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2181. Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts

Author:
Dean Karlan and Jonathan Zinman
Publication Date:
01-2007
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Expanding credit access is a key ingredient of development strategies worldwide. Microfinance practitioners, policymakers, and donors have ambitious goals for expanding access, and seek efficient methods for implementing and evaluating expansion. There is less consensus on the role of consumer credit in expansion initiatives. Some microfinance institutions are moving beyond entrepreneurial credit and offering consumer loans. But many practitioners and policymakers are skeptical about “unproductive” lending. These concerns are fueled by academic work highlighting behavioral biases that may induce consumers to overborrow. We estimate the impacts of a consumer credit supply expansion using a field experiment and follow-up data collection. A South African lender relaxed its risk assessment criteria by encouraging its loan officers to approve randomly selected marginal rejected applications. We estimate the resulting impacts using new survey data on borrower behavior and well-being, and administrative data on loan repayment. We find that the marginal loans increased credit access and produced measurable benefits in the form of increased employment, reduced hunger, and reduced poverty. The marginal loans also appear to have been profitable for the lender. The results must be interpreted with caution but suggest that consumer credit expansions can be welfare-improving.
Topic:
Development, Markets, and Poverty
Political Geography:
Africa and South Africa

2182. Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions

Author:
Dean Karlan and Martin Valdivia
Publication Date:
01-2007
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Can one teach basic entrepreneurship skills, or are they fixed personal characteristics? Most academic and development policy discussions about microentrepreneurs focus on their access to credit, and assume their human capital to be fixed. The self-employed poor rarely have any formal training in business skills. However, a growing number of microfinance organizations are attempting to build the human capital of micro-entrepreneurs in order to improve the livelihood of their clients and help further their mission of poverty alleviation. Using a randomized control trial, we measure the marginal impact of adding business training to a Peruvian group lending program for female microentrepreneurs. Treatment groups received thirty to sixty minute entrepreneurship training sessions during their normal weekly or monthly banking meeting over a period of one to two years. Control groups remained as they were before, meeting at the same frequency but solely for making loan and savings payments. We find that the treatment led to improved business knowledge, practices and revenues. The program also improved repayment and client retention rates for the microfinance institution. Larger effects found for those that expressed less interest in training in a baseline survey. This has important implications for implementing similar market-based interventions with a goal of recovering costs.
Topic:
Development, Economics, Education, and Gender Issues

2183. Female Empowerment: Impact of a Commitment Savings Product in the Philippines

Author:
Dean Karlan, Wesley Yin, and Nava Ashraf
Publication Date:
01-2007
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Female “empowerment” has increasingly become a policy goal, both as an end to itself and as a means to achieving other development goals. Microfinance in particular has often been argued, but not without controversy, to be a tool for empowering women. Here, using a randomized controlled trial, we examine whether access to an individually-held commitment savings product leads to an increase in female decision-making power within the household. We find positive impacts, particularly for women who have below median decision-making power in the baseline, and we find this leads to a shift towards female-oriented durables goods purchased in the household.
Topic:
Development, Economics, and Gender Issues
Political Geography:
Southeast Asia

2184. Why Are There So Few Black-Owned Firms in Africa? Preliminary Results from Enterprise Survey Data

Author:
Vijaya Ramachandran and Manju Kedia Shah
Publication Date:
01-2007
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Much of the growth in Sub-Saharan Africa in the past decade has come from extractive industries, rather than from private, entrepreneurial activity. Furthermore, non-extractive activity in the private sector is often dominated by firms owned by ethnic minorities. This paper analyzes the characteristics of the formal private sector in five countries in sub-Saharan Africa, with a particular emphasis on Black African-owned (indigenous) firms. We find that indigenous firms start smaller and grow more slowly; however their rate of growth is positively influenced by whether the owner-entrepreneur has a university degree. We do not find overwhelming evidence that credit is the binding constraint but we do find that indigenous firms get less access to trade credit than firms owned by minority entrepreneurs. Finally, we discuss policy solutions that might enable a larger number of indigenous entrepreneurs to enter and survive in a vibrant, multi-ethnic private sector.
Topic:
International Relations, Development, Economics, and Humanitarian Aid
Political Geography:
Africa

2185. Georgia: Sliding towards Authoritarianism?

Publication Date:
12-2007
Content Type:
Working Paper
Institution:
International Crisis Group
Abstract:
The government's repressive and disproportionate response to peaceful protests in November 2007 shocked Western capitals, which had viewed Georgia as a beacon of democracy in a region of illiberal regimes. Since the Rose Revolution, however, President Mikheil Saakashvili's administration has become increasingly intolerant of dissent as it has sought to reform inefficient post-Soviet institutions, stimulate a deeply dysfunctional economy, regain the breakaway regions of Abkhazia and South Ossetia and deal with its meddling Russian neighbour. In an attempt to restore his democratic credentials, Saakashvili has called an early presidential election for 5 January 2008, which he is expected to win, but a free and fair election will not be enough to repair the damage. The West should press the government to abandon its increasingly authoritarian behaviour, engage in a genuine dialogue with political opponents and make the ongoing reform process transparent and accountable.
Topic:
Conflict Prevention, Corruption, Democratization, and Development
Political Geography:
Russia, Georgia, South Ossetia, and Abkhazia

