Portrait of Dr Zaki Wahhaj

Dr Zaki Wahhaj

Reader in Economics


Zaki Wahhaj is a Reader in Economics. He obtained his BSc in Economics with Mathematics from Yale University, and a PhD in Economics from MIT. Following his PhD, he spent two years as a postdoctoral fellow at the Centre for Research in Economic Development (CRED) at the University of Namur, Belgium, and three years as lecturer in development economics at the Department of International Development (ODID), University of Oxford. He joined the University of Kent in 2012.

Research interests

Zaki's main fields of research are in economic development and applied theory. His current research deals, broadly, with the themes of social norms and household decision-making in developing countries, including work on: 

  • extended family networks
  • risk-sharing and formal insurance
  • microfinance
  • the impact of formal law on customary practices
  • issues relating to early marriage and female education.

During the period 2013-16, Zaki was a principal investigator in a three-year research project on 'The Role of Secondary Schooling and Gender Norms in the Long-term Opportunities and Choices of Rural Bangladeshi Women', funded by the Australian Development Research Awards Scheme. Further information about the project can be obtained from www.integgra.org.

Since 2016, he has been a principal investigator (together with Harounan Kazianga) on a project on 'Enhancing Access to Weather Index Agricultural Insurance in Burkina Faso', funded by the International Initiative on Impact Evaluation, in partnership with Innovations for Poverty Action.

Zaki's RePEc page is http://econpapers.repec.org/RAS/pwa344.htm



Zaki is presently looking to supervise PhD students in the following research areas:

  • intra-household decision-making
  • social norms
  • microfinance
  • informal and formal insurance
  • social networks
  • health and education in developing countries.

