Millions of people in developing countries work in the informal sector, due in part to significant barriers to registering one’s business and entering the formal sector. In this study, researchers carried out a randomized evaluation in Malawi, within the context of the World Bank Business Environment Strengthening Technical Assistance Project (BESTAP), to measure the impact of formalization on the business performance of micro-, small and medium enterprises (MSMEs).
Recent evidence suggests formal savings accounts can lead to increased savings for the poor, but uptake of bank accounts has been low. There is also evidence suggesting that savings for specific goals can potentially be increased by enabling people to commit money towards goal-specific “mental accounts”.
Improving access to family planning in Sub-Saharan Africa has the potential to help women and couples achieve their desired family size and avert unintended pregnancies and unwanted births. It may also have longer-term effects by improving women’s health, educational attainment, and socio-economic status. However, little is actually known about the effectiveness of family planning.
Malawi’s public works program is the largest social protection scheme in one of the world’s poorest countries. Although public works programs are widespread, they can be costly, and there is limited evidence of their effectiveness. Researchers worked with Innovations for Poverty Action and the Malawi Social Action Fund to evaluate the program’s effect on food security.
For people with seasonal incomes, saving income earned during the high season is important for being able to purchase goods and necessities in the off-season. However, in the absence of formal savings mechanisms, it is especially difficult to postpone purchasing something now in favor of longer-term goals. When people cannot save, they may even choose to work less, feeling that working will not help them reach important goals.
Efficient targeting of public programs is difficult when the costs or benefits to potential recipients are unobservable. This study examined the potential of self-selection to improve allocational efficiency in the context of a program that subsidized tree planting in Malawi.
Especially in developing countries, there is little evidence about the mechanisms through which compensation impacts worker productivity. To examine this relationship, researchers evaluated the effect of randomly offering varied wages to bean-sorting workers in rural Malawi. While offering higher wages caused workers to increase their productivity, it did not attract more productive workers.
With limited income and many demands on their financial resources, it is especially important for poor households in developing countries to allocate their money deliberately across various expenditures. In Malawi, researchers investigated how paying workers in weekly installments versus as a monthly lump sum affected their spending on temptation goods, and if the timing of wage payments changed the impact of the payment structures.
Can fingerprinting borrowers improve repayment rates? For micro-lending to be viable microfinance institutions need to ensure that their clients repay their loans. We worked with the Malawi Rural Finance Corporation (MRFC) to create a more reliable system for identifying and tracking, by fingerprinting borrowers. Fingerprinting improved repayment rates, especially for those borrowers predicted to have the worst repayment rates.
Introducing biometric identification substantially increased repayment rates amongst Malawian farmers with the highest risk of default. Researchers are now examining the large-scale impact of biometric technology on repayment and borrower behavior at microfinance institutions across the country.
Commitment savings products are a useful tool to help individuals with self control problems stick to their financial plans, but they are unnecessarily restrictive for individuals who want to back out of their commitments due to an unanticipated change in income or other household shock. To shed light on the mechanisms behind the failure to adhere to financial plans, researchers carried out a lab-like study in Malawi that mimicked real life choices.
Conditional cash transfers, where money is given to individuals on certain conditions, have been used successfully to incentivize families to send their children to school, to encourage people to get preventive healthcare check-ups, and to change other behaviors. In this study, researchers evaluated if financial incentives could motivate safer sexual behavior.
In developing countries, women are commonly underrepresented in the formal sector. One potential explanation is that a large proportion of these jobs are secured through informal channels, including employee referrals, which may disadvantage women. Innovations for Poverty Action examined how informal job referral systems affect labor market participation for women in Malawi using a randomized evaluation and found that informal referral schemes systematically disadvantaged qualified women.
Ownership and use of bank accounts is low in many developing countries. Researchers partnered with banks in three countries to see if removing the costs to opening basic bank accounts would lead to more households opening and using bank accounts. Overall, use of the accounts was low across all three countries, and being offered a free, basic bank account had no impact on savings, expenditures, health, or education.