Dupas and Robinson (2009)
Does limited access to formal savings services impede business growth in poor countries? To shed light on this question, we randomized access to non-interest-bearing bank accounts among two types of self-employed individuals in rural Kenya: market vendors (who are mostly women) and men working as bicycle-taxi drivers. Despite large withdrawal fees, a substantial share of market women used the accounts, were able to save more, and increased their productive investment and private expenditures. We see no impact for bicycle-taxi drivers. These results imply significant barriers to savings and investment for market women in our study context. Further work is needed to understand what those barriers are, and to test whether the results generalize to other types of businesses or individuals.
Intervention settings: Rural.
Intervention description: Individual commitment savings products offered by a village bank. Interest-free account; high withdrawal fees. Tested the importance of savings constraints for self-employed individuals.
Methodology: RCT - Moderate rigor (small sample size).
Sample: 185 microentpreneurs.
Findings: Positive impact of savings on business investment among women (40% increase). Increase in women's private expenditures (37 to 40% higher). Some impact on making women less vulnerable to health shocks. No effect for men.
Duflo, Kremer and Robinson (2008)
Intervention settings: Rural: Busia district.
Intervention description: Free fertilizer and hybrid seeds provided to randomly selected farmers. Assistance in applying the inputs correctly and harvesting the crops.
Sample: 673 farmers with children enrolled in schools (randomly selected from school enrollment list).
Findings: Median increased in yields from 9% to 49% (depending on the fertilizer treatment). However, median rates of return were positive for only one of the treatments.
Challenges in Banking the Rural Poor: Evidence from Kenya's Western ProvinceDupas and Robinson (2012)
Most people in rural Africa do not have bank accounts. In this paper, we combine experimental and survey evidence from Western Kenya to document some of the supply and demand factors behind such low levels of financial inclusion. Our experiment had two parts. In the first part, we waived the fixed cost of opening a basic savings account at a local bank for a random subset of individuals who were initially unbanked. While 63% of people opened an account, only 18% actively used it. Survey evidence suggests that the main reasons people did not begin saving in their bank accounts are that: (1) they do not trust the bank, (2) service is unreliable, and (3) withdrawal fees are prohibitively expensive. In the second part of the experiment, we provided information on local credit options and lowered the eligibility requirements for an initial small loan. Within the following 6 months, only 3% of people initiated the loan application process. Survey evidence suggests that people do not borrow because they do not want to risk losing their collateral. These results suggest that, while simply expanding access to banking services (for instance by lowering account opening fees) will benefit a minority, broader success may be unobtainable unless the quality of services is simultaneously improved. There are also challenges on the demand side, however. More work needs to be done to understand what savings and credit products are best suited for the majority of rural households.
Intervention settings: Rural.
Intervention description: Provided safe place (metal box) to save money with randomly varying levels of commitment to save.
Sample: 771 Members of 113 rotating savings clubs (ROSCAs) in one administrative division of western Kenya.
Findings: Preventive health investments increased by 68%. The share of households achieving their savings goals increased by 13% (compared to 34% in the control group). Three years later 39% of those who received metal boxes were still using them for saving. Larger effects found among married than among unmarried females. The results also suggest that savings programs that do not restrict liquidity are most effective.
Duflo, Kremer and Robinson (2009)
While many developing-country policymakers see heavy fertilizer subsidies as critical to raising agricultural productivity, most economists see them as distortionary, regressive, environmentally unsound, and argue that they result in politicized, inefficient distribution of fertilizer supply. We model farmers as facing small fixed costs of purchasing fertilizer, and assume some are stochastically present-biased and not fully sophisticated about this bias. Even when relatively patient, such farmers may procrastinate, postponing fertilizer purchases until later periods, when they may be too impatient to purchase fertilizer. Consistent with the model, many farmers in Western Kenya fail to take advantage of apparently profitable fertilizer investments, but they do invest in response to small, time-limited discounts on the cost of acquiring fertilizer (free delivery) just after harvest. Later discounts have a smaller impact, and when given a choice of price schedules, many farmers choose schedules that induce advance purchase. Calibration suggests such small, time-limited discounts yield higher welfare than either laissez faire or heavy subsidies by helping present-biased farmers commit to fertilizer use without inducing those with standard preferences to substantially overuse fertilizer.
Intervention settings: Rural: Busia district.
Intervention description: Farmers randomly offered one of the following: the chance to purchase a voucher immediately after the harvest, the chance to purchase at the time of their choosing, fertilizer at regular price with free delivery 2-4 months after harvest or fertilizer at a 50% subsidy with free delivery 2-4 months after harvest.
Sample: 924 farmers (841 in follow-up) with children enrolled in 16 local schools.
Findings: Fertilizer use increased in every group (from 14-22% on a base of 23%), except for the group allowed to purchase fertilizer at the regular price.
When is Capital Enough to Get Microenterprises Growing? Evidence from a Randomized Experiment in GhanaFafchamps et al (2010)
Standard models of investment predict that credit-constrained firms should grow rapidly when given additional capital, and that how this capital is provided should not affect decisions to invest in the business or consume the capital. We randomly gave cash and in-kind grants to male- and female-owned microenterprises in urban Ghana. Our findings cast doubt on the ability of capital alone to stimulate the growth of female microenterprises. First, while the average treatment effects of the in-kind grants are large and positive for both males and females, the gain in profits is almost zero for women with initial profits below the median, suggesting that capital alone is not enough to grow subsistence enterprises owned by women. Second, for women we strongly reject equality of the cash and in-kind grants; only in-kind grants lead to growth in business profits. The results for men also suggest a lower impact of cash, but differences between cash and in-kind grants are less robust. The difference in the effects of cash and in-kind grants is associated more with a lack of self-control than with external pressure. As a result, the manner in which funding is provided affects microenterprise growth.