Current students

Past students


Administrative roles

  • Non-Academic Impact Manager
  • PhD Job Market Placement Co-ordinator



  • Kazianga, H. and Wahhaj, Z. (2020). Will Urban Migrants Formally Insure their Rural Relatives? Family Networks and Rainfall Index Insurance in Burkina Faso. World Development [Online] 128. Available at: http://dx.doi.org/10.1016/j.worlddev.2019.104764.
    Large segments of the population in developing countries, especially in rural areas, have a high level of vulnerability to weather-related shocks but have limited means to insure themselves against them. In recent years, microfinance institutions have experimented with micro-insurance products, including rainfall index insurance, but the uptake of these products has generally been very low. We present findings from a pilot study exploring whether and how existing ties between urban migrants and rural farmers may be used to provide the latter improved access to formal insurance. Urban migrants in Ouagadougou (the capital of Burkina Faso) originating from nearby villages were offered, at the prevailing market price, a rainfall index insurance product that can potentially protect their rural relatives from adverse weather shocks. The product had an uptake of 22% during the two-week subscription window. Half the urban migrants in the study were randomly offered an insurance policy in which payouts would be made, not to the subscriber, but directly to the intended beneficiary. This feature
    increased uptake rates by 17-22 percentage points. We argue that rainfall index insurance can complement informal risk-sharing networks by mitigating problems of informational asymmetry and self-control issues.
  • Asadullah, M. and Wahhaj, Z. (2019). Early Marriage, Social Networks and the Transmission of Norms. Economica [Online] 86:801-831. Available at: https://doi.org/10.1111/ecca.12291.
    We investigate whether female early marriage is a conduit for the transmission of social norms, specifically norms relating to gender roles and rights within the household. We exploit differences in age at menarche between sisters as an exogenous source of variation in marriage age. This approach allows us to control for beliefs and attitudes that are transmitted from parents to children. Using a sample of unmarried adolescents, we first show that the timing of menarche has no direct effect on adolescent attitudes towards gender norms. Yet we find that early marriage increases agreement with statements supportive of traditional gender roles and gender bias in the allocation of resources. We also find some evidence that early marriage worsens the (self-reported) quality of a woman’s post-marital social network
  • Mahmud, M. and Wahhaj, Z. (2019). Charitable Giving or Signalling? Voluntary Contributions by Microcredit Borrowers in Pakistan. Journal of Economic Behavior & Organization [Online] 158:394-415. Available at: https://doi.org/10.1016/j.jebo.2018.12.011.
    This paper investigates charitable giving by atypical donors in an unusual setting: the donors are microfinance recipients who provide charitable contributions to their lender, a non-profit institution. The institution provides interest-free loans but encourages its borrowers to make a voluntary contribution of any amount with the monthly instalment for principal repayment. Analysis of these monthly voluntary contributions suggests that the institution rewards borrowers for their contributions by giving them repeat loans. In particular, borrowers on joint liability loans in poorly performing groups make larger contributions using individual contributions to override a group-level signal. We develop a theory to show that this giving behaviour is consistent with borrowers signalling their level of success with the loan, but inconsistent with other explanations, including purely altruistic motives for giving. We argue that this mechanism of signalling success can provide the basis for a potential innovation in providing financial services in the presence of informational asymmetries.
  • Wahhaj, Z. (2018). An economic model of early marriage. Journal of Economic Behavior and Organization [Online] 152:147-176. Available at: https://doi.org/10.1016/j.jebo.2018.06.001.
    To explain female adolescent marriage patterns around the world, we develop a marriage market
    model with asymmetric information about prospective marriage partners, and a noisy signal about the
    brideís quality during an engagement. In equilibrium, there is a negative relationship between the age and
    perceived quality of women on the marriage market and, consistent with available evidence, older brides
    make higher net marriage payments. The model also implies path dependence in the evolution of adolescent
    marriage practices over time and persistent e§ects on marriage practices from transitory shocks.
    Model simulations show interventions which increase the opportunity cost of early marriage attenuates
    the association between bride quality and age, triggering a virtuous cycle of marriage postponement.
  • Kazianga, H. and Wahhaj, Z. (2017). Intra-household Resource Allocation and Familial Ties. Journal of Development Economics [Online] 127:109-132. Available at: http://dx.doi.org/10.1016/j.jdeveco.2017.03.002.
    In this paper, we investigate the link between intra-household resource allocation and familial ties between household members. We show that, within the same geographic, economic and social environments, households where members have `stronger' familial ties (nuclear family households) achieve near Pareto efficient allocation of productive resources and Pareto efficient allocation of consumption while households with `weaker' familial ties (extended family households) do not. We propose a theoretical model of the household based on the idea that altruism between household members vary with familial ties which generates predictions consistent with the observed empirical patterns.
  • Pal, S. and Wahhaj, Z. (2016). Fiscal Decentralisation, Local Institutions and Public Good Provision: Evidence from Indonesia. Journal of Comparative Economics [Online] 45:383-409. Available at: http://dx.doi.org/10.1016/j.jce.2016.07.004.
    Using data from the Indonesian Family Life Surveys, we study the impact of fiscal decentralisation in Indonesia on local public spending across communities characterised by different types of informal and formal institutions. Our results provide new evidence that fiscal decentralisation led to a significant increase in community spending on social infrastructure (health and education) in communities which observed strict adherence to customary laws and had a tradition of local democracy. We argue that investment in transport and communication facilitates exchange with outsiders and improves the outside options of community members, thus making it more difficult to sustain intra-community cooperation. Consequently, communities which enjoy a high level of cooperation in collective activities benefit less from investing in transport and communication and are more inclined to invest in social infrastructure.
  • Casini, P., Vandewalle, L. and Wahhaj, Z. (2015). Public Good Provision in Indian Rural Areas : The Returns to Collective Action by Microfinance Groups. World Bank Economic Review [Online] 1. Available at: https://doi.org/10.1093/wber/lhv041.
    Self-help groups (SHGs) are the most common form of microfinance in India. The authors provide evidence that SHGs, composed of women only, undertake collective actions for the provision of public goods within village communities. Using a theoretical model, this paper shows that an elected official, whose aim is to maximize reelection chances, exerts higher effort in providing public goods when private citizens undertake collective action and coordinate their voluntary contributions towards the same goods. This effect occurs although government and private contributions are assumed to be substitutes in the technology of providing public goods. Using first-hand data on SHGs in India, the paper tests the prediction of the model
    and shows that, in response to collective action by SHGs, local authorities tackle a larger variety of public issues, and are more likely to tackle issues of interest to SHGs. The
    findings highlight how the social behavior of SHGs can influence the governance of rural Indian communities.
  • Platteau, J., Somville, V. and Wahhaj, Z. (2014). Elite capture through information distortion: A theoretical essay. Journal of Development Economics [Online] 106:250-263. Available at: http://doi.org/10.1016/j.jdeveco.2013.10.002.
    We investigate donor–beneficiary relationships in participatory development programmes, where (i) communities are heterogeneous and dominated by the local elite, (ii) the elite strategically proposes a project to the donor, knowing that the latter has imperfect knowledge of the needs of the target population.

