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
