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We conducted a randomized controlled trial with small and medium-sized enterprises in Kenya to estimate the causal impact of an e-payment technology on business finance. Using an encouragement design, we exogenously increased e-payment usage among a random subset of firms by relaxing adoption transaction costs and information barriers. Sixteen months after the intervention, we find that the e-payment technology increased access to mobile loans (in number of loans, as well as in the amount borrowed) by at least 50% (0.17 sd), likely due to the reduction of information asymmetries brought by an increase in digital transactions. We find no effect of the e-payment technology on sales and profits, but we do find a reduction of sales volatility and precautionary investment, especially for smaller firms. This suggests that mobile loans help smaller firms cope with short-term negative shocks. We provide a stylized model of business finance that rationalizes these findings.

Agricultural investments often carry labor costs and market risks, and spouses negotiate and bargain to settle their conflicting preferences for risk and differing views on individual labor costs. Using a lab-in-the-field experiment with a real-effort task, we analyze man, woman, and joint decision-making in those investments. Our experiment randomizes the assignment of the investment decision-maker and laborer performing the real-effort task. This randomization allows us to obtain the effects of gender-related and joint decision-making on the amount of labor-intensive investments, allocation of those investments between risky and not risky alternatives within households, and outcomes of those decisions. Our findings show that men prefer to take production and market risks more often than women, investing higher amounts in risky investments. However, those investments' returns are low, as they cannot complete the task in which they have invested. When couples jointly decide, they choose investment amounts in line with man spouse preferences; however, allocate investments between risky and not risky investments in line with woman preferences. We also find that woman spouses who have participated in a gender-related training program take more risks and the joint investment decisions of the couple are closer to woman investment decisions when compared to other couples. Our results are in line with previous studies on the behavioral aspects of agricultural investments and can guide organizations in improving program design to increase agricultural technology and crop adoption. This paper contributes to the scarce literature on behavioral aspects influencing the gender gap in agricultural production and technology adoption.

Production risk and market access put pressure on agricultural household production and food consumption decisions. Improving market access and promoting production diversity have been proposed as solutions to better agricultural household nutritional outcomes. Particularly with regards to production diversity, the efficacy of these solutions has been called into question. We show that the effectiveness of increased production diversity translating into improved household nutrition is dependent on levels of market participation and access. To demonstrate these results, this paper develops a non-separable agricultural household model with multiple agricultural goods for consumption and/or production, production risk, and imperfect markets. Households jointly maximize production, consumption, and marketing decisions. The model’s results are tested econometrically using nationally representative data from Tanzania. The paper contributes to a growing empirical literature concerning the relationships between production diversity, market access, and dietary diversity. We show that while on average a household needs to grow ten additional food groups to consume just one more food group, households not participating in markets need to grow just four more food groups to consume one more. This interaction explains why the literature typically finds weak correlations between dietary diversity and production diversity for typical households. The paper also contributes to the theoretical literature surrounding non-separable household models by providing a framework for understanding the role of markets and risk for household dietary diversity by developing. Our model provides economic theory consistent with existing empirical evidence and helps explain why most studies only find a small link between production diversity and dietary diversity.

The long-term growth and development of agricultural markets depends on access to a range and volume of capital which, over time, naturally eclipses governments’ ability to provide that capital directly. As private capital markets and financial service providers become involved in the agricultural finance market, the challenge for governments becomes how to appropriately create, incentivize and regulate space for the private sector. As countries move to higher levels of agricultural productivity, more mature agricultural markets, more sophisticated banking systems, and larger farm sizes, the commercial business case for financial service provision emerges. However, this process can take decades and often remains incomplete with some market segments requiring on-going subsidy to attract financial services. Questions remain: How to accelerate the participation of private sector financial service providers while markets are still developing? How to do so in ways that are aligned with national development goals, including transitioning subsistence farmers to viable livelihoods and ensuring domestic food security?This Briefing Note builds on previous analysis of the natural stages of agricultural finance and interrogates more deeply the transition that coun-tries make from government-led to more bank-led agricultural finance. By adding the historical experiences of Mexico, Turkey, and Uganda (as well as other specific initiatives in other coun-tries around the world) to past research by ISF Advisors into the United States, Germany, and South Korea, we gain a greater understanding into the unique approaches that different coun-tries have taken to make this transition. While these approaches are heavily influenced by each country’s macro-level approach to managing the economy, analysis shows the importance of meso-level enablers and more direct micro-level interventions. As we unpack government actions into these different levels and acknowledge the dynamic interplay between the agricultural and finance sides of the market we create a more systemic view of these historical experiences.

