28. When grouped by occupation, a similar distribution of HEs is also evident. Using the ILFS data, results suggest that more than 75 percent of HEs are in just two categories of activity: service shopkeepers and craftsmen. Owing to lack of education, the number of HEs providing professional services is low, i.e., hardly 2 percent of the total (Table A1.10). Most workers with high levels of education prefer to work in firms.

## **Box 3.1:  The Success Story of a Small Entrepreneur**

The 25-year old Hafsa Hassan from Matwara used her TSh 150,000 savings to start a business buying and selling cashew nuts. In 2003, she joined the Matwara Small Entrepreneurship Development Association (MSEDA) from where she was able to get a TSh 500,000 loan to expand her business, and avail of various training opportunities, including study tours with SIDO, ILO, and other NGOs. With only 25 kilogram of cashew nuts to sell at start-up, Hafsa is currently trading on more than 250 kilograms of cashew nuts and has a working capital of more than TSh 1.5 million. Commenting on the reasons why her business is doing well, she remarked: “ _Unahitaji kuwa mbunifu na mtafutaji wa misaada kama unataka kufanikiwa kama mjasiriamali mdogo. Nilianza kidogo kidogo, lakini nilihakikisha natafuta taarifa muhimu kuhusu maendelea ya biashara kokote nilikosikia. Nilipoingia MSEDA ikawa ndiyo kama Mungu kanifungulia....nilikutana na wenzangu, tukabadilishana mawazo na uzoefu. Tulipata mafunzo kutoka sehemu mbalimbali. Kwa sasa naweza kusema mimi ni kati ya kinamama ambao ukija miaka michache ijayo utakuta nina kampuni yangu ya kubangua na kuuza korosho_ .” This means, “You need to be creative and look for where you can get assistance if you want to succeed as a small entrepreneur. I started with a small capital, but I was constantly looking for important information and opportunities that could help me succeed. When I joined MSEDA, it was like God opening the door for me. I met several entrepreneurs and we exchanged ideas and also got training from several sources. I can go so far as to say that I am one of few women who, when you come back here a few years from now, will be owning a factory, and in my case, my own cashew nut processing factory.” _Source: Narratives from the FGD report, 2009._

# **3.2 Analysis of Productivity Drivers for HE Earnings**

29. HE operators enter the business to gain income. Does running an HE pay off? Unfortunately, the ILFS data set does not include agricultural income so a comparison cannot be made between earnings from HEs and from the alternative for most of the labor force in rural areas -- agriculture. However, when comparing HE earnings with those from other nonagricultural employment options, HE is not a poor choice. Although public employment is obviously a better choice in Tanzania, 95 percent or more of HE operators do not have the qualifications for these jobs (see Table A1.9). Not surprisingly, if an HE is able to graduate to an MSE, reported earnings tend to rise. For women, the median hourly earnings appear to be higher than those from a wage job in the private sector, even though HE earnings tend to be undermeasured compared to wage earnings (Figure 3.3). Moreover, if agricultural wage earnings approximate the alternative of agriculture, both men and women do better in non-agricultural activities, including HEs.

30. To determine in more detail which of the various characteristics of HE operators support increased earnings, a multivariate analysis was done separately for men and women. Table 3.4 16