## **Box 4.5: Major Constraints Listed by the Sampled Enterprises in the Rural FGDs, 2009**

|1. Seasonality of income from agriculture, resulting in business stagnation (especially businesses dependent<br>on farmers‟ seasonal incomes).|
|---|
|2. Poor road infrastructure to the villages (hence high transport cost for goods)|
|3. Low capital which hinders expansion or start-up of businesses.<br>4. Lack of business skills; lack of training|
|5. Poor harvest (due to bad weather), high price of agricultural inputs, poor agricultural markets, poor<br>market information, and lack of irrigation facilities; hence less money from agriculture to invest in<br>business.|
|6. Market competition among entrepreneurs in the same village and/or entrepreneurs from other villages<br>(e.g., auction markets for selling clothes attract traders from several areas, including from the nearby<br>towns).|
|7. Security (risk of theft), coupled with lack of secure places to keep money (e.g., banks which are easily<br>accessible)|
|8. Remote location of some business enterprises|
|9. No saving culture|
|10. Selling by credit with possible risk of default by borrower|
|11. High income tax charged bythe Tanzania Revenue Authority (TRA)|

# **4.5 Coping Strategies**

67. While much of the studies conducted so far have generated a wealth of information about the many constraints faced by HEs, little is known about how they cope with these difficulties. Narratives from the FGD participants shed light on some of the coping strategies HEs adopt to overcome these constraints or mitigate their effects. Some of these findings are corroborated by the results of the recent FinScope survey (Table A1.18).

68. Most HEs survive from a variety of risks and constraints with resilience, hard work, and good use of a network of family and community support. Some draw on their limited household savings and switch between working on farm and running their HEs to augment low income. Others sell on credit, which is made possible by previous business relationships. Urban HEs cope with the risk of theft and burglary by making their own security arrangements. For example, HE operators sharing a business premise with other operators make a monthly contribution to pay for hired security guards. In the rural areas, it is common to find a group of HEs guarding their property on a rotation basis.

69. Although most HEs adopt coping strategies that are useful in mitigating risks, others resort to deceptive, sometimes illegal practices. For example, some operators admitted during interviews to charging wealthier-looking customers higher than the regular price for services rendered (e.g., TSh 500 instead of TSh 200 for shoe-shining), or tampering with their weighing machines such that customers pay more for lesser amount of the goods they buy. Hawkers reported to have paid bribes to be able to operate in restricted areas. In some extreme cases, HE owners resorted to operating at night to avoid harassment by local officials.

70. Support from relatives and friends is very useful for HEs, especially as a source of capital. Since access to credit from MFIs is found to be biased in favor of urban areas, the only option for HEs in the rural areas is to rely on the generosity of relatives and friends, or to draw 34