2186. Inside Gaza: The Challenge of Clans and Families

Publication Date:
12-2007
Content Type:
Working Paper
Institution:
International Crisis Group
Abstract:
Throughout Gaza's history, its powerful clans and families have played a part whose importance has fluctuated with the nature of central authority but never disappeared. As the Palestinian Authority (PA) gradually collapsed under the weight of almost a decade of renewed confrontation with Israel, they, along with political movements and militias, filled the void. Today they are one of the most significant obstacles Hamas faces in trying to consolidate its authority and reinstate stability in the territory it seized control of in June 2007. Although they probably lack the unity or motivation to become a consistent and effective opposition, either on their own or in alliance with Fatah, they could become more effective should popular dissatisfaction with the situation in Gaza grow. There are some, as yet inconclusive, indications that Hamas understands this and is moderating its approach in an attempt to reach an accommodation.
Topic:
Conflict Resolution, Development, and War
Political Geography:
Middle East, Israel, Palestine, Gaza, and Haiti

2187. Peacebuilding in Haiti: Including Haitians from Abroad

Publication Date:
12-2007
Content Type:
Working Paper
Institution:
International Crisis Group
Abstract:
The UN mission in Haiti (MINUSTAH) will not stay forever and, in any case, cannot be made responsible for solving Haiti's manifold and deep-seated problems. The absence of adequate professional staff, sufficient financial resources and efficient management at all levels of government has delayed structural reforms and economic and social programs. The country needs institutional strengthening prior to its transition from President René Préval to his successor after the elections in 2011 – also the likely outside limit for MINUSTAH's mandate. Otherwise, political polarisation along traditional cleavages will reappear, as will the risk of conflict. Training civil servants and increasing their salaries are important but insufficient to produce the advances Haitians are demanding. A serious and sustained initiative to include three million Haitians living abroad could overcome historic nationalistic mistrust of outsiders, bring a missing middle class within reach and help Haiti escape its “fragile state” status.
Topic:
Conflict Resolution, Development, and United Nations
Political Geography:
Haiti

2188. Kosovo Countdown: A Blueprint for Transition

Publication Date:
12-2007
Content Type:
Working Paper
Institution:
International Crisis Group
Abstract:
Kosovo's transition to the status of conditional, or supervised, independence has been greatly complicated by Russia's firm support of Serbia's refusal to accept that it has lost its one-time province. Recognition of conditional independence has broad international, and certainly European Union (EU) and American, support. Under threat of Moscow's veto, the Security Council will not revoke its Resolution 1244 of 1999 that acknowledged Serbian sovereignty while setting up the UN Mission (UNMIK) to prepare Kosovo for self-government pending a political settlement on its future status. Nor will the Council be allowed to approve the plan for a conditionally independent Kosovo devised by the Secretary-General's special representative, Martti Ahtisaari, earlier this year and authorise the EU-led missions meant to implement that plan.
Topic:
Conflict Resolution, International Relations, Development, and United Nations
Political Geography:
Russia, Europe, Kosovo, Moscow, and Serbia

2189. Nigeria: Ending Unrest in the Niger Delta

Publication Date:
12-2007
Content Type:
Working Paper
Institution:
International Crisis Group
Abstract:
The Niger Delta is again at risk of sliding into chaos. The 29 May 2007 inauguration of new federal and state governments offered an opportunity to resolve longstanding conflicts afflicting the oil-rich, deeply impoverished region. Six months later, the opportunity is unravelling amid new violence and criminality. Decisive action is necessary to stop militant violence and criminal hostage-taking, initiate quick-impact development projects that can build public confidence in President Umaru Yar'Adua's administration and tackle constitutional and legal issues that have fuelled unrest in the region.
Topic:
Conflict Resolution, International Relations, and Development
Political Geography:
Africa and Nigeria

2190. ECUADOR: OVERCOMING INSTABILITY?

Publication Date:
08-2007
Content Type:
Working Paper
Institution:
International Crisis Group
Abstract:
Ecuador has been Latin America's most unstable democracy for a decade. Starting with the ousting of President Abdalá Bucaram by Congress and street protests in 1997, weak, temporary governments have been the rule. In 2000, Jamil Mahuad was toppled by a civilian-military coup, and in 2005, protests brought down Lucio Gutiérrez, who had helped oust Mahuad. The government of Rafael Correa of the Alianza País(AP) movement, who took office in January and enjoys record-high approval ratings, is applying "shock therapy" to overwhelm the discredited opposition and pave the way for a constituent assembly (CA) intended to produce "profound, radical and fast change". This triggered one of the sharpest clashes between branches of government since the return to democracy in 1979, including the Electoral Court's firing of 57 opposition members of Congress in March, accompanied by street violence. To restore stability to the troubled country, Correa will need to pay more attention to upholding the rule of law, ensuring a level CA playing field and building consensus for fundamental reforms.
Topic:
Development and Politics
Political Geography:
South America