ethnic networks and strongenterprisestrong credit the serahules of the.pdfVIP

0 Ethnic Networks and Enterprise Credit: The Serahules of The Gambia Ousman Gaj igo* Jeremy D. Foltz** March 2010 Abstract This work analyzes the effects of ethnic heterogeneity on credit and entrepreneurship in The Gambia. We develop a model of credit transactions based on ethnic density, which shows that where formal credit markets fail denser ethnic groups will have better access to credit. This work places a special emphasis on the Serahule ethnic group, which is ethnically dense and entrepreneurially successful. Our results show that Serahule-owned enterprises are indeed larger and more profitable. Furthermore, their marginal rate of return of capital is significantly lower than that of enterprises owned by other ethnicities, as one would expect with lower credit constraints. Selected Paper prepa redf or presentation at the Agricultural App lied Economics Association’s 2010 AAEA, CAES WAEA Joint Annual Meeting, Denver, Colorado, July 25- 27, 2010. Copyright 2010 by Ousman Gajigo and Jeremy Foltz. All rights reserved. Readers may make verbatim copies of this document for non-commercial purpos es by any means, provided this copyright notice appears on all such copies. * Ousman Gaj igo, Researcher, World Bank, Ousman_g@ ** Corresponding Author: Jeremy Foltz, Vilas Associate Professor, Dept. of Ag Applied Economics, University of Wisconsin-Madison, j dfoltz@ Acknowledgements: The authors would like to thank Michael Carter, Laura Schechter, Matthew Turner, and seminar participants at the University of Wisconsin for comments, and Abu Camara and the Gambian Bureau of Statistics for helping provide and