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.

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

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.

The Effect of Credit on Growth and Convergence of Firms in Kenyan Manufacturing

Although some recent studies have analysed issues relating to credit in African manufacturing, they have not directly tested for the effect of credit on firm growth. The use of bank credit can affect firm growth in two opposite ways. The effect may be positive if credit allows a firm to address its liquidity constraint and increase profitability. However, if macroeconomic shocks such as increases in interest rates make firm debts unsustainable as experienced in Kenya in the 1990s, indebted firms may shrink or even collapse. Hence, empirical testing is necessary to determine which effect dominates in a specific case. Using microeconomic data on the Kenyan manufacturing sector, the study finds that conditional on survival, the firms that use credit grow faster than those not using it. This result is robust to alternative estimation procedures, controlling for both endogeneity of the credit variable and selection bias. Convergence in firm size is significant in all the models except the GMM estimation that controls for several forms of endogeneity. The significance of convergence contradicts Gibrat.s law of proportionate effects while supporting Jovanovic.s learning hypothesis.

Capital Flight and Poverty Reduction in Africa

This paper investigates the impact of capital flight on poverty reduction through the investment and growth channel. It uses two approaches. First, the Incremental Capital-Output Ratio (ICOR) approach is used to estimate additional income that would have been generated if all capital flight had been invested domestically. The second approach uses capital stock to derive the potential effect of capital flight on income per capita and on poverty. The effect on poverty reduction is computed by taking into account country-specific and time-varying income-growth elasticity of poverty. The ICOR method suggests that the average annual rate of poverty reduction over the period 2000-2010 could have been 1.9 percentage points higher. The capital stock method generates an additional 2.5 percentage points per year above the current rate of poverty reduction. The evidence in this paper confirms that capital flight ha

Blended teaching and learning methods in nursing and midwifery education: A scoping review of the literature

Background: Blended learning (BL) is defined as the combination of both traditional face-to-face learning and synchronous or asynchronous e-learning approaches. The aim of this scoping review was to explore the literature to obtain a broad understanding of the use of BLin nursing and midwifery education in general, in Sub-Saharan Africa (SSA), and in particular Rwanda.Methods: The literature published between 2010 and 2019 were reviewed from six electronic databases using keywords including blended learning, nursing education, midwifery education, higher education, SSA, and Rwanda. Arksey and O'Malley's framework was used in this review.Results: The initial search identified 1,283 records. Eleven articles were selected for this review after the application of predetermined inclusion criteria. Almost all reviewed articles indicated that the integration of BLmethods improved the quality of nursing and midwifery education in general, and in SSAcountries including Rwanda.Conclusions: Initial research in this area highlights that moving from traditional classroom-delivered programs to the BLapproach is feasible and can promote the quality of nursing and midwifery standards of education. This scoping review highlights a paucity of research on BL in nursing and midwifery education, particularly in SSAcountries. Keywords: Blended learning, nursing and midwifery education, SSA, Rwand

Local Observations of Climate Change and Adaptation Responses: A Case Study in the Mountain Region of Burundi-Rwanda

Mountain regions and their communities are particularly vulnerable to climate change impacts. However, little is known on the impacts observed and adaptation responses used in Burundi’s mountain region and if these are different to those reported in the contiguous mountain region of Rwanda. This paper aims to fill in these knowledge gaps. Semi-structured interviews were conducted with 300 smallholder farmers, 150 in northern Burundi and 150 in southern Rwanda. Farmers in both countries reported negative impacts on crops, animals, and human health, with small differences between countries driven by the main cultivated crops. More adaptation strategies were used in Burundi than in Rwanda, and more farmers in Burundi were using multiple strategies. In both countries, farmers’ wealth affected farmers’ adaptation responses and their food security. Notably, for all wealth groups (poor, average, rich), food security was lower in Rwanda than in Burundi. We relate our findings to current agricultural intensification policies in both countries and argue for the greater involvement of local farmers in adaptation planning using, for example, science-with-society approaches.We are deeply grateful to our study participants, who graciously shared their time, energy, and stories. We thank our field assistants and facilitators for making this research possible. We also acknowledge the Mountain Research Initiative for funding support

The virological durability of first-line ART among HIV-positive adult patients in resource limited settings without virological monitoring: a retrospective analysis of DART trial data

BACKGROUND: Few low-income countries have virological monitoring widely available. We estimated the virological durability of first-line antiretroviral therapy (ART) after five years of follow-up among adult Ugandan and Zimbabwean patients in the DART study, in which virological assays were conducted retrospectively. METHODS: DART compared clinically driven monitoring with/without routine CD4 measurement. Annual plasma viral load was measured on 1,762 patients. Analytical weights were calculated based on the inverse probability of sampling. Time to virological failure, defined as the first viral load measurement ≥200 copies/mL after 48 weeks of ART, was analysed using Kaplan-Meier plots and Cox regression models. RESULTS: Overall, 65% of DART trial patients were female. Patients initiated first-line ART at a median (interquartile range; IQR) age of 37 (32-42) and with a median CD4 cell count of 86 (32-140). After 240 weeks of ART, patients initiating dual-class nucleoside reverse-transcriptase inhibitor (NRTI) -non-nucleoside reverse-transcriptase (NNRTI) regimens containing nevirapine + zidovudine + lamivudine had a lower incidence of virological failure than patients on triple-NRTI regimens containing tenofovir + zidovudine + lamivudine (21% vs 40%; hazard ratio (HR) =0.48, 95% CI:0.38-0.62; p < 0.0001). In multivariate analyses, female patients (HR = 0.79, 95% CI: 0.65-0.95; p = 0.02), older patients (HR = 0.73 per 10 years, 95% CI: 0.64-0.84; p < 0.0001) and patients with a higher pre-ART CD4 cell count (HR = 0.64 per 100 cells/mm(3), 95% CI: 0.54-0.75; p < 0.0001) had a lower incidence of virological failure after adjusting for adherence to ART. No difference in failure rate between the two randomised monitoring strategies was observed (p= 0.25). CONCLUSIONS: The long-term durability of virological suppression on dual-class NRTI-NNRTI first-line ART without virological monitoring is remarkable and is enabled by high-quality clinical management and a consistent drug supply. To achieve higher rates of virological suppression viral-load-informed differentiated care may be required. TRIAL REGISTRATION: Prospectively registered on 18/10/2000 as ISRCTN13968779