    We analyse how changes in the donor's outside option or information about the needs of the target population affect elite capture. Our central, paradoxical result is that a more attractive outside option, or a higher quality of donor's information may end up encouraging the local elite to propose a project that better matches their own preference rather than the preference of the grassroots. Moreover, in the case where the noise in the donor's information follows a normal distribution, we find that a better outside option generally decreases elite capture but improved information about the needs of the target population is likely to increase elite capture.
  • Platteau, J. and Wahhaj, Z. (2014). Strategic Interactions Between Modern Law and Custom. Handbook of the Economics of Art and Culture [Online] 2:633-678. Available at: http://doi.org/10.1016/B978-0-444-53776-8.00022-2.
    The question of the role of statutory law in social environments permeated by custom and traditional norms is particularly important when the state law aims to correct social inequalities embedded in the custom. The conventional view is that modern law often fails to take root in custom-driven poor societies, especially when the formal law conflicts with the custom. Based on a simple, static analytical model, we argue that from the low activity of modern courts we cannot infer that the statutory law is ineffectual. Indeed, there may be an effective indirect impact exerted through a ‘magnet’ effect of the formal law on the informal rulings of customary authorities. We highlight various factors impinging on this effect and illustrate their operation with a number of examples drawn from the existing literature, as well as from the authors’ own field experience. Another striking result is that pro-poor radicalism may defeat its own purpose: under certain conditions, a moderate law better serves the interests of the poor than a radical law. The same conclusion can actually be reached with the help of a more complex model in which the size of the community subject to customary mediation is itself endogenous, and the benefits and costs of remaining within the customary jurisdiction relative to those of going to the formal court depend themselves on community size. The purpose of the chapter is therefore to open to the instruments of micro-economic analysis a new field: interactions between modern statutory law and custom in the context of developing countries subject to strong and sometimes inegalitarian social norms. It will be argued that the economist’s tools can shed useful light on certain empirical facts and observations of legal anthropologists and other social scientists.
  • Baland, J., Somanathan, R. and Wahhaj, Z. (2013). Repayment incentives and the distribution of gains from group lending. Journal of Development Economics [Online] 105:131-139. Available at: http://doi.org/10.1016/j.jdeveco.2013.07.008.
    Group loans with joint liability are a distinguishing feature of many microfinance programs. While such lending benefits millions of borrowers, major lending institutions acknowledge its limited impact among the very poor and have shifted towards individual loans. This paper attempts to explain this trend by exploring the relationship between borrower wealth and the benefits from group lending when access to credit is limited by strategic default. In our model, individuals of heterogeneous wealth face a given investment opportunity so poor investors demand larger loans. We show that the largest loan offered as an individual contract cannot be supported as a group loan. Joint liability cannot therefore extend credit outreach in the absence of additional social sanctions within groups. We also find that the benefits from group loans are increasing in borrower wealth and that optimal group size depends on project characteristics. By allowing for multi-person groups and wealth heterogeneity in the population, the paper extends the standard framework to analyze joint liability and contributes to an understanding of the conditions under which microcredit can reduce poverty.
  • Kazianga, H. and Wahhaj, Z. (2013). Gender, Social Norms, and Household Production in Burkina Faso. Economic Development and Cultural Change [Online] 61:539-576. Available at: http://dx.doi.org/10.1086/669258.
