Differences in the livelihood activities practiced by rural inhabitants of the two districts studied can be traced to a variety of historical, environmental and social factors, and public and social service provision trends that have created the conditions for, and in fluenced the forms of diversification found. In Kumi District, the rural economy is undergoing significant development and change. Armed insurgency forced many rural households into low entry barrier activities, particularly farm laboring. However, the broad range of low entry barrier livelihood activities identified, albeit practiced by few individuals, implies an increasingly adaptive approach. The rehabilitation of physical infrastructure, particularly roads, has enabled some to engage more fully in trading and service sector activities and has contributed to the development of small market and retail trading centers. In addition, the construction of schools and health posts has created some demand for local downstream enterprise, with brick making identified as one of the more important livelihood activities practiced by men. Thus, whilst aspirations amongst the rural poor still tend towards the traditional animal and crop-based livelihoods, it was evident that these views are in some cases shifting towards more diverse, non-traditional, higher entry barrier activities. In Rakai District, livelihood diversification, particularly non-farm, appears to be growing in extent and importance in recent years. Some of this increase hinges on reconstruction and development investments made by the central government, with extensive donor support, and NGOs. In particular, the rehabilitation of the road network has enabled transport-dependent and transport-related enterprise to prosper. NGO programs have introduced new ideas and provided both Financial and technical support, particularly to women ’s groups engaged in handicrafts and newer initiatives such as baking. Groups have also formed in response to increasing dependency and the high numbers of widows and orphans resulting from AIDS deaths. The relative vibrancy of the non-farm economy may also be linked to the generally productive agricultural system. While the conditions that have governed access to diverse livelihoods in Rakaiand Kumi districts are in some ways different, it is still possible to draw a number of more general policy conclusions. For example, in both districts, a lack of access to financial capital was highlighted as a major constraint to development, and there is a need to revisit the structure of government, NGO and private sector schemes that may exclude the poor by virtue of initial capital requirements or restrictive repayment schedules. Support from NGO and CBO programs to community groups, particularly in non-traditional enterprise development, was identified as an important factor in enhancing the nature, status and profits of these group activities. However, successful groups were not necessarily characterized by external support, but by trust, and by the fact that they often exclude the poorest who are unable to meet investment or membership criteria. As few of the groups in the communities studied had received any support from an external source, there is clearly scope to explore the potential for more inclusive group-based programs, particularly focusing upon group dynamics, training and appropriate credit provision. More broadly, the different determinants of livelihood diversification found between Rakai and Kumi, and the nature and speed of change within the districts indicates the need for policy mechanisms that can respond to difference and change. Whilst the process of decentralization of public administration and service provision to district councils potentially facilitates this increased awareness and response time to local circumstance and change, responsibility for small enterprise and non-farm livelihood diversification has, by default, been left with NGOs and the private sector. Whilst the NGO sector is making some progress, there are few incentives for private investment in rural areas, and relatively non-interventionist government policies emphasizing traditional agro-based activity rather than the promotion of economic diversification