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Credit Constraints and Agricultural Risk for Non‐ F arm Enterprises
Author(s) -
Gajigo Ousman
Publication year - 2013
Publication title -
african development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.654
H-Index - 32
eISSN - 1467-8268
pISSN - 1017-6772
DOI - 10.1111/1467-8268.12059
Subject(s) - diversification (marketing strategy) , constraint (computer aided design) , agriculture , investment (military) , livelihood , business , finance , economics , geography , mechanical engineering , archaeology , marketing , political science , law , engineering , politics
This paper uses two nationally representative datasets collected in 1992 and 2003 in Gambia to analyse small, non‐farm enterprises. The results reveal evidence of significant credit constraint among these non‐farm enterprises. Specifically, household wealth is a significant determinant not only of entry into the enterprise sector but also determines investment levels conditional upon entry. Furthermore, the marginal returns to investments in enterprises are very high and significantly exceed the prevailing lending rates of banks in the country. Besides being credit constrained, these enterprises are also affected by farm‐related variables. Agricultural risk adversely affects enterprise investment. This latter result underscores the importance of livelihood diversification.