    Empirical studies of intrahousehold allocation have revealed that, in many instances, gender is an important determinant in the allocation of resources within the household. Yet, within the theoretical literature, why gender matters within the household remains an open question. In this article, we propose a simple model of intrahousehold allocation based on a particular social institution for the organization of agricultural production practiced among certain ethnic groups in West Africa. We highlight how this institution, while resolving certain problems of commitment and informational asymmetry, can also lead to a gendered pattern in the allocation of productive resources and consumption within the household. Using a survey of agricultural households in Burkina Faso, we show, consistent with this theory, that plots owned by the head of the household are farmed more intensively and achieve higher yields than plots with similar characteristics owned by other household members. Male and female family members who do not head the household achieve similar yields. We argue that the higher yields achieved by the household head may be explained in terms of social norms that require him to spend the earnings from some plots under his control exclusively on household public goods, which in turn provides other family members the incentive to voluntarily contribute labor on his farms. Using expenditures data, as well as measures of rainfall to capture weather-related shocks to agricultural income, we show that the household head has, indeed, a higher marginal propensity to spend on household public goods than other household members. The fact that the head of the household is usually male accounts for the gendered pattern in labor allocation and yields across different farm plots.
  • Ngo, T. and Wahhaj, Z. (2012). Microfinance and Gender Empowerment. Journal of Development Economics [Online] 99:1-12. Available at: http://dx.doi.org/10.1016/j.jdeveco.2011.09.003.
    In this paper, we develop a theoretical model of household production, bargaining and credit to analyse how access to microcredit affects intra-household decision-making and welfare, and identify conditions under which female household members are most likely to benefit. We show that, consistent with ethnographic accounts of the impact of microcredit programmes on poor households, access to loans can lead to a variety of outcomes for intra-household decision-making and welfare depending on initial conditions and that, in some instances, women borrowers may experience a decline in welfare. We identify two instances in which a woman is most likely to benefit: when there is scope for investing the loan profitably in a joint activity, and when a large share of the household budget is devoted to household public goods.
  • Aldashev, G., Chaara, I., Platteau, J. and Wahhaj, Z. (2012). Modern Law as a Magnet to Reform Custom. Economic Development and Cultural Change [Online]:795-828. Available at: http://www.jstor.org/stable/10.1086/665607.
  • Aldashev, G., Chaara, I., Platteau, J. and Wahhaj, Z. (2012). Using the law to change the custom. Journal of Development Economics [Online] 97:182-200. Available at: http://dx.doi.org/10.1016/j.jdeveco.2011.03.001.
    The custom often acts as a powerful hindrance to equity-increasing changes. In this paper, we present a simple model of legal dualism in which a progressive legal reform can, under certain conditions, shift the conflicting custom in the direction intended by the legislator. Formal law then acts as an outside anchor that exerts a 'magnet effect’ on the custom. We also characterize the conditions under which a moderate reform performs better than a radical one in improving the welfare of the disadvantaged sections of the population. We illustrate our insights using examples on inheritance, marriage, and divorce in Sub-Saharan Africa and India.
  • Aldashev, G., Platteau, J. and Wahhaj, Z. (2011). Colloquium Paper: Legal Reform in the Presence of a Living Custom: An Economic Approach. Proceedings of the National Academy of Sciences [Online] 108:21320. Available at: http://dx.doi.org/10.1073/pnas.1017139108.
    Empowerment of disadvantaged groups of population is a key issue in development. One major difficulty in implementing progressive legal reforms arises from the persistent and contrary influence of custom. In this paper, we present a simple theoretical framework that analyzes how customary rules evolve under the impact of a change in formal law. This evolution is ultimately caused by a modification of relative costs and benefits of exiting the community by members of the disadvantaged groups as a result of change in the law. We also describe how the welfare of these groups is affected and provide illustrative evidence.
  • Wahhaj, Z. (2010). Social norms and individual savings in the context of informal insurance. Journal of Economic Behavior and Organization [Online] 76:511-530. Available at: http://dx.doi.org/10.1016/j.jebo.2010.08.012.
    This paper develops a theory of informal insurance in the presence of an intertemporal technology. It is shown that when an insurance agreement suffers from enforcement problems, constraints on individual savings behaviour can enable the group to sustain greater cooperation. This result provides a motivation for a variety of social norms observed in traditional societies which discourage ‘excessive’ accumulation of wealth by individuals. The paper also shows that social norms that discourage savings are more likely to benefit poorer communities and thus, paradoxically, cause them to fall further behind even as it serves a useful purpose.