Subsistence farmers in rural areas of developing countries are usually outside the current reach of banks and formal microfinance institutions. They do not have access to savings accounts, insurance products, and agricultural credit facilities, limiting those farmers’ investment in agriculture. Being at the outreach of those institutions, those farmers established, so-called savings and loan associations, self-managed groups of 20-30 individuals meeting regularly to provide its members a safe place to save and obtain emergency aid and small loans. When efficiently organized, those associations may provide a secure platform to save and access loans to invest in climate-smart agriculture and mitigate income shocks. The objective of this study is to identify the role of the associations in financing agriculture,major bottlenecks and organizational characteristics that might explain their financial performances.We use survey data from 48 savings and loan associations in rural Tanzania with members trained for adopting climate smart agricultural practices. We identify that 45% of the loans of associations are distributed for agricultural investment purposes and the major bottleneck is to low savings and participation rates, and late repayment or defaults of loans. We find that the size of associations and record-keeping matters. The average amount of loan received per member approximately doubled for associations with twice as many members, and default rates decrease with the accurate financial recording practices. Our findings suggest that savings and loan associations could strengthen the financial resilience of its members by empowering their members through financial record keeping training. At the same time, they can add new members to the associations.

Climate change will adversely affect agricultural production for small-scale farmers in developing countries. Many policy initiatives advise the use of climate-smart agriculture (CSA) practices to improve the adaptation of the farmers to the climate and reduce the adverse impacts of climate on agricultural production. Among others, the profitability of investing in agricultural practices is a significant factor that influences the adoption of agricultural practices among farmers in developing countries. Are CSA practices profitable for small-scale farmers in developing countries? We address this question by investigating the profitability of CSA practices in rural Tanzania. We conduct a cost-benefit analysis (CBA) in Iringa rural district in Tanzania for four CSA practices involving crop rotation or intercropping maize with early or late-maturing soybean varieties. Our findings show that CSA practices are financially profitable for those farmers. Investments in crop-rotation practices have higher net present values, internal rates of returns, and shorter payback periods when compared to intercropping. We do not find any differences in the profitability of early and late maturing seeds. Our robustness checks show that almost all our study population can make a profit from investing in those practices. However, the profitability of those practices depends on market interest rates (discount rates), labor cost, and maize prices. These findings imply that investments in CSA practices, such as crop rotation and intercropping of maize with soybean, have positive returns in short periods. These short payback periods make crop rotation with soybean a profitable investment option for small-scale farmers in rural areas with limited financial power. Policymakerscan support the use of CSA practices and design instruments to upscale the adoption of those practices, especially in rural Tanzania and in similar contexts.

Electronic payment instruments have the potential to spur the transparency of business transactions and thereby reduce information frictions. We design a field experiment to understand whether e-payments facilitate the financial inclusion of SMEs in developing world and to study adoption barriers. We encourage a random sample of Kenyan merchants to adopt a new mobile-money payment instrument and find that the decision to adopt is hampered by the combination of information, know-how and seemingly small transaction costs barriers. In addition, we nd that business owners who are more averse to transparency are more reluctant to adopt. Sixteen months after the intervention, we observe that treated firms have better access to finance in the form of mobile loans. The impact on financial access is more pronounced for smaller establishments, which also experience a considerable reduction in sales volatility. We conclude that e-payments can help un-collateralized firms become transparent and get financially integrated.

6 policy recommendations for PADANE, and 5 toolboxes for follow-up research

This study is part of the food system innovation lab, executed by Wageningen Economic Research in preparation for the SNV PADANE programme in Burundi in the period 2020-2022. This report presents a summary of the literature study on nutrition gap analysis and market analysis combined. The nutrition gap analysis and market analysis are guided by the food system analysis framework. The food system analysis framework gives an overview of the dynamics between a selection of socio-economic and environmental drivers and food system activities that play a role in the Burundian food markets in relation to nutrition outcomes.

This paper studies the effects of a payment technology innovation (mobile money) on entrepreneurship and economic development in a quantitative dynamic general equilibrium model. In the model mobile money dominates fiat money as a medium of exchange, since it avoids the risk of theft, but comes with electronic transaction costs. We show that entrepreneurs with higher productivity and access to trade credit are more likely to adopt mobile money as a payment instrument vis-a-vis suppliers. Calibrating the stationary equilibrium of the model to match firm-level data from Kenya, we show significant quantitative implications of mobile money for entrepreneurial growth and macroeconomic development.

