population
density, and farming risks limit productivity and growth.