period of the NPS panel (table A5)<sup>15</sup> . Thus, while there is clearly scope for policies and programs to increase access to affordable financial services, a better understanding of how households manage to save and invest in their tiny enterprise would also be helpful.

HEs in Mozambique, as in other countries, have low levels of working capital. Thirty-eight percent of HEs report to have no capital invested in equipment or installations at all, and 58 percent of those that do report any equipment or installations, report a value of USD $10 or less (INFOR 2005)<sup>16</sup> . Evidence from urban SSA shows that though HEs operate at very low levels of capital, they also have very high returns to invested capital (Grimm et al, 2011). High returns at low levels of investment do not necessarily indicate that the enterprise would be able utilize loans to significantly scale up the enterprise. The returns to additional capital might rapidly decline with more capital investment as indicated by the few HEs that successfully scale up enterprises. These exceptional low levels of invested capital with likely high returns are therefore both a challenge and opportunity for lenders. The high returns indicate good business opportunities, while the risk and the transactions cost on such low amounts could be too high.

Surprisingly, governance aspects as registration, taxes, permissions and licenses, and conflict are the least severe problems according to existing HEs in both RICs and INFOR.<sup>17</sup> Research in East Africa - Tanzania and Uganda (World Bank 2012 and Kweka and Fox, 2011) - found that the attitude of governments toward enterprises, as well as local conditions including access to workspace - markets stalls or other areas to manufacture and sell products and services - and good governance from local authorities in terms of implementing fair, transparent and consistent rules were reported by owners to be very important for the survival and sustainability of existing HEs. And in Mozambique, Fox et al (2008) found in a survey of households in poor areas that petty corruption from local authorities over basic transactions was a huge irritant and detrimental to livelihoods. However, households in the RICs survey in rural areas of Mozambique very rarely reported any of these aspects to be the reason for not starting up or for continuing. One percent or less of rural households report any of the following as reason to not starting up an HE: corruption and bribes, crime theft and conflict, roads and transportation, lack of cell or fixed phones, water, or technology. Licenses and permits are also barely reported by any households (2 percent) as a reason for not starting up an HE. A reason for the somewhat diverging views on the importance of governance aspects could in fact be that location is important and some communities fare better than others. The RICS surveys is not nationally representative and has a limited sample, hence it might be sensitive to the communities included in the survey.

Available and reliable infrastructure services appear to be a constraint. A higher start-up rate is observed in areas with a market (39 percent of households in areas with a market started up an HE within the last three years), and an even higher rate in areas that built a market within the last three years (45 percent) compared to a start-up rate of 35 percent in areas that do not have a market (RICS,

> 15 Cunguara et al (2011) also finds that wealth is unrelated to start-up of NFEs.

> 16 The amount is in USD 2005 values and using the average Metecais –USD exchange rate in august 2005 of 24256 Metecais per dollar.

> 17 In INFOR, the only governance response recorded was “too much bureaucracy”, and this one was ranked very low by respondents.

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