Factors impeding credit use in small‐farm households in Bolivia

Sample survey data show few Bolivian small‐farm households using credit, but most would like to borrow from formal market institutions. A theoretical framework is developed to formulate testable hypotheses to identify factors that inhibit credit use. Major impediments to borrowing are scale of operations, as measured by amount of useable land, and borrower's transactions costs that arise from loan paperwork, use of Indian language, remoteness from market, little education and low degree of market integration. When farmers with these characteristics borrow they tend to use informal market sources because of the lower transactions costs compared to those of formal market lenders. The policy implication is if formal market lenders are to reach more farmers they must lower transactions costs.     

Formal and Informal Rural Credit in Four Provinces of Vietnam

This paper uses a survey of 932 rural households to uncover how the rural credit market operates in Vietnam. Households obtain credit through formal and informal lenders. Formal loans are almost entirely for production and asset accumulation, while informal loans are used for consumption smoothening. The determinants of formal and informal credit demand are distinct. While credit rationing depends on education and credit history, in particular, regional differences in the demand for credit are striking. A ‘one size fits all’ approach to credit policy in Vietnam would be inappropriate.     

Labour market segmentation in Cameroonian manufacturing

The economic crisis in Cameroon has provided a test for distinct causes of labour market segmentation. Many firms that previously followed rigid legislation have ceased to do so, while a traditional informal sector has continued outside almost all regulation. We categorise workers as informal, formal, or regulated, by firm characteristics, and test for labour market segmentation between these sectors. Direct legislation is the most significant cause of segmentation. We find limited evidence that the costs of becoming formal create rationing in formal‐sector jobs. While addressing both sets of rigidities would have maximum impact on unemployment in Cameroon, reforming direct labour legislation is likely to have the most beneficial short‐term impact.     

Releasing Constraints to Growth or Pushing on a String? Policies and Performance of Mexican Micro-Firms

Using firm-level data from Mexico, this paper investigates the firm characteristics associated with participation in credit markets, access to training, tax payments and membership in business associations. We find that firms which participate in these institutions exhibit significantly higher profits. Moreover, firms that borrow from formal or informal sources and those that pay taxes are significantly more likely to stay in business but firms that received credit exhibit lower rates of income growth. These results persist when firm characteristics that are arguably correlated with unobserved entrepreneurial ability are controlled for. Our findings suggest that the significant within-country differences in firm productivity observed in developing economies are due in part to market and government failures that limit the ability of micro-firms to reach their optimal sizes.     

Informal borrowing sources and uses: insights from the North West Region,Cameroon

Abstract

This article seeks to analyse the informal borrowing sources of the poor as well as the purposes for borrowing. The obsession on characterising the poor as financially excluded fails to grasp their active financial lives. This article emphasises how relations of credit/debt are rooted in complex social and cultural forces. It is precisely because of the social embeddedness of credit that family finance, though interest-free, is not a first resort. Similarly, credit in kind from shopkeepers, though critical to consumption smoothing, is detested by some people. Also, it is argued that the involvement of the traditional leader in repayment enforcement in informal financial groups challenges the economistic narrative that attempts to separate credit from cultural norms.     

The Formal Divide: Customary Rights and the Allocation of Credit to Agriculture in Tanzania

It is generally held that one mechanism to enable inclusive growth in Tanzania is enabling farmers to access credit to raise productivity and incomes. The formalisation of property rights in Tanzania is being undertaken by a multiplicity of actors at great expense to donors, individuals and the government. While there have been a variety of different justifications for allocating Certificates of Customary Rights of Occupancy (CCROs) to farmers in Tanzania, perhaps the most prominent argument is that it will enable farmers to finally overcome the divide between ‘informal’ customary rights and the formal banking sector. CCROs would provide the collateral that would induce banks to lend money to small-scale farmers. As part of a six-year investigation in Manyara, Mbeya and Dodoma regions, our research team evaluated the impact of formalisation on farmers’ access to credit. The paper will present the results while pointing to the continuing institutional and market imperfections that perpetuate the formal divide.     

Getting to the frontier

This article analyses a Stackelberg differential game in which households' labour supply and fertility decisions are taken assuming husbands as leaders and wives as followers. The model solution yields the optimal number of children and labour supply of male and female. In equilibrium male and female labour supply increases with wage and decreases with children costs and time preference, and the optimal number of children increases with male wage and decreases with cost of children, husband's time preference, and female's wage and time preference. We test the model using Ghana Living Standard Survey Round 4 and find that women are more sensitive to changes in the labour market conditions than males, and better labour market opportunities for women may lead to a strong reduction in fertility.     

Expanding Microfinance in Brazil: Credit Utilisation and Performance of Small Firms

We take advantage of the natural experiment generated by the exogenous change in government policy towards microcredit to evaluate the impact of the increased supply of microcredit on the utilisation of credit by micro-entrepreneurs. Based on micro-entrepreneurs' survey and administrative data from a microcredit programme in Brazil, we show that: the increased supply of microcredit raised formal credit utilisation and this does not crowd out the use of informal credit sources; formal credit taking improves business performance; and returns are larger for women- than for men-owned firms, but males employ significantly more workers after taking formal credit than females.     

