Reputation and Credit without Collateral in Africa’s Formal Banking

The analysis of reputation as a contract enforcement instrument where legal institutions, especially commercial courts, fail to enforce commercial contracts has focused on informal credit markets. The literature centres on the argument that lenders or co-borrowers in group lending can easily monitor each borrower, given the small size of an individual lender.s market. Verifiability allows the detection of opportunistic default and hence allows its punishment. This paper argues that in Africa, even formal credit markets rely on reputation. However, the modelling strategy is not based on monitoring and verifiability, given the potential for residual information asymmetry between a bank and a borrower after screening. Instead, the paper conceptualises the relationship between a bank and a borrower as an infinitely repeated game. The bank learns the type of the borrower through repeated interaction, a process by which a borrower builds his reputation as an honest partner. A defaulting dishonest borrower forfeits his access to future loans. The main result of the model is that the higher the reputation of a borrower, the lower his equilibrium payoff that is incentive compatible with debt repayment. Conversely, in the absence of any reputation, the payoff that is incentive compatible with repayment is equal to infinity meaning that credit trade is impossible without either a credible formal contract enforcement mechanism or some level of reputation.

How long can inflation tax compensate for the loss of government revenue in war economies? Evidence From Burundi

We explore the role of reciprocity in wage determination by combining experimental and survey data. The experiment is similar to Berg, Dickhaut and McCabe.s (1995) and is conducted with Ghanaian manufacturing workers. The survey relates to the same sample workers and the firms within which they are employed. We find a strong positive association between individual reciprocity and individual wages. However, the direction of causality is unclear. Various aspects of the distribution of the tendency to reciprocate within an employee.s workforce are also associated with that employee.s wage and, in this case, there are strong arguments for a causal link is from former to latter. In particular, the mean, median, and minimum levels of reciprocity have a positive effect on wages, while the spread in the distribution (standard deviation) has a strong significant negative effect. This suggests that homogenous behaviour, or convergence to a norm, is rewarded. The results underline the importance of behavioural characteristics and firm culture for the operation of the labour market.wages, reciprocity, field experiment

Credit Can Precipitate Firm Failure: Evidence from Kenyan Manufacturing in the 1990s

This paper models firm survival in Kenyan manufacturing with a particular emphasis on the effect of credit on firm resilience. The paper explores how firms coped with the challenging economic environment that prevailed in the 1990s particularly the effect of the dramatic increase in interest rates. The key finding is that the burden of past loans precipitated firm failure in the 1990s but overdrafts did not seem to have had a significant impact on firm failure. Furthermore, older firms appear to have resisted better than younger ones, but there is no evidence that large firms had higher survival rates. These results are robust to different specifications, namely probit models, Cox proportional hazard models and exponential, Gompertz and Weibull parametric hazard models. The main contribution of the paper is to highlight the role of credit in explaining firm failure in a shockprone developing economy. The study shows that the key factors explaining firm survival in developed economies, namely size and age, are not necessarily the most relevant determinants of firm survival in developing economies. Methodologically, this paper is one of the few that have applied hazard analysis to firms in developing economies.

Explaining Growth in Burundi: 1960-2000

This study analyses Burundi’s economic performance over the period 1960-2000 and finds that it has been catastrophic. The usual economic factors explaining growth are endogenous to political decisions, suggesting that it is politics not economics that explains the dismal performance. This picture particularly limits the relevance of textbook models that rely on the assumption of a competitive resource allocation rule. When cronies rather than qualified managers are running the economy, when priority is given to investment projects in function of their location rather than the objective needs of the economy, the economic model loses its explanatory power. Economic performance has been shaped by the occurrence of violent conflicts caused by factions fighting for the control of the state and its rents. The capture of rents by a small group have become the overarching objective of the successive governments that have ruled the country since shortly after its independence. Therefore, the economic system will not change unless the political system is modernised from a dictatorial regime playing a zero-sum game to a more democratic and accountable regime. Therefore, it would be naïve to propose that economic reforms will boost the country’s economy if they are not preceded or at least accompanied by political reforms. One central message of this study is that Burundi’s poor economic performance is the result of specific identifiable factors evolving around governance. There is nothing fundamentally wrong with Burundi: Development failure may be reversed if the issues identified in the study are properly addressed.