  • Amirapu, A., Asadullah, M. and Wahhaj, Z. (2019). Child Marriage Law, Gender Norms and Marriage Customs. Economic Development and Institutions Working Paper Series. Available at: https://edi.opml.co.uk/resource/child-marriage-law-gender-norms-marriage-customs-bangladesh/.
    The negative welfare consequences of child marriage are well established, but the phenomenon is still ubiquitous in developing countries, where one in three girls is married before the age of 18. Although most countries have a legal minimum age of marriage set at 18 years, in practice marriage age in developing countries is determined by social norms. In this paper, we test the hypothesis that formal laws can influence social norms – even when the laws are not enforced. We do this by administering a randomized video-based information treatment that accelerates knowledge transmission about a new child marriage law in Bangladesh which contains separate progressive and regressive components. We find evidence that our information treatments led to a change in participants’ own attitudes and behaviour (including reported attitudes regarding appropriate marriage age and willingness to contribute to a charity that campaigns against child marriage), but did not substantially influence their beliefs about attitudes or practices prevalent in their community. We use these findings to distinguish between alternative hypotheses for how the formal law may influence behaviour, arguing that they are consistent with “focal point” theory and “whistle-blowing”, but are inconsistent with the law having an “expressive effect”.
  • Crentsil, C., Gschwandtner, A. and Wahhaj, Z. (2018). The Effects of Risk and Ambiguity Aversion on Technology Adoption: Evidence from Aquaculture in Ghana. School of Economics.
    We study how aversion to risk and ambiguity affects the adoption of new technologies by Ghanaian smallholder aquafarmers. We conduct a set of field experiments designed to elicit farmers’ risk and ambiguity preferences and combine it with surveybased information on their technology adoption decisions. We find that aquafarmers who are more risk-averse were quicker to adopt the new technologies: a fast-growing breed of tilapia fish, extruded feed and floating cages. By contrast, ambiguity aversion has no effect on the adoption of the new tilapia breed and extruded feed. Furthermore, it slows down the adoption of floating cages - a technology which entails higher fixed costs than the others - and the effect is diminishing in the number of other adopters in the village. We argue that these differential effects are due to the fact that the technologies are risk-reducing, with potential ambiguity about their payoff distributions at the early stages of adoption. The findings highlight the importance of distinguishing between risk and ambiguity in investigating technology adoption decisions of small-holder farmers in developing countries