Intervention settings: Urban.
Intervention description: Capital grants in cash or in-kind ($120) as proxy to credit.
Sample: Entrepreneurs (more than half of sample).
Findings: Both cash and in-kind grants had positive impact on men's businesses. In-kind grants led to higher profits only for women with initially larger, higher-profit businesses. No significant impact on per capita expenditure. No overall impact of grants on women's business investment or income; heterogeneous impact that depends on initial business size and profitability, and type of capital injection (in-kind have positive impact on more successful firms). Cash grants have no impact on women's businesses; tend to be used for HH expenses. No impact of grants on profits of women with initially below average profit businesses.
Fafchamps and Quisumbing (2002)
This paper investigates how the control and devolution of productive assets are allocated among husband and wife. Using detailed household data from rural Ethiopia, the authors show that assets brought to marriage, ownership of assets, control within marriage, and disposition upon death or divorce are only partly related.
Intervention description: Land titling.
Methodology: Logit, probit, tobit with 1995/96 and 1997 household surveys.
Sample: 1,420 households (23% female-headed).
Findings: Land that women bring with them into a marriage as assets served as a strong predictor of their control over productive assets during the marriage, including the right to rent land.
A Psychological Personal Initiative Training Enhances Business Success of African Business OwnersGlaub, Frese, Fischer, and Hoppe (2012)
Intervention settings: Rural
Intervention description: Three-day course focused on personal intitiative through a psychological intervention aimed at making business owners more likely to self-start new ideas on products and processes, be more proactive in preparing future opportunities and problems, and be persistent in overcoming barriers.
Sample: 109 male and female business owners.
Findings: 57.4% increase in revenues using difference in difference calculation. Study reports difference in log sales is signficant at 1% level.
Insurance, credit, and technology adoption: Field experimental evidence from MalawiGiné and Yang (2009)
Does production risk suppress the demand for credit? We implemented a randomized field experiment to ask whether provision of insurance against a major source of production risk induces farmers to take out loans to adopt a new crop technology. The study sample was composed of roughly 800 maize and groundnut farmers in Malawi, where by far the dominant source of production risk is the level of rainfall. We randomly selected half of the farmers to be offered credit to purchase high-yielding hybrid maize and groundnut seeds for planting in the November 2006 crop season. The other half of farmers were offered a similar credit package, but were also required to purchase (at actuarially fair rates) a weather insurance policy that partially or fully forgave the loan in the event of poor rainfall. Surprisingly, take-up was lower by 13 percentage points among farmers offered insurance with the loan. Take-up was 33.0% for farmers who were offered the uninsured loan. There is suggestive evidence that reduced take-up of the insured loan was due to farmers already having implicit insurance from the limited liability clause in the loan contract: insured loan take-up was positively correlated with farmer education, income, and wealth, which may proxy for the individual's default costs. By contrast, take-up of the uninsured loan was uncorrelated with these farmer characteristics.
Intervention settings: Rural: Central Malawi.
Intervention description: Farmers offered either credit to purchase high-yielding hybrid seeds or credit plus a requirement to purchase rainfall insurance at an actuarially fair price.
Sample: Maize and groundnut farmers in 32 localities.
Findings: Take up was 33% in the first group, and 13% lower in the second group.
Karlan and Zinman (2010)
Expanding access to commercial credit is a key ingredient of financial development strategies. There is less consensus on whether expanding access to consumer credit helps borrowers, particularly when loans are extended at high interest rates. Popular skepticism about "unproductive," "usurious" lending is fueled by research highlighting behavioral biases that may induce overborrowing. We estimate the impacts of expanding access to consumer credit at a 200% annual percentage rate (APR) using a field experiment and follow-up data collection. The randomly assigned marginal loans produced significant net benefits for borrowers across a wide range of outcomes. There is also some evidence that the loans were profitable.
Intervention settings: Urban.
Intervention description: Individual credit with median loan size of $127, 40% of average borrower's gross monthly income. Assessed impact of offering access to individual loans to marginal clients who otherwise would have been rejected.
Sample: Poor men and women wage workers.
Findings: Positive impact of access to credit on clients' retention of jobs (loans likely helped clients smoothe or avoid shocks that prevent them from getting to work). Positive impact of access to credit on HH incomes. Loans increased HH food consumption. Reported experiencing increased HH decision-making (though small sample size of married women and imprecise estimate). No significant difference in impact of credit assigned to men and women.
Goldstein and Udry (2008)
We examine the impact of ambiguous and contested land rights on investment and productivity in agriculture in Akwapim, Ghana. We show that individuals who hold powerful positions in a local political hierarchy have more secure tenure rights, and that as a consequence they invest more in land fertility and have substantially higher output. The intensity of investments on different plots cultivated by a given individual correspond to that individual's security of tenure over those specific plots and, in turn, to the individuals' position in the political hierarchy relevant to those specific plots.
Intervention settings: Rural: Akwapim South District, Eastern Region.
Intervention description: None.
Methodology: Household-level fixed-effects estimation.
Sample: 252 married couples; 519 plots in 4 village clusters owned by 240+ married couples; each couple was interviewed 15 times during a two-year period.
Findings: Security of tenure has an important effect on land productivity (via investments in soil fertility) and security of tenure is related to an individual's position in the political and social hierarchy, with most women relatively disadvantaged. Insecure tenure leads to substantially lower profits per hectare for women compared to men.