Explaining growth in Burundi: 1960-2000.

This study analyses Burundi’s economic performance over the period 1960- 2000 and finds that it has been catastrophic. The usual economic factors explaining growth are endogenous to political decisions, suggesting that it is politics not economics that explains the dismal performance. This picture particularly limits the relevance of textbook models that rely on the assumption of a competitive resource allocation rule. When cronies rather than qualified managers are running the economy, when priority is given to investment projects in function of their location rather than the objective needs of the economy, the economic model loses its explanatory power. Economic performance has been shaped by the occurrence of violent conflicts caused by factions fighting for the control of the state and its rents. The capture of rents by a small group have become the overarching objective of the successive governments that have ruled the country since shortly after its independence. Therefore, the economic system will not change unless the political system is modernised from a dictatorial regime playing a zero-sum game to a more democratic and accountable regime. Therefore, it would be naïve to propose that economic reforms will boost the country’s economy if they are not preceded or at least accompanied by political reforms. One central message of this study is that Burundi’s poor economic performance is the result of specific identifiable factors evolving around governance. There is nothing fundamentally wrong with Burundi: Development failure may be reversed if the issues identified in the study are properly addressed.

Going nuclear: gene family evolution and vertebrate phylogeny reconciled

Gene duplications have been common throughout vertebrate evolution, introducing paralogy and so complicating phylogenctic inference from nuclear genes. Reconciled trees are one method capable of dealing with paralogy, using the relationship between a gene phylogeny and the phylogeny of the organisms containing those genes to identify gene duplication events. This allows us to infer phylogenies from gene families containing both orthologous and paralogous copies. Vertebrate phylogeny is well understood from morphological and palaeontological data, but studies using mitochondrial sequence data have failed to reproduce this classical view. Reconciled tree analysis of a database of 118 vertebrate gene families supports a largely classical vertebrate phylogeny

Evolution of the magnetic field distribution of active regions

AIMS: Although the temporal evolution of active regions (ARs) is relatively well understood, the processes involved continue to be the subject of investigation. We study how the magnetic field of a series of ARs evolves with time to better characterise how ARs emerge and disperse. METHODS: We examined the temporal variation in the magnetic field distribution of 37 emerging ARs. A kernel density estimation plot of the field distribution was created on a log-log scale for each AR at each time step. We found that the central portion of the distribution is typically linear, and its slope was used to characterise the evolution of the magnetic field. RESULTS: The slopes were seen to evolve with time, becoming less steep as the fragmented emerging flux coalesces. The slopes reached a maximum value of ∼-1.5 just before the time of maximum flux before becoming steeper during the decay phase towards the quiet-Sun value of ∼-3. This behaviour differs significantly from a classical diffusion model, which produces a slope of -1. These results suggest that simple classical diffusion is not responsible for the observed changes in field distribution, but that other processes play a significant role in flux dispersion. CONCLUSIONS. We propose that the steep negative slope seen during the late-decay phase is due to magnetic flux reprocessing by (super)granular convective cells

Observable Signatures of Energy Release in Braided Coronal Loops

We examine the turbulent relaxation of solar coronal loops containing non-trivial field line braiding. Such field line tangling in the corona has long been postulated in the context of coronal heating models. We focus on the observational signatures of energy release in such braided magnetic structures using MHD simulations and forward modelling tools. The aim is to answer the question: If energy release occurs in a coronal loop containing braided magnetic flux, should we expect a clearly observable signature in emissions? We demonstrate that the presence of braided magnetic field lines does not guarantee a braided appearance to the observed intensities. Observed intensities may – but need not necessarily – reveal the underlying braided nature of the magnetic field, depending on the degree and pattern of the field line tangling within the loop. However, in all cases considered the evolution of the braided loop is accompanied by localised heating regions as the loop relaxes. Factors that may influence the observational signatures are discussed. Recent high-resolution observations from Hi-C have claimed the first direct evidence of braided magnetic fields in the corona. Here we show that both the Hi-C dataand some of our simulations give the appearance of braiding at a range of scales