  • Crentsil, C. (2018). Essays On The Effects of Risk and Ambiguity Attitudes On Production Choices Of Smallholder Fish Farmers In Southern Ghana.
    This thesis contains four empirical chapters which together contribute to behavioural economics in the area of fish production in a developing country context. The key thread connecting all the empirical studies is the behavioural characteristic of farmers (risk and ambiguity attitudes) elicited through incentivised field experiments and general survey questions.
    The first empirical chapter seeks to answer the questions: What is the risk attitude of a typical smallholder fish farmer in a developing country? Do risk attitudes of fish farmers remain stable across different elicitation methods and contexts of validation? Risk attitude measures are known to be sensitive to the method of elicitation and context (Bauermeister and Mushoff, 2016). The purpose of this chapter is three-fold.
    1. It elicits and compares the risk attitudes of within-subject sample of smallholder fish farmers in southern Ghana using three of the frontier methods used to elicit risk attitudes in the literature. The risk attitudes elicited from these methods are employed in the subsequent chapters of this thesis to investigate how risk preferences affect production efficiency and technology adoption.
    2. It investigates how the risk attitude measures correlate with each other, and how they vary with farmer characteristics.
    3. It assesses whether the risk attitude measures can predict farmer responses to questions on hypothetical economic choices.
    The results show that a typical smallholder fish farmer is risk preferring in the gains-only lottery experiment, risk averse in the gains-and-losses lottery experiment but is risk neutral from the self-reported risk attitude scale. However, the risk attitude measures from the two lottery experiments are positively correlated, consistent with the assumption that the two experiments capture similar traits of the same farmer. This confirms that risk attitude measures are influenced by the method of elicitation and the context being examined. Some personal characteristics of the farmers influence their risk attitudes. Finally, while risk preferences from the lottery experiments failed to explain hypothetical economic choices, the stated risk preferences were significantly correlated with some hypothetical economic choices, perhaps due to hypothetical bias. These results indicate that care should be taken to tailor the elicitation of risk attitudes to contexts and domains farmers are familiar with.
    The second empirical analysis attempts to answer the question: to what extent does a fish farmer's risk attitude affect his/her level of economic efficiency? This is predicated on the assumption that the types, levels and frequency of application of inputs could be influenced by the risk attitudes of farmers. Data on the units of inputs, outputs and prices are collated from the farmers in an earlier survey, and their risk attitudes obtained from the previous chapter are then juxtaposed on their production data. The economic efficiency of the farmers is assessed with both the Stochastic Frontier Analysis (SFA) and the Corrected Ordinary Least Squares (COLS) techniques. While the former assumes that all deviations from the cost frontier are due to farmer-specific factors (including risk attitudes) and stochastic factors, the latter, a deterministic procedure, attributes all deviations from the frontier to farmer-specific factors. The evidence from this chapter suggests that over 80% of the total deviation from the cost frontier results from stochastic factors beyond the control of the farmers. It is also found that risk attitudes play no significant role in the economic efficiency of fish production in the study area. Based on the findings, it is concluded that stochastic factors, such as government policies, may have a greater impact on economic efficiency rather than risk attitudes of farmers.
    The third empirical study assesses how risk attitudes of fish farmers affect the speed of technology adoption; adoption decisions are modelled with duration models. This study focuses on the adoption of Floating Cages, Extruded Feed and Akosombo Strain of Tilapia (AST) technologies in the fish farming sector in southern Ghana. Contrary to most existing literature on speed of adoption of technologies (e.g. Liu, 2013), the results from this chapter show that risk averse farmers have a higher proclivity to adopt the AST, Extruded Feed and Floating Cage technologies at a point in time. This novel outcome is due to the nature of the technologies in question, as perceived by the farmers. Liu's (2013) study, for instance, focuses on the adoption of cotton seeds modified genetically with Bacillus thuringiensis (Bt) bacteria, which enables cotton plants to produce phytotoxins to kill pests. The subjective risks posed by these phytotoxins to the farmers themselves may be an additional source of uncertainty and a likely reason for the delayed adoption by risk averse farmers. However, in this chapter, even though the AST is also genetically modified, it produces no toxins and yet it is more disease-resistant than the local breeds, therefore it may be perceived by the farmers as risk-reducing and hence it may not be surprising that risk averse farmers adopt this technology earlier.
    In the final empirical study, attention is on how ambiguity attitudes affect the farming decisions of smallholder fish farmers, using the speed of adopting the AST technology as an example of such decisions. The speed of technology adoption is analysed with the hazard/survival model. Additionally, this chapter introduces and interacts the number of previous adopters in the same village with ambiguity attitude as a better test of the effect of ambiguity aversion on farmers' decisions. Where a farmer cannot predict with certainty the yield to be obtained from the new technology, an ambiguity averse farmer is expected to adopt the technology late. Ambiguity attitudes are elicited with Ellsberg's (1961) two-colour urn experiment. The results from this chapter show that the average fish farmer is ambiguity averse. However, risk aversion, but not ambiguity aversion, has a significant effect on the speed of adopting the AST technology in the study area, confirming the robustness of the finding in the previous chapter. I also find that the speed of adopting this technology increases with the number of prior adopters in the same village. The lack of any significant impact of ambiguity attitudes in determining the speed of adopting this technology suggests that there are other important determinants of adopting this technology, rather than lack of information about it, that affect other technology adoption decisions.