Wage determination in Brazil: The growth of union bargaining power and informal employment

This article examines wage determination in Brazilian manufacturing during the 1980s and early 1990s. It presents evidence to show that the reduction in state regulation of collective bargaining has led to the development of a system of wage determination which is increasingly characterised by rent sharing and insider trade union bargaining power. Real wages appear increasingly inflexible with respect to movements in open unemployment, with a large informal sector disciplining formal sector wage bargaining and cushioning the impact of broader labour market conditions. An important consequence of this is that the employment costs of a successful counter‐inflationary strategy may be very severe.     

Limits of regulatory governance change in the post-developmental state: Korean telecommunications market restructurings from a comparative perspective

This study explains the limits of institutional transformation in Korea from the developmental state to a post-developmental state, in terms of regulatory institutions instead of developmental institutions. The Korean state has taken advantage of the government's discretionary policy changes and power formed by both informal state institutions and informal policy networks, while the regulatory state has placed a special emphasis on social consensus as well as political support for changes of market institutions. New market rules and laws have also been inefficient and ineffective for fair market competition. Limits of regulatory governance change have occurred due to misalignments between informal regulatory institutions in the developmental state and formal regulatory institutions in the post-developmental state. State managers have created discretionary state intervention in policy implementation, politicized the roles of regulatory agencies, and brought ministry-type regulatory state institutions back in. The establishment of effective market institutions has failed due to informal market institutions (unfair and illegal market practices) that have interfered with the policy implementation of new formal market regulations.     

Women’s work and development in Latin America

The discussion explores the problem of women's employment patterns under capitalist development in Latin America, first by analyzing the way in which women's work has been conceptualized within modernization theory. It then goes on to examine the 2 types of work in which most Latin American women are engaged -- domestic service and informal work such as selling produce and taking in laundry -- to provide evidence for challenging modernization theory and for developing a more useful approach. Subsequently, the discussion considers women's domestic and informal work within the context of capitalist development, which provides some insight into the broader structures shaping women's employment. Finally, the discussion proposes some reconceptualizations of women's work and development. Modernization theorists analyze women's work in the cities within a variety of constructs, interpreting it as a backward manifestation of traditional society, a reflection of women's inadequate training for the modern sector, an indication of women's primary orientation to the family, or as a phenomenon that is too tangential to warrant examination. The primary assumption is that modernization improves women's status and the conditions of their lives as it brings greater productivity, more advanced technology, and more highly differentiated institutions. Assumptions concerning women's absorption into the modern sector and the equalization of work roles between men and women are not borne out by actual employment trends, which reveal the persistent concentration of women in domestic work, informal jobs, and the lower-paying service jobs. Despite their predominance, domestic service and informal jobs are infrequently included in employment statistics and are virtually ignored in studies of development, yet these 2 types of work are the primary forms of work for Latin American women. Even when modernization theorists recognize the proliferation of informal and domestic service jobs, they see it as part of a progressive development stage, with displaced rural laborers becoming incorporated into the modern sector by way of informal jobs. In most Latin American countries, rural women become a permanent part of the services and the informal labor market when they move to the cities. There is little sign of their transition to industrial employment. In general, capitalist development marginalizes Latin American women, who in several important ways lose status. The range of pursuits considered women's work should include their activities within the infromal labor sector. Informal work is still virtually unexplored, especially as it relates to wage work in underdeveloped countries. Informal labor is not registered in the census, nor is it included in the gross national product. Yet, it is a major component of women's work. Domestic service and infromal jobs should be seen in relation to other forms of labor and to total social production.     

Social Capital and Access to Credit: Evidence from Uganda

We use a nationally representative survey in Uganda to study the links between social capital and financial access. Our results indicate a positive association between individual social capital and access to institutional credit, but no significant relationship between generalised trust and credit access. The effect of individual social capital is more pronounced for poorer people, in rural areas, and in areas where generalised trust is low. Individual social capital seems to promote access especially to semiformal and informal financial institutions.     

The Transnational Debt Architecture and Emerging Markets: the politics of paradoxes and punishment

The Argentine default at the end of 2001 highlighted the ongoing problems plaguing the existing transnational debt architecture, namely the tensions between creditor rights and human rights. While these debates have thrown important light on what needs to be done in terms of improving the transnational debt architecture, few studies have actually attempted to evaluate critically the manner in which transnational debt has been managed since the outset of the Bretton Woods system in 1944. I argue that the postwar informal arrangement governing transnational debt architecture not only helps augment the power of credit to serve as an effective form of social discipline, but that it is also profoundly contradictory. Through an historical survey, spanning the beginning of the Bretton Woods system to the recent Argentine default, I demonstrate that the informal nature of the transnational debt architecture, coupled with the mounting power of global financial capitals over debtor states, has played a major role in bringing about increased levels of volatility and vulnerability in the international credit system.     