Data depth measures the centrality of a point with respect to a given distribution or data cloud. It provides a natural center-outward ordering of multivariate data points and yields a systematic nonparametric multivariate analysis scheme. In particular, the halfspace depth is shown to have many desirable properties and broad applicability. However, the empirical halfspace depth is zero outside the convex hull of the data. This property has rendered the empirical halfspace depth useless outside the data cloud, and limited its utility in applications where the extreme outlying probability mass is the focal point, such as in classification problems and control charts with very small false alarm rates. To address this issue, we apply extreme value statistics to refine the empirical halfspace depth in “the tail”. This provides an important linkage between data depth, which is useful for inference on centrality, and extreme value statistics, which is useful for inference on extremity. The refined empirical halfspace depth can thus extend all its utilities beyond the data cloud, and hence broaden greatly its applicability. The refined estimator is shown to have substantially improved upon the empirical estimator in theory and simulations. The benefit of this improvement is also demonstrated through the applications in classification and statistical process control.

The five essays in the dissertation explore the interaction between economic development in Africa and three economic concepts from different fields: decentralized agricultural innovation systems, trust and saving practices. A relatively new view to boost agricultural growth is the implementation of the innovation system approach. The Sub Saharan African Challenge Program adopted this approach through the development of local decentralized Innovation Platforms (IPs) in eight African countries. The first and the second essay respectively evaluate the impact of those platforms, on poverty and the adoption of agricultural technologies. The studies reach to mixed results concerning average impact on poverty and technology adoption. Some platforms promote the adoption of some innovations and reduce poverty level, and others do not (yet). The third essay complements these studies and investigates whether this difference in IP performance is because they may not have equally implemented the principles of the approach. The essay shows that IPs which performed better in human capacity development at the field, ceteris paribus, are more successful. Theory suggests that trust fosters economic development via reduced transaction costs and increased specialization. A vicious cycle may materialize if increased specialization, via increased market integration, also fosters trust. To shed light on the latter, the fourth essay studies whether increased market integration fosters trust by using a comprehensive survey of households living in West Africa in the early stages of market integration. The study identifies a negative and causal relationship between market integration and trust, which is contradictory to the theory. Having limited access to finance, entrepreneurs in developing countries have to utilize business profits or save in order to invest in their businesses. At the same time they keep their savings in multiple practices (e.g bank account, moneylender, etc.), which potentially may have different efficiency levels, and therefore may have varying effects on business investments. The fifth essay studies how different saving practices affect the likelihood of business profit reinvestment. The study shows that the practice of saving in a deposit account of a formal financial institution is more likely to facilitate reinvestment compared to the practice of keeping savings within the household.

We use a novel enterprise survey from Tanzania to gauge the relationship between saving instruments and entrepreneurial reinvestment. While most informal savings practices do not imply a lower likelihood of entrepreneurial reinvestment when compared with formal savings practices, we find a significantly negative effect of saving within the household on the likelihood of reinvesting entrepreneurial profits. Our results are robust to an extensive list of robustness checks, including controlling for reverse causation and omitted variable biases. Our work contributes to the recent debate on the implications of different saving instruments in developing countries and expands the entrepreneurial financing constraints literature by focusing on internal rather than external fundings constraints.

What is the relationship between entrepreneurs' saving practices and their investment decisions? We present a simply stylized model that shows that entrepreneur's business investment decision depends on the efficiency of her saving practice, in addition to the productivity, liquidity needs, and the borrowing capacity of the entrepreneurial firm. Utilizing a novel micro & small enterprise survey from Tanzania we test the empirical implications of this stylized model. We find that (1) saving for business purposes and entrepreneurial earnings reinvestment are positively related, and (2) the practice of saving in a deposit account of a formal financial institution is more likely to foster reinvestment compared to the practice of keeping savings within the household. We also show that the negative impact of saving within-household on investment is more pronounced for life-style entrepreneurs; and also for family members with inherently low intra-household bargaining power - such as females and non-head household members. Our work contributes to the recent debate on the implications of saving instruments in developing countries, and suggests within-household saving practice as a bottleneck to microenterprise performance.

A modification of the kinetic growth model in two dimensions for the polymerization of 5-membered rings is presented. The preliminary results reveal the validity of the modified model.