    Overall, this thesis demonstrates and presents the elicitation of risk and ambiguity preferences outside the usual laboratory setting by engaging fish farmers in a field experiment involving real cash incentives, as well as field surveys. The experiments and methods employed are at the frontier of research in the field of development economics. The results of the analysis presented in this thesis indicate that that risk preferences are sensitive to the method of elicitation, as well as the context or domain in which it is elicited. While contrary to findings from other studies, risk averse farmers are more prone to adopt improved fish farming technologies earlier than farmers who are not risk averse. This conclusion is plausible because the technologies may be perceived as risk-reducing by the farmers. This outcome remains robust when ambiguity aversion is introduced into the analysis of the technology adoption decision. Therefore, research on farmer production choices should take their risk attitudes into account, and such risk attitude measures should be elicited in a manner that is compatible with the context of operation of the farmers.
  • Darko, F. (2016). Empirical Analysis on Microfinance Institutions in Developing Countries.
    This thesis contains three empirical essays which aim to contribute to economic research in the field of microfinance. Specifically, the first of these essays, presented in Chapter 2, examines the effect of commercialisation on efficiency of microfinance institutions (MFIs) in Sub-Saharan Africa using Data Envelopment Analysis and truncated regression model. The analysis is performed on 273 MFIs in Sub-Saharan Africa for the period 2005 - 2011. It is shown that commercialisation has a positive effect on efficiency of MFIs. In the light of this finding, we uphold the view that commercialisation can bring some benefits to the microfinance industry. Chapter 3 reports the investigations of whether productivity growth in the microfinance industry are passed to microcredit clients in the form of lower interest rates, and whether the effect depends on the extent of competition in the industry, using a balanced panel data on 175 MFIs worldwide over the period 2005 - 2012. The study finds that the effect of productivity growth in reducing microcredit interest rates is greater for high levels of competition than for low levels of competition. Thus, the evidence suggests that microcredit clients can benefit from productivity growth in the form of lower interest rates as the microfinance industry increasingly becomes competitive. We therefore argue that productivity growth and competition should be encouraged in the microfinance industry. The third essay, presented in Chapter 4 considers the possibility of mission drift in microfinance; a situation whereby MFIs move away from targeting the poor towards better-off clients. Using two different measures of poverty, the chapter examines whether the location choices of MFIs in Uganda are consistent with the objective of extending financial services to the extreme poor; and whether the pattern observed varies across different types of MFIs. The analysis is conducted on 118 MFIs over the period 2009 - 2013, by adopting a static count data model and dynamic regression approach. The results point towards an interesting picture that is important to take into account in the debate on mission drift. We show that the location of branches of MFIs is initially correlated negatively with poverty, but this correlation disappears over time; suggesting that MFIs have a greater incentive to target richer districts during earlier years, but poorer districts tend to catch-up with time. Again, we show that Commercial Bank MFIs are more likely to increase their presence in poorer districts than do other types of MFIs. These results suggest that full-fledged commercially oriented MFIs can have a strong positive response to targeting poorer districts. The implication of these findings is that commercial microfinance could be pursued as a strategy to reach the unbanked segment of the world's poor population. Taken together the analysis presented in each of these three chapters appears to indicate that, contrary to the writing of some popular commentators, the cause of economic development may have little to fear and much to gain from the entrance of commercial MFIs. While this conclusion may surprise many development professional, it should not surprise the development economist that the very forces of competition appear to drive these findings. While it is quite possible that the MFI revolution could not have been set lose by the commercial sector, it certainly does appear that the market which they established is now a viable and flourishing area to do business. Just as importantly, fears that commercial lenders might not target the poorest, or could charge exploitative rates of interest, may have been overstated.
  • Mahmud, M. (2015). Essays on Small Scale Finance and Recipient Behaviour.
    These essays consider various aspects of the access to finance to micro-entrepreneurs who remain outside the purview of the banking sector primarily due to lack of collateral. An innovative way to provide access to finance - microfinance - originated from Bangladesh and has since then spread to all over the world. Evidence points to micro-enterprises earning returns well above market interest rate. It is therefore puzzling that hardly any study has found a significant impact on various development indicators for households receiving a microcredit loan. This coupled with high indebtedness and defaults by borrowers resulting in the collapse of several microfinance organizations across the world has raised questions about the fundamentals of the microcredit model and led to a rethinking of microfinance at large. In line with this, we look at an alternative model of microcredit with zero interest rate and voluntary contributions being used by Akhuwat, a microfinance organization in Pakistan. Chapter 2 has details about this organization and chapter 3 about a telephone survey of the borrowers of the organization that was conducted to collect information in addition to that in the organization database.