How Infrastructure and Financial Institutions Affect Rural Income and Poverty: Evidence from Bangladesh

The mechanisms by which the poor benefit from economic growth remain a topic of debate in development literature. We address this issue in the context of rural Bangladesh, using a pooled dataset of three household panels between 1991–2001. Expansion of irrigation, paved roads, electricity, and access to formal and informal credit have (through different veins) led to higher rural farm and non-farm incomes, accounting for exogenous local agroclimatic endowments that explain a large part of the variation in the growth of infrastructure and credit programmes. However, this has not translated into substantial reductions in poverty for the poorest households.     

When Shadow Banking Can Be Productive: Financing Small and Medium Enterprises in China

Small and medium enterprises (SMEs) represent the backbone of China’s economy, yet they face challenges in accessing bank credit. SMEs thus rely on a wide range of alternative sources, including informal finance, online peer-to-peer (P2P) platforms, registered non-banking financial institutions (NBFIs), and underground financiers. This article distinguishes among different types of ‘shadow banking’ to clarify popular misconceptions about the nature of risks associated with informal financial intermediation in China. Given their familiarity with local business conditions and needs, regulated and well-managed NBFIs could provide an enduring foundation for commercialised financial intermediation serving SMEs.     

Agricultural Workers,Credit Rationing and Family Networks in Rural Mexico

Abstract

We use mixed methods and first-hand household data in Mexico to investigate credit practices by households engaged in agricultural wage employment. Quantitative analysis shows evidence of rationing in the formal sector but also suggests the existence of mitigating mechanisms. Qualitative analysis provides additional insights. First, income patterns associated with agricultural wage generate income smoothing needs that are sometimes better met by the informal sector. Second, family networks can perform key functions as gateways to the formal sector, through specific informal arrangements that inject flexibility into formal rules and procedures.     

The Balance of Power in Rural Marketing Networks: A Case Study of Snake Trading in Cambodia

Producers in small-scale rural markets often receive unfavourable prices for their goods as a result of more powerful market participants. This study uses a combination of price analysis and interview data to assess the position of snake hunters in the aquatic snake market from Tonle Sap Lake in Cambodia. Despite the hunters' dependence on intermediary traders for market access and credit, the evidence implies that they are not powerless participants. Intermediary traders operate under high competition as a result of the increasing scarcity of snakes and therefore, despite interlocked credit and snake markets, offer relatively high prices to hunters.     

Transnational mobility,social capital,and cosmopolitan women traders in Ghana

Abstract

The dynamic economic power of Ghanaian women as traders in cloth and foodstuffs is well documented in the humanities and social sciences. This paper focuses on an emergent category of Ghanaian traders, women who are educated abroad and travel the globe to purchase consumer items, art, and cloth to sell on the Ghanaian market. The narratives of these women highlight numerous sociohistorical moments relevant to the global economy. As first- and second-generation immigrants in North America, these young traders are the children of the first-wave highly skilled African immigrants who sought educational opportunities in North America and Europe in the 1960s–1970s. The offspring of these educational elite now often speak of and act on a different set of desires and experience, to earn degrees in North America and Europe but return to Ghana in order to start entrepreneurial endeavors in art, fashion, and music. This new Ghanaian market woman earns a lucrative income using their cultural capital garnered through highly prized Western diplomas, the social history of women as formidable traders in Ghana, and the economic start-up funds garnered from transnational job opportunities and global family networks. In this paper, I examine the ways in which young women take advantage of global capital in order to achieve economic success in ways that question as well as challenge public policy and development programs in Ghana. Using a qualitative analysis based on ethnographic research conducted during 2009–2011 during which I interviewed 16 women ages 23–36, this paper examines how elite women progressively participate in and benefit from globalization in the ballooning informal economy of Ghana.     

Local Government Support for Women in the Informal Economy in Durban, South Africa

This paper examines the response of the city government of Durban to the growth of the informal economy. It argues that, unlike the national government of South Africa, Durban's government has been creative in designing policies that favor informal economy workers, particularly women. These progressive policies are the result of an innovative local government and, to some extent, an emerging self-employed women worker's union that has been able to exert influence on informal economy policies.     

Viability of Self-Employment

Empirical studies on self-employment uniformly cite the high mortality rate in both developed and developing countries. Several studies on the entry into self-employment incorporate a savings constraint. Policy makers and international aid agencies have responded by providing credit to would-be entrepreneurs yet the mortality rate persists. We formulate a model of the viability of self-employment that incorporates the impact of cost perceptions at the time of entry. We use the ability to meet monthly loan repayment ratios as a measure of viability since loans are usually the largest explicit cost. Our results have important policy implications on the desirability of interest rate subsidies, the size of initial capital relative to market size and criteria for granting additional credit to existing enterprises.