Reputation and credit without collateral in Africa’s formal banking

The analysis of reputation as a contract enforcement instrument where legal institutions, especially commercial courts, fail to enforce commercial contracts has focused on informal credit markets. The literature centres on the argument that lenders or co-borrowers in group lending can easily monitor each borrower, given the small size of an individual lender's market. Verifiability allows the detection of opportunistic default and hence allows its punishment. This paper argues that in Africa, even formal credit markets rely on reputation. However, the modelling strategy is not based on monitoring and verifiability, given the potential for residual information asymmetry between a bank and a borrower after screening. Instead, the paper conceptualises the relationship between a bank and a borrower as an infinitely repeated game. The bank learns the type of the borrower through repeated interaction, a process by which a borrower builds his reputation as an honest partner. A defaulting dishonest borrower forfeits his access to future loans. The main result of the model is that the higher the reputation of a borrower, the lower his equilibrium payoff that is incentive compatible with debt repayment. Conversely, in the absence of any reputation, the payoff that is incentive compatible with repayment is equal to infinity meaning that credit trade is impossible without either a credible formal contract enforcement mechanism or some level of reputation

D 5.5.2. Report on near-market consumer testing of new improved products and substitutes in Africa. Project AFTER “African Food Tradition rEvisited by Research”

In this deliverable, the reengineered products relating to groups 1 to 3 are tested by consumers in Africa in order to test whether the acceptance meets consumer needs. The summaries are by group. These products were widely different and tested in differing cultures and situations. A common feature, however, is that all products are already commonly consumed by the communities and accepted, particularly with respect to the baseline products. Some products were found to be more acceptable (Gowe and Akpan in Benin, Kenkey in Ghana, Kong and Lanhouin in Senegal, Bissap and Baobab in Senegal), some of similar acceptance (Kitoza in Madagascar) and some were less acceptable (Kishk Sa'eedi in Egypt and Jaabi in Cameroon). Ways forward are discussed in all cases. Group 1: The reengineered group 1 products had mixed acceptance to consumers. Ones that were highly accepted were the reengineered Akpan which was highly accepted regardless of age, gender, socio- professional category and possessions (goods) and the majority (84.9%) expressed an interest for purchasing the reengineered Akpan and the reengineered gowe (n=100 consumers) in Benin, which was strongly accepted and more so than the traditional gowe. However, the reengineered Kenkey in Ghana while being comparable acceptance to the traditional white kenkey this would only meet a niche market. However, for the reengineered Kishk Sa'eedi, it was less acceptable and the difference was due to sour taste and spicy flavour. Group 2:The group 2 products had mixed acceptance among consumers. In the case of Kong in and Lanhouin in Senegal, the reengineered products had improved acceptance while for kitoza in Madagascar, there was no improvement in acceptance apart from those in terms of quality and safety. More specifically, Kong made using liquid smoke novel technique (RLK) had by far the highest acceptance and could easily be integrated as part of the Senegalese cuisine. This shows that there is a potential for RLK on the Senegalese market. Two types of reengineered Lanhouin types (Lanhouin dry powder, Lanhouin dry fillet) were greatly acceptable and the powdered form more than the fillet. In the case of Kitoza, consumer acceptance studies showed that there was no significant difference between all samples tested. Group 3: Group 3 reengineered products had mixed acceptance among consumers. Re-engineered bissap (hibiscus drinks) in Senegal were positively appreciated by consumers in Senegal and better accepted than the traditional commercial infusion used as baseline comparison. However, the new drinks were not perceivably different from the baseline drink to consumers concerning both the traditional character and the nutritional and healthy attributes. The reengineered baobab drinks were positively appreciated by consumers in Senegal and significantly better appreciated than the traditional commercial ones earlier tested. Jaabi (Ziziphus mauritiana). The result is the proposition of a reengineered Yaabande presenting fine texture well appreciated by consumers. However, particle size was critical and this needed to be lower than 125μm. Due to this limit, processors have adopted the manual production of flour of particle size 250μm>Ø>125μm, which is less tiresome, though it appears in second rank in the preference of consumers. The detailed methodology for each product is given for Groups I, II and III respectively. Common to all of the methodologies is the Ethical assessment and consent which is listed as follows: Ethical assessment and consent. The studies have been assessed and approved by the University of Greenwich Research Ethics Committee and the Ethics Committee at CIRAD. Consent was sought from sensory panellists and from adult consumers participating in this study. Enumerators informed participants about the study and explained that their participation was entirely voluntary, that they could stop the interview at any point and that the responses would be anonymous