    In chapter 4, the analysis of monthly data on voluntary contributions provide evidence that the organization is rewarding borrowers for their contributions by giving them repeat loans and that borrowers are strategically timing these voluntary contributions through their loan cycles to maximize impact. In the case of joint liability loans, borrowers in poorly performing groups make on average higher voluntary contributions, and voluntary contributions in a previous loan cycle correlate with borrower discipline in a subsequent loan cycle. Thus, voluntary contributions can signal borrower quality, and joint liability borrowers appear to be using them to signal their quality independently of their group.
    Microcredit loans were traditionally extended to groups of people who were held jointly liable for the payments of each other. However, there is no clear evidence that joint liability does lead to better borrower performance and recent years have seen a shift towards individual liability lending. In Chapter 5, utilizing the exogenous shift from individual to joint liability lending by a microfinance organization in Pakistan, we find evidence of significant improvement in borrower discipline. We also use the exogenous variation in number of months borrowers had till the expiry of their individual liability loans at the time of the shift to study the kind of groups they formed. Using this time that borrowers had as an instrument, we find that they are more likely to form groups with people they knew from before and met weekly. The time that borrower had to form group also correlated positively with borrower discipline.

    Chapter 6 investigates the impact on micro-entrepreneur households of unconditional transfers in a Randomized Control Trial setting. In a situation of no commitment, it looks at the second order effects on the household of an exogenous shock to the enterprise. Even with no repayment for principal or additional interest charge, there is no significant impact on the consumption and education expenditures of these households. We focus on the demographic and labour supply response and find that households of male and female owned enterprises adjust differently. Households of male run enterprises experienced a rise in fertility while those of women saw a decline in the number of other women working in the household and thereby in overall hours worked in the household. For male run enterprise households, there appears to be no substitution away from work towards leisure as the household feels richer. We did not find evidence that the rise in fertility is a pure income effect and so it appears to be associated with different choices made by the two genders when in charge of resources.


  • Crentsil, C., Gschwandtner, A. and Wahhaj, Z. (2020). The Effects of Risk and Ambiguity Aversion on Technology Adoption: Evidence from Aquaculture in Ghana. Journal of Economic Behavior and Organization.
    We study how aversion to risk and ambiguity affects the adoption of new technologies by Ghanaian smallholder aquafarmers. We conduct a set of field experiments designed to elicit farmers’ risk and ambiguity preferences and combine it with survey based information on their technology adoption decisions. We find that aquafarmers who are more risk-averse were quicker to adopt the new technologies: a fast-growing breed of tilapia fish, extruded feed and floating cages. By contrast, ambiguity aversion has no effect on the adoption of the new tilapia breed and extruded feed. Furthermore, it slows down the adoption of floating cages - a technology which entails higher fixed costs than the others - and the effect is diminishing in the number of other adopters in the village. We argue that these differential effects are due to the fact that the technologies are risk-reducing, with potential ambiguity about their payoffs? distributions at the early stages of adoption. The findings highlight the importance of distinguishing between risk and ambiguity in investigating technology adoption decisions of small-holder farmers in